What do Warren Buffett and Medieval Kings have in common?

moat 2
They both like moats (so do I).

A good economic moat can help drive market share and profitablility, here are some of my favorites for software companies:

1) Network data – the obvious example, a natural monopoly emerges when a company is able to create a dominant network.  The more participants, the more attractive it is for new users and the harder it is for competitors to gain share (Facebook, LinkedIn).

2) Marketplace – similar, but two-sided, with buyers wanting to use the provider with the most sellers, and sellers wanting to user the provider with the most buyers (Etsy, Amazon).

3) Ecosystem – a well connected company with APIs to other relevant solutions in the market has an advantage, a platform that other products are built on develops a real moat (Salesforce, Shopify).

4) Machine learning dataset – the better the training dataset, the better the AI product.  With a better product, even more data comes in, making it that much harder to catch up (Google, IBM).

5) High switching costs – alright, this one is more a ditch than a true moat.  High switching costs might not help drive market share and profitablity, but they can often help a company maintain them.

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