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Warren Buffett vs. Elon Musk: Investing Philosophies, Electric Cars, and Solar Power
Posted on February 15, 2016 by Matt Pressman
Two billionaire business mavericks, Elon Musk and Warren Buffett, may have more in common than you might think. The two icons look at investing, electric cars, and solar power in similar ways. Yet, their approach differs. Sometimes the two clash and sometimes they mirror one another. It's worth taking a look into the parallels (and battles) between these two during their prolific business careers.
A few week's ago, Warren Buffet amusingly described the stock market as follows: “This imaginary person out there -- Mr. Market -- he's kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed. And when he get really enthused, you sell to him and if he gets depressed you buy from him.” Interestingly, Elon Musk seems to agree with Buffett on this investing philosophy. Musk actually quoted Buffett in an interview: "I try to avoid watching the day-to-day share price, because it's somewhat distracting. People try to really read the tea leaves, even though there's really not enough information to make conclusions. And then they'll get exuberant, and then depressed. I mean, as Warren Buffet said, dealing with the market is like dealing with a manic depressive."
Source: Fox Business
In addition, Buffett and Musk are both voracious readers. Elon Musk simply read books to learn about rocket technology according to aerospace expert Jim Cantrell: "He'd been borrowing all my college textbooks on rocketry and propulsion. You know, whenever anybody asks Elon how he learned to build rockets, he says, 'I read books.' Well, it's true." And, Warren Buffett credits his business savvy to constant study, claiming, “I just sit in my office and read all day.” When asked how to get smarter, Buffett once held up stacks of paper and said he 'read 500 pages like this every day. That's how knowledge builds up, like compound interest.'"
One thing is definitely clear - both of their investing philosophies display a keen interest in green technologies.
According to Autos Cheat Sheet, "The results for plug-in electric vehicle sales for 2015 are in, and there are a few new kings of the global market. Tesla nailed down the sales title for an individual car with its Model S luxury sedan topping the charts both in the U.S. and around the world. As for the top-selling EV maker, that honor goes to Chinese company BYD, which moved over 60,000 plug-in cars, most of them in its home country." Buffet owns about 10% of BYD (Build Your Dreams), the Chinese electric car company.
Source: Bidness Etc
While both companies are working on massive battery factories and electric vehicles, BYD has a rather different business model than Tesla. The BYD Qin is China's best-selling plug-in electric and sells for about $31,000USD. When analyzing the lower-priced Qin vs. the Model S, their differences become apparent: "BYD ’s Qin car has a 44 mile [electric] range, compared to Tesla [Model S]’s nearly 300 mile range. It [BYD's Qin] isn’t totally electric... making the car more a [plug-in] hybrid rather than an all-electric vehicle... [and] BYD has also targeted its vehicles specifically to the needs and wants of the Chinese consumer, while Tesla Motors Inc is using the U.S. market as a gauge for what is desired." Does Musk see BYD as a threat to Tesla? Check out his reaction a few years back when asked on Bloomberg...
Source: EVUK0001 via Bloomberg
Musk and Buffett are engaged in a major solar power battle in Nevada. The Nevada Public Utilities Commission voted recently to "essentially gut solar net metering in the state. In one corner is NV Energy, the incumbent utility and a subsidiary of Warren Buffet's Berkshire Hathaway Energy, which is pushing to add charges and otherwise lower the payments to customers whose rooftop solar panels feed energy onto the grid. NV Energy, and its Buffett-owned parent, have invested heavily in utility-scale solar.... In the other corner are solar rooftop leasing companies, notably SolarCity, whose board is chaired by tech icon Elon Musk... [SolarCity has] been fighting an uphill battle against the long-established utility [Buffett's NV Energy] to preserve the favorable rates that led to the state’s two-year rooftop solar growth spurt."
Source: Bloomberg Business
The solar war in Nevada could be a microcosm of what's coming between these two. And, as China becomes a bigger market for Tesla with the launch of it's lower-priced Model 3, Tesla Motors and BYD will likely compete head-to-head. As we watch these two business visionaries, Buffett and Musk, we see similar investing philosophies and focus on green tech - yet, it's clear they're taking different paths. That said, it will be fascinating in the years to come to watch how these two work somewhat in tandem (albeit with vastly different approaches) to transform how Wall Street and the world views the energy paradigm.