No. of Recommendations: 32
In WEB's words, you don't want to compete with Musk.
It's not a comment on Mr Musk at all, but note that just because you don't want to compete with somebody doesn't mean you want to be in business with them.
I sure don't want to compete with Craigslist, the killer of the economics of the world's mighty newspapers, but similarly I don't want to be in business with Craigslist...the profit outlook is not interesting to me.
There is a key point about "disruption" that a lot of people don't fully appreciate. Often a disrupter crushes the giant bloated profitable incumbent...but the disrupter is not an interesting business to own. The wildly profitable classified ad business didn't move to a new upstart company, it just went away. Nobody is making zillions of dollars on long distance calls that used to cost an arm and a leg. You can believe that new company AAA is going to replace old profitable company BBB in their business, and be entirely right, but that is not nearly enough to suggest that an investment in AAA is a good idea.
Possible general rules:
All moats have a finite lifespan. It's not enough to identify a firm with a moat, you also have to estimate its longevity.
When a moat goes away, it doesn't usually pass to someone else, it more often ceases to exist or at least shrinks a lot.
Jim
