The idea of an "economic moat" comes from Warren Buffett[1] and it was/is part of his investing philosophy to look for companies with some sort of unique feature which allows them to dominate markets and create effective monopolies on their particular niche. It makes sense in that context but it doesn't necessarily apply everywhere.
What if you're just trying to create a business that gives you a good lifestyle and you're not looking to dominate? Maybe the market is big enough that if you just take a piece of it that's plenty. There are plenty of businesses out there that are offering a product that is one of a range but the market is large enough to sustain multiple offerings.
Not everyone needs a moat because not everyone is trying to build a castle.
[1] I believe he first used it here in his shareholder letter where he describes GEICO's low costs as creating a moat that competitors couldn't cross. May have been earlier but most people credit the invention of the term to him anyway https://www.berkshirehathaway.com/letters/2016ltr.pdf
Agreed.
>What if you're just trying to create a business that gives you a good lifestyle and you're not looking to dominate? Maybe the market is big enough that if you just take a piece of it that's plenty. There are plenty of businesses out there that are offering a product that is one of a range but the market is large enough to sustain multiple offerings.
Yes. In fact, the majority of businesses in the world are probably this way.
>Not everyone needs a moat because not everyone is trying to build a castle.
That's a brilliant line and metaphor. Gonna steal and share it whenever and wherever I can. Thanks.
His moat is a combination of pricing + cost structure + time spent to cumulate the customer base.
If someone were to enter the market and try to take his business, they will have to consider if their conditions can result in the same offerings. I don't think it's easy to match the same offerings.
