WTF Is a Moat?
hot take but i think a moat is skill, extreme execution & luck.
i don't understand when people pull engineering moats when raising capital. like literally any technical build can be replicated?
unless and otherwise you're a researcher, can we talk about how makes a great moat specially for consumer startups?
like what's the moat of tiktok / youtube. creators are almost all the time jumping back and forth between platforms that give more views & money, no loyalty. From a business sense, I've heard it described when a company has significant market share with longer contracts, not monthly SaaS types of businesses where in theory everyone could leave at once. A technical moat? The only thing I can think of is something like search with Google or a company with a patented, hard to build technology, probably involving hardware or something requiring getting thru legal regulation. But legal regulations are a legal moat, not technical. Usually network effects. Hamilton Helmer describes a moat as "persistent differential returns." Or in other words, it's something that lets you keep making more money than your competition. There are many kinds of moats but they all end up giving you that outcome. This website is a fantastic resource: https://7powers.com/ Ironic how moat is a metaphor based on a defense that has been useless for... I dunno... 200 years? A moat is great until warfare changes. Maybe thats the point. A moat is your "rent seeking runway", a capacitor that you can draw on while you reinvent yourself or die. Most of these were actually ditches. Ditches stopped cavalry or redirected them. The water is unnecessary. They were also dug on the spot, like hours or days before battle rather than around a fortified castle... a little ditch just messes with movement drastically. I like the analogy of ditches though. Network effects fall apart quickly. I signed up for Spotify/Netflix/Google Premium with my family, but I unsubscribe as a family too. Just add something that slows down the competitor. Software giants are like cavalry or battle tanks. They're expensive and unstoppable, but they can't go uphill very well, and you should be just throwing a few obstacles here and there instead of entrenching yourself. The new trendy moat are multi-verticals in SaaS. Hard to compete and as a customer it's hard to choose another competitor because the current package includes just so much. The only moat that matters is gaining and keeping customers. In addition to the network effects mentioned elsewhere: capital-intensive businesses that have raised significant capital and have a head start have moats. So for instance, the reason a power company is a natural monopoly is that power transmission infrastructure is massively expensive to build, and the first one to raise the capital and build it out has a moat. The same applies to something like video hosting that requires massive infrastructure (tho less so now than 15-20 years ago when YouTube was getting established.) Or AWS — it takes massive capital to compete with them head to head, and even Google hasn’t entirely succeeded at that. (Microsoft sort of has, but mostly because their proprietary OS that’s so heavily relied on by enterprise is its own moat.) Marketplaces are network effect adjacent. The reason no one really competes with Amazon (or in their niches, eBay or Etsy) is that all the buyers and all the sellers are already there. Same for Uber and Lyft. IP is a type of moat for content based businesses like TV streaming services (Disney, Netflix, etc). Apple tries to use the ubiquity of its devices as a moat for its services and massively profitable app store — though it’s a weak moat for the services and starting to be weakened by antitrust laws for apps/IAPs. Technical moats, well… some tech expertise isn’t sufficiently widespread that any upstart competitor can hire someone to do the work. If you want to compete with Nvidia, good luck hiring all the world-class experts you’d need. Microsoft’s moat? Switching costs, including learning curves. And all the software written specifically for Windows that’s not available on other platforms. Switching costs are also a major moat for an email service like Gmail. > Apple tries to use the ubiquity of its devices I think the ecosystem is Apple’s moat. The ubiquity of everyone in a friend group having them in since and its own moat that creates social pressure to have what your friends have, but I think the same could be said for Android. Even without other people, if a person has more than one device, Apple’s integration between them is pretty solid. If someone already has one or two Apple products, it makes sense to stick with them for anything else, because it will all work together so much better. I got my first Mac because I had an iPod and the software for Windows was trash, I wanted iTunes and the idea of it being on Windows was just a rumor at that time. Once I had the Mac it made sense to get the iPhone. Once I had those it made sense to get the Apple TV, AirPods, Apple Watch… if I’m in the market for something in those product categories. Not to mention that Apple's approach (whether genuine or not) to consumer privacy, usability, etc. is perceived as better than Google's or Microsoft's. Branding is a moat in itself. Nvidia mid or long term has no moat. It has to keep innovating. Groq are coming for them. AWS are coming for them. TSMC are in a country that could be at war in the next 10 years. Guess thats a spicy take :) Nvidia's Moat is CUDA, it's become so entrenched in development stacks that people have inertia in moving to anything else.
I've been in situations where I've wanted to use other GPUs and everyone's said to be "but surely you want Nvidia?!" because it's the de facto now.
AMD, Intel and others haven't done enough to break the NVidia API monopoly in the past decade. Intel's done stuff with One and AMD sponsored that CUDA converter thing. But there's not been enough effort to break through even when that's fundamentally the blocker. If AMD and Intel want to compete, they need to think about the early years of computer software development. When people would say "Oh, we're not going to port our software for Amiga, PCs are now more popular." There is some portability in games for new GPUs, but it's CUDA in scientific and enterprise where they should have broken the CUDA stranglehold. You make a most after you've won and become huge. The most prevents smaller, more innovative companies from succeeding even though they're better than you. For example, good luck building a better search engine without Google's data. "hot take but i think a moat is skill, extreme execution & luck." Lol. That is the exact opposite of the meaning. Example moats: having cleared FDA two times, getting a great relationship with a taxi board, getting 50% tax breaks from a city in Ohio, etc etc. Moats are x10000 more valuable than "hard work or execution".