Companies
The switching cost moat
The most durable advantage is often the most boring. It is a hassle to leave.
Of all the moats a business can have, switching costs are the ones we trust most. They compound quietly and almost never show up in the marketing.
When a product is woven into how a customer works, into their systems and their certifications and the muscle memory of their staff, leaving stops being a purchasing decision and becomes a project. The cheaper rival has to be cheaper by enough to cover the disruption, the retraining and the risk. Usually it cannot be.
So we look for businesses whose customers stay out of sensible reluctance rather than love. Retention that holds through a downturn. Contracts that renew without a negotiation. A product whose cost is small but whose failure is large. These relationships survive recessions and new entrants, and they are almost never the businesses people are excited about.
The views above are the firm's own and are provided for information only. They are not investment advice, nor an offer or solicitation to invest. Capital at risk; the value of investments can go down as well as up, and past performance is not a guide to future results.
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