Moat-ology and Competitive Advantage: Buffett vs. Musk

Elon Musk, one of the original founders of PayPal among other accomplishments, has taken the gloves off in his comments about Warren Buffett’s principle of business “moats”.

While Buffett has famously said that “wide sustainable moats” such as pricing, distribution networks, and branding lead to sustainable advantage, Musk has countered saying that competitiveness today is driven mainly by the “pace of innovation” at a company.

Musk has seemingly crossed outdated moats with his strategies in the automotive industry – or has he? The article points out that Tesla has missed several goals in producing the Model 3, underscoring the value of traditional auto-manufacturing expertise.

Predicting the death of conventional moats may be premature: even digital-age businesses such as Google and Amazon have built useful moats in size and scale. And regulatory constraints in industries such as energy, financial services, and pharma continue to act as formidable moats to new entrants.