Of Moats and Castles

Medieval strongholds included moats as a defensive mechanism for castles and forts. A moat makes it harder and more costly for attackers to reach the castle. The hope is that it would be so costly that they would change their minds and attack a different castle.

The idea of a moat has been adopted in the investment community to indicate how defensible a business is. A significant moat means it is costly to compete with the business. The moat that protects a business could be many things - relationships, patents, experience and, classically, technology. In many of the technology assessments we've done, we were specifically asked to assess how defensible a company's technology is. That was a reasonable question to ask. But things have changed - moats were fine in the days of cavalry and infantry with swords and spears. They work less well against aircraft and ballistic weapons. By analogy, AI seems to have leapfrogged the technology moat of many companies.

But is this true ? Let's think it through. A moat is a simple mechanism that requires little more than backbreaking labour to build. A very large part of the software that formed part of companies' traditional "moats", are no different. The software required lots of backbreaking, repetitive labour to build. Stuff that can now largely be done by machines. (People who still bother to create moats for their castles also use machines).

The question becomes - does technology still constitute a defensive mechanism for companies ? Let's force the analogy a bit further. In the same way that castles now need hi-tech anti-aircraft weapons to defend themselves, so does your business. AI will do the groundwork, the time consuming labour. But you need architects and engineers to map your business requirements onto scalable, distributed architectures. You still need knowledgeable people who can make sure that edge cases are addressed - and yes, maybe that is done through a conversation with an LLM. But you have to know the questions to ask. You have to understand what can go wrong. You have to know that AI is an essential, invaluable tool. Which, like all tools, you have to know how to use.

If you understand what AI really brings to the table, then you are in the fortunate position that your technology can be far more than a defensible moat - it can be your anti-aircraft weaponry.

Rosewood has extensive experience evaluating how defensible software platforms are, and we have worked with many teams that use AI based development tools. Reach out to us for help with a contextually relevant technical due diligence.

Header Image by timbigger: https://pixabay.com/photos/bodiam-castle-east-sussex-moat-3403157/