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Best Investment During Times of Inflation

Question asked by a young investor during 2022 Berkshire Hathaway Annual Meeting (paraphrased)

What one investment would you recommend in context of today’s high inflation?

Warren Buffett’s answer (paraphrased)

The best thing you can do is to be exceptionally good at something. If you're the best doctor in town, if you're the best lawyer in town, if you're the best whatever it may be... [people] are going to give you some of what they produce in exchange for what you deliver.


Instead of giving a stock pick, Mr. Warren Buffet’s answer expounded the value of self-mastery, the ultimate stoic virtue. He reminded the audience that each person is in control of his or her destiny. Rather than give a self-serving answer (buy XYZ company), he gave a timeless one: Develop an exceptional skill.

Investing in yourself is the best hedge to inflation.

(True to form, Mr. Charlie Munger inverted the question, answering what not to do. He quipped, if anyone offers the young investor to buy bitcoin to protect against inflation, “Just say no!”)

Buffett’s response was one of many nuggets of wisdom during the six-hour public Q&A session.


The Q&A format did not allow follow-up questions. But if follow-up questions were permitted, the young investor might have also asked Mr. Buffett: “Once I choose a skill, how can I develop it into an exceptional skill?”

Mr. Buffett’s response began to answer the question. He said, “Choose something that you love doing, something that creates value for society, and something that you can be good at.” In essence, he said, choose a skill at the center of a Venn diagram.

But once one finds a skill at the center of the diagram, then what? Mr. Buffet stopped short of a complete answer.


Charles Duhigg’s book, The Power of Habit, gives an answer to the “How”? Duhigg is a former New York Times editor, reporter for The New Yorker, and Pulitzer Prize winning author. In The Power of Habit, Duhigg smartly spotlights how habits are the root of outcomes. His book describes how habits develop and take root. It also offers a template to re-engineer habits to get what you want. [1]

The answer to the follow-up question of “How?”, according to Duhigg, would be: Learn how to engineer habits to get what you want. We are what we repeatedly do. So, engineer habits to develop an exceptional skill.


Duhigg gives readers vivid examples of conscious and unconscious habits. They follow a common pattern, or Habit Loop:

The Cue triggers a Routine that results in a Reward, which in turn reinforces the Cue and Routine. For example, boredom may trigger an hour of social media scrolling for messages from friends, which gives a dopamine rush and distraction from boredom. The dopamine rush subconsciously links to the boredom cue thus reinforcing the social media routine. Very quickly indeed the habit is formed.

Unproductive habits provide short-term reward but also long-term negative consequences.

Unproductive habits can create a viscous cycle. If one were trying to be exceptional, he or she would want to prune unproductive habits that detract from developing a skill. Then swap them for productive habits. Productive habits create a flywheel of positive results.

Duhigg researched how others have transformed habits. Abstracting the various examples, he offers a simple template: Keep the Cue and Reward, replace the Routine. This is the Golden Rule of Habit Change.

Example of the Golden Rule of Habit Change in Action

It’s simple, but not easy.

Re-engineering habits is not easy for two reasons:

  1. Isolating the cue. The cue can be multi-layered, obscured by environmental stimulus, and hard to deconstruct without deep contemplation.

  2. Finding the emotion underneath the reward. Professor BJ Fogg (Stanford), author of Tiny Habits, researched rewards are not material in nature (e.g., money, promotions, finishing first), but powered by emotion (e.g., freedom, connection, safety, calmness). Finding the emotion underlying the reward helps to tie the Habit Loop together.

Finding clarity on both the cue and the emotion requires great effort. If it were easy, no one would have unproductive habits.


So, thanks to Duhigg and those he researched in The Power of Habit, we can guess how Mr. Buffett might have answered the follow-up question: “How?”

The answer might have been, “Develop productive habits to reinforce your chosen skill.”

He may have also given the example of how early in Charlie Munger’s career as a lawyer, he decided to develop a habit to get to his desired outcome of independence and wealth. He chose to sell himself an hour each day.

During his first hour of the day, Mr. Munger would work on various construction projects and real estate deals for himself. He was his own client. His Habit Loop was cued first thing in the morning. Mr. Munger would work on an interesting project for himself (the routine) and enjoy the reward - satisfaction that he was one day closer to a life of independence and wealth. Eventually, Mr. Munger’s habit cultivated an exceptional skill at creating value in real estate, and he got what he wanted.

Both Buffett and Munger have suggested other habits that might lead to developing exceptional skills. A few timeless and broadly applicable suggestions:

  1. Read 50 to 500 pages a day.

  2. Associate yourself with people who are better than you.

  3. Start early, don’t wait.

  4. Say no to almost everything.

  5. Build a positive reputation.

[1] Duhigg’s book has three parts. Individual habits, Organizational habits, Societal habits. The power of habits applies in each context. Individuals are the protagonist of individual habits and can linearly take control of each element. Organizational habits are more complex given multiple individuals, teams and competing priorities. Yet, organizations develop habits (norms, routines, culture) and these can also be re-engineered through leadership. Societal habits are more complex yet. Societal habits depend on broad webs of strong and weak relationships, and these can also be re-engineered through leadership, but at a much larger scale.

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