Three years later, Musk finally admitted defeat to Buffett

Financial Associated Press (Shanghai editor Liu Rui) news, as the world's investors are most concerned about the two people, for a long time, Buffett and Musk have been some "unpleasant to look at each other": Musk has bluntly said that Buffett's work is "boring", buffett has tactfully hit back that Musk as CEO "there is still room for growth". Behind this "scolding war" is actually the collision of old and new ideas between traditional value investors and emerging industry disruptors.

Recently, however, Musk admitted in an interview that he conceded defeat in a "moat" argument between him and Buffett three years ago.

A debate about the "moat"

The origin of the matter was a "war of words" between Buffett and Musk three years ago.

In May 2018, Musk criticized Buffett's famous "moat" theory at Tesla's earnings conference, claiming that "moats are lames" and that if you want to resist the invasion of opponents, it is important to maintain the rhythm of innovation, and only relying on moats can not last long.

The "moat theory" was proposed by Buffett as early as 1993, referring to large companies with controlling positions in the industry, whose concessions or dominant positions are difficult to be copied, and therefore have great or permanent ability to continue to operate. Buffett's most proud investments, such as Coca-Cola and the U.S. Rapid Transit, are considered moat companies.

A few days later, Buffett rebutted Musk's claims at a Berkshire shareholder meeting. Buffett believes that although the speed at which moats in some industries have been destroyed has accelerated with the development of technology, it cannot be said that technology is enough to destroy the moats of every industry. In some areas, there are still very good moats in place.

As an example, he said: "Elon may disrupt certain areas. But I don't think he's going to want to play against us in the candy space. He was clearly referring to Berkshire-owned See's Candies — a confectionery company he'd invested in for decades and was considered one of Buffett's greatest dream investments.

Musk then responded on Twitter, claiming that he was starting a candy company and stressing in his comments that "I'm very serious" — but that was not the case. To the outside world, Musk's tweet at the time seemed like a joke.

Musk: I did try to challenge TheSis Candy

However, in an interview recently, Musk revealed that he did seriously consider the candy company project and seriously studied its potential - but finally gave up.

Musk said in an interview: "I did try to find some compelling candy products that are much better than other candies. ”

Musk revealed that he had invited his Twitter fans, Tesla and SpaceX employees to give him their favorite candy. He said that while he enjoyed receiving a variety of chocolates and peanut candy, he found nothing special.

"We tried all sorts of candies, but I couldn't find a candy that was a lot better than the others," he says, "and I don't want this product to be just a decent candy." ”

Musk then emphasized his entrepreneurial philosophy: He wouldn't start any business without a better product. "If a company can't provide great products and services, it shouldn't exist."

The "moat" theory is once again confirmed

Buffett may not be too surprised by Musk's conceding. Buffett has used the confectionery business many times before to illustrate the enduring power of brands and consumer habits, as well as the difficulty of impacting the status of a well-known brand like Snickers — and these confirm Buffett's "moat" theory.

In a 2011 letter to shareholders, Buffett stressed that he was confident that today's top confectionery brands would remain popular.

"I don't know how much oil, wheat, soybeans or cocoa will sell next week, next month or next year, (but) I know people will still chew Wrigley gum and eat Mars sticks [a type of chocolate bar]," he said. ”

Buffett said at a 2007 Berkshire shareholder meeting that consumers would continue to buy their favorite candy anyway, and that producing the product would require little capital investment. "In a world of inflation, this is probably the best investment." He said.

Musk believes he gave up challenging Hisits candy only because he couldn't find a better product than Hiss. But Buffett believes that Xishi is not only excellent in products, but also its low capital cost, high brand loyalty, and excellent management team, which all build a deep moat of Xishi.