Even a company with a wide moat, great management, and structurally favorable industry dynamics needs a big enough opportunity for those advantages to matter. TAM (Total Addressable Market) analysis is the discipline of asking: how large is the market the company can compete in, how much can this company realistically capture, and is the market growing or contracting? A wonderful business in a small or shrinking market produces wonderful but limited returns.

A wonderful business in a large and growing market is what compounds for decades. TAM is the theoretical ceiling: total spending if the company captured 100% of every possible customer in every geography. SAM (Serviceable Addressable Market) narrows to what the company can realistically reach with its current product, sales channels, and operational footprint.

SOM (Serviceable Obtainable Market) narrows further to the realistic share given competition. A SaaS company might cite 'TAM of \$500B,' 'SAM of \$80B,' 'SOM of \$15B' — and current revenue of \$2B.