Bathgate: Investors should avoid extractive moats reliant on price-hiking lock-in
John Bathgate · Complexity Investing & Semiconductors with NZS Capital (Extended Cut) · Acquired · Nov 3, 2021 · at 19:37
John Bathgate of NZS Capital explains to David Rosenthal why traditional 'economic moats' based on value extraction and customer lock-in are inferior to non-zero-sum value creation.
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“One of the things that we're careful about is like looking for companies where, you know, part of their moat is kind of you know, inserting themselves into the value chain or into their you know, their customers, you know, share of wallet basically, where they put themselves in a position to extract as much economics as possible. And so I think that can be viewed as, especially in kind of a more of like an industrial age view of how competitive, competitive advantage you know, has evolved is, is that something that we try to avoid? Like we're not trying to look for a company where they feel like they have customer lock-in and then all of a sudden they can raise price, you know, three to five percent for the next 10 years. I think that's, you know, part of our framework and the reason we named the firm NZS Capital is we're looking for non-zero sumness. So looking for a win-win outcome for all constituencies across kind of the value chain.”
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