Warren Buffett. Picture: REUTERS/JIM YOUNG
Warren Buffett. Picture: REUTERS/JIM YOUNG

Omaha/New York — Elon Musk recently took aim at the idea a successful business needs a "moat" — a competitive advantage that keeps rivals at bay. The pace of innovation, he said, is more important in the long run.

On Saturday, Warren Buffett and his business partner, Charles Munger, shot back.

"Elon says a conventional moat is quaint, and that’s true of a puddle of water," Munger said. "It’s ridiculous. Warren does not intend to build an actual moat. Even though they’re quaint."

Munger and Buffett were responding to a question at Berkshire Hathaway’s annual meeting about Musk’s comments this week. The pair often talk about trying to expand the "moats" around their businesses.

"First of all, I think moats are lame," Musk said during an earnings call for his Tesla on May 2. "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."

While Buffett said it did seem like more moats had become susceptible to invasion recently, he still observed plenty of companies, such as the See’s Candies unit that Berkshire owns, where they were holding firm.

"Elon may turn things upside down in some areas, I don’t think he’d want to take us on in candy," Buffett quipped. "There are some pretty good moats around."

Musk did not stay silent. "I’m starting a candy company & it’s going to be amazing," he wrote in a Twitter post Saturday, responding to Munger’s remarks. "I am super super serious."

He followed up with another tweet: "Then I’m going to build a moat & fill it w candy. Warren B will not be able to resist investing! Berkshire Hathaway kryptonite …"

And then: "Saying you like ‘moats’ is just a nice way of saying you like oligopolies."