In a digital era, Google, Apple and Amazon are examples of companies with the right trappings that will reinforce their moats.
“It was a very good sign that Warren bought Apple. Either he’s gone crazy or is learning. I prefer to think he’s learning.”
—Charlie Munger, Berkshire Hathaway Annual Meeting 2017
A recent issue of The Economist (May 6, 2017) had a cover story titled, “The world’s most valuable resource...”– data – which the magazine called “the oil of the digital era”. It went on to state: “Machine learning will extract more value from data...This abundance of data changes the nature of competition. Technology giants have always benefited from network effects...With data there are extra network effects. By collecting more data, a firm has more scope to improve its products, which attracts more users, generating even more data, and so on...Vast pools of data can thus act as protective moats.”
Mr Buffett noted at the recent Berkshire Hathaway Annual Meeting: “The five largest US market cap companies are $2.5 trillion, close to 10% of the US market. One could run them with no equity capital at all. It’s a very different world than Carnegie’s steel mills and Rockefeller’s tank cars.”
So, how different are the moats and the economics in this world – the world of the Apples, Amazons and Googles – from those of the past century on which much of our understanding of competitive advantage and strategy is based?
This story is from the June 9,2017 edition of Outlook Business.
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This story is from the June 9,2017 edition of Outlook Business.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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