Paul Mampilly on Warren Buffet and Moats

Should Investors Avoid Moats? Paul Mampilly Explains.

When Tesla CEO Elon Musk recently said that moats were lame, he referred to Berkshire Hathaway CEO Warren Buffet’s main investing philosophy. A moat is a business that does not have much competition. According to Musk, the true determining factor of competitiveness is the pace of innovation. When he made the remark about businesses as moats, he illustrated the ineffectiveness of a moat as a sole defense against invading armies.

In response, Buffet said that while Musk may turn some things upside down, he would not want to compete against Buffet in candy. Buffet was referring to See’s Candies, which is one of his companies. According to Buffet, customers of See’s Candies will stay loyal to the well-known company even if other fine candy companies emerge. Musk either took the comment as a challenge or as joke, and he replied with a tweet that said he planned to start an amazing candy company of his own. Although this leaves people wondering what Musk is up to, the issue of moats is something that sparks the interest of many business professionals and investors across the country today.

Paul Mampilly Talks About Moats

Investing expert Paul Mampilly weighed in on the conversation between the two powerful billionaires. Paul is known for winning the Templeton Foundation’s coveted investing award in 2009. To win it, he invested $50 million in 2008. That amount turned into $88 million just a year later, which was an impressive growth for an investment during one of the worst recessions of the century. Paul also spent more than two decades working on Wall Street after he finished his studies at SUNY Albany. As someone who started out as a cafeteria worker and wound up winning such a distinguished award, Paul became a trusted investment adviser for many people. His experience as a hedge fund manager who grew a fund from $6 billion to $25 billion added to his prestige. Today, Paul shares some advice with Banyan Hill readers for free, and he authors a popular newsletter called Profits Unlimited. Paul is known for making accurate but extremely bold predictions. His Profits Unlimited newsletter recently grew to more than 90,000 subscribers. Paul’s advice about investing in moats appeared in a free article from Banyan Hill.

According to Paul’s article, most people who read the discourse between Buffet and Musk about moats will side with Buffet. However, Paul sides with Musk on the argument. His reasoning is that moats lack disruption and innovation. They become targets for new large businesses that boast those benefits, and it is clear that innovation and disruption lead many markets today. Amazon CEO Jeff Bezos once said that another company’s margin was his opportunity. Many companies agree with that perspective, and they seek out opportunities that could eventually hurt or cripple moats. As Paul Mampilly pointed out, many businesses that Buffet defines as moats charge a premium for their products and have large profit margins. If no other large businesses try to compete with them, they can continue to thrive. Also, they can stay powerful with government protection or with a dominant position that intimidates people who may otherwise consider supporting a competing company.

Paul said that moats worked in the past when it was difficult to start a company. At that time, capital costs were high. The costs for distribution and marketing were higher, and manufacturing was harder to source. Large companies had the upper hand because of those factors. Today, it is much easier to start a business. Entrepreneurs can easily access capital from crowdsourcing platforms such as Kickstarter. There are also crowdfunded loans, investors and other options for attaining money for startup costs. A person can design a product on a computer, develop a prototype and send it to a 3D printer. An individual can build an alliance with a foreign manufacturing company that keeps its production costs low and can sell products without spending as much on marketing because of how effective and affordable it is to market through social media platforms. Additionally, some small startups use inexpensive online services such as Shopify for small-scale distribution until it is time for them to scale up.

Paul’s Advice About Investing In Moats

As he concluded the Banyan Hill article, Paul Mampilly said that it was a bad time to invest in moats. Before social media marketing, distribution services, cheap manufacturing, 3D printing and crowdfunding existed, his advice may have been different. However, he said that these game-changing aspects of starting a business show that moats are illusions. To emphasize his point, he added that moats thrived in the past only because those things did not exist. Paul added that his advice would probably not surprise the readers of his publications since his newsletters highlight innovative and disruptive companies. For example, many of Paul’s top picks are companies that are involved in the “internet of things,” energy, precision medicine and artificial intelligence fields. According to Paul, moats will likely go bust over the next five years as such companies take over.

In addition to his Profits Unlimited newsletter, Paul Mampilly authors another publication called Extreme Fortunes. That newsletter also shares some of his top investment picks in a variety of sectors. Paul’s latest endeavor is a new research service called True Momentum, which may help some readers gain profits as high as 100 percent. In September, Paul will speak at the Banyan Hill Total Wealth Symposium in Las Vegas. He has been featured in several news publications and on multiple television shows such as Bloomberg TV, CNBC and Fox Business News. Paul left his lucrative career on Wall Street when he was only 42 years old to retire early and to spend more time with his family. However, he also enjoys helping average Americans become wealthier and live more comfortably by providing them with the same valuable advice that he once gave to make millionaires richer when he was a respected hedge fund manager.

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