Buffett to Musk: ‘There Are Some Pretty Good Moats Around’ | Hacker News Reader

Buffett to Musk: ‘There Are Some Pretty Good Moats Around’

bloomberg.com

47 pointsmcguire38 comments

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I think they are both talking past each other a bit here, even though all those comments are intentionally joking.

A moat in business isn't a static thing that you build and then leave forever.

Apple's moat is its supply chain with Tim Cook built out.

Coke's moat is its bottler and distribution chain

Visa's moat is its ubiquity world wide

Google's moat is its search technology and infrastrucutre, both the 85,000 employee's it has and its data centers world wide that any of these engineers can harness.

None of these companies built that years go and then left it. These companies spend billions a year on updating their moat's. And if big companies can innovate, then their "moat's" are one area where they probably have an innovation advantage on competitors.

I'm with Buffet and Peter Theil on this one, give me a moat any day over a company that is continuously innovating trying to find a working business plan

Apple’s moat is its ecosystem. There are things uniquely on Apple platforms like iCloud photos, iMessage and anything bought on iTunes that make it tough to switch.

I recently switched from iPhone to a Google Pixel 2 (Android) and I found the most annoying part was iMessage. Everything else was fairly easy to switch over. I'm more than happy to never see iTunes again.

Just to clarify, are you claiming iTunes isn’t the most amazing piece of software ever? ;)

More seriously, are you talking the desktop app or the music player of the phone? (I’ve not found the phone version /that/ bad, but yeah desktop version remains terrible)

As someone who has never used iMessage, can you expand on what specifically makes iMessage hard to leave?

Do you lose your past conversations? Do you lose your contacts? Or is it simply that you lose the extra features and are back to simple base "sms"?

There are a bunch of extra features vs sms (attachments, groups, actual encryption, that’s even end to end). I assumed android had similar but I can’t tell from things like the gchat news from last (?) week whether that’s true.

For me (exclusive Apple product house) it’s useful that messages end of an every device - it’s useful when looking things up, and saves finding my phone when I’m working, etc.

Also read receipts are useful - they’re opt in, but the useful when communicating with coworkers. Which also feeds into the ecosystem thing - if most people you talk to are also using iMessage you can get read receipts.

This isn’t saying iMessage is flawless or superior to everything else - as I said before I don’t know the state of android messaging, so I just can’t really compare.

From experience, one thing that happens is any "text messages" from your friends who still have iphones get routed into some black hole until you visit a page on the Apple website and "reset your number".

End to end encryption, content rich messages, very fast, and it can be especially hard to leave if most of your friends that you talk to also have iMessage.

Typing indicators too.

If you bought anything in iTunes, it is forever locked inside of it though. Otherwise, I agree.

Are you contradicting yourself?

From the article: "The pace of innovation, he [Elon] said, is more important in the long run."

And you include "These companies spend billions a year on updating their moat's" as part of your argument.

A bunch of over-funded, under-profitable startups trying to discover a business plan is, in itself, a moat. I just wonder: for who?

This sounds profound but I'm not sure it really says anything.

The implication is that venture capitalism and large/entrenched investment firms in particular can consider diversified investment in innovative startups to be their "moat."

I'm not entirely sure I agree, but I see the line of reasoning, and I can in a way validate in my own mind how some might see this statement as genuinely profound.

For it to be a competitive "moat" (a forbidding competitive advantage), don't they have to be making money? As an asset class, venture capital has comparatively pitiful performance.

The top VCs --- the ones that actually generate reliable market-beating returns --- certainly have a "moat": the best dealflow. But that's unrelated to the snark from the comment upthread.

VC doesn’t need to be the asset class benefiting, does it? Doesn’t most of the cream and benefit of innovation in the startup space end up getting purchased by first the big tech firms (Cisco, Oracle, Facebook, Apple, Microsoft, Google), second the S&P500, and rarely the public markets?

I remember the panic of the ‘90s about the coming disruption from internet technologies, but at best it has been a horizontal revolution, rather than a vertical one, and the same wealth and power centers have survived.

You would think that a new, superior set of technology and process would revolutionize, say, the hiring process. Instead, the brute force of lots of money provides a moat where HR, hiring managers, teams, and candidates are protected from meaningful disruption and progress.

All that said, my comment is almost certainly nonsense. I was referring to the broad sway of competitive advantage and the inertia of inadequate equalibria (more nonsense, surely). If you believe I am not properly building a warrant against the technical meanings on investment analysis terminology, you are right.

Those over-funded under-profitable startups increase demand for labor, acting as a hurdle for the smaller boot-strapped companies trying to hire people. It's a moat in favor of the entrenched companies with easy access to capital

Musk tweeted this later on:

Saying you like “moats” is just a nice way of saying you like oligopolies [1]

[1] https://twitter.com/elonmusk/status/992964829282418688

If anything, it's a nice way of saying you like monopolies, and particularly, ones that you own. If I owned one, I would like it.

More to the point, saying you like moats, probably just means you own some moats.

Everybody loves the moat they own and hates the one they don't own. Every CEO likes the competitive advantage they have, and hates the one their competitor has. Right now Musk is busy slogging his way across a moat, so I wouldn't expect positive feelings.

If the moat is that the established company can offer its products cheaper than the competition (for whatever reason) then that's not bad for the consumer in the way that "monopoly" often implies.

Well, he's right.

I'm sort of terrified about the opportunity cost to humanity when billionaires want to settle an idle theory about markets and start devoting cycles to that.

If Buffett knew he was throwing down a gauntlet, I'd hope he would have dared Elon to do something about malaria rather than candy.

>I'm sort of terrified about the opportunity cost to humanity when billionaires want to settle an idle theory about markets and start devoting cycles to that.

you act like tesla is giving away electric cars to underprivileged minorities and spacex is ferrying school kids to better school districts. it's always all fun and games and that anyone believes otherwise speaks to efficacy the marketing/ideology machine

Call me a sucker, but I do think electrification, AI, and space tech have a nonzero chance of improving humanity's future. Gil Scott Heron's right that rockets don't put food on the table though. So for more immediate problems, note that Buffett has also pushed tech billionaires towards charitable causes in other interactions:

https://givingpledge.org

sucker

Right on the money. Looks like Elon is the one taking it a bit too seriously. His behavior is erratic, flying too close to the Sun

> His behavior is erratic, flying too close to the Sun

If anything I'd say he's working too much. His behaviour has always seems to have been outgoing but now it's downright hostile.

He needs to take a few weeks off surely someone in his companies can run them without being micromanaged every minute of every day by Musk?

Exactly what I meant, my words should have been less poetic perhaps. He's putting so much pressure on himself and his companies (a lot of the time self imposed), and the media treats him unfairly a lot of the time. What I'm seeing is nothing but signs of burnout indeed, nothing personality related

> (...) and the media treats him unfairly a lot of the time

I find the idea that the media treats Elon Musk unfairly laughable. He is consitently portrayed either as a genius that can make anything happen or as a lunatic that can make anything happen. He couldn't have more favorable media coverage if he was writing the headlines himself.

That's exactly what unfair means: he's not a genius nor a lunatic. Favorable (never used that term) ≠ Fair

According to the latest Tesla owners terms&conditions, owners cannot use a different ride sharing service than Teslas to send their automated cars off working, once such a service exists. A classic case of a "moat" if there ever was one. Musk should put his money where his mouth is and scrap that passage.

I don’t get what Buffett is referring to about See’s Candies moat. Besides being an aging candy brand that is enjoyed by older people, they seem to be pretty pedestrian.

Long term shareholder here. I’ve noticed Buffet uses every opportunity to promote his brands. It’s super easy to over read into it when he uses See’s as an example. Honestly, The brand barely registers where I live. The better example would’ve been something like BNSF which has a huge capex moat. They spent something like 19 bil on infrastructure a few years ago when the rest of the industry spent less than a bil combined.

Here's a video of him talking about See's Candies and moats more generally.

https://youtu.be/2MHIcabnjrA?t=1955 (In case the timestamp doesn't work, the relevant part starts at 32:35.)

Thanks. I wonder what See's Candies brand reputation trend-line looks like. While I remember viewing them being premium back in the 1980's, I view others more favorably today. (Godiva).

They're both right.

The ability to innovate faster than your competition is a pretty good moat.

I get that it's material to BRK how long they're going to have Buffett and Munger, but isn't it a little weird how this article supplies their ages?

Tesla’s moats are the supercharger network, and their direct sales and repair service networks.

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