How to Talk About Your Moat the Way Investors Do
What buy-side investors see in Costco, FICO, Ecolab, and Vulcan Materials
We’ve been listening to Business Breakdowns, a podcast where buy-side investors and analysts dissect public companies in real depth. The way they describe competitive advantage is worth paying attention to.
In our work, we use a six-factor framework for what investors look for in a public company. Competitive advantage, or moat, is one of the six. It’s table stakes. And yet it’s one of the hardest things for companies to articulate clearly in their own investor materials.
We went back to four of our favorite episodes on Costco, FICO, Ecolab, and Vulcan Materials and looked at how each analyst describes the company’s moat. What stood out is how precise and specific they are, not vague language about “market leadership” or “differentiated platform,” but clear explanations of why the business is hard to replicate.
That’s the idea behind this piece. Chances are, at least one of these moats applies to your business too. The question isn’t just whether you have one, but whether you’re talking about it with the same clarity.
1. Costco’s moat: The Member-Value Flywheel
Zack Fuss (Continental Grain Company) described Costco as a “scale economics shared” business, a term coined by investor Nick Sleep. Most companies keep the benefits of scale for themselves through higher margins. Costco does the opposite: it passes those savings back to members through lower prices. The margin cap is strict, roughly 14% on branded goods and 15% on Kirkland, and the company makes almost all of its operating profit from membership fees rather than product sales.
That creates a flywheel. Lower prices drive renewal rates above 90%, which funds further investment in value, which drives more spending and volume. As Zack put it, “If you have happy employees and they’re willing to take care of the customers, that’s gonna drive the customers to spend more.” The culture reinforces the economics.
IRO takeaway: If your business has a self-reinforcing loop like this, make it explicit. Show investors how customer value feeds back into financial value rather than just inflating margins.
2. FICO’s Moat: The Standard That Can’t Be Unstuck
Dev Kantesaria (Valley Forge Capital Management) described FICO as something closer to infrastructure than a product. The FICO score is used in roughly 90% of U.S. lending decisions, and that dominance is structural, not just a market share number.
The score is referenced in securitization documents, built into bank underwriting models, and written into regulatory frameworks. That creates a network effect that compounds over time: the more participants who rely on the score, the costlier it becomes for any single one to adopt something different.
Kantesaria noted that FICO scores are “sold into each of these different categories: mortgage, auto, credit card, personal loans,” meaning the company collects a small royalty on every score pull across the entire consumer lending ecosystem, with operating margins approaching 90%. Competitors exist, but switching means losing historical benchmarking data, introducing friction in secondary markets, and taking on regulatory risk.
IRO takeaway: If your product has become the standard an ecosystem is built around, show investors the layers of entrenchment: regulatory, contractual, and operational. The moat is not just that customers use you, but that the cost of replacing you sits across multiple parties who would all have to move at once.
3. Ecolab’s Moat: 28,000 Relationships You Can’t Replicate
Todd Wenning (KNA Capital) explained that Ecolab’s full name, Economics Laboratory, reflects its founding DNA: solving customer problems scientifically and proving the savings in dollars.
Out of 48,000 employees, roughly 28,000 are in field sales and service roles. Wenning called the culture “sales-driven,” but the better description is operationally embedded. These reps are on-site at customer facilities managing chemical dosing, water treatment, and hygiene protocols as part of the daily workflow.
In many cases, Ecolab installs its own dispensing equipment and monitoring systems when a new site opens, making its solutions part of the operation from day one. Displacing Ecolab means ripping out installed hardware and retraining staff.
There is also an economic layer. Because Ecolab has so many customers in a given geography, its route density gives it a cost advantage that thinner competitors cannot match. And the moat has a direction: the 2011 Nalco acquisition moved Ecolab heavily into industrial water treatment, and as water scarcity intensifies globally, the company’s positioning becomes more valuable over time.
IRO takeaway: If your competitive advantage runs through people and proximity rather than patents, show investors the numbers that make it hard to copy. Field density and installed base compound in ways that are easy to quantify and difficult for a competitor to replicate overnight.
4. Vulcan Materials’ Moat: Geography as a Monopoly
Rob Hansen (Vontobel Asset Management) laid out a moat that has nothing to do with technology or brand. It is geological and regulatory.
Aggregates, the crushed stone, gravel, and sand used in construction, are among the heaviest, lowest-value materials in the supply chain. As Rob put it, “Every 40 miles you travel by truck, the cost doubles because it’s about 25 cents per ton mile.” Ship much beyond 50 miles and the freight can exceed the value of the rock. Every quarry operates as a local monopoly within its trucking radius.
Vulcan’s reserves “have 50 to 70 year lives,” so these are not assets that get depleted on normal business cycles. And opening a new quarry to compete takes years of environmental review, NIMBY opposition, and often litigation, barriers that only get harder as suburbs expand toward existing sites.
That combination of long reserve life and high barriers to new entry gives Vulcan pricing power. Its scale lets it acquire quarries near high-growth markets and push pricing because customers have no viable alternative within the trucking radius.
IRO takeaway: If your moat is rooted in physical assets and geographic positioning, show investors why those assets appreciate rather than depreciate. Scarcity of permitted reserves and barriers to new entry can be just as durable as any network effect.
Real-World Examples: Bringing Competitive Advantage Into Investor Presentations
Let’s see the articulation of moat in action with the companies we work with.
At TE Connectivity’s Investor Day, the CEO made moat the second slide in the deck. That placement says something: before getting into financials or segment detail, he wanted investors to understand why the business is hard to replicate. The slide lays out how 10,000 engineers co-creating with customers, a global manufacturing footprint, and deep process excellence create structural advantages that compound over time.
In Armstrong World Industries’ investor presentation, the moat shows up through specification excellence. Architects and interior designers specify AWI products into building plans, which means the company wins projects before a contractor ever gets involved. Pair that with the largest installed base in the category, exclusive distribution partners, and manufacturing scale, and you have a competitive position that is both quantifiable and difficult to displace.
Both are worth studying if you’re looking for ways to bring your own competitive advantages forward in your investor materials.
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