Warren Buffett's most-cited investing concept is the economic moat — the durable competitive advantage that protects a company's profits the way a castle's moat protects against invaders. Companies with wide moats earn high returns on invested capital for decades; companies without them earn average returns at best, and often worse, because competition relentlessly compresses pricing toward marginal cost. Identifying durable moats is the foundation of long-term investing.

The data live in the financial statements (high and stable ROIC, high and stable margins, durable customer retention) but the cause lives in the business model itself. There are four classic types of economic moat. Network effects arise when each new user makes the product more valuable for existing users.

Visa, Mastercard, and Google Search are textbook examples — every new merchant accepting Visa makes the card more useful for consumers, and every new consumer using Visa makes acceptance more compelling for merchants.