An economic moat describes how well a company can protect its profits from competitors over time. It reflects the durability of its competitive advantages and how long it can maintain superior returns in its industry.

Wide Moat
A company with a wide economic moat has:

• Significant and sustainable competitive advantages
• Ability to maintain high profitability for over 20 years
• Strong protection from competition
• Pricing power that allows it to raise prices without losing customers
• Consistent growth in revenue, profits, and cash flow
• Examples of wide moat characteristics include strong brand monopoly (like Apple), high switching costs (Microsoft Office), powerful network effects (Visa/Mastercard), or significant barriers to entry (regulated industries).

• Some competitive advantages, but they're not as strong or sustainable
• The ability to maintain above-average returns for 10-20 years.
• Some protection from competition, but faces more significant threats
• Limited pricing power
• May need to periodically cut prices to remain competitive (like Tesla)

• Little to no competitive advantages
• Cannot maintain above-average returns for long periods
• Faces intense competition that quickly erodes profits
• No pricing power (often competes mainly on price)
• Operates in industries with low barriers to entry where new competitors can easily emerge