Published on August 3rd, 2020 |
by Guest Contributor
August 3rd, 2020 by Guest Contributor
Originally published by EV Annex.
by Charles Morris
Piddling contests between billionaires are an All-American tradition, and Elon Musk can hold his own against the best of them. He’s mixed it up with Mark Zuckerberg, who has called Musk an alarmist for his concerns about artificial intelligence, and jousted with Jeff Bezos, whose Blue Origin space venture is a rival of SpaceX.
But what about Warren Buffett? Everybody likes the grandfatherly, soft-spoken Sage of Omaha. Is it true, as some recent headlines claim, that Musk trashed Buffett and called him a fake?
Hardly. What Musk said, in a gossipy interview with Maureen Dowd of the New York Times, was: “I think [Buffett] has managed to create a great image for himself as a kindly grandfather, which is maybe overstating the case.” Dowd also asked Musk if he had taunted Buffett by sending him a clip of Daniel Day-Lewis’s famous robber-baron-style line “I drink your milkshake,” a charge Musk denied.
These days, belittling and insulting powerful people is considered great sport, as Musk knows as well as anyone. Mr. Buffett, however, doesn’t present a very tempting target — at 89, he’s admired for his comparatively simple lifestyle, his philanthropy, and his long and drama-free career.
That doesn’t mean he’s not a hard-nosed businessman. As Alice Schroeder wrote in The Snowball: Warren Buffett and the Business of Life (via Business Insider), he shrewdly took advantage of opportunities presented by the 2008 financial crisis, lending money to struggling companies at high interest rates.
In the past, Buffett may have hurt the famously sensitive Musk’s feelings by saying that he wouldn’t invest in Tesla. However, he also praised Musk, saying that he had “done some remarkable things.” The two are known to have met at least a couple of times, and both have signed onto The Giving Pledge. The Oracle’s lack of interest in investing in TSLA isn’t personal — he’s generally avoided investing in tech companies. There’s also a conflict of interest, as Buffett invested in a Tesla competitor, China’s BYD:
|In prior interviews, Warren Buffett has stated that electric cars are “very much” in America’s future (YouTube: CNBC)|
Elon and Warren did a little good-natured verbal sparring in 2018. The internet echo chamber made much of an offhand comment Musk made during an earnings call: “I think moats are lame. … What matters is the pace of innovation.”
The “moat” Musk was referring to is a Buffett-coined business term that describes a competitive advantage that protects a business against rivals. Buffett responded that moats were still valuable, citing the example of one of his companies, See’s Candies, which enjoys an unassailable cult following. The mischievous Musk responded that he might just start up a candy company of his own (he hasn’t done so yet, as far as we know).
As I and other pundits pointed out at the time, Musk’s statement was a little surprising, as Tesla has several competitive advantages that seem to fit the definition of a Buffettian moat. One thinker listed no fewer than 24 moats that Tesla enjoys, including the company’s direct sales model, its over-the-air updates, its ever-growing library of driver usage data, the Supercharger network, the Gigafactories, its superior software and battery technology, and not least its brand, which is one of the strongest in business history, and arguably far more valuable than that of any candy company.
We wordsmiths had lots of fun with the imagery of castles and candy, but in the end, we found wisdom: moats can be valuable, but they can be breached by a determined attacker. To keep the barbarians at bay, companies have to keep improving their technology. As Elon said, “the pace of innovation” is critical, and Tesla continues to set a frighteningly fast pace.
Sometimes a disagreement between two extremely experienced and talented business people can be a catalyst for lesser mortals, such as we, to glean new insights. I think that’s the constructive lesson to be learned from the friendly rivalry between the Oracle of Omaha and the Prophet of Palo Alto.
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