Buffett Responds to Musk's Candy Company and Moat Comments

BECKY QUICK: Elon Musk was brought into the conversation this weekend at the shareholders meeting by a question — and I forget who asked it, one of the shareholders maybe — bringing up this idea — or maybe — maybe it was Andrew. But somebody brought up this idea of moats. Competitive advantages and moats.

Elon Musk recently said that he thinks moats are stupid. People —

WARREN BUFFETT: I wish he could give me his. (Laughter)

BECKY QUICK: And that became a subject where Charlie weighed in and said, yes, he's right that actual moats around castles are stupid.

But you guys got into a little bit where you were joking around, saying that you'd like to see him try and get into a candy store.

He responded this weekend with some tweets, saying, "I'm starting a candy company & it's going to be amazing. I am super super serious. It just occurred to me that the plot of Willy Wonka is really messed up. Ok ok, just for the sake of argument, what do u wish for in candy? Cryptocandy. Then I'm going to build a moat & fill it with candy. Warren B will not be able to resist investing! Berkshire Hathaway kryptonite… I'm killin me lol"

WARREN BUFFETT: Well —

BECKY QUICK: What do you think about all of this?

WARREN BUFFETT: Well, if you look at the leading candy bars, for example, for the last 50 years, I think you'll find Snickers on top. And then you've got M&M's. You've got two types. So they don't combine the peanuts with the other ones. But I think they're number two and four. And, you know — Hershey's in there at number three or something of the sort. Yeah.

I can't take them on. (Laughter)

I don't — I don't think Elon can take them on. You know? (Laughs)

They have moats. When you go into a drug store, a 7-Eleven, or something and you say, I would like a Snickers bar, and the owner says, oh, I've got something — the Musk Bar — at 10 cents off the Snickers bar, you say, give me the Snickers.

And if he doesn't give you the Snickers, you go across the street and buy the Snickers.

Brands are moats, I mean, obviously.

And if you try to — you know — this product is selling, you know, to hundreds of millions of people who want Coca-Cola. And if you say, I'll sell you something for two cents less, or I've got some celebrity's name on it —

They actually — Richard Branson tried Virgin Cola in the United States about 15 or 20 years ago. And a million others have been tried.

So I don't really have the same urge to produce automobiles that he apparently has to — (laughs) — produce candy. But I don't suggest that he take on Snickers.

BECKY QUICK: You're taking me literally and stepping away from the real story here, which is kind of this war of words between you and Charlie and Elon. And I just want — do you even know Elon Musk?

WARREN BUFFETT: I've never said anything to anyone about Elon. I mean, you know — you're baiting me a little bit to do it, but —

BECKY QUICK: I am.

WARREN BUFFETT: But I've never — you know, I — people like his car and everything, but —

But somebody mentioned that now he's talking about financing. Something this morning about that. I thought I heard that earlier.

BECKY QUICK: Yes. Well, actually, Warren — Andrew just read some headlines where it looked like they may be — Tesla — may be going back to market to pick up some additional financing. I'm not entirely sure.

WARREN BUFFETT: Well that's —

BECKY QUICK: All I heard was the — all I heard was the headline.

WARREN BUFFETT: That's what I call a counter-revelation. I mean — (laughs) — you know, because I think it was just a few days ago they said they wouldn't need financing. It —

But, you know, he's trying something to improve a product. And I salute him for that. And the American public will decide whether it's a success. And — it's not easy. You know? So a lot —

It's probably easier to develop a new car than it is to compete with Snickers.

But some products have terrific moats, you know. Probably Elmer's Glue does. You know, WD-40. I mean, there you go.

You can — there's just certain things that you are not in — much inclined to be dissatisfied with and seek — and I would say that, incidentally, that the iPhone, you know, has a terrific moat.

I mean, people that have an iPhone — or maybe have some other phone. But they want to continue with the product that they've got. They want the new version. It's just easier for them. They've learned how to do everything, and their life's built around it, and all of that, and —

Moats are very useful.

Costco has a moat in people's mind. I mean, you know —

Amazon can raise the price of Prime, you know, 20 percent. And you can't do that unless you've built something within that image of the Amazon Prime, that's based on reality, that you're going to get a lot for your money and you're going to want to use it. And then you can raise prices $20.

But if you're selling, you know, if you're selling some commodity product, you can't do that. You need a moat.