Economic Moat

Imagine a castle, surrounded by a rim of water, with a drawbridge that you can close to keep out invading enemies. This moat works the same way, except with products and corporations rather than with horses and armor.

The phrase comes from one of the most famous investors in history: Warren Buffett (who bought Dairy Queen...not a franchise, the whole company...do you need more proof that he's a genius?). What Buffett referred to as an economic moat is what less folksy finance guys might call a "competitive advantage."

Basically, to maintain its business, a company has to have a moat surrounding its market share...a buffer that competitors have trouble crossing. What's in that moat? Patents. Long-term union contracts. A company selling addictive substances like caffeine or nicotine. Really hard-to-build, cheap technology. A brand name.

If you can have an angry moat, you should.