ESYB2 033 - More On Moats Barriers and Being First
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[00:00:00] After I made the last video about creating a moat for your business, I had additional ideas on this topic as it pertains to first time entrepreneurs and a lot of my students and that is that instead of thinking of how do you create a moat when you're a first time entrepreneur or starting your business, you're not making a moat, you are facing a moat.

That's the challenge that most of my students have and most first time entrepreneurs have. And that's what I coach people on all the time. Usually the modes are competition. It's always like you're in a difficult market. Most niches today are very competitive. Usually first time entrepreneurs have lack of resources.

And if for some products like maybe dating apps or something like that, it's really hard to get critical mass. Which is essentially a lot of activity of people that you're bringing together on your platform. And of course, if you're entering a market, and you're selling a product, there's probably some products out there that are already very successful in your niche.

This leads to [00:01:00] frustration, and failure, and quitting, and people wonder, why do people fail so much in business? But really, that's why. It's because you're facing that moat. That's really what's happening, and that's why I always talk about niche, niche, niche, niche, and down. You don't have to stay in a tiny niche forever, but it has to be your foothold where you start to get some success because if you're going up against big competitors, you're actually fighting against their moat.

Which is tricky. So that's really something to think about. Now, I also want to bring up another issue. There is this idea of a mode and there's an idea of a barrier to entry. You might have heard this term barrier to entry. What's the difference between them? Well, a barrier to entry prevents people from starting.

It's a deterrent from starting. A mode, it helps you compete against competitors after they've started. So a moat helps during competition. Since earlier we talked about moats, let's talk about some examples of barriers to entry. Patents are barriers to entry. Of course, if you patent some technology, nobody can use that.[00:02:00] 

Also, if you create technically complex products, it doesn't deter everyone, obviously, because a lot of good programmers can copy that. But it deters many potential competitors. And of course, additional barriers to entry is A business that requires a lot of money or other resources to get started. And lastly, let's talk about this idea of being first to market.

A lot of people obsess about it. I think it's overhyped because being first to market means you're innovating and innovating carries more risk. It even has more risk if you're facing something like a moat. Because most experiments, just by their nature, they fail. And a lot of my clients, especially when they had unique ideas, it kind of became a point of obsession and stress for them, because they always focused on like, I gotta go faster, I gotta go faster, I gotta go faster.

And that created this kind of stress and desperation. Which actually resulted in a lot of bad, desperate business [00:03:00] decisions, like hiring the wrong people, partnering with the wrong people, which led to failure, actually, rather than success. And even if you create something great, once you create something great, there will be a lot of copycats, a lot of people copying your business.

They will Look at your history and your trajectory as a business, what you've done, the mistakes you've made, they'll use that. They're not going to make the mistakes you made. Those mistakes will be expensive learning experiences for you, but for your competitors, they'll be like, Oh, thanks for teaching me what not to do.

And so for every competitor, it will be cheaper to get into that business because you've done the hard work, which is the innovation, and you'll have a lot of copycats. If you're successful, a lot of people will copy you, no question about it. At least they'll try. Even if you have barriers to entry and a mode, people will still try to compete with you.

And another thing that is important is if you are truly first to market, you have to ask yourself a very important question. Why [00:04:00] am I the first to market? It's very easy to assume, Oh, because I'm smart or because I'm creative or innovative, but really there's like 6 billion people living in the world.

Surely other people have had these ideas. Surely other people have tried your idea. So is it just that maybe you didn't do enough research or you don't know your market very well, or even worse, historically, there's a lot of people who tried your business, but all failed. So you could be kind of looking around and seeing no competitors, but you're like literally standing on a graveyard of past businesses that failed trying to do the same thing which you're doing.

So you have to evaluate. Okay. How did this business fare historically? And am I doing something better that actually will lead me to success so that I don't make the same mistakes that earlier businesses that failed it. And there is one truism that is. something to take away from this is that winner is the [00:05:00] company that outcompetes long term.

You can jump out of the gate, and you can get a head start by being first to market, by having defenses, but it's the company that outcompetes long term. There's examples of both companies that have had competition that and not like if you look at Facebook, they basically just executed the social networking space better because before that there was my space and thousands upon thousands, if not tens or hundreds of thousands of companies try to create social networks.

But the first Company, MySpace, first serious company in that space, they failed, Facebook out competed them. But if you look at a company like Uber, they were the first entrant in that space of taxi apps, but they ended up out competing. Even though there's so many apps competing with them in every which way, they're still the leader.

So in this case, offense is the best defense because whoever executes better, longer, wins.

