Moats and Loops
Why some businesses get stronger with every customer
Strategy isn't a position — it's a loop. The companies that don't get caught are running self-reinforcing flywheels that competitors can't enter cheaply. Here's the vocabulary for designing them.
- 01Mental Models · Economics
Network Effects
Value grows with users. The right side wins. The wrong side dies.
Value grows with the number of users.
Open the full definition →Try it · 30 secondsLive example · Apply Network EffectsUse the model. Pick the move.
Value grows with the number of users. You've just seen this: Phones, marketplaces, social platforms, LinkedIn. Which lever does the model recommend?
● LivePick a lever. There are no neutral ones — every incentive funds a behavior somewhere.
- 02Mental Models · Economics
Switching Costs
The deepest moats are made of inconvenience.
What does it cost to leave?
Open the full definition →Try it · 30 secondsLive example · Apply Switching CostsUse the model. Pick the move.
What does it cost to leave? You've just seen this: Enterprise software lock-in. Which lever does the model recommend?
● LivePick a lever. There are no neutral ones — every incentive funds a behavior somewhere.
- 03Mental Models · Systems
Flywheel Effect
Self-reinforcing momentum. Once it turns itself, you've stopped selling.
Self-reinforcing loops of momentum.
Open the full definition →Try it · 30 secondsLive example · Apply Flywheel EffectUse the model. Pick the move.
Self-reinforcing loops of momentum. You've just seen this: Amazon's selection → lower prices → traffic → more selection. Which lever does the model recommend?
● LivePick a lever. There are no neutral ones — every incentive funds a behavior somewhere.
- 04Mental Models · Systems
Compounding
Boring discipline, applied consistently, beats brilliant inconsistency. Always.
Small advantages, applied consistently, become uncatchable.
Open the full definition →Try it · 30 secondsLive example · Apply CompoundingUse the model. Pick the move.
Small advantages, applied consistently, become uncatchable. You've just seen this: 1% better every day = 37x better in a year. Which lever does the model recommend?
● LivePick a lever. There are no neutral ones — every incentive funds a behavior somewhere.
- 05Mental Models · Markets
Reflexivity
Beliefs about reality shape the reality. Most moats begin as stories that became true.
Beliefs about reality shape the reality.
Open the full definition →Try it · 30 secondsLive example · Apply ReflexivityUse the model. Pick the move.
Beliefs about reality shape the reality. You've just seen this: Bubbles, runs, and credit cycles. Which lever does the model recommend?
● LivePick a lever. There are no neutral ones — every incentive funds a behavior somewhere.
Map your own business as loops, not as funnels. The funnels lie. The loops tell the truth.
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