By Katherine Chiglinsky, Noah Buhayar and Sonali Basak
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.
“Elon says a conventional moat is quaint, and thats true of a puddle of water,” Munger, 94, said. “Its ridiculous. Warren does not intend to build an actual moat. Even though theyre quaint.”
Munger and Buffett, 87, were responding to a question at Berkshire Hathaway Inc.s annual meeting about Musks 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 Inc. on May 2. “Theyre 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 Sees Candies unit that Berkshire owns, where theyre holding firm.
“Elon may turn things upside down in some areas, I dont think hed want to take us on in candy,” Buffett quipped. “There are some pretty good moats around.”
Musk didnt stay silent. “Im starting a candy company & its going to be amazing,” he wrote in a Twitter post Saturday, responding to Mungers remarks. “I am super super serious.”
He followed up with another tweet: “Then Im 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.”