BookWatch: How corporate monopolies fuel wage stagnation, inequality, and populism

I was once a stock analyst at Morningstar, where the Warren Buffett-inspired approach begins with analyzing a company’s competitive position, and assigning a “moat” rating to it. A castle with a protective moat around it is Buffett’s metaphor indicating a company that is protected from competition. Superior technology, a name brand, a network effect, or high customer switching costs can all underpin moats.

But there are other sources of advantages in an economy where competition is supposed to keep them to a minimum. Companies can achieve special arrangements with government or influence legislation, entrenching their positions. The government can decline to enforce antitrust legislation, allowing mergers to occur until a few players dominate an industry.

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