(Question)
WARREN BUFFETT: Yeah. Well, the best businesses
during inflation are usually the best —
they’re the businesses that you buy once
and
then you don’t have to keep making capital investments
subsequently.
So you
you
you get —
you do not face the problem of
continuous reinvestment
involving greater and greater dollars because of inflation.
That’s one reason real estate,
in general,
is good during inflation. If you
built your own house
55 years ago
like Charlie did, or bought one 55 years ago like I did,
it’s a one-time
outlay, whereas if you’re —
and
you get the —
you get an inflationary expansion in replacement capital
without having to replace yourself.
And if you’ve got something that’s useful to someone else,
it tends to be priced in terms of replacement value over time,
so you really get the inflationary kick.
Now,
if you’re in a business
such as the utility business or the railroad business,
it just keeps eating up more and more money,
and your depreciation charges are inadequate and you’re kidding yourself
as to your real economic profits.
So, any business with heavy capital investment
tends to be a poor business to be in
in inflation and often it’s a poor business to be in generally.
And the business where you
where you buy something once —
a brand is a wonderful thing to own during inflation.
You know,
See’s Candy built their brand
many years ago. Now, we’ve had to nourish it as we’ve gone along,
but the value of that
brand
increases
during inflation, just as the value of,
really, any strongly branded goods.
Gillette
bought the entire
radio rights to the World Series in 1939.
And as I remember, it cost them $100,000, and for that they
they got to broadcast the Yankees, I think, versus the Reds in 1939.
And think of the number of impressions they made on minds
in 1939 dollars for $100,000, and they were getting in the minds of
young guys like myself. I was eight or nine.
And
millions of people — and they did it in those dollars then.
And, of course, if you were going to go out and try out and do —
have similar impressions on millions of minds now, it’d cost a fortune.
And part of that is due to inflation. Part of it’s due to other things.
But it was a great
investment, which
could be made
in 1939 dollars
that paid off, in terms of selling
selling razors and blades
in 1960 and 1970 and 1980 dollars.
So that’s the kind of business you want to own.
Charlie?
CHARLIE MUNGER: Well, yeah, but
if the inflation ever goes completely out of control,
you have no idea how it’s going to end up.
If it weren’t for the Weimar
inflation, we might never have had Adolf Hitler.
It was the twosome of the
great German inflation followed by the
Great Depression that brought us Hitler.
And think of the price
that
the world paid for that one.
We don’t want inflation because it’s good for
See’s Candy.
(Laughter)
WARREN BUFFETT: I didn’t quite realize I was —
CHARLIE MUNGER: No, I wasn’t criticizing you.
WARREN BUFFETT: What’s good for See’s Candy is good for
the United States.
(Laughter)