A Tale of Three Titans: Buffett's Stability, Musk's Innovation, and Cuban's Middle Ground
News and media company Benzinga recently conducted a poll asking average Americans which entrepreneur they would most trust to invest their life savings: Warren Buffett, Elon Musk, Mark Cuban, or others. The top three results were clear: 58% of Americans chose Buffett while 11% chose Musk, and 11% chose Cuban. So why is that? And, more importantly, which of the three would financial experts choose?
Let’s begin with a deep dive on each of Buffett’s, Musk’s, and Cuban’s investments and strategies. Then we’ll ask the experts their opinions.
Warren Buffett: The Master of Value Investing
When it comes to investing, Buffett has a very conservative approach, choosing to stay away from complexity and fads and opting instead for solid, name-brand companies like Apple, Chevron, and Bank of America. “His portfolio often touches on necessities over all else […] things that all Americans rely heavily on,” stated Adam Ferrari, CEO at Phoenix Capital Group. He “has proven time and time again to have stability, long-term growth, and strong fundamentals.” Buffett advocates patience and level-headedness in prioritizing long-term gains over short-term wins. This approach is not always exciting or dramatic, but it gets the job done.
A Margin of Safety: Buffett's Key to Risk Limitation
Robert Johnson, Chairman and CEO of Economic Index Associates, explained that a key principle in Buffett’s limiting risk lies in his utilizing a margin of safety. “What margin of safety means is that one only invests in a company when its market price is substantially less than its intrinsic (or true) value.” Basically, Buffett shops for a good deal by recognizing companies that are inherently strong but have yet to fully take flight. “Therefore, if things don’t go to plan with a company, there is a large cushion before the investor suffers losses,” stated Johnson.
Elon Musk: The Visionary of Disruptive Innovation
Musk, considered the opposite of Buffett, is known for taking big swings in uncharted waters. For this reason, his investments in innovative companies like Tesla, SpaceX, and X (formerly Twitter), as well as additional holdings in Bitcoin, are considered volatile and high-risk. However, they could have the potential for massive rewards.
Yet, it can be harder to pinpoint Musk’s precise investment strategy because, rather than being driven specifically by the company’s performance, he is driven by his belief in the mission of a company (typically, rebellion against the status quo) and his subsequent confidence in running it. Instead of pursuing diversification, “he places large bets on companies he controls,” according to a previous article from GOBankingRates. Musk is quoted as saying, “It’s OK to have your eggs in one basket as long as you control what happens to that basket.”
Mark Cuban: The Balanced Investor
“Mark Cuban offers a middle ground between the conservative and the adventurous,” stated Stephen Greet, investment guru and Co-Founder at BeamJobs. “He’s made a fortune through a combination of traditional business acumen and a knack for spotting emerging opportunities.” While Amazon and Netflix are in Cuban’s stock portfolio, most of his investments are outside the publicly traded markets. Examples include pharmaceuticals and (most notably) the Dallas Mavericks.
Cuban amassed most of his wealth during the dot-com boom when he founded one of the first sports-centered internet radio companies, Broadcast.com, which sold to Yahoo for $5.7 billion in stock — a deal he protected by selling calls which ultimately safe-guarded him against the market crash weeks later. Today, he is perhaps best known for his decade-plus run on Shark Tank where he invests in startups. Cuban could be seen as existing at the intersection between stability and innovation.
The Experts Weigh In: Buffett Emerges as the Clear Favorite
For the most part, financial experts agree that Americans got this one right. “In my mind, there is no doubt who Americans should trust most to invest their money, and that is Berkshire Hathaway CEO and Chairman, Warren Buffett,” stated Johnson. “His compound annual return from 1965 through 2023 has been 19.8% — nearly double the S&P 500 over that period. The overall gain for Berkshire shareholders over that time period has been 4,384,748% compared to that of the S&P 500 at 31,223%.”
Ferrari agreed that Buffett would undoubtedly be the most trustworthy for safeguarding investments over the long haul, and David Kass, Clinical Professor of Finance at the University of Maryland, Robert H. Smith School of Business, called Buffett the best investor in the past hundred years. “Although Elon Musk is a technological genius, some of his investments have not worked out well,” stated Kass. “His recent $44 billion acquisition of Twitter is now valued at about half that amount. Tesla has declined substantially over the past two years and is down by 16% in 2024 year-to-date as compared to the S&P 500, which is up 15% thus far in 2024.” Regarding Cuban, Ferrari emphasized that he may lack the finesse of a proven track record “which navigates through all kinds of market conditions in the way Buffett has.”
A Matter of Personal Values and Risk Tolerance
Still, other experts like Greet argued that the choice of who to trust with your money isn’t a one-size fits all, and may have more to do with individual “values, goals, and risk tolerance.” Jake Falcon, CEO at Falcon Wealth Advisers, similarly cautioned taking general investment advice from anyone not acting as a fiduciary on your specific portfolio.
Ultimately, the decision of who to trust with your money is a deeply personal one. While Buffett’s proven track record and conservative approach may make him the safest choice, Musk’s innovative ventures could offer higher returns, albeit with higher risk. Cuban's balanced approach might appeal to those seeking a blend of stability and growth. Regardless of your preference, it's crucial to do your own research, understand your own risk tolerance, and seek advice from a qualified financial professional.
