Lakshay
Awesome to hear back from you. I think we’re on the same page. Just to clarify…

Lakshay: “But, if well-executed, features result in the sources of moats referred to in the Investopedia definition you linked. Rewards programs create customer lock-in and goodwill (intangible assets). Subscription plans create friction for consumers to change (switching costs). Physical infrastructure can create cost advantages and regulatory goodwill. Others can copy the features but they will be too late to capture the benefits you already have.”

Yes, exactly, I agree. I guess I should’ve said what I said in a different way…

What you’re describing is more traditional economies of scale or traditional moats, not the modern tech version, called “aggregation”. Aggregation becomes more than sustainable; it becomes unassailable, due in part to zero marginal costs to scale. From “The Carrot and the Stick”:

“Big Tech’s markets all trend toward monopoly, because they operate multi-sided networks with zero barriers-to-entry. Thus, network liquidity is the basis of competition for many of them: Who has the most buyers and sellers; the most producers and consumers; the most supply and demand; etc. That liquidity sets-off the virtuous cycle of network effects, wherein scale improves user experience improves scale and so on. If you add software’s zero marginal costs to that virtuous cycle, you get Aggregation Theory…”

I say “unassailable” because the legal constructs of “monopoly” and “monopsony” generally don’t apply here (see “Antitrust and Tech’s Endgame”), although there are surely pockets of enforceable regulatory abuse (see “Tech’s Agency Problem”).

So, “unassailable” was more of the upshot from my use of “sustainable” and “sustainability” in my response to you. Hence my specific contrast of “sustainable vs ephemeral moats” in my analysis.

What I said in my response to you was this:

Anthony: Whether the “Rewards Programs”, “Subscriptions”, or “Physical Infrastructure” you suggest, none of these represent sustainable moats, per the conventional definition…

What I probably should have said was this:

Whether the “Rewards Programs”, “Subscriptions”, or “Physical Infrastructure” you suggest, none of these represent unassailable moats like those of today’s tech giants…

My point was not that your ideas of “rewards”, “subscriptions”, and “infrastructure” aren’t traditional moats. Rather, my point was that those are vestiges of traditional businesses, which are prone to disruption from modern aggregators whose non-rivalrous businesses provide structural competitive advantages. Once upon a time, for example, traditional economies of scale provided competitive advantages that were sustainable for a limited time only, but they weren’t really unassailable. But, now, software has moved-the-goalposts — providing secularly sustainable advantages.

While a traditional business can have its lunch eaten via innumerable competitive threats, really the only way a fully-scaled aggregator gets dethroned is via new market disruption. Furthermore, an aggregator’s economics allow it to eat other businesses’ lunches using a myriad of tactics, including classic low-end disruption — as popularized Clay Christensen.

Now, applying that knowledge, Google and Uber would certainly gatecrash the subscription/reward moats you proposed, were the scooter industry proven to be a strategically-important and/or fruitful business. In addition, the physical infrastructure you mentioned is really only a barrier-to-entry because it’s capital intensive, thus any aggregator with a relatively low cost of capital (compared to a scooter upstart) would gatecrash that moat too.

In contrast to those ephemeral moats, Bird’s GovTech segment is an attempt to earn what I keep calling a sustainable, unassailable moat — as explained under my analysis’ “Vertical vs horizontal integration” section.

Lakshay, this has been a good conversation. Thank you. I may incorporate some of these clarifications into my analysis, because I understand there’s some confusion there…

Choose which kind of reader you are:

“Perfection is achieved not when there is nothing more to add, but when there is nothing left to take away...” 👉 http://annotote.launchrock.com

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store