It's Your Castle - Build a Moat Around It
Questions of the Week
How often do you intentionally re-evaluate your people to ensure you have the right Knights guarding the Castle?
How do you know that you haven’t been smart just once and what are you doing to continue staying smart?
How do you build a moat around your business? It has to be something that no one can take from you. How would you change your product or services to a level that even if someone could compete with you, they wouldn’t want to?
What is your goal, and what are you doing daily to work towards the goal of the castle? What happens if you fall behind or a member isn’t carrying their load? What adjustments are made, and how to you stay in offense both internally and externally ahead of attacks?
Who’s the right lord or lady to lead your Castle? How have you earned their trust and what is it about that person that has caused you to trust them?
What steps are you taking to earn the right to hire the best people to protect your castle?
In what ways right now do you know that you’ve chosen the right job?
Anyone can act like a knight, in what ways are you demonstrating protecting the Castle?
“The world is a great movie to watch but you don’t want to sleepwalk through life. The important thing to do is to look for the job you would take if you didn’t need a job. Life is wonderful then.” – Warren Buffett
Not everyone is fortunate enough to find a career where they wake up every day and look forward to the workday, and on most evenings their spouse ends up knocking at the door asking them to stop working and rejoin the family. While many people look at the clock in excitement for what time they end the workday, I relish in the number of hours I still get to put in. I’d never consider myself a workaholic, nor advocate of being one. What I do, aligns with my personal Mission Statement, so sometimes the hours between work, family, and fun blend into one-another. Should you feel differently about your career, what would it take for you to feel the same?
“My Mission is to create a positive lasting impact in as many people as I come into contact with on a daily basis coaching them to live their best life possible.” – Dru Lee
My coach often asks me what I would do if I had more available time on my calendar or “whitespace.” Admittedly I wouldn't do many things different. I would only work to accelerate my growth plan to help even more people, faster. Time is the one constant that we all have in common, and it cares not who you are. If I had more, I’d simply learn more. When you know you're “Who and Do” statement, or who are you and what you intend to do, decisions are easy. Think of that like,” Why would I hire you”, and, “What would I expect if I did”? For me, I’m the Coach you hire when you want to position your business into a Legacy worth leaving. Who knows, maybe it will last for 1000 years and one day others will study your success formula. When someone asks you to stop doing something you enjoy or encouraging you to do it less, it’s a bit baffling to me. The closest I can compare it to is when your parents said to come inside when the streetlights came on as that means it’s time to stop playing. My goal is to live the life described by James Michener.
“The master in the art of living makes little distinction between his work and his play, his labor and his leisure, his mind and his body, his information and his recreation, his love and his religion. He hardly knows which is which. He simply pursues his vision of excellence at whatever he does, leaving others to decide whether he is working or playing. To him he's always doing both.”― James A. Michener
While growing up I had the privilege of living in England for three years. During the time we lived there, I became fascinated with ancient structures that have stood longer than the civilizations that created them, Castles. When I was a kid, I played this reoccurring game using Legos. For some reason there was always a looming thunderstorm (imaginary) and idea was I, or sometimes we (my brother and I), had to build a Castle for our little Lego knight from scratch in time to have a shelter so the Knight could avoid the impending storm. It was a simple little Castle, with at least four walls, a roof, and a pretend moat, yet it kept my little Knight warm and cozy. What exactly is a Castle? Webster’s defines a Castle as a medieval stronghold, generally the residence of the king or lord of the territory in which it stands. Strongholds designed with the same functionality have been built throughout the world, including in Japan, India, and other countries. Under this definition many structures can be considered a Castle. Considering they are defined as strongholds and the residence of the lord of the territory, this arguably could describe a business. When one sets out to build a business, they want to build something that stands the test of time, is a stronghold against competition and rivals and dominates their business space territory. You are the Lord or Lady of your Castle!
“Build a tower for your staff, a castle for your team, and a moat around your database and your business becomes an impenetrable fortress.” – Dru Lee
“Defining what your game is or where you’re going to have an edge is enormously important.” – Warren Buffett
In 1604, the English judge and jurist Sir Edward Coke (pronounced cook) declared that the house of everyone is to him as his Castle and Fortress as well for defense against injury and violence. The ruling was designed to prevent Sheriff’s from unlawful entering of a person’s home without justification. This saying eventually became known as “Every Man’s Home is His Castle.” Castles represent so many things, from stories of Knights rescuing the princess from the dragon or simple being a person’s home that no one can lawfully enter without consent or justification. The word ‘castle’ comes from the Latin word castellum, which basically means any kind of fortified building or town. Our definition moving forward will be anything that can be fortified, which simply means to strengthen. Since you can technically strengthen a business, why not consider it a Castle?
Whenever I picture a castle, my mind either races towards a gorgeous English countryside with high walls and a deep moat, (like the picture for this blog) or the scene of Winterfell from Game of Thrones being sieged and taken back by the Starks, with a little help from a Giant.
The moat that protected Castles was usually the depression surrounding a castle, city wall, or other fortification, usually but not always filled with water. The existence of a moat was a natural result of early methods of fortification by earthworks, for the ditch produced by the removal of the earth to form a rampart, creating a valuable part of the Castle’s defense system. An economic moat is a distinct advantage a company has over its competitors which allows it to protect its market share and profitability. It is often an advantage that is difficult to mimic or duplicate (brand identity, patents) and thus creates an effective barrier against competition from other firms. Consider Google as a business with a moat as it owns 67% of the search engine market share and it’s not something you need more than one of. How many of us conduct a Google search, for example followed by a Yahoo or Bing search to see if the results are different? If you are anything like me, if you don’t like the results you simply change the search term and hit submit again. The National Football League is another Moat…. More on Moats next week.
Charlie Munger and Warren Buffett try to distinguish between businesses where you have to be smart once and businesses where you have to stay smart. Buffett explained his moat principal at the 1995 Berkshire Hathaway annual meeting of shareholders.
"What we're trying to do," he said, answering a question from the audience, "is we're trying to find a business with a wide and long-lasting moat around it, surround -- protecting a terrific economic castle with an honest lord in charge of the castle."
He then went on to explain some key traits a company with a moat must have:
"What we're trying to find is a business that, for one reason or another -- it can be because it's the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumers' mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it."
When he's found a business with a large moat around it, the next stage in Buffett's process is to try and figure out what's keeping the moat intact:
"But we are trying to figure out what is keeping -- why is that castle still standing? And what's going to keep it standing or cause it not to be standing five, 10, 20 years from now. What are the key factors? And how permanent are they? How much do they depend on the genius of the lord in the castle? And then if we feel good about the moat, then we try to figure out whether, you know, the lord is going to try to take it all for himself, whether he's likely to do something stupid with the proceeds, et cetera."
So, if a Castle is anything that can be fortified and therefor strengthen, couldn’t that also relate to building a business? Building a business is like constructing a fortress and those that last, do so because they create the best offensive and defensive battle plan available in their respective space.
Robert Redford talked about the key elements that make a castle such a strong force in the movie The Last Castle. The design hasn't changed in thousands of years. Let’s start exploring its requisites and blueprints.
One- Location: A site on high ground that commands the territory... as far as the eye can see. Build your database, recruit, gain market share. Is your business visible and distinguishable? Since we live in a primarily virtual world, your location is all about telling and retelling your customer where you are located. The internet is like the downtown traffic in Los Angeles and just as noisy. Your location comes down to knowing where to find you.
Two- Protection: Big walls strong enough to withstand an attack. Team build your MVVC- make the determination if you were smart once or how you can remain smart and ahead of the competition. Real estate is a good example of this. Once your competitor sees what you are doing, they will attempt to do it better, so you constantly have to stay ahead of them and stay smart. If you had jumped into the foreclosure and short-sale market in 2006-2008, that would have paid highly as you were ahead of the next problem in your business and it would have been a smart decision. However, if you didn’t pay attention to your accounts receivable and profit-margin as the market changed, many found themselves drowning in their own moats.
Three- Have a garrison: Men who are trained and willing to kill. Constant and intentional re-evaluation of your team and do they have the tools and equipment to continue domination. Do you have loyalty by those sitting at your Round Table and a leader prepared to fall on the sword to protect your honor?
Four: A flag. No one takes our flag!” A recent study by McKinsey found that the average lifespan of companies listed in Standard & Poor’s (S&P) 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared. Their flag will have fallen as a result of losing their moat.
Businesses that are built to last are first fortified, get stronger, are defensive powerhouse, which is what allows them to create a gap in the marketplace and then use their services or product to fill that gap. The best businesses have walls to defend full frontal attack, which is the Mission, Vision, Values, and Culture of the business. Top businesses seek out, find, and hire the best talent warriors whom are trained to attack and defend against rivals. Lastly, every business has a brand, logo, or image that distinguishes them as unique like a flag flying high in the business world. Business flags come in varies shapes and colors like the golden arches of McDonalds, the green Mermaid of Starbucks, the bitten Apple of Apple INC, the Peacock of NBC, or the arrow of Amazon representing they sell everything from A to Z. When Netflix seized Blockbuster, they captured the flag and became the dominate player in streaming video…. for now anyway… As of 2020, Disney launched their own streaming service Disney+ and time will tell if Netflix has the ability to withstand their own Castle siege.
