This is a metaphor used by Warren Buffett:

        So we think in terms of that moat and the ability to keep its width and its impossibility of being crossed as the primary criterion of a great business.

        And we tell our managers we want the moat widened every year. That doesn't necessarily mean the profit will be more this year than it was last year because it won't be sometimes.

        However, if the moat is widened every year, the business will do very well. When we see a moat that's tenuous in any way - it's just too risky. We don't know how to evaluate that. And, therefore, we leave it alone. We think that all of our businesses - or virtually all of our businesses - have pretty darned good moats. And we think the managers are widening them.

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The idea of the moat is further discussed in 'The Warren Buffet CEO: Secrets From the Berkshire Hathaway Managers', by Robert Miles:

Build the brand, build the brand and build the brand. Invest, as much as possible, in the customer relationship.

Focus on building for the long term, even if that means taking short-term hits.

Plan ahead. Search for ways to keep building the competitive advantage – distribution, manufacturing, branding, acquisitions etc. Dominate, profitably, the markets you are in.

It’s not necessary to do extraordinary things to make extraordinary profits. It is necessary to do the basics extraordinarily well.

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'The Little Book That Builds Wealth', by Pat Dorsey:

    The company with the moat is worth more today because...

Author: Dean Isaji

Email: dean@thinkmentalmodels.com