The Little Book that Builds Wealth by Pat Dorsey

Key Takeaways


You must have a long-term mindset, be patient, do your homework, be analytical and a little bit lucky and then you have a good shot of getting a healthy return on your investment with less risk


List of what makes a company with a moat includes:

  • A company with intangible assets, like brands, patents, regulatory licenses that can’t be matched by competitors

  • Products or services that a company sells may be hard for customers to give up which creates customer switching costs that gives the firm pricing power

  • A company with network economics, which is a very powerful type of economic moat which can lock competitors out in a long time

  • Cost advantages, stemming from process, location, scale or access to a unique asset, which allows them to offer goods or services at a lower cost than competitors

Companies with moats are more resilient and are less likely to leave you with drastic, permanent capital loss


Identifying companies with moats helps you define your “circle of competence.”


Don’t fall for false moats – great products, strong market share, great execution and great management.


All of these things are not very enduring


If you can find a company that can price like a monopoly without being regulated like on, you’ve probably found a company with a wide economic moat


The absolute size of a company matters much less than its size relative to its rivals


Broadly speaking, the higher the level of fixed costs relative to variable costs, the more consolidated an

industry tends to be


Be very mindful of when a company loses its moat. Disruptive technologies can hurt moats of businesses that are enable by technology even more than businesses that sell technology. Also, watch out for a consolidation of a once-fragmented group of customers


Be weary of companies that pursue growth in areas where they have no moat


Companies that provide services to businesses have more moats than most because they are often able to integrate themselves into their customer’s business processes, creating high switching costs


Best way to determine a company’s profitability is to look at the amount of profit the company is generating relative to the amount of money invested in the business





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