What it is
Durability is the time dimension of moat. A business with a 25% ROIC today is great. A business with a 25% ROIC that's been earning that for 30 years and seems likely to keep earning it for 30 more is much greater. Compounding rewards duration.How Buffett tests it
Buffett's 10-year test: "I try to envision the business 10 years out. If I can't see it clearly, I don't buy."Proxy questions:
- Will people still drink Coke in 2035? (yes - 100+ years of evidence)
- Will people still use Visa in 2035? (yes - payment networks have crushing inertia)
- Will people still use [today's hottest social network] in 2035? (probably not - every previous social network died on a 10-year timeline)
Anti-durable signals
- Technology disruption risk: every business that depends on a current technology being current 10 years out
- Regulatory risk: businesses whose moat is government licensing (utilities, telecoms) have a moat that politicians can revoke
- Fashion-cycle risk: branded goods that depend on remaining "cool"
- Single-customer concentration: anything earning > 30% revenue from one buyer
Pro-durable signals
- Product is consumed daily (Coca-Cola, food, basic services)
- Switching costs grow over time (databases, ERP systems, payroll)
- Network gets stronger as it grows (payment networks, marketplaces)
- Brand has been #1 for 20+ years (M&M, Hershey, Boeing)