Warren Buffett: Tesla Stock Is A Terrible Investment (TSLA)

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 the success of the auto companies getting into the insurance business is probably about as likely as the success of the insurance companies getting into the auto business. I worry much more about Progressive than all of the auto company possibilities that I can see in terms of getting insurance business. It's not an easy business at all. I would bet against any company in the auto business being any kind of an unusual success. The idea of using telematics in terms of studying people's driving habits, that's spreading quite widely, and it is important to have data on how people drive, how hard they brake, how much they swerve, all kinds of things. So I don't doubt the value of the data, but I don't think the auto companies will have any advantage. I don't think they'll make money in the insurance business. Using the internet to shop for cars is like using the internet for shopping for everything. It's another competitor. There's no question that people will look for better ways. Now, the gross margin on new cars is about six percent, so there's not lots of room in the game. But that will be a method and will sell some cars. It's another competitor, but I don't think it destroys the auto dealer who takes good care of the customers and is there to service the customers. It's not an overwhelming threat, but it's obviously something that's going to be around and will sell some cars. Charlie?

Yeah, I can't take them on. I don't think he likes to take a bond. They have moats. When you go into a drugstore, 7-Eleven or something, and you say I would like a Snickers bar, and the owner says I've got something, the Musk 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 brands, brands are moats. Obviously, if you try to, this product is selling to hundreds of millions of people who want Coca-Cola, if you say something for two cents less or I've got some celebrity's 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 I don't really have the same urge to produce automobiles that he apparently has to produce candy, but I don't suggest any take on Snickers.

I've never said anything negative about anyone. I mean, you're debating me a little bit to do it, but I've never. People like his car and everything, but somebody mentioned that now we're talking about financing something this morning. I thought I heard that earlier.

I mean, Charlie, you know, because I think it was just a few days ago they said they wouldn't need financing. But you know, he's trying something to improve a product, and I salute him for that. The American public will decide whether it's a success, and it's not easy. So it's probably easier to develop a new car than to compete with Snickers. But some products have terrific moats. Elmer's Glue does, WD-40. There's just certain things that you are not much inclined to be dissatisfied with. And I would say incidentally that the iPhone has a terrific moat. People that have an iPhone want to continue with a product they've got, they want the new version, it's just easier for them, they've learned how to do everything and their life's built around it. Moats are very useful. Costco has a moat in people's mind. Amazon can raise the price of Prime $20, and you can't do that unless you've built something within that image of 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. Then you can raise prices $20, but if you're selling some commodity product, you can't do that.

The answer is yes. I think it's a long way off, but there's no question that anything that makes cars safer is very pro-social and it's bad for the auto insurance industry. But nevertheless, the auto insurance industry has always worked on making cars safer. They've led the way on things like seat belts and all that. But if there are no accidents, there's no need for insurance. I think there will be a big reduction in accidents over a longer period of time, and of course it already has. Cars have been made way safer. But now when you start making the driver safer, that would be a big, big change. That'll happen someday, and when it happens, there'll be a whole lot less auto insurance written.

Just the last year. I mean, generally speaking, the trend has been fabulous over the years. We literally have gone from 15 deaths per 100 million vehicle miles down to something close to one. You've got to give Ralph Nader credit for some of that. But last year there was an uptick. There were more miles driven, but I'm expressing this in terms of miles driven, so you have to say that there was some other variable, and I think it's almost has to be distracted driving.

It's intrinsically a very difficult thing to do. People are going to want to drive faster than the speed limit and so forth, and the software is not going to allow it. I think there are going to be lots of problems. Berkshire has experienced technological destruction before. One of the earliest examples came from Bill Gates. We had this wonderful company that made this wonderful encyclopedia that produced $50 million of net income every year like clockwork, and Bill gave away a free encyclopedia with every bit of Microsoft software, in a way destroying a large part of our profits from the encyclopedia business forever.

That's right, and it helped him to make us fortunate. Now he destroyed it. It's just the way he is.

Well, I think the software industry as a whole has so much opportunity to improve things.