Moats II: Greenwald, 7 Powers, Measuring the Moat

Learning objectives

By the end of the week you can:

1. Run Greenwald's collapse: reduce any five-forces map to the single decisive question, do barriers to entry exist here?, then sort every claimed advantage into his three real categories (supply/cost, demand/customer captivity, economies of scale), rejecting everything else as strategy theatre.
2. Explain and detect the strongest combination, economies of scale interlocked with customer captivity, and why local or niche dominance (Walmart's regional density, DMart's clusters, Ghari's Uttar Pradesh) beats thinly spread global scale.
3. Execute the market-share-stability test on any industry from public data: build the share table, compute average absolute share movement per year, apply the ~2-points-per-year threshold, cross-check against incumbent ROIC, and state the verdict with its limits.
4. Prescribe correctly for no-barrier markets: explain why, on a level playing field, operational efficiency is the only strategy and cost of capital the only durable expectation, and what that implies for the multiple you may pay.
5. Apply Helmer's Benefit + Barrier gate to all 7 Powers (scale economies, network economies, counter-positioning, switching costs, branding, cornered resource, process power): for each, name the benefit, name the barrier, and demonstrate why "me too won't do", including the incumbent's-dilemma arithmetic behind counter-positioning.
6. Place powers on the clock: use Helmer's power progression (origination → takeoff → stability) to say which powers a business could possess at its stage, and spot claims that violate the timing (a two-year-old startup claiming brand power; a mature laggard claiming counter-positioning).
7. Run Mauboussin's Measuring-the-Moat workflow (industry map → profitability/profit-pool analysis → five forces → sources of added value) as a repeatable audit that ends in a written verdict.
8. Estimate a CAP and read the market's implied CAP: value a franchise as steady state + excess-return years (the Miller–Modigliani decomposition), solve backwards from price to the CAP the market is granting, judge it against mean-reversion base rates, and connect the answer to M3.05's three-lever diagnosis.

Prerequisites & connections

Builds on. M2.03 gave you ROIC/ROCE built by hand, the ROIC−WACC spread as the economic verdict, and the persistence base rates (Mauboussin's transition matrices: mean reversion is the default fate; roughly half of top-quintile firms are still top-two a decade later). That section ended with a promise: "when you meet a durable spread, your job is to name the barrier." The naming machinery starts here. M3.03 supplied the hurdle rates you will test spreads against (~12% post-tax INR, ~8–9% USD, as of mid-2026, verify against your own WACC builds). M3.05 supplied the reverse DCF and its three-lever diagnosis (growth, duration, required return); lens 4 here is the duration lever made rigorous. M4.03 covered Porter's five forces and profit pools, and Greenwald is a ruthless simplification of it: you need to know the full map before you're allowed the shortcut. M4.04 covered the five sources and the numbers test, which is lens 1. Everything there is assumed. Nothing here re-argues whether ROIC persistence is required; the argument is why it happens and how long it lasts.

Feeds forward. In M4.06 the capital cycle and disruption arrive as the moat-*erosion* forces; the share-stability test and CAP estimates you build here are exactly what M4.06 teaches you to watch decay. The Phase 4 capstone (two moat dossiers, one Indian, one US, graded against the rubric) requires all four lenses run and reconciled. Phase 5's sector playbooks apply these lenses industry by industry. Phase 8's teardown question 6 ("is there a moat?") is this week under a stopwatch, and the deep dive's Day 2 (share stability, Mauboussin's map) is §4.5 and §4.11 verbatim. Competency C4 in the master map, "identify moat existence, source, width, and direction, and prove it in the numbers", is certified on what you learn this week.

The one-sentence version of this module. One question decides everything (can a newcomer get in and force returns to the cost of capital?); three lenses answer it from different angles, with Greenwald naming the barriers, Helmer stress-testing each claim as Benefit-plus-Barrier with a birth certificate, and Mauboussin converting the survivors into a number of years; and that number of years, the CAP, is where moat analysis stops being literature and becomes a valuation input.