May 8, 2018

Musk v. Buffett: Candy clash exposes differences in investment philosophy

Opposing philosophies surrounding investment drew billionaires Elon Musk and Warren Buffett into the ring for a childish public back-and-forth.

After Elon Musk badmouthed Warren Buffett’s investment theory of “moats,” the babbling billionaires exchanged remote jabs in a public fight about candy this past week. 

The playground boxing match showcased two big egos in opposite corners of the ring — and their fundamental differences in investment style.

WTF is a moat and why does Elon think it’s lame?

An economic moat is the competitive advantage that separates a particular business from the pack, a term popularized by Buffett — and a requirement for any business that wants his investment.

“Moats are lame,” Elon told investors on an earnings call last week, “What matters is the pace of innovation.”

Warren B — owner of See’s Candies — wouldn’t take Musk’s mockery, saying “Elon may turn things upside down in certain areas [but] I don’t think he’d want to take us on in candy.”

Musk later unleashed a Tweet-storm sarcastically describing plans to “build a moat & fill it w candy… Berkshire Hathaway kryptonite.”

Two billionaires, polar opposite investment strategies

Buffett invests in stable, near-monopolies over decades (4, in the case of See’s) — stark contrast to Musk’s investment in rapid-fire innovation to disrupt established industries.

The bickering between the Obi-Wan-like Berkshire Hathaway investor and the upstart Tesla founder highlights a broader debate about the merits of risky short-term innovation vs. oligopolistic long-term competitive advantage.

But by the close of trading yesterday, both billionaires were doin’ alright — Tesla was up 2.95% and Berkshire Hathaway was up 1.03%.

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