Going back through “Measuring the Moat” by Mauboussin.
Here are some helpful things:
1. Industry Map
- Important to understand all of the players in an industry and how the whole value chain works.
Here are some helpful things:
1. Industry Map
- Important to understand all of the players in an industry and how the whole value chain works.
2. Profit pools.
- Once you have the players, you need to understand which points in the value chain capture the most value. Profit pools are the factor of the excess returns on capital and the share of the industry’s total investment.
- Once you have the players, you need to understand which points in the value chain capture the most value. Profit pools are the factor of the excess returns on capital and the share of the industry’s total investment.
3. Market share stability
- Another important concept when studying an industry is how much the market share changes. If it is all over the place, that likely means the barriers to entry aren’t that high.
- Another important concept when studying an industry is how much the market share changes. If it is all over the place, that likely means the barriers to entry aren’t that high.
4. Value created = WTP - opportunity cost
- This is a great, simple framework. Willingness to pay will be low if the product has no differentiation. Likewise, opportunity cost will be high if the supplier has the negotiating leverage.
- This is a great, simple framework. Willingness to pay will be low if the product has no differentiation. Likewise, opportunity cost will be high if the supplier has the negotiating leverage.
5. Supply side vs. demand side
- This is a great graphic. If the section in the middle gets larger, that’s more value created for the firm. Increasing price and decreasing cost leads to higher profits. Not rocket science.
- This is a great graphic. If the section in the middle gets larger, that’s more value created for the firm. Increasing price and decreasing cost leads to higher profits. Not rocket science.
6. Another profit pool but for healthcare instead of airlines. Just look at how much more value was created. Where you fish is very important!
End/ This mini-thread wasn’t very cohesive, just some sections I wanted to share :)
Thanks for reading!
Thanks for reading!
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