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Poor Richard's Almanack: Benjamin Franklin's Incredibly Popular Book of Aphorisms, Forecasts, and More
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The following is an excerpt from Berkshire Hathaway's 2005 Annual Letter from Warren Buffett. In just three paragraphs, Warren provides the best explanation of how moats are built cumulatively by the many small, seeming invisible, actions we take on a daily basis.
Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs, and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. **On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous.**
When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as "widening the moat." And doing that is essential if we are to have the kind of business we want a decade or two from now. **We always, of course, hope to earn more money in the short-term. But when short-term and long-term conflict, widening the moat *must* take precedence.**
If a management makes bad decisions in order to hit short-term earnings targets, and consequently gets behind the eight-ball in terms of costs, customer satisfaction, or brand strength, no amount of subsequent brilliance will overcome the damage that has been inflicted. Take a look at the dilemmas of managers in the auto and airline industries today as they struggle with the huge problems handed them by their predecessors. Charlie is fond of quoting Ben Franklin's, "An ounce of prevention is worth a pound of cure." But sometimes no amount of cure will overcome the mistakes of the past.
Ultimately, every day you're either widening or withering your business.
Everything that you do matters.