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Not so hot take: The Soul of a New Machine is a story of a company with no moat.

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But here’s another weird story: Helmer asserts that margin compression happens because competitive arbitrage, right? You do something hugely profitable, those profits attracts competitors that copy you and drive your margins down. Except … sometimes they don’t appear!

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For some strange reason, Shopify managed to grow without serious competition for much of its early life. You can hear the

@AcquiredFM

guys ponder this (they riff on Magento at the beginning, another non-serious competitor):

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I’m trying to write something longer than a blog post and to keep myself motivated I’m breaking it up into smaller pieces and publishing them here. So this should be read in conjunction…

There’s another useful idea here.

@ganeumann

has this wonderful series of posts talking about the only moat a startup has in its early days: uncertainty! That’s totally true:

reactionwheel.net

Startups and Uncertainty

And, yes, uncertainty can’t last; eventually you prove out your business model and incumbents and copycats pay attention. But it *is* a mild Barrier in the beginning.

And I think the most bizarre thing is that, in the long term operational excellence isn’t a moat; in the short term, or in small markets, operational excellence can totally allow you to crush your competitors. Mostly because the good people don’t enter.

(Mostly speaking from experience here: in my previous company we kicked the asses of several of our competitors because they were resellers with no technical capability; the startups with technical capability weren’t competent enough to read the shape of the market.)

(But our market — point of sale systems in Singapore — was so small it didn’t matter lol; no serious competitor entered. There *is* a reason Helmer inserts the clause ‘significant markets’ in his definitions!)

Follow if you’re interested in career moats or business moats or cats, I’ll probably be doing a few more threads like this in the next few weeks.

Highlights from my 7 Powers summary (tl;dr, READ THE SURPLUS MARGIN EQUATIONS):

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Jun 10, 2021

I just published a 10400 word members-only summary of 7 Powers on Commonplace, probably my longest post ever. I've not seen very many summaries that do a good job of representing the nuances of Helmer's framework. So here's a thread on the highlights. commoncog.com/blog/7-powers-

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