If you had to choose between following the investment path of an 84-year-old billionaire from Nebraska who drives an older model Cadillac and a 43-year-old billionaire from South Africa who tools around in an all-electric Tesla (NASDAQ:TSLA), I’m quite sure the choice would be easy depending on the type of person you are. Younger, free-wheeling with a penchant for risk-taking? You’re probably going with Tesla Boy. Slightly older with the term ‘baby boomer’ attached to your profile, and bets are you’d go with Cadillac Man.
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But let me throw you a curve ball here: If you had to choose between the investments these business luminaries have gone with when it comes to Solar, the lights dim on the ease of that choice.
The men in question -- Warren Buffet and Elon Musk -- are arguably two of the smartest risk takers of our time. But both have taken entirely different paths to billionaire status. That, too, goes for the money they’re throwing behind solar.
Buffett loves energy of all kinds. He has an entire unit within his multi-billion dollar conglomerate Berkshire Hathaway (NYSE:BRK.A) called Berkshire Hathaway Energy. There, he operates natural gas pipelines, electric utilities and grids, along with both solar and wind farms.
Lately he’s been committing billions specifically to solar which, he has said, “may not make you rich but it will keep you rich.” Buffett is such a believer that he’s poured $15 billion into renewables and said recently he’d double down on that.
His massive foray into solar grabbed investors’ attention when, back in 2013, he bought SunPower’s gigantic solar-generating stations in California. The plants weren’t even completed yet but SunPower (NASDAQ:SPWR) promises that once up and running, they will be the largest permitted solar-voltaic generator on the planet. The genius of Buffett’s investment came just two years after solar naysayers were yelling “I-told-you-so” after the dramatic implosion and liquidation of solar cell panel maker Solyndra, which had received a Department of Energy loan of $536 million dollars before failing. In other words, solar wasn’t shining and Buffett knew it. A classic, Buffett ‘buy unloved areas’ play.
On the other end of the light spectrum, Elon Musk has made an entirely different bet and he did it well before Buffett jumped on the solar-powered band wagon.
Eight years ago, the Paypal co-founder and Tesla CEO helped launch SolarCity (NASDAQ:SCTY) with his cousin, Lyndon Rive. The soup-to-nuts provider of solar services installs rooftop solar and designs, finances and builds solar systems for corporations both large and small. SolarCity counts Wal-Mart and the U.S. military along with hundreds of thousands of residential homeowners as clients.
So here we go, back to the choice of which billionaire to follow. Both SunPower and SolarCity are publicly-traded companies. When you compare three-year charts of the two, the movements tend to mirror each other, with growth spurts around May and November of 2013, along with a significant spike for SolarCity in March of 2014. Comparison charts show SolarCity has sometimes out-performed SunPower; however, these are highly specific businesses that don’t exactly mirror each other when it comes to their genetics. Make no mistake: these stocks are noisy and volatile. Therein lies the billionaire attraction: quite frankly, all newer areas of development whether it’s Chinese Internet stocks or social media usually are volatile and a little scary at times to own. Solar companies are capital-intensive and highly dependent on everything from the price of oil to political winds to the expiration of tax credits set to hit in 2016. But last I checked, just about every self-made billionaire from Buffett to Musk took major risks on opportunities swirling with unknowns.
Buffett and Musk have vastly different styles. Buffett sees the world in very practical terms. He and his vice chairman and longtime friend Charlie Munger told Fox Business in 2009, “If we don’t harness the wind, the sun and the water for energy, we’re just stupid.” I’d say putting $15 billion behind that is putting your money where your mouth is. Buffett, Munger and Berkshire have done that in spades. Musk, on the other hand, is an entrepreneur-slash-dreamer who refuses to see failure. Hewlett Packard CEO Meg Whitman (who ran eBay when it bought Musk’s PayPal years ago) told me in 2012, “Elon just wills things to happen.”
But removing the cult of personalities involved, the reality of our nation’s electrical demands is quite harsh. The aging electrical grid is a spit-and-sealing-wax creation that’s highly unreliable during winter storms and summer hurricanes. David Crane, CEO of electricity behemoth NRG, told Forbes that roof-top solar is NRG’s fastest growing business--this from a fossil fuel-run, old-school energy giant. “Think how shockingly stupid it is to build a 21st-century electric system based on 120 million wooden poles,” Crane was quoted as telling a conference of utility executives earlier this year.
Buffett and Musk are already there, establishing themselves as investor-believers who truly aim for one thing: shareholder return. The choice is yours as to whether you let the sun shine in.
This article originally appeared on LinkedIn.