The 7 Most Powerful Moats For AI Startups

**Garry** (0:00)
This idea of motes is so pervasive and so important.

**Harj** (0:03)
It is interesting how motes have just become much more discussed by aspiring startup founders now than they were pre-AI.

**Garry** (0:11)
What is going to prevent you from being basically subject to infinite competition?

**Harj** (0:16)
Like a moat is inherently a defensive thing, and you have to have something to defend, otherwise, like. If you have nothing to defend, don't worry about your moat.

**Garry** (0:30)
Welcome back to another episode of the Lightcone. Today, we're going to talk about motes. So in your head, you might be thinking about barbarians storming your gate. You've got this little startup, and you've got every other company out there who wants to come and eat your lunch. And you know, right outside your castle is a mote that keeps them away. Jared, when you were going to college campuses, this isn't sort of this trivial thing that people are thinking about. It's actually something that keeps them from starting companies right now.

**Jared** (1:01)
Yeah, this is a question that we got from a lot of very smart college students on our recent college trips. And basically, their question is like, they don't see how these new AI agent companies, like a lot of the ones that we've talked about on this podcast, could have motes. It plays into this meme of like the chat GBT wrapper that like all of these companies could be easily cloned. And so they can see how you could build a business that makes some amount of revenue, but they don't really see if you can build a long enduring business. And so I think it's actually not true. I actually think these businesses do have quite deep and interesting motes, but they're not totally obvious what they would be. So I think this is an interesting topic for us to explore.

**Garry** (1:40)
At our recent AI startup school backstage, I had this exchange with Sam Altman that I thought was kind of funny. You know, we spend a lot of time thinking about, you know, make something people want, very simple maxims that are sort of anti-business school. And yet, this idea of moats is so pervasive and so important, we sort of remarked how funny it is that one of the more important books to read these days is actually Business School Fodder, this book called The Seven Powers. So today, we thought that we would actually go through those seven powers. What are they? What are some concrete examples and ways that a startup founder who's just starting out could or should be thinking about these things from real world examples that we've seen?

**Jared** (2:26)
So Diana, can you tell us a bit about this book?

**Diana** (2:29)
This book was written by Hamilton Helmer, who taught at Stanford Economic School and was published in 2016 And the book title was The Seven Powers, the Foundations of Business Strategies. And a lot of the examples are more with the era of internet companies from the 2000s. So a lot of the examples are like Oracle, Facebook, Netflix, which is an older generation. So we want to do a bit of a reboot right now, how it applies now 2025 with AI.

**Jared** (3:01)
I think it's a little bit confusing the way he uses the terminology in the book. It's called The Seven Powers, but it would make a lot more sense if you just call the thing The Seven Motes, because that's really what he's talking about. He's really talking about seven categories of motes that a business can have. And it's true that the examples are out of date, but I think the framework is actually pretty timeless. It turns out there's just only so many kinds of motes that a business can have, and they don't really change. And so even though the specific versions of these motes are different in the agent world, the categories haven't changed.

**Garry** (3:31)
Thankfully, we live in a world where there's markets, and there's free markets where there's lots and lots of competition. And these motes, in a lot of ways, are the only way, if you're running a business, you can fight against all of the other people who might want to do exactly what you're doing. And famously, Peter Thiel talks about competition is for losers. And so the profound view there is that, given infinite competition, what is going to prevent you from being basically subject to infinite competition? And then as a result, your margins, how much you can actually profit off of what you're selling goes down to zero. And what that means is, actually, your business will die. And so having a moat is relatively existential eventually.