Elon Musk, Warren Buffett spar over moats

Elon Musk recently took aim at the idea a successful business needs a “moat” - a competitive advantage that keeps rivals at bay. The pace of innovation, he said, is more important in the long run.

On Saturday, Warren Buffett and his business partner, Charles Munger, shot back.

“Elon says a conventional moat is quaint, and that’s true of a puddle of water,” Munger, 94, said. “It’s ridiculous. Warren does not intend to build an actual moat. Even though they’re quaint.”

Munger and Buffett, 87, were responding to a question at Berkshire Hathaway’s annual meeting about Musk’s comments this week. The pair often talk about trying to expand the “moats” around their businesses.

“First of all, I think moats are lame,” Musk said during an earnings call for his Tesla on May 2.

“They’re like nice in a sort of quaint, vestigial way. But if your only defense against invading armies is a moat, you will not last long. What matters is the pace of innovation. That is the fundamental determinant of competitiveness.”

While Buffett said it does seem like more moats have become susceptible to invasion recently, he still observes plenty of companies, such as the See’s Candies unit that Berkshire owns, where they’re holding firm.

“Elon may turn things upside down in some areas, I don’t think he’d want to take us on in candy,” Buffett quipped. “There are some pretty good moats around.”

Musk didn’t stay silent. “I’m starting a candy company & it’s going to be amazing,” he wrote in a Twitter post on Saturday, responding to Munger’s remarks. “I am super super serious.”

He followed up with another tweet: “Then I’m going to build a moat & fill it w candy. Warren B will not be able to resist investing! Berkshire Hathaway kryptonite …”

And then: “Saying you like ‘moats’ is just a nice way of saying you like oligopolies.”

* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.
ZAR/USD
16.59
(+0.80)
ZAR/GBP
21.51
(+0.39)
ZAR/EUR
19.52
(+0.40)
ZAR/AUD
11.95
(+0.21)
ZAR/JPY
0.16
(+0.76)
Gold
1899.52
(+0.63)
Silver
23.78
(+1.90)
Platinum
901.00
(+1.20)
Brent Crude
42.12
(+1.78)
Palladium
2324.00
(+0.89)
All Share
54747.80
(+0.89)
Top 40
50447.18
(+0.81)
Financial 15
10288.44
(+2.15)
Industrial 25
73646.42
(+0.63)
Resource 10
53739.49
(+0.67)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1400 votes
It depends on how the funds are used.
73% - 9070 votes
No. We should have gotten the loan elsewhere.
16% - 1996 votes
Vote