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."

Below is a chart from Benedict Evans comparing annual revenue from the Wintel era (Microsoft + Intel) to the current GAFA era (Google, Apple, Facebook, and Amazon). 

His argument is that, today, “the scale of tech winners” is about 10x what it was during the previous cycle.

And here is a chart, from that same post, showing how the internet ate print ads when it comes to global revenue:

A lot of this has to do with the unprecedented growth of smartphones and the sheer number of people who came and are coming online. Mobile is 10x the PC market.

But the other interesting narrative from the post is the argument that these companies (GAFA) have learned from previous generations just how aggressive you need to be to survive.

The shift to mobile posed a structural threat to Facebook. At the time of its IPO, there were serious doubts as to whether the company would be able to pull off this transition.

Which is why the founder went out and spent 10% of the company to acquire companies that would help with this transition and ensure its survival. That seems to have worked.

In the words of Andrew Grove: “Only the paranoid survive.“ And in today’s tech world, the rewards for surviving are that much bigger.

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."

Below is a chart from Benedict Evans comparing annual revenue from the Wintel era (Microsoft + Intel) to the current GAFA era (Google, Apple, Facebook, and Amazon). 

His argument is that, today, “the scale of tech winners” is about 10x what it was during the previous cycle.

And here is a chart, from that same post, showing how the internet ate print ads when it comes to global revenue:

A lot of this has to do with the unprecedented growth of smartphones and the sheer number of people who came and are coming online. Mobile is 10x the PC market.

But the other interesting narrative from the post is the argument that these companies (GAFA) have learned from previous generations just how aggressive you need to be to survive.

The shift to mobile posed a structural threat to Facebook. At the time of its IPO, there were serious doubts as to whether the company would be able to pull off this transition.

Which is why the founder went out and spent 10% of the company to acquire companies that would help with this transition and ensure its survival. That seems to have worked.

In the words of Andrew Grove: “Only the paranoid survive.“ And in today’s tech world, the rewards for surviving are that much bigger.