Anyone here really pay attention to economic moats?

SYTFE

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Jun 25, 2016
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I'm referring to Morningstar's interpretation of what Buffett calls a "moat." They've uncovered some very good moats, such as a 'network effect, intangible assets, trap door and cost advantage.'

I've become SUPER tuned to these concepts, and I can now see other "moats" as well that they don't mention. Owning my own business has made be hyper sensitive to these invisible moats, and I think they're key for picking companies to buy.
 
While moats do exist finding companies that have them before they price themselves out of undiscounted value is very hard to do.
 
I prefer sticking with companies that are worth more dead than alive with positive underpriced earnings.
 
What is a moat, a trap door, or a network effect?
Network effects are quantifiable as derivatives of ([N+1]/2)N. the 49,999th member of a network adds more than 250,000, how much depends on the type of Network. Moats are barriers to entry that can also dissolve quickly. Trapdoors cannot be analyzed but are inferred by the failure of potential competitors.
 
Thank you william. I will look it up on internet too but your world just seems way too arcane for this pea brain.
lots of luck, I found two other definitions for trapdoor other than the one I'm used to using. And even in simple stuff network reasoning can sound like gibberish as in the number of people on a conference call can be unbounded depending on the software being used in the phones. I would strongly advise reading the works of Janet Lowe if you want to put together an investment strategy that you can understand.
 
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What is a moat, a trap door, or a network effect?

The best analogy is to think of a castle. In the middle ages, they would build a moat around the castle to create protection and to make it difficult for an intruder to get inside. Businesses can build a "moat" in this same way, and it's done though things like trap door, network effect, etc.

Trap door is when it's very hard for a customer to switch to another competitor. Oracle for example has a very strong trap door as their customers are "locked in" with their products in a big way. Banks also have strong trap doors.

Network effect is when your customers themselves form a strong network. Facebook for example has a very strong network effect, facebook's network itself is easily its strongest asset. There really isn't another social network out there right now that compels people to leave facebook and join another one. This is because Facebook has done such an amazing job at integrating itself into peoples lives and integrating into other websites as well.
 
What is a moat, a trap door, or a network effect?
Network effects are quantifiable as derivatives of ([N+1]/2)N. the 49,999th member of a network adds more than 250,000, how much depends on the type of Network. Moats are barriers to entry that can also dissolve quickly. Trapdoors cannot be analyzed but are inferred by the failure of potential competitors.

What the hell are you talking about dude? lol
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?

Jeez man, you're making it way more complicated than they do at Morningstar. Facebook benefits from a network effect, so does Ebay, to give a couple of examples. It's one of the harder things for a company to develop, only certain companies even have a chance.
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?

Jeez man, you're making it way more complicated than they do at Morningstar. Facebook benefits from a network effect, so does Ebay, to give a couple of examples. It's one of the harder things for a company to develop, only certain companies even have a chance.
Quite true on everything. Morningstar dumbs things too far down for franchise stocks at least according to your reply. Network, Scale and scope economies is where the profits are but they are very hard to compute.
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?

Jeez man, you're making it way more complicated than they do at Morningstar. Facebook benefits from a network effect, so does Ebay, to give a couple of examples. It's one of the harder things for a company to develop, only certain companies even have a chance.
Quite true on everything. Morningstar dumbs things too far down for franchise stocks at least according to your reply. Network, Scale and scope economies is where the profits are but they are very hard to compute.

lol. Scale and scope have nothing to do with a moat. Good for business, but a moat they do not make. And you can't use some sort of mathematical formula to calculate a network effect in a business dude.
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?

Jeez man, you're making it way more complicated than they do at Morningstar. Facebook benefits from a network effect, so does Ebay, to give a couple of examples. It's one of the harder things for a company to develop, only certain companies even have a chance.
Quite true on everything. Morningstar dumbs things too far down for franchise stocks at least according to your reply. Network, Scale and scope economies is where the profits are but they are very hard to compute.

lol. Scale and scope have nothing to do with a moat. Good for business, but a moat they do not make. And you can't use some sort of mathematical formula to calculate a network effect in a business dude.

It's done every day, and has been done every day for at least the past six thousand years. The Sumerians left records of numerous financial networks on at least two continents. "A history of interest rates" is available on Amazon and if the revised edition doesn't work for you try the original "A Short History of Interest Rates" Network economies pre-date writing.
 
networks are covered by Guass's law, the one he devised to get out of a grammar school punishment to add the numbers of 1-100 and he got the correct answer, 5050, in less than a minute. You didn't do course work in finite math and logistics?

Jeez man, you're making it way more complicated than they do at Morningstar. Facebook benefits from a network effect, so does Ebay, to give a couple of examples. It's one of the harder things for a company to develop, only certain companies even have a chance.
Quite true on everything. Morningstar dumbs things too far down for franchise stocks at least according to your reply. Network, Scale and scope economies is where the profits are but they are very hard to compute.

lol. Scale and scope have nothing to do with a moat. Good for business, but a moat they do not make. And you can't use some sort of mathematical formula to calculate a network effect in a business dude.

It's done every day, and has been done every day for at least the past six thousand years. The Sumerians left records of numerous financial networks on at least two continents. "A history of interest rates" is available on Amazon and if the revised edition doesn't work for you try the original "A Short History of Interest Rates" Network economies pre-date writing.

Dude, you and I are talking about 2 totally different things.
 
yes i think in this discussion there are people who are really intersted to discuss about this topic

Well as Benjamin Graham pointed out by at least the 1930s (His fans are not sure they have found all of his articles and interviews) this type of investing is not illegal, immoral or fattening but it is very hard to do.
 

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