How to AI-proof your business

The speaker begins by asserting that more businesses are poised to fail in the next five years than have in the past fifty, a concern stemming from his observations as an investor at his VC firm, L7B. He notes that historically, starting a business required significant resources like technical expertise, employees, capital, and servers, which acted as a substantial barrier, preventing most ideas from ever materializing. However, this has fundamentally changed in recent months. AI and coding agents have compressed development timelines from years into days, allowing individuals to build viable products with minimal funding, no team, and limited specialized knowledge. This ease of creation, while seemingly positive, poses a significant threat to existing companies, as anyone can now build products that replicate previously successful, relatively simple business models. To counter this threat, the speaker proposes building an "unkillable business" by establishing "moats"—strategies designed to keep competitors out. He uses the analogy of a castle: the larger the moat and taller the castle walls, the harder it is for rivals to storm it. The goal is to create such formidable defenses that competitors are deterred, choosing to pursue other ventures instead. The speaker promises to cover six reliable moats, noting that even two can make a business highly resilient, and reveals that the final two moats discussed were precisely those he employed in his own business, which he successfully sold for nine figures. The first moat is a **brand moat**, exemplified by Coca-Cola. Despite numerous attempts by competitors, Coke remains dominant, not due to its formula or taste (which can be replicated), but because it owns the brand—a feeling, a lifestyle, and an identity. Warren Buffett, a major holder in Coke, has consistently invested in brand-based businesses, recognizing their immense power. Building a brand moat involves associating a product with desirable traits that a target audience seeks, such as the fun and connection often depicted in Coke's advertising. Next is a **distribution moat**, which provides an unfair advantage in getting a product in front of customers. The principle is simple: if two products are equal in price and quality, the one with better distribution will always win. Coca-Cola achieves this by sending representatives to new restaurants, offering to install fridges stocked exclusively with Coke products, thus securing distribution from day one. In the modern era, brands often build distribution moats by engaging influencers as long-term ambassadors, ensuring continuous product promotion and preventing them from endorsing competing products. The third strategy is a **data moat**, characterized by proprietary access to data that consistently improves a product over time. An AI-powered cancer screening company serves as an example: its AI analyzes screens to detect cancer, and as it processes millions of screens, its accuracy approaches perfection, potentially surpassing human doctors. This creates a formidable barrier for new entrants, who lack access to such extensive, proprietary first-party data, making their products less accurate and thus less appealing. Google Search is another illustration; its superior search results attract more users, generating more data to further refine its algorithm, solidifying its position as the default search engine and creating a compounding data moat. An **ecosystem moat** is the fourth defense, where a product becomes a platform that others build on or around, making it "too big to leave." YouTube epitomizes this, with all creators and viewers concentrated on the platform. Creators publish on YouTube for maximum reach, and viewers go there for the best content. A new platform struggles to attract either side, as neither wants to join an empty ecosystem. Similarly, Salesforce benefits from an ecosystem moat in B2B sales; VPs of sales and account executives are accustomed to Salesforce dashboards, leading companies to eventually adopt it due to its entrenched presence and user familiarity, despite its cost. The speaker's own business incorporated the final two moats. The fifth is a **compliance and legal moat**, involving navigating regulatory and legal processes that are difficult for others to shortcut. His company sold software to car dealerships, a sector highly regulated by federal, state, and even zip code laws that vary by car type and model. This required years and hundreds of thousands of dollars to understand and comply with the complex legal landscape, a barrier AI cannot fully overcome as it cannot meet with officials or secure approvals. Building in such a regulated space creates a significant, enduring barrier to entry. Finally, the sixth moat is a **hard-coded IP moat**, which entails proprietary software logic designed to handle complex real-world systems. The speaker's software automated the car-buying process, reducing a 3-4 hour ordeal to mere minutes online. This necessitated intricate integrations with dealerships, the DMV, dealership management systems (DMS), customer relationship management (CRM), finance and insurance (FNI) offices, legal paperwork, and manufacturer headquarters—all across 50 states, every zip code, and for every make, model, and trim, both new and used. This monumental task, which took years of dedicated effort and direct work within dealerships, cannot be quickly copied or replicated, effectively keeping out new competitors. In conclusion, while a business can succeed with just two of these moats, combining all six renders it truly unstoppable. The speaker also promotes another video that guides viewers on how to build a multi-million dollar business from idea to paying customers within 90 days.