Tailwinds > Moats.

A thread.

Worth noting that when Softbank acquired ARM in ‘16, both NVidia and ARM had similar market cap - in the early $30bns. Now Nvidia is at $300b and ARM is being acquired for $40b!

1/7 https://www.theverge.com/2020/9/13/21435507/nvidia-acquiring-arm-40-billion-chips-ai-deal

Nvidia has perhaps been amongst the biggest beneficiaries of rise of ML, self-driving cars, gaming where their GPUs have come in handy. As the need for compute power grew Nvidia found itself on the right side of ML tailwinds.

Whereas ARM, a virtual monopoly has languished.
2/7

Sure, there have been perhaps management issues at ARM etc. And the comparison isn't exactly like to like. But if there is a takeaway here, it is that riding tailwinds is perhaps far more important than having moats.
3/7

Every pitchdeck and VC asks for moats, but no one talks abt tailwinds and riding them. Buffett thought of moats because the brands he invested in were growing at a measly 3-4%. Moats mattered there for pricing power. For venture and startups, moats matter zilch.
4/7

What matters instead is being on the right side of tailwinds. And if you can - picking the tailwinds to ride on.

For Milkbasket and Dunzo the moat hasn't been as important as COVID’s immense tailwinds.

Edtech has no real moat* - it has fierce tailwinds at its back though.
5/7

* brand and customer data are decent moats if you grow to scale, i will confess.
6/7

So, let us not obsess unduly over moats. Being on the right side of trends or tailwinds is often more important than having moats or being a monopoly.

Tailwinds > Moats.

7/7 Fin.