How an Economic Moat Provides a Competitive Advantage
What Is an Economic Moat?
Some companies seem to have an uncanny ability to fend off rivals and maintain their market dominance year after year. This phenomenon, known as an “economic moat,” doesn’t just keep rivals at bay but also seems to separate successful firms from those that fail.
Popularized by legendary investor Warren Buffett—it’s perhaps his favorite metaphor, used in dozens of investor talks going back decades—the term “economic moat” draws an evocative parallel with the water-filled trenches that protected medieval castles. In the business world, these moats characterize sustainable competitive advantages that shield a company’s profits from marauding competitors.
But what constitutes an economic moat and,…
