On Saturday 5th May 2018, the 2018 Annual Berkshire Hathaway meeting was held at CenturyLink Centre Omaha 455 North 10th Street Downtown Omaha in the state of Nebraska, United States of America. Mr. Warren Buffett, the CEO of Berkshire Hathaway had some advice which was offered to Elon Musk, the CEO of Tesla. The advice was to “Stay away from See’s Candies.”
Warren Buffett, who just was answering a shareholder’s question about whether he had agreed with Elon Musk’s views about so-called ‘economic moats’ or not. ‘Moats’ was a term which was used by Warren Buffett which was coined in 1999 Fortune Magazine article while referring to Berkshire Hathaway’s competitive advantages. Buffett was going on and on about the benefits of moats and how it was a key component of his stock-picking process.
Elon Musk had rejected the concept of ‘moats’ completely during Tesla earning call in this week and he said that:
“I think that moats are lame. They are like good in a type of quaint, vestigial manner. If the only defence you have against an attacking army is a moat, we will not last that long. What matters is the speed of innovation is the basic determinant of competitiveness.”
In response to Elon Musk’s comment, Warren Buffett said that:
“Certainly, you should work on improving your own moat and you should defend your own moat all the time. Elon can change things upside down in certain areas. You do not want to take them on in candy business”
According to Warren Buffett, See’s Candies is a company with a wide moat, because of its loyal, entrenched customer base which is particularly on the West Coast. He also feels that it is difficult for any other chocolate company can steal business from See’s.
In 1972, Berkshire Hathaway had acquired See’s Candies, Warren Buffett is fond of their peanut. Berkshire Hathaway’s other businesses have also got moats which are wide enough to keep off competition apart from an innovative tech upstart.
Elon Musk the CEO of Tesla, tweeted this as a funny response:
“I’m starting a candy company & it’s going to be amazing’ and later he added ‘I am super super serious”
Mockingly, Musk after understanding Buffett’shatredd towards cryptocurrencies, says:
Charlie Lee, the creator of Litecoin, in response to this comments:
“So when Bitcoin and Litecoin, Elon?”
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