undefined | Better HN

0 pointstoasterlovin1y ago0 comments

> I don't think you can call ChatGPT a product. It has zero switching cost.

In consumer markets the moat is habits. The switching cost for Google Search is zero. The switching cost for Coke is zero. The switching cost for Crest toothpaste is zero. Yet nobody switches.

0 comments

swat5351y ago

Not to nitpick but..

1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

2. I don't know many people who are dedicated "Pepsi" fans, they just grab whatever drink is available Coke/Pepsi..

3. I've also not heard many people who are never willing to switch from "Crest".. People will just grab the next available option if Crest is not on shelf. No one is pre-ordering Crest.

SllX1y ago

I will nitpick this one:

> 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

Google Search is a product. Not the whole company. Switching to most other search engines is $0. Naturally no one is honor bound to use anything else you listed either.

toasterlovinOP1y ago

You’re standing in the aisle at the supermarket, looking at the soda. Everything is in stock. What do you grab? Most people make the same decision for their entire life: Coke. That is the moat that Pepsi has been trying to overcome for decades.

sumedh1y ago

> That is the moat that Pepsi has been trying to overcome for decades.

Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?

1 more reply

yawnxyz1y ago

I used to work for Coke — they've been making a lot of money for a very long time.

The size of a moat befits the size of a castle it protects. Coke absolutely has a moat, but it's not big enough to defend Coke as a trillion dollar company.

The question isn't whether OpenAI has a moat or not, it's if its current moat is big enough to protect a trillion-dollar company.

toasterlovinOP1y ago

The person I'm responding to just said there was no moat because switching costs were zero. They didn't say anything about a trillion dollar valuation. But, while we're on the topic, Google's market cap is $2T because people can't be bothered to change the default search engine in their browser.

charlieyu11y ago

I’m not that old and I remember people switching away from Geocities, ICQ, Yahoo, many social media sites etc

crazygringo1y ago

(Never mind I was wrong -- deleting my comment to not spread misinformation. The definition of moat is wider than I was familiar with, thanks for the correction!)

herval1y ago

A strong brand is most definitely a moat. So is habit. Any source you can find that defines economic moats will list those.

https://corporatefinanceinstitute.com/resources/management/e...

toasterlovinOP1y ago

Minor nit, but brand and habit are kinda the same thing. The habit is that you buy a particular brand.

j / k navigate · click thread line to collapse

0 comments

swat5351y ago

Not to nitpick but..

1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

2. I don't know many people who are dedicated "Pepsi" fans, they just grab whatever drink is available Coke/Pepsi..

3. I've also not heard many people who are never willing to switch from "Crest".. People will just grab the next available option if Crest is not on shelf. No one is pre-ordering Crest.

SllX1y ago

I will nitpick this one:

> 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

Google Search is a product. Not the whole company. Switching to most other search engines is $0. Naturally no one is honor bound to use anything else you listed either.

toasterlovinOP1y ago

sumedh1y ago

> That is the moat that Pepsi has been trying to overcome for decades.

Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?

1 more reply

yawnxyz1y ago

I used to work for Coke — they've been making a lot of money for a very long time.

The size of a moat befits the size of a castle it protects. Coke absolutely has a moat, but it's not big enough to defend Coke as a trillion dollar company.

The question isn't whether OpenAI has a moat or not, it's if its current moat is big enough to protect a trillion-dollar company.

toasterlovinOP1y ago

charlieyu11y ago

I’m not that old and I remember people switching away from Geocities, ICQ, Yahoo, many social media sites etc

crazygringo1y ago

(Never mind I was wrong -- deleting my comment to not spread misinformation. The definition of moat is wider than I was familiar with, thanks for the correction!)

herval1y ago

A strong brand is most definitely a moat. So is habit. Any source you can find that defines economic moats will list those.

https://corporatefinanceinstitute.com/resources/management/e...

toasterlovinOP1y ago

Minor nit, but brand and habit are kinda the same thing. The habit is that you buy a particular brand.

j / k navigate · click thread line to collapse