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A taxonomy of moats

Jerry Neumann’s recent blog post on the “taxonomy of moats” is a great summary of the ways in which companies — and perhaps even cities — can protect themselves against competition.

Here’s an excerpt from his introduction:

Value is created through innovation, but how much of that value accrues to the innovator depends partly on how quickly their competitors imitate the innovation. Innovators must deter competition to get some of the value they created. These ways of deterring competition are called, in various contexts, barriers to entry, sustainable competitive advantages, or, colloquially, moats. There are many different moats but they have at their root only a few different principles. This post is an attempt at categorizing the best-known moats by those principles in order to evaluate them systematically in the context of starting a company.

And here is his taxonomy of moats. He identifies four main sources:

As a sidebar, consider how this might also apply to cities.

Scale, for example, matters a great deal. We know that as cities get bigger, people tend to walk faster, have broader social connections (the relationship is super-linear), and be far more productive and innovative.

If you’d like to read Jerry’s full post, click here. And if you’re interested in this space, I recommend you also check out Fred Wilson’s recent post on, “The Great Public Market Reckoning.”

1 Comment so far

  1. In the tech world, speed of innovation is often the only “moat”. Once the new “concept:” has been identified it’s often (relatively) easy to translate from concept to practice. The trick is to identify new, implementable, attractive “concepts”, and to keep identifying them.

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