QuestionerYou've described inflation as a gigantic corporate tapeworm. Which of Berkshire's businesses are best suited to thrive during a period of high inflation and why, which will suffer the most in why?
WarrenYeah, well, the best businesses, inflation, 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 do not face it. 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 and 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, It tends to be a poor business to be in inflation, and often it's a poor business to be in generally. And the business where you buy something wants, a brand is a wonderful thing to own during inflation. You know, Seas 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, any strongly branded goods.