We’re told that Amazon has plans to move into the prescription drug market. We’re also told that this will be very difficult for the reasons that Warren Buffett gives about economic moats. The first claim may be true, and the second definitely is, but that’s not the end of the story. As with the higher the castle walls, the greater the treasure therein; so the wider and deeper the moat, the more profit to be made by conquering it.
Warren Buffett has, for many years, pointed out that he likes businesses that have an economic moat around them. The thought being that if there is something (a brand name, a monopoly of some sort) that makes it difficult for competitors to arise, then profits are going to be nice and safe and predictable. That moat could be something like the Coke or See’s Candy brands, or it could be the fact that we’re just not building railways any more with Burlington Northern.
