Speaker 1: Elon Musk and Warren Buffett have recently had a bit of a just say disagreement with regards to investing. Warren Buffett is the guy known as the best investor of the past 50 odd years. And Elon Musk is the guy whose company, Tesla, burned through nearly half a million dollars an hour, once known as an investing genius and the other known as a pure all-round genius. But they disagree on something with regards to buying businesses.
Most of Warren Buffett’s enthusiasts know that when investing in a company, one of Warren Buffett’s criteria is a moat. A business must have a moat. So what is this? It’s the water that runs around the outside of a castle and makes it really hard for the competitors to attack and take over the castle, basically. So it’s a metaphor for company’s competitive advantage over competition and basically what makes them bitter over the long term.
Elon Musk says moats are lame. They are not important things to focus on these days. What matters, he says, is the pace of innovation, which is exactly what his company, Tesla, focuses on. I mean, they basically started the whole electric car industry. They don’t spend any money on advertising at all. All of the money goes towards innovation and improvements towards the product, and they’re spending a damn lot of it as well. Nearly half a million dollars every hour. So you got one genius, Warren Buffett, saying focus on Moat’s and the other, Elon Musk saying focus on innovation. But who should we listen to? The guy that probably is the greatest and best of all time, or the guy who is probably the greatest thinker of the modern time?
Well, I think I found the perfect mix. One of the best investors I know, Mohnish Pabrai, has a strategy that blends these two ideas together. He says what you want is a business that has a deep moat with lots of parana in it and they’re getting deeper by the day. So in a sense, he’s saying invest in companies that have Moat’s already companies that have competitive advantages. But he’s also saying you want them to keep getting deeper, the company must keep innovating so that its advantages are only growing. For me, that’s the ideal mix. It’s ensuring you’re investing in the business that is quality at the current point in time, but will also continue into the long term future.
So what do you think Moat’s or Innovation and Elon Musk start up the candy company that he is super, super serious about?