Of moats & candy: Musk announces he will start a candy company after Buffett's 'challenge'

Rank 2 | Elon R Musk | Company: SpaceX and Tesla | Net worth: $136 billion | YTD change: Gain by $108 billion (Image: Reuters)

A banter between two of the finest businessmen of two different generations could see a rise of a new candy company.

Legendary investor Warren Buffett and entrepreneur Elon Musk sparred words over the idea of moats— a competitive advantage that one company has over other companies in the same industry. The term ‘moat’ in the investment parlance was established by Buffett.

Musk in his earnings call last week said that he thought moats were lame. “They’re like nice in a sort of quaint, vestigial way. But if your only defence 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,” he added.

Buffett and Charles Munger, Berkshire’s two proven stalwarts hit back at the technocrat on Saturday saying it was true that moat was quaint. “Elon says a conventional moat is quaint, and that’s true of a puddle of water. It’s ridiculous, Warren does not intend to build an actual moat. Even though they’re quaint,” said Munger.

Buffett acceded that moats have become susceptible to invasions recently but stuck to his time-tested formula. “Elon may turn things upside down in some areas, I don’t think he’d want to take us on in candy. There are some pretty good moats around,” he said.

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Berkshire owns confectionary See’s Candy which it bought in 1972 for $25 million. And, according to Warren Buffett’s own admission, over 40 years it has brought in a staggering $1.65 billion in total profits.

As it is a trend, in an exchange of words with Musk, the last response came from him. Musk in a series of Twitter posts took to the challenge and said he was staring a candy company.

“I’m starting a candy company & it’s going to be amazing,” he wrote in a Twitter post on Saturday. “I am super super serious.”

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In another tweet, Musk said, “Then I’m going to build a moat & fill it w candy. Warren B will not be able to resist investing! Berkshire Hathaway kryptonite… (Sic)” He followed the tweet with another, “Saying you like “moats” is just a nice way of saying you like oligopolies.”