Moat By Induction

Oct 23, 2022

Most startups are founded with no moats. But the best ones can prove moat by induction.

Induction is a simple mathematical way to prove statements. An example: Can you climb a ladder to the top?

  • Base case n=0 – Can you get on the bottom rung of the ladder?
  • Induction step (given n=k, prove n=k+1) – At a given rung, can you climb up to the next rung?

Moat by induction can manifest in many ways. Take network effects:

  • Is your product valuable to a single user (n=1 is the base case).
  • With n=k users, how much more value does a customer get with n=k+1 users?

Sometimes it's about solving zero to one and then one to n.

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