The Moat

WARREN BUFFETT: OK, good. The questions you ask are right on the mark. And we do think, to the extent I understand what — or have read what Porter has written, we think alike, basically, in terms of businesses. And we do call it a moat. And he makes it all into a book, but that’s the difference between the businesses we’re in. (Laughter) I — and Charlie may have a different view on this. I don’t think that the quantity or sustainability of moats in American business has changed that dramatically in 30 or 40 years. Now, you can say that Sears and General Motors and people like that thought there were some very wide moats around their businesses, and it turned out otherwise when, in the case of Sears, Walmart, for example, came along. But, I think — the businesses we think about, I think the moats that I see now seem as sustainable to me as the moats that I saw 30 years ago. But I think there are many businesses — industries where it’s very hard to evaluate moats. There — those are the businesses of rapid change. WARREN BUFFETT: Well, there you have it. (Laughter) Unanimity at Berkshire. OK. I think it’s a very good question. And I really don’t — you know, Charlie may be right, I may be right. I think it’s a very tough one to figure. But regardless of whether there are fewer or that — harder to find, that’s still what we’re trying to do at Berkshire. I mean, that is what it’s all about. Our instructions to our managers — we don’t have budgets and we don’t have all kinds of reporting systems or anything else. But we do tell them to try and not only protect, but enlarge, the moat. And if you enlarge the moat, everything else follows.

It — We do love the companies, obviously, with the moats around the product long — where consumer behavior can be, perhaps, predicted further out. But I would say it’s getting harder to — for us, anyway — to anticipate consumer behavior than we might’ve thought 20 or 30 years ago. I think that it’s just a tougher game now. But we’ll measure it and we’ll look at it in terms of returns on present capital, returns on prospective capital. We may have — we can — A lot of people give you some signals as to what kind of people they are, even in talking in the first five minutes, and whether you’re likely to actually have a satisfactory arrangement with them over time. So a lot of things go on fast, but it — We know the kind of sectors we kind of like to — or the type of business we’d kind of like to end up in. But we don’t really say, “We’re going to go after companies in this field, or that field, or another field.” Charlie, you want to?

WARREN BUFFETT: Well, just - though the system may have a moat against intruders, it doesn’t mean that everybody operating within the system has individual moats, for one thing. Now, I - we are - if this new triumvirate succeeds at all, we are attacking an industry moat. And I’m defining industry very broadly; health care, not just, you know, health care insurers or this or that. We’re trying to figure out a better way of doing it and making sure that we’re not sacrificing care. And the goal is to improve care. And like I say, that is a - that’s a lot bigger than a single company’s moat. It’s bigger than a component of the industry’s moat. The moat held by the whole system, since it interacts in so many ways, is actually - that’s the moat that essentially has to be attacked, and that’s a huge moat. And like I say, we’ll do our best. But - I hope if we fail, I hope somebody else succeeds. Charlie? WARREN BUFFETT: Yeah. (Laughter) There’s certainly a great number of businesses - this has always been true, but it does seem like it - the pace has accelerated and so on, in recent years. There’s been more moats that have been - become susceptible to invasion - than seemed to be the case, earlier. But there’s always been the attempt to do it. And there - here and there, there are probably places where the moat is as strong as ever. But certainly - you could work at - certainly should be working at improving your own moat and defending your own moat all of the time. And then - Elon may turn things upside down in some areas. I don’t think he’d want to take us on in candy. But - (Laughter) And we’ve got some other businesses that wouldn’t be so easy to You can look at something like Garanimals out there in the other room. And - it won’t be technology that takes away the business in - (laughs) - Garanimals. Maybe something else that catches the young kid’s fantasy or something.