Hamilton Helmer: recommendation

Transcript context

…Of course, now you're alluding to Charlie Munger-isms here. My biggest question I'm dying to ask you, reading the book, and learning about power and this model that you've come up with, how does it relate to moats? Is power the means by which you create a moat for a business or is it something different? There are two necessary and sufficient conditions for power. There's a benefit. You've got to come up with something that's better than what other competitors do, but better for you as a business model. It's a better business model somehow, so that's something good. But that happens every day, every little improvement you see in Starbucks, getting a different kind of coffee cup or something. That happens often, but the thing that's rare is when you do that and it's material—it is enough to tilt the needle—but also it satisfies the second condition which is that not just there's a benefit, but there's a barrier. A barrier means there are lots of smart people out there, they will be aware of what you're doing, and they're going to try and take it away from you. That's how competitive dynamics works. You have to have something that will prevent that from happening, even if they're motivated and capable. I'm a huge fan of Warren Buffett's, as you might imagine. He's a genius, I think. But the word moat to me, although he means more with the word than that makes you think about the barrier piece. I think it is fair to say that the Seven Powers are, for me, a very careful, and I hope, exhaustive articulation of the nature of moats. I think when you're thinking about competitive analysis, in particular, when you're thinking about starting businesses, I always tell people, don't focus so much on the competition. You have something unique. Yes, you have to pay attention to him. You don't be stupid, but you don't create a great business by just saying, I'm going to beat the other guy. The benefit side is also very important. It's tightly tied and of course, the whole idea of moats is just a brilliant concept on their part. So there are seven powers in your book. Each of the seven powers is a way to create this power. How did you distill the seven? How did you come up with seven? Do you worry that there's an eighth out there that you haven't found yet?…

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