"The higher a monkey climbs a tree, the more you can see his ass" is attributed to oil investor T Boone Pickens. This also aptly reflects investing's holy grail: competitive advantage; something highly prized by the Strawman community. 

Achieving it is immensely difficult; holding it is even harder, as competitors conduct a 360-degree analysis of the company holding that advantage—ass included! 

Morgan Housel is one of my favourite business writers because of his unusual, quirky and thoroughly ‘bang on’ perspectives. On the subject of competitive advantages, he offers unique insights that shed light on the elusive nature of sustaining an edge over competitors, and it's damn difficult. He cites a horrifying statistic - 40% of all USA-based public companies lost all their value from 1980 to 2014! He uses Sears Roebuck as a prime example where his five BIG things, which eat away at competitive advantages, were present.

Let’s examine them using a current falling star – Dominos Pizza (DMP):

(1) Overconfidence and a belief that success in one specific field is automatically transferable to others. Sears couldn’t replicate its winning retail advantage in banking, insurance, and other areas. Could this be DMP and its aggressive international push?

(2) Misunderstanding the ‘growth leads to success’ mantra, which leads to a small, nimble company becoming a large company where an entirely different managerial skill set is required. The Peter Principle is the organizational manifestation of this point. Again, DMP!

(3) Sometimes, those who gain a competitive advantage are satisfied with fame, money, or success and become unwilling to defend what they’ve built. Was Don Meij’s pullback in 2024 a precursor here?  

(4) Inability to adapt to new conditions. Sears failed to recognize that changing US economics led the wealthy to exclusive brands and most consumers to budget retailers like Walmart and Kmart, thereby hollowing out the middle. Has DMP misread its various international markets in this vein? 

(5) Competitive advantage can come from being in the right place at the right time, which inevitably ends. Think of Kodak and digital photos. No question about it, DMP was in the right place at the right time. 

With these pointers in mind, perhaps one can begin to form a view of when a competitive advantage might be coming to an end. For instance, do the living habits and share sell-downs by, say, Richard White of WiseTech Global indicate a potential “coming to an end” of its competitive advantage?

Likewise, does the recently announced retirement intention of Scott McMillan of Alliance Airlines, and the last of the founding directors, indicate a loss of sharpness that made AQZ an industry leader?

Food for thought & watch that monkey!