The Barbarians Have Been Crossing the Moats to Plunder the Castles: IBM, US Big Law, Disney and More

 It was investment-guidance god Warren Buffett who hammered that a business needs an "economic moat." That is, the unique competitive advantage that impedes entry into their force field. Good advice, at least until recently when so much disruption has made many of those moats fragile. Castles are being plundered.

Classic is IBM's. Today the stock closed at $212.67, down from the 52-week high of $332.46. Barron's directly addresses the weakening of the moat:

"[Anthropic's] COBOL modernization ... for its Claude Code tool ... could dramatically streamline updates to the outdated programming language that runs on IBM mainframes ...  the immense complexity and cost of migrating off these systems protected IBM’s highly profitable mainframe business ..."

Going, then gone could be that moat protection.

No surprise then that Stefan Stolinski, BNP Paribas analyst, warns against buying IBM on the dip. He doesn't estimate too much organic growth for IBM.

Then there are the Barbarians boldly crossing the moats of US Big Law. 

Among them are the UK powerhouse law firms scooping up US Big Law star partners for their newly established New York offices. Those brandnames both protect the business and bring in business. A competitive advantage didn't get better than that. 

Now this: UK Linklaters recently poached from US-headquartered Paul, Weiss two FIFA partners. UK Freshfields is ponying up $17 million Profit Per Equity Partners in the New York market.

Disney polluted its own moat. That had consisted of the Intellectual Property for its content. But it got cute and decided to add on also distribution through streaming. The economics didn't pan out, making the castle vulnerable. 

Meanwhile so many other enterprises which assume they have a moat don't. Take that contention that AI lacks the human touch. So, human content-creators will be protected, right. In the early November 2022 days of the OpenAI ChatGPT release that might have been somewhat credible. No longer. If humans want to survive in that collapsing niche they have to put together a very different moat.

In my intuitive coaching/tarot reading I have no illusion that the economics are protected. Not now. There, as in too many categories, is a glut. That wasn't how it was five years ago when I entered that line of work. 

To even stay in business, IBM will probably have to acquire nimble AI startups. 

US Big Law will have to develop new profit centers, just as Paul, Weiss has been doing in London. Perhaps, like Vorys, it can use AI to clone partners, but then go the extra step of selling subscriptions to a Bard Karp or Scott Barshay twin. Major corporations, smaller businesses and government could be eager to buy. 

Disney will have to return to sticking to the knitting, ditching distribution. 

And the rest of us have to conjure up the strategy and operational moves just-in-time. Most of those who consider they are sitting pretty are fools. And it shows. They boast. We roll our eyes.

In coaching, I warn about the fragility of all moats. 

Career Paths? So Over. It’s about Earning a Good Living. No matter what.

Complimentary consultation. No Pressure. Street-smart Guidance. Contact Jane Genova janegenova374@gmail.com.


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