What Is A Moat? Moats, And Share Of Mind In The Digital Era

Economic or market moats represent long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Aspect	Explanation
Economic Moat	An Economic Moat is a term used in business and investing to describe a competitive advantage or set of advantages that makes it challenging for other businesses or competitors to erode a company’s market position and profitability. It’s like a protective barrier that helps maintain a company’s long-term success.
Key Characteristics	– 1. Brand: A strong and recognized brand can create customer loyalty and trust, making it difficult for competitors to lure customers away. – 2. Cost Leadership: Achieving lower production or operational costs compared to competitors can provide a significant advantage. – 3. Network Effects: When a product or service becomes more valuable as more people use it, like social media platforms. – 4. Switching Costs: High costs or inconveniences associated with changing from one product or service to another. – 5. Intellectual Property: Patents, trademarks, or proprietary technology that protect a company’s innovations.
Examples	– 1. Coca-Cola: The Coca-Cola brand is globally recognized and valued, giving the company pricing power and a loyal customer base. – 2. Amazon: Its vast distribution network and Prime membership create a competitive advantage in the e-commerce industry. – 3. Microsoft: The Windows operating system is a classic example of high switching costs, as many businesses rely on it. – 4. Apple: Apple’s ecosystem of devices and services creates network effects and brand loyalty.
Importance in Investing	– Identifying companies with economic moats is a key strategy for investors. These companies often provide more predictable and sustainable returns over the long term. – Moats can also be a source of competitive advantage in various economic conditions, making a company less vulnerable to downturns. – They can indicate a company’s ability to maintain or increase its profitability over time.
Maintaining and Expanding Moats	– Companies with moats must work to maintain and, if possible, expand their advantages. This can involve investing in R&D, marketing, and customer service to protect the brand and enhance customer loyalty. – Innovating to stay ahead of competitors or securing new patents can strengthen the moat. – Constantly adapting to changing market conditions is essential.
Challenges	– Moats are not permanent; they can erode over time due to changing technologies, market dynamics, or competitive pressures. – Companies with moats are not immune to mismanagement or external risks. – Investors must regularly assess a company’s moat to ensure it remains intact.
Conclusion	– Economic moats are a critical concept for investors and businesses. Identifying, building, and maintaining a moat can have a significant impact on a company’s long-term success and value. – Investors should carefully analyze a company’s competitive position and its ability to sustain its moat when making investment decisions.

Table of Contents

The father of economic moats

In a speech to MBA students, Warren Buffet highlighted what a moat is about.

Holding in his hands a can of soda, Warren Buffet said “you can understand this – referring to the popular cherry soda – anybody can understand this I mean this is a product that basically hasn’t been changed.”

Warren Buffet kept highlighting how the business staid the same over a long period of time, “…since 1886 or whatever it was and it’s a simple business, it’s not an easy business I don’t want a business that’s easy for competitors so I wanted a business with a moat around it.”

And he went on defining moats as castles administered by hardworking and capable dukes (its managers), “I want a very valuable castle in the middle and then I want a duke who’s in charge of that castle to be honest and hardworking and able.”

Then finally he gives some examples of moats in several industries, “…I want a big moat around the castle and that moat can be various things the moat in a business like our auto insurance business at Geico is low cost, I mean if people have to buy auto insurance so everybody’s going to have an auto insurance policy per per car basically for driver and and I can’t sell them 20 you know but but they have to buy one what are they going to buy on they’re going to buy on based on service and cost.”

Moats are not market shares

While many do associate moats with market shares, Warren Buffet highlighted “if you’ve got a wonderful castle (referring to moats) there are people out there going to try and attack it and take it away from you and I want a castle that I can understand but I want a castle with a motor on it.”

Yet moats have something more. Valuable brands do not only take market shares, they gain market shares as a result of something else, which Warren Buffet calls “share of mind.”

When explaining the Kodak’s case, Warren Buffet highlighted, “30 years ago Kodak’s moat was was just as white as coca-cola smoke…they had what I call share of mind. Forget about share market…they had something and everybody’s mind around the country around the world with a little yellow boxing ring that said Kodak is the best, that’s priceless.”

Moats as widening business fences

Warren Buffet kept highlighting, how Coca-Cola (one of his favorite brands and portfolio companies, had just that.

You can’t see the moat day by day but every time you know the infrastructure gets built in some country that isn’t yet profitable for Coke but will be 20 years from now. The moat is widening a little bit that things are all the time changing that moat in one direction other ten years from now you can see the difference. our managers are the businesses we run I’ve got one message to them you know which is the widening moat.

Below an example of what Warren Buffet has in mind. As explained, in the Coca-Cola system, as the company enters new markets, as a go-to market strategy, it will control most of the operations.

Yet, once operations have been established, Coca-Cola divests, and it follows a franchising model, where it holds control over its franchisees as the company is the sole distributor of the product, and by keeping some equity invested.

Coca-Cola follows a business strategy (implemented since 2006) where through its operating arm – the Bottling Investment Group – it invests initially in bottling partners operations. As they take off, Coca-Cola divests its equity stakes, and it establishes a franchising model, as long-term growth and distribution strategy.

I redefined this model, franchained.

In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

This is an example, of how Coca-Cola combines branding, distribution, operational and financial efficacy, as it enters new markets, while retaining its brand’s “share of mind” as it keeps scaling its operations.

Market moats are about business defensibility

David George and Alex Immerman, partners at venture capital firm, a16z, when talking about gross margin, they pointe out how those alone are misleading. And it all goes back to what really drives business value.

As they further point out “business quality is about defensibility. Defensibility comes from moats.”

In short, if a company is focusing on higher gross margins at the expense of business defensibility that might over time translate in loss of competitiveness of the business.

But what makes up a moat? There are several ways to build moats and in many cases, depending on the market contexts a moat will come from the mixture of several elements.

Market moats is about the brand and the share of mind

One of the most powerful business defences is the brand, or the direct access to your customer base. For instance, if you take Facebook, it’s still among the most valuable websites on earth, because people recognize its brand.

There is no intermediary, people access their Facebook app, or go directly on the Facebook login page. This is critical, as over time it defends against disintermediation.

Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all can produce products that customers want.

If, let’s say, Facebook depended solely on traffic coming from Google, the day Google had launched its social network, it would have killed Facebook.

Yet, as the product and brand was recognized and people got straight to the source, it didn’t need any intermediary.

Customer obsession

If you take the case of Amazon, over the years it has had a relentless focus on low price, convenience, variety, and great delivery, in a mixture, they defined “customer obsession.”

Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start by the entrepreneur’s wandering process, driven by hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.

This built-in low price, convenience and variety took years to build, and in Amazon’s case that was a combination of operational model: inventory facilities and systems; financial model: Amazon gave up profitability for free cash flows), customer modeling (through its e-commerce, Amazon could know exactly what customers wanted); and business experimentation: Amazon launched many failed products that it thought customers would be excited about.

Among those failed launches though, it also came up with things like Amazon Prime and Amazon AWS, which are among the most successful parts of the business.

Low cost

For players in industries where the products offered are mostly undifferentiated, moats are created by economies of scale combined with low costs.

As Warren Buffet explains in his speech about moats, an insurance business like Geico, a lot of defensibility comes with offering lower prices.

Differentiated technology

In a software world where hundreds of new products are launched to market everyday, building up differentiation (in terms of features, technology, and value proposition) is a key element.

Distribution

A distribution channel is the set of steps it takes for a product to get in the hands of the key customer or consumer. Distribution channels can be direct or indirect. Distribution can also be physical or digital, depending on the kind of business and industry.

While strong products and brands can draw directly from their user or customer base. Having a strong distribution network is also a key element.

As highlighted in the Google TAC and if we look at the costs associated to the money invested into distribution of some of the most valuable brands, this goes in the multi-billion dollar mark.

Economies of scale

Economies of scale enable companies to improve efficiency and profitability as the company scales (beware though of diseconomies of scale).

This is one of the elements of creating market moats.

In Economics, a Diseconomy of Scale happens when a company has grown so large that its costs per unit will start to increase. Thus, losing the benefits of scale. That can happen due to several factors arising as a company scales. From coordination issues to management inefficiencies and lack of proper communication flows.

Growth capital

In periods of economic expansion, when capital becomes available for companies to expand in riskier markets, those companies give up efficiency to gain scale.

This sort of blitzscaling mode can help companies gain market shares quickly, in markets that are new, but are becoming hot from an investing standpoint.

Blitzscaling is a business concept and a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh. At its core, the concept of Blitzscaling is about growing at a rate that is so much faster than your competitors, that make you feel uncomfortable. In short, Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.

Those players able to open the market, and retain it, might become long-term dominators. This risky game, however, is good as long as the economy keeps expanding, and the growth capital is available for the company burning cash at fast speed.

If, by luck, good timing, or continued growth, the company is able to sustain this mode of aggressive growth, a competitive advantage can be created.

Examples of this are companies that are opening up new markets, that are still yet to be defined (take the Uber case).

Network effects

A platform company generates value by enabling interactions, transactions or relationships. A platform company leverages network effects (direct/same side or indirect). Platform companies are also known as platform business models, given their intrinsic way to create value for users.

This is true for platform business models. Where in economies of scale the company gains in efficiency and profitability as it grows (it lowers its per cost unit). In network effects, the platform becomes more valuable as its per user value grows as more users join (beware of negative or reverse network effects).

In a negative network effect as the network grows in usage or scale, the value of the platform might shrink. In platform business models network effects help the platform become more valuable for the next user joining. In negative network effects (congestion or pollution) reduce the value of the platform for the next user joining.

Value proposition and perception

A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.

Understand what’s the killer use case that makes your product valuable in the hands of several types of customers is another key ingredient.

While this might go beyond the engineering world, and as such it might seem more foggy, it is though one of those elements that make a long-term difference.

In short, are you willing to test, and experiment with your product to find value propositions that fit the market? If so, you product will evolve contextually, to create moats.

Business model innovation

A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.

Those factors combined are all part of your business model recipe, and it often becomes evident only in hindsight. And it takes years to build. What’s left is a lot of business experimentation, a strong long-term vision.

Case Studies

Brand Recognition:
- Coca-Cola: The Coca-Cola Company has a globally recognized brand with a strong share of mind. Its distinct brand image and long history make it a dominant player in the beverage industry.
Customer Obsession:
- Amazon: Amazon’s relentless focus on customer experience, convenience, and fast delivery has created a moat around its e-commerce business. Its customer-centric approach has built customer loyalty and trust.
Low Cost:
- Walmart: Walmart’s low-cost strategy allows it to offer competitive prices to consumers. Its efficient supply chain management and economies of scale contribute to its moat in the retail industry.
Differentiated Technology:
- Apple: Apple’s innovation in hardware and software design, along with its ecosystem of products and services, sets it apart in the technology industry. Its brand and user experience create a strong moat.
Distribution:
- FedEx: FedEx’s extensive global network and efficient logistics serve as a significant moat in the package delivery and courier services sector. Its ability to reach customers quickly and reliably is a competitive advantage.
Economies of Scale:
- Microsoft: Microsoft’s dominance in the software industry is partly due to economies of scale. Its widely used operating systems and office productivity software benefit from network effects and cost efficiencies.
Growth Capital:
- Uber: Uber used growth capital to rapidly expand its ride-sharing platform into new markets worldwide. While it sacrificed short-term profitability, it gained a strong position in the gig economy and transportation sector.
Network Effects:
- Facebook: Facebook’s social media platform benefits from network effects, where more users attract more users. Its large and engaged user base creates a moat that makes it challenging for competitors to enter the market.
Value Proposition and Perception:
- Nike: Nike’s strong brand perception and compelling value proposition, focused on performance and style, make it a leader in the athletic footwear and apparel industry.
Business Model Innovation:
- Netflix: Netflix disrupted the traditional entertainment industry by innovating its business model, offering streaming services and original content. Its subscriber base and content library create a moat against competitors.
Regulatory Advantage:
- Alphabet (Google): Google’s dominant position in online search is reinforced by network effects and its ability to collect vast amounts of data. It faces regulatory challenges due to its size and market power, creating a regulatory moat.
Intellectual Property:
- Disney: Disney’s extensive portfolio of intellectual property, including iconic characters and franchises like Mickey Mouse and Star Wars, provides a moat in the entertainment industry.

Key highlights related to economic or market moats:

Definition of Market Moats: Market moats represent a business’s long-term defensibility and its ability to maintain a competitive advantage over time. They are the characteristics or factors that protect a company from competitors and allow it to sustain profitability.
Warren Buffett’s Concept: Warren Buffett, the renowned investor, popularized the term “moat” in the context of investing. He described a moat as a protective barrier that surrounds a business, making it difficult for competitors to challenge its position in the market.
Share of Mind: Buffett emphasized that a moat is about having a “share of mind” in customers’ perception. It goes beyond market share and involves building a strong brand and customer loyalty. Brands with a share of mind are recognized and trusted by consumers.
Examples of Market Moats: Buffett provided examples of moats in various industries. For instance, he mentioned Geico’s low-cost advantage as a moat in the insurance industry. Coca-Cola’s global brand recognition and direct access to consumers also serve as a moat.
Components of Market Moats:
- Brand and Share of Mind: Building a recognizable and trusted brand that consumers associate with quality and value.
- Customer Obsession: Focusing on meeting customer needs and preferences, often driven by customer feedback and innovation.
- Low Cost: Achieving cost efficiency and offering competitive prices.
- Differentiated Technology: Developing unique technology or features that set the company apart.
- Distribution: Establishing effective distribution channels to reach customers directly.
- Economies of Scale: Achieving operational efficiency and cost savings as the company scales.
- Growth Capital: Using available capital to rapidly expand into new markets, even at the expense of short-term profitability.
- Network Effects: Leveraging network effects, where the value of the platform or service increases as more users join.
- Value Proposition and Perception: Creating a compelling value proposition and generating demand through brand perception and identification.
- Business Model Innovation: Developing a sustainable and adaptable business model that captures long-term value.
Defensibility: Market moats are all about creating defensibility for a business. They protect a company from competitive threats and allow it to maintain its position in the market.
Long-Term Vision: Building market moats often takes time and continuous effort. It involves strategic planning, experimentation, and a long-term vision for the company’s growth and sustainability.
Importance in Investing: Understanding market moats is crucial for investors. Identifying businesses with strong moats can lead to wise investment decisions, as these companies are more likely to maintain their profitability and competitive edge.

Case Studies

Company	Economic Moat Type	Case Study Description
Apple Inc.	Brand and Ecosystem	Apple’s strong brand and ecosystem, including the iPhone, App Store, and Mac, create customer loyalty and high switching costs.
Coca-Cola Company	Brand and Distribution	Coca-Cola’s iconic brand and extensive global distribution network provide a competitive advantage in the beverage industry.
Amazon.com	Network Effects	Amazon’s vast customer base, third-party seller ecosystem, and Prime membership program create network effects that attract more customers and sellers.
Alphabet (Google)	Network Effects	Google’s dominant search engine benefits from network effects, as more users contribute to improved search results and ad revenue.
Facebook	Network Effects	Facebook’s social network, including Facebook, Instagram, and WhatsApp, relies on network effects to retain users and advertisers.
Disney	Intellectual Property	Disney’s extensive portfolio of intellectual property, including characters, franchises, and theme parks, creates a moat in the entertainment industry.
Microsoft	Software Ecosystem	Microsoft’s Windows and Office software ecosystems have long-standing customer relationships and integrations in the enterprise space.
Visa Inc.	Network Effects	Visa’s vast payment network benefits from network effects, as more users and merchants join the network, increasing its value.
Johnson & Johnson	Research and Development	Johnson & Johnson’s investment in pharmaceutical and healthcare research results in a strong pipeline of patented products.
Mastercard	Network Effects	Mastercard’s payment network leverages network effects, making it attractive to financial institutions, merchants, and consumers.
Berkshire Hathaway	Diversified Holdings	Berkshire Hathaway’s diverse portfolio of wholly-owned businesses provides a stable and profitable base for its operations.
Nike Inc.	Brand and Innovation	Nike’s strong brand and continuous product innovation maintain its competitive edge in the athletic footwear and apparel industry.
Pfizer	Intellectual Property	Pfizer’s investment in drug development and a portfolio of patented pharmaceuticals contribute to its moat in the healthcare sector.
Intel Corporation	Technology Leadership	Intel’s leadership in semiconductor technology and manufacturing capabilities gives it an edge in the chip industry.
Procter & Gamble	Brand and Consumer Goods	Procter & Gamble’s portfolio of well-known consumer brands and product diversification create a moat in the consumer goods sector.
Johnson Controls	Economies of Scale	Johnson Controls’ scale in building technology and HVAC systems results in cost advantages and a competitive moat.
Visa Inc.	Network Effects	Visa’s vast payment network benefits from network effects, making it attractive to financial institutions, merchants, and consumers.
Adobe Systems	Software Dominance	Adobe’s software dominance in creative and document management tools results in a moat in its respective markets.
Oracle Corporation	Database Technology	Oracle’s database technology and enterprise software solutions establish a moat in the database and cloud computing industry.
McDonald’s	Real Estate Holdings	McDonald’s substantial real estate holdings and global restaurant network create an economic moat in the fast-food industry.

These case studies highlight how vario

Connected Financial Concepts

Circle of Competence

The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

What is a Moat

Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Venture Capital

Venture capital is a form of investing skewed toward high-risk bets, that are likely to fail. Therefore venture capitalists look for higher returns. Indeed, venture capital is based on the power law, or the law for which a small number of bets will pay off big time for the larger numbers of low-return or investments that will go to zero. That is the whole premise of venture capital.

Foreign Direct Investment

Foreign direct investment occurs when an individual or business purchases an interest of 10% or more in a company that operates in a different country. According to the International Monetary Fund (IMF), this percentage implies that the investor can influence or participate in the management of an enterprise. When the interest is less than 10%, on the other hand, the IMF simply defines it as a security that is part of a stock portfolio. Foreign direct investment (FDI), therefore, involves the purchase of an interest in a company by an entity that is located in another country.

Micro-Investing

Micro-investing is the process of investing small amounts of money regularly. The process of micro-investing involves small and sometimes irregular investments where the individual can set up recurring payments or invest a lump sum as cash becomes available.

Meme Investing

Meme stocks are securities that go viral online and attract the attention of the younger generation of retail investors. Meme investing, therefore, is a bottom-up, community-driven approach to investing that positions itself as the antonym to Wall Street investing. Also, meme investing often looks at attractive opportunities with lower liquidity that might be easier to overtake, thus enabling wide speculation, as “meme investors” often look for disproportionate short-term returns.

Retail Investing

Retail investing is the act of non-professional investors buying and selling securities for their own purposes. Retail investing has become popular with the rise of zero commissions digital platforms enabling anyone with small portfolio to trade.

Accredited Investor

Accredited investors are individuals or entities deemed sophisticated enough to purchase securities that are not bound by the laws that protect normal investors. These may encompass venture capital, angel investments, private equity funds, hedge funds, real estate investment funds, and specialty investment funds such as those related to cryptocurrency. Accredited investors, therefore, are individuals or entities permitted to invest in securities that are complex, opaque, loosely regulated, or otherwise unregistered with a financial authority.

Startup Valuation

Startup valuation describes a suite of methods used to value companies with little or no revenue. Therefore, startup valuation is the process of determining what a startup is worth. This value clarifies the company’s capacity to meet customer and investor expectations, achieve stated milestones, and use the new capital to grow.

Profit vs. Cash Flow

Profit is the total income that a company generates from its operations. This includes money from sales, investments, and other income sources. In contrast, cash flow is the money that flows in and out of a company. This distinction is critical to understand as a profitable company might be short of cash and have liquidity crises.

Double-Entry

Double-entry accounting is the foundation of modern financial accounting. It’s based on the accounting equation, where assets equal liabilities plus equity. That is the fundamental unit to build financial statements (balance sheet, income statement, and cash flow statement). The basic concept of double-entry is that a single transaction, to be recorded, will hit two accounts.

Balance Sheet

The purpose of the balance sheet is to report how the resources to run the operations of the business were acquired. The Balance Sheet helps to assess the financial risk of a business and the simplest way to describe it is given by the accounting equation (assets = liability + equity).

Income Statement

The income statement, together with the balance sheet and the cash flow statement is among the key financial statements to understand how companies perform at fundamental level. The income statement shows the revenues and costs for a period and whether the company runs at profit or loss (also called P&L statement).

Cash Flow Statement

The cash flow statement is the third main financial statement, together with income statement and the balance sheet. It helps to assess the liquidity of an organization by showing the cash balances coming from operations, investing and financing. The cash flow statement can be prepared with two separate methods: direct or indirect.

Capital Structure

The capital structure shows how an organization financed its operations. Following the balance sheet structure, usually, assets of an organization can be built either by using equity or liability. Equity usually comprises endowment from shareholders and profit reserves. Where instead, liabilities can comprise either current (short-term debt) or non-current (long-term obligations).

Capital Expenditure

Capital expenditure or capital expense represents the money spent toward things that can be classified as fixed asset, with a longer term value. As such they will be recorded under non-current assets, on the balance sheet, and they will be amortized over the years. The reduced value on the balance sheet is expensed through the profit and loss.

Financial Statements

Financial statements help companies assess several aspects of the business, from profitability (income statement) to how assets are sourced (balance sheet), and cash inflows and outflows (cash flow statement). Financial statements are also mandatory to companies for tax purposes. They are also used by managers to assess the performance of the business.

Financial Modeling

Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Business Valuation

Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.

Financial Ratio

WACC

The Weighted Average Cost of Capital can also be defined as the cost of capital. That’s a rate – net of the weight of the equity and debt the company holds – that assesses how much it cost to that firm to get capital in the form of equity, debt or both.

Financial Option

A financial option is a contract, defined as a derivative drawing its value on a set of underlying variables (perhaps the volatility of the stock underlying the option). It comprises two parties (option writer and option buyer). This contract offers the right of the option holder to purchase the underlying asset at an agreed price.

Profitability Framework

A profitability framework helps you assess the profitability of any company within a few minutes. It starts by looking at two simple variables (revenues and costs) and it drills down from there. This helps us identify in which part of the organization there is a profitability issue and strategize from there.

Triple Bottom Line

The Triple Bottom Line (TBL) is a theory that seeks to gauge the level of corporate social responsibility in business. Instead of a single bottom line associated with profit, the TBL theory argues that there should be two more: people, and the planet. By balancing people, planet, and profit, it’s possible to build a more sustainable business model and a circular firm.

Behavioral Finance

Behavioral finance or economics focuses on understanding how individuals make decisions and how those decisions are affected by psychological factors, such as biases, and how those can affect the collective. Behavioral finance is an expansion of classic finance and economics that assumed that people always rational choices based on optimizing their outcome, void of context.

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