{"id":1974,"date":"2013-09-15T12:16:48","date_gmt":"2013-09-15T19:16:48","guid":{"rendered":"https:\/\/masonmyers.com\/?p=1974"},"modified":"2015-01-28T12:58:40","modified_gmt":"2015-01-28T20:58:40","slug":"competitive-advantage-and-persistent-investment-returns","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/competitive-advantage-and-persistent-investment-returns\/","title":{"rendered":"Competitive Advantage Leads to Persistently Good Performance — Like Top Tier VC Firms"},"content":{"rendered":"

It is good to be the incumbent.\u00a0 Usually.\u00a0 They have often built competitive advantages over time.\u00a0 Except maybe in the ever-changing world of technology, it is usually an advantage for a business to have been around a long time and to have established customers, suppliers, and reputation. \u00a0Also, this is true for VC fund performance as shown below.\u00a0 For any business owner, it pays to think proactively about how to improve the performance of your business so that it is persistently above average.<\/p>\n

What competitive advantages can you build over time to give yourself the best odds of maintaining high performance? Or, if you are an emerging business, how can your company be 10X better than the incumbent to overcome early advantages?\u00a0 Both now and in the future.\"Persistence<\/a><\/p>\n

It’s Good To Be a Top Third VC (for Continued VC Fund Returns)<\/h2>\n

In business, there are no extra style points for degree of difficulty, so we all might as well attempt to put in place strategies and initiatives that provide our businesses unfair competitive advantages over time.\u00a0 This idea jumped out at me through a study comparing the persistence of high returns by venture capital firms.\u00a0 It is commonly understood that the most successful venture capital firms often continue to be successful because of the self-reinforcing loop of seeing the best new companies which leads to a patina of success which leads to seeing the best new companies.<\/p>\n

From the chart above, it is clear that a fund in the top third is more likely to have its next fund also be in the top third.\u00a0 The same is true for funds in the middle third and bottom third.\u00a0 Thank goodness my investment fund, Greybull Stewardship<\/a>, is on pace to be solidly in the top third!<\/p>\n

Competitive Advantage and Persistent Performance in Your Business<\/h2>\n

Does your business have strong persistence of performance?\u00a0 For all the use of the buzzwords of competitive advantage, it can be difficult and fuzzy to describe and can be even more difficult to develop over time.\u00a0 This post describes the attempt by Morningstar to define competitive advantages.<\/a>\u00a0 It can also be described as a “moat” around a business <\/a>as explored in this post.\u00a0 In thinking about it over the years, here are some observations:<\/p>\n