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> I don't think you can call ChatGPT a product. It has zero switching cost. In consumer markets the moat is habits. The switching cost for Google Search is zer

> I don't think you can call ChatGPT a product. It has zero switching cost. In consumer markets the moat is habits. The switching cost for Google Search is zero. The switching cost for Coke is zero. The switching cost for Crest toothpaste is zero. Yet nobody switches.

charlieyu1 2y ago
I’m not that old and I remember people switching away from Geocities, ICQ, Yahoo, many social media sites etc
crazygringo 2y ago
(Never mind I was wrong -- deleting my comment to not spread misinformation. The definition of moat is wider than I was familiar with, thanks for the correction!)
- herval 2y ago
  A strong brand is most definitely a moat. So is habit. Any source you can find that defines economic moats will list those. https://corporatefinanceinstitute.com/resources/management/economic-moat/ https://corporatefinanceinstitute.com/resources/management/e...
  - toasterlovin 2y ago
    Minor nit, but brand and habit are kinda the same thing. The habit is that you buy a particular brand.
yawnxyz 2y ago
I used to work for Coke — they've been making a lot of money for a very long time. The size of a moat befits the size of a castle it protects. Coke absolutely has a moat, but it's not big enough to defend Coke as a trillion dollar company. The question isn't whether OpenAI has a moat or not, it's if its current moat is big enough to protect a trillion-dollar company.
- toasterlovin 2y ago
  The person I'm responding to just said there was no moat because switching costs were zero. They didn't say anything about a trillion dollar valuation. But, while we're on the topic, Google's market cap is $2T because people can't be bothered to change the default search engine in their browser.
swat535 2y ago
Not to nitpick but.. 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail 2. I don't know many people who are dedicated "Pepsi" fans, they just grab whatever drink is available Coke/Pepsi.. 3. I've also not heard many people who are never willing to switch from "Crest".. People will just grab the next available option if Crest is not on shelf. No one is pre-ordering Crest.
- SllX 2y ago
  I will nitpick this one: > 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail Google Search is a product. Not the whole company. Switching to most other search engines is $0. Naturally no one is honor bound to use anything else you listed either.
- toasterlovin 2y ago
  You’re standing in the aisle at the supermarket, looking at the soda. Everything is in stock. What do you grab? Most people make the same decision for their entire life: Coke. That is the moat that Pepsi has been trying to overcome for decades.
  - sumedh 2y ago
    > That is the moat that Pepsi has been trying to overcome for decades. Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?
    - toasterlovin 2y ago
      According to this[0], Coke (the cola brand, not the company) has a ~19% soft drink market share in the US vs. Pepsi at ~8%. This[1] has Coke (the company, not the cola brand) at a 69% market share of the US soft drink market vs. Pepsi 15 27%. Pepsi is a larger company, though, because they own a bunch of snack food brands whereas Coke is beverages only. 0: https://www.wfaa.com/article/news/local/us-soda-rankings-coke-pepsi-dr-pepper-cola-market-share/287-042fd9e5-ab99-4362-82fc-bc97cc54dff4 https://www.wfaa.com/article/news/local/us-soda-rankings-cok... 1: https://www.investopedia.com/ask/answers/060415/how-much-global-beverage-industry-controlled-coca-cola-and-pepsi.asp https://www.investopedia.com/ask/answers/060415/how-much-glo...

charlieyu1 2y ago

I’m not that old and I remember people switching away from Geocities, ICQ, Yahoo, many social media sites etc

crazygringo 2y ago

(Never mind I was wrong -- deleting my comment to not spread misinformation. The definition of moat is wider than I was familiar with, thanks for the correction!)

herval 2y ago
A strong brand is most definitely a moat. So is habit. Any source you can find that defines economic moats will list those. https://corporatefinanceinstitute.com/resources/management/economic-moat/ https://corporatefinanceinstitute.com/resources/management/e...
- toasterlovin 2y ago
  Minor nit, but brand and habit are kinda the same thing. The habit is that you buy a particular brand.

yawnxyz 2y ago

I used to work for Coke — they've been making a lot of money for a very long time. The size of a moat befits the size of a castle it protects. Coke absolutely has a moat, but it's not big enough to defend Coke as a trillion dollar company. The question isn't whether OpenAI has a moat or not, it's if its current moat is big enough to protect a trillion-dollar company.

toasterlovin 2y ago
The person I'm responding to just said there was no moat because switching costs were zero. They didn't say anything about a trillion dollar valuation. But, while we're on the topic, Google's market cap is $2T because people can't be bothered to change the default search engine in their browser.

swat535 2y ago

Not to nitpick but.. 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail 2. I don't know many people who are dedicated "Pepsi" fans, they just grab whatever drink is available Coke/Pepsi.. 3. I've also not heard many people who are never willing to switch from "Crest".. People will just grab the next available option if Crest is not on shelf. No one is pre-ordering Crest.

SllX 2y ago
I will nitpick this one: > 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail Google Search is a product. Not the whole company. Switching to most other search engines is $0. Naturally no one is honor bound to use anything else you listed either.
toasterlovin 2y ago
You’re standing in the aisle at the supermarket, looking at the soda. Everything is in stock. What do you grab? Most people make the same decision for their entire life: Coke. That is the moat that Pepsi has been trying to overcome for decades.
- sumedh 2y ago
  > That is the moat that Pepsi has been trying to overcome for decades. Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?
  - toasterlovin 2y ago
    According to this[0], Coke (the cola brand, not the company) has a ~19% soft drink market share in the US vs. Pepsi at ~8%. This[1] has Coke (the company, not the cola brand) at a 69% market share of the US soft drink market vs. Pepsi 15 27%. Pepsi is a larger company, though, because they own a bunch of snack food brands whereas Coke is beverages only. 0: https://www.wfaa.com/article/news/local/us-soda-rankings-coke-pepsi-dr-pepper-cola-market-share/287-042fd9e5-ab99-4362-82fc-bc97cc54dff4 https://www.wfaa.com/article/news/local/us-soda-rankings-cok... 1: https://www.investopedia.com/ask/answers/060415/how-much-global-beverage-industry-controlled-coca-cola-and-pepsi.asp https://www.investopedia.com/ask/answers/060415/how-much-glo...