Management Journal 0409 – “Of Warren and his MOATS …”

“When everyone is greedy, be cautious; when everyone is cautious, be greedy!” That’s the wisdom of Warren Buffet, one of the richest persons in the history of mankind!

So going by this “Buffetology” now, we should all be very greedy now! But are we? Yet notwithstanding that he has reminded us again by saying that he has been waiting for this time for years!

Let’s venture deeper into this, perhaps. The best place to start would be from the latest letter that Warren has written to his most treasured shareholders in Berkshire Hathaway (you better be one if you want to be on Buffet’s annual mailing list!).

Here are his 4 goals in this economic turbulence:

1. Maintaining huge and excess liquidity – balance modest short term obligations against dozen of sources of earnings in cash.
2. Widening the “MOATS” around our business and give them durable competitive advantages.
3. Acquiring or developing new and varied streams of income.
4. Expanding or nurturing the cadre of outstanding employees that deliver results.

Sounds simple? That’s where the challenge starts. If ever that there is only one thing I’ve learned as an entrepreneur is that “Simple almost certainly does not mean easy”.

The MOATS concept that Warren used most infrequently has certainly captured my imagination. Moats are the barriers to access the Castle - the deep water that surrounds the Castle’s solid stone walls with hungry crocodiles lying deep in between. Get the picture? The idea of making your business an unbreachable fortress; simply the USP and the competitive advantages that set us apart from our competitors.

Moats can almost certainly take the following forms:

1. Intangible Assets – These are the Intellectual Property like patents, copyrights, trademarks and the creative commons; as well as the massive value of Brand – think Coca Cola, think Gillette, think Xerox, think Ferrari!     
2. Network Effects that increases the value of goods and services for both new and existing users; get other involved to create things that compliments the existing products and services – think Ebay, think FaceBook!
3. High Switching Costs – cultivate dependability and unquestioned reliance, pamper your users, high costs of reeducation and readjustment – think Microsoft, think Nokia!
4. Low Costs – bulk bargain and minimize the distribution channels, think Dell, think Amazon, think Air Asia!

Yes, I hear you saying that nothing is irreplaceable BUT we can made it really HARD. So, let’s get to work, fellow “moatsters”!

Applying to the current situation, we are as excited as Warren as we have been waiting for this moment for years. Who do not know how to do business in good time? We are very excited and our extremely high energy is making 2009 our best year yet!

Here is a “blink” in my head – CA (Chur Associates in short) has always toyed with the idea in naming our own building “CAstle” (guess you can see where that is coming from!). Thanks Warren for making the connection now, we are building our CAstle within the moats that we have been working on since we have started our journey in that faithful day of November 2003.

Finally, one more take on “MOAT” – Master Of All Trades, that’s what being an entrepreneur is all about! 

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