---
type: claim
domain: grand-strategy
description: "Moats don't persist by default -- they require continuous investment in isolating mechanisms (switching costs, network effects, learning curves) or they degrade to zero"
confidence: likely
source: "Rumelt (2011), Ghemawat (commitment/lock-in, 1991), Greenwald and Kahn (competitive advantage, 2005)"
created: 2026-04-21
secondary_domains: [internet-finance]
related_claims:
  - "strategy-is-a-design-problem-not-a-decision-problem-because-value-comes-from-constructing-a-coherent-configuration-where-parts-interact-and-reinforce-each-other"
  - "economic-path-dependence-means-early-technological-choices-compound-irreversibly-through-dominant-designs-and-industrial-structures"
  - "value-flows-to-whichever-resources-are-scarce-and-disruption-shifts-which-resources-are-scarce-making-resource-scarcity-analysis-the-core-strategic-framework"
---

# Competitive advantage must be actively deepened through isolating mechanisms because advantage that is not reinforced erodes

Competitive advantage is not a state -- it is a rate of change. An advantage that is not being actively deepened is being actively eroded by competition, imitation, and environmental change. Rumelt's "isolating mechanisms" are the structural features that prevent competitors from replicating an advantage: patents (temporary), switching costs (behavioral), network effects (demand-side scale), learning curves (supply-side scale), and proprietary information (knowledge asymmetry).

The critical insight is that isolating mechanisms must be investments, not inheritances. Network effects don't maintain themselves -- they require continued investment in platform quality and standards (Microsoft Windows' network effect eroded when web applications reduced switching costs). Learning curves only protect if the firm continues to move down them faster than entrants (Ford's Model T learning curve was overtaken by GM's flexible manufacturing). Patents expire. Switching costs decrease as competitors invest in migration tools.

The firm that treats its moat as self-sustaining will find it drained within a strategy cycle. The firm that invests its current advantage into deepening its isolating mechanisms compounds its position. Amazon's flywheel is the canonical example: lower prices leads to more customers leads to more sellers leads to more scale leads to lower costs leads to lower prices. Each cycle deepens the advantage, but only because Amazon reinvests margin into the flywheel rather than extracting it.

This connects to the broader pattern of compounding versus extraction. Any system -- firm, organism, civilization -- that extracts value from its current position without reinvesting in the mechanisms that created that position is on a declining trajectory. The advantage doesn't disappear suddenly; it erodes gradually until a single shock (a new competitor, a technology shift, a crisis) reveals that the moat was already gone.

## Evidence
- Amazon flywheel (2000-present) -- deliberate reinvestment of margin into lower prices and infrastructure
- Intel (1985-2015) -- Moore's Law as learning curve advantage; erosion began when TSMC's foundry model decoupled design from fabrication
- Kodak -- had switching costs (installed base of film cameras) but didn't deepen them; digital photography eliminated the switching cost entirely
- Blockbuster vs. Netflix -- Blockbuster had location-based switching costs that Netflix eliminated by changing the delivery mechanism

## Challenges
- Overinvestment in moat-deepening can become its own trap -- defensive spending that prevents exploration of new positions (Microsoft's decade-long defense of Windows at the cost of mobile)
- Network effects can flip from advantage to liability when the network becomes toxic (early social media advantage to content moderation burden)
