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Think about an economic moat in two dimensions. There’s depth—how much money the firm can make—and there’s width—how long the firm can sustain above-average profits.

What others may see as a moat, we may more earnestly see as “stickiness” or “defensibility” rather than as an outright moat. As we wrote about in  “What is a “Moat” and why does it matter?” , we define moats as  “Proven, perpetuating and permanent unit economic advantages from peers within a competitive set” . These moats need to be root

When you’re examining the sources of a firm’s economic moat, the key thing is to never stop asking, “Why?” Why aren’t competitors stealing the firm’s customers? Why can’t a competitor charge a lower price for a similar product or service? Why do customers accept annual price increases?

A firm that has consistently cranked out solid ROEs, good free cash flow, and decent margins over a number of years is much more likely to truly have an economic moat than a firm with more erratic results.

The key to identifying wide economic moats can be found in the answer to a deceptively simple question: How does a company manage to keep competitors at bay and earn consistently fat profits?

What separates a bad company from a good one? Or a good company from a great one? In large part, it’s the size of the economic moat a company builds around itself. The term economic moat is used to describe a firm’s competitive advantage—in

The stronger a firm’s competitive advantage—that is, the wider its moat—the more likely it will be able to keep competitors at bay and generate a reliable stream of cash flows.