Warren Buffett: Why I'd Bet Against Tesla (UNBELIEVABLE)

so let me say warren buffett for example andrea telly frank i'm not his biggest fan oh alternatives have a future then they are the future over time but you can't change the world the base of the world i mean you've got 260 million vehicles on the road or whatever number it is in the united states and i don't know how many around the world and they're not changing what they use tomorrow and uh you know the average age of the american vehicle the auto i think it's 11 to 12 years something like that and so the world can't change dramatically and and anybody thinks you can change energy sources ten percent of the year it just doesn't work that way and then uh but the world is going in the right direction in terms of of working toward uh minimization of carbon speaking of those cars i mean look at tesla and what elon musk is doing i mean that kind of is a revolution right well it's it's an important change but if you guessed on the penetration of electric cars let's say we say so 17 million or something a year in 2030 when i'll be 100. uh i would say that i'd be surprised if more than a third of those would be electric well that's two-thirds of an arc plus all the ones and so of the total car of the total vehicles on the road it still might be 10 to electric tops or something like that worldwide i mean you can't change this mass of of of transportation uh you can't change it in here it is changing it should change but but in terms of just the math of of of replacing if if we said we're going to junk all the cars we have well you know the economy would stop i mean we can't produce we couldn't replace them what do you think of elon musk though if you met him and would you invest in tesla well i think you're trying to bait me a little i don't know i'm just asking you you can say no no no he's done some remarkable things okay he's done some remarkable things have you met him oh yeah he uh he joined the giving pledge uh some years ago that i've only met him once or twice but but uh yeah that's a i've talked with him but not for quite a while and would you invest in tesla no okay uh elon musk says that tesla will start to offer insurance for its cars and can price it better than a typical insurance company because of the data it collects from all the vehicles on it the road you've talked about the threat of autonomous vehicles on the insurance business but what about the threat to geico of automobile companies themselves getting into the insurance business and on a very similar topic tesla recently announced that they're shifting to an online only sales model and several traditional auto dealerships are also reducing their property holdings as car buyers increasingly use smartphones and the internet to shop for cars what does this portend for berkshire hathaway automotive yeah actually general motors had a company for a long time called motors insurance company and various companies have tried it i would say that uh the success of of the insurance company of the auto companies getting an insurance business are probably about as likely as this success of the insurance companies getting into the auto business it uh i worry much more about progressive than all of the auto company possibilities that i could see in terms of getting insurance business it's not an easy business uh at all and uh uh i would bet against any company in the auto business being any kind of a out of an unusual success the idea of using telematics in terms of studying people studying people's drivers happens that's that's spreading quite quite widely and it isn't important it is important to have data on how people drive how hard they break how much they swerve all kinds of things so i don't doubt the value of the data but i don't think that the the auto companies will have any any advantage to that i don't think they'll make money in the insurance business the uh using the internet to shop for cars is like you know using internet for shopping for everything it's another competitor and uh there's no question that people will look for better ways now the gross margin on news cars on new cars is about six percent or they're about so there's there's not lots of room in the game but but that's that will be a method and that will sell some cars and that there are you know it's it's another competitor but i don't think it it destroys the auto dealer who takes good care of the customers and is is there to service the customers and know that it's not a it's not an overwhelming threat but it's obviously something that's going to be around and we'll sell some cars 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 got two types so they don't combine the penis with the ones but i think they're number two and four and you know hershey's in there number three or something of the short yeah i can't take them on i don't say i don't think eli should take a bond you know they have moats when you go into a drug store 7-eleven or something and you say i would like a snickers bar and the owner says oh i've got something uh the mosh 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 the brand's brands or moats i mean obviously and and and and if you try to you know this product is selling you know to hundreds of millions of people who want coca-cola if you say i'll sell you something for two cents less or i've got some celebrities 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 uh i i don't really have the same urge to produce automobiles that he apparently has to produce candy but i don't i don't suggest any take on snickers 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 do you even know elon musk i've never i've never said anything negative about elon i mean you know you're abating me a little bit to do it i am but uh but i've never you know i i people like his car and everything but uh uh but somebody mentioned that now he's talking about financing something this morning about that i i i thought i heard that yes well actually andrew just read some headlines where it looked like they may be tesla may be going back to market to to pick up some additional financing i'm not entirely sure i hear was that all i heard was the headline that's what i call a counter-revelation i mean charlie you know because i think it was just a few days ago they said they wouldn't need financing it's it but you know he's trying something to improve a product and i i salute them for that and the american public will decide whether it's a success and and and it's not easy you know so it's probably easier to develop a new car doesn't compete with stickers uh but some products have terrific boats probably elmer's glue does you know wd-40 i mean you can there's just certain things that you are not much inclined to be dissatisfied with and see and i would say that incidentally that the that the iphone uh you know has a terrific mode i mean people that have an iphone uh uh or maybe have some other phone but they they want to continue with the product that they've got they want they want the new version it's just easier for them they learn how to do everything and their life's built around it and all of that and moats are very useful costco has a mode in people's mind i mean amazon can raise the price of prime you know 20 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 you're selling some commodity prop a product you can't do that you need a mode elon musk this week on his tesla earnings call said the following quote i think moats are lame they are like nice in a sort of quaint vestigial way and if your only defense against invading armies is a mode you will not last long what matters is the pace of innovation that is the fundamental determinant of competitiveness unquote so warren it seems the world has changed business is getting more competitive pace of innovation technology is impacting everything is elon right well the idea or elon says a conventional mode is quaint and that's true of a bottle of water and he says that the best moat would be to have a big competitive position and that is also right all right so it's ridiculous warren does not intend to build an actual moat even though they're quaint yeah there's certainly a great mem a great number of businesses this has always been true but it does seem like it uh the pace has accelerated and so on in recent years there's been more moats that have been become susceptible to invasion uh that seemed to be the case earlier but there's always been the attempt to do it and there here and there there are probably um uh places where the mode is as strong as ever but certainly uh you can work it certainly should be working at improving your own mode and defending your own mode all the time and then uh elon may turn things upside down and in some areas uh i don't think he'd want to take us on in candy but and we've got some other businesses that when he's always either uh you can um you can look at something like um animals out there in the other room and and uh that it won't be technology that takes takes away the business and and incredibles and maybe something else that catches the young kids fantasy or something but uh there are some pretty good moats around being the low-cost producer for example is a terribly important mode and something like geico uh technology has really not brought down the cost that much and that i think i think our position as there are a couple of companies that have costs as low as ours but among big big companies we are a low-cost producer and that is not bad when you're selling an essential item okay greg apple has been suggested by some analysts who are pretty smart that they should get into the electric vehicle business and maybe do so by buying tesla you and charlie munger your vice chair did this years ago with byd buying electric vehicle an electric battery company um would you suggest that apple get into or would you support it if they bought well i would support what tim cook does better i i think i think it would be a very poor idea to get into the auto business it's not an easy business and incidentally that the auto business is different than something if if you're premier with google on search or you're a premier you know with movies on netflix whatever it be there's a huge first mover and size and you know and and network effect and all that working for you you can win an audit one year and you lose the next i mean you've got a dozen big companies out there with resources they're going to keep coming they copy what you do people move from one year to another you don't worry about the fact that you know your whole life is on the iphone as opposed to you don't want your whole life and to be in one car or something it's not it's not a it does not give you like permanent advantage the always colorful elon musk the ceo uh got into a little trouble recently if one of your ceos did an elon musk type of tweet i'm going private of course they wouldn't go private but they revealed something they shouldn't have how would you have handled that well i think i think what you do if you misspeak and i can do it with you or somebody you know i mean if you misspeak uh you correct it immediately and if you've got a stock that's trading like crazy you come on three minutes later and and don't say and say i misspoke when i said lending secured i meant to say i really think i can get funding i mean or something bitcoin you and charlie have told fox business and made news calling it rat poison rat poison squared has anything changed to make you take a second look it will come to a bad ending [Music] still

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Id: WNJfJs5A5Z0

Length: 14min 15sec (855 seconds)

Published: Sun Jun 13 2021