Economic Moats

What this unit covers

Learn two more kinds of moat, network effects and legal protection, and put the full moat check to work on a real company.

By the end you will be able to

• Explain how a network effect protects a product even with no brand loyalty.
• Explain how legal protection blocks rivals regardless of customer preference.
• Apply the full five-category check to a real company, category by category.

How it starts: The App Everyone Already Has

1. You try a new messaging app with no ads and better features.
2. Your family, your housing society and your bill group are on the old app.
3. The old app has no brand and no switching cost, so what protects it?

Words you will meet

Network effect

A product becomes more valuable to each user as more people use it.

Legal protection

A patent, licence or regulatory approval that blocks rivals regardless of product quality.

Cost advantage

The ability to produce or deliver something more cheaply than rivals can.

In this module: Finding Great Companies

1. Sector Analysis
2. Competitive Analysis
3. Economic Moats (this unit)
4. Case Study: Finding a Long-Term Winner