Mark Sellers: technology is not an investor's economic moat1999 2018-10-02 21:42
Economic moat: a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share
Those who are NOT sources of an economic moat
- technology. technology will always be duplicated
- reading a lot. reading only makes people keep up. Everyone reads a lot in this business. Some read more than others, but it does not necessarily make you more competitive.
- an MBA from a top school or any other degrees or designations. This often gives people a big paycheck even though it is the antithesis of what a great investor does.
- Experience. In order to play the game, some level of experience is necessary, but at some point, it doesn’t help anymore.
Those who are sources of an economic moat
- economies of scale and scope. e.g. Wal-Mart, Home Depot, Lowe’s.
- network effect. e.g. eBay, Mastercard.
- intellectual property rights, e.g. patents, trademarks.
- high customer switching costs. Paychex and Microsoft.