Warren Buffett saw the Alpha that Elon Musk laughed at.
A Bloomberg interviewer asks Musk about BYD. He laughs. “Have you seen their car?”
Three years earlier, Berkshire Hathaway had put $230 million into that same company, at HK$8 a share. Munger called Wang Chuanfu a mix of Edison and Welch.
Both men were looking at the same company. Musk saw the product. Buffett saw the curve: intrinsic capability, battery DNA plus vertical integration, compounding far above market valuation. The widest possible Alpha Gap.
For seventeen years, capability compounded while Western valuation stayed in the pit. Buffett held the entire gap.
Then 2022. BYD becomes the world’s largest NEV maker. The violent re-rating begins. Berkshire starts selling. Not because the story got worse. Because the stock stopped being mispriced. Value investors do not hold monopoly premium. They sell to those who do.
The deeper reason sits one curve over. BYD’s premium lives in batteries. But the car’s value has migrated from electrification to intelligence, the smart car as physical AI. On that curve, BYD holds no Alpha Gap. It is the incumbent being caught, not the dark horse being mispriced. And a new curve demands a new decade of waiting. Munger was 98. Buffett was 91.
Buffett never bought a car company. He bought the gap between what China was building and what the West could see. When that gap closed, and the next gap belonged to someone else, the trade was over.
Musk laughed at the gap. Buffett sized it.
That is not market timing. That is curve reading.
Read also: The Empire that Forgot to Enter the Next War.