Enduring Economics

Businesses often fail by fixating on competitors instead of customers. Jeff Bezos recognized this early, famously noting that most companies are “competitor-obsessed” rather than “customer-obsessed.” From Amazon’s earliest days, he set out to do the opposite, declaring his aim to “build the world’s most customer-centric company.” This wasn’t altruism; it was a calculated strategy. By taking care of customers, Amazon was taking care of itself, securing its long-term survival in a rapidly changing industry.

For many years, I didn’t fully appreciate the power of Amazon’s approach. Only later did I realize that this same mistake–overweighting competition and underweighting customers–isn’t confined to businesses. It is present in many investors as well.

Investors, like companies, often fall into a state of competition obsession. Far more effort goes into analyzing competitive positions–measuring moats, dissecting defenses, and observing market share shifts–than into understanding how a company sustainably delivers superior value to its customers. Yet it’s the strength and resilience of this relationship, more than any single competitive advantage, that often determines whether a company fades or endures.

Customers aren’t an afterthought of an investment thesis; they are the thesis! As I wrote in Customer Centric, every dollar of revenue and profit that drives an investment’s return comes from customers. Investors who overlook the customer introduce significant risks.

What’s missing from much of the investment dialogue is a framework for evaluating whether a company has built unique, durable capabilities that allow it to deliver unmatched value to customers. I refer to this as "customer advantage," which, alongside competitive advantage, serves as a pillar of enduring growth.

While competitive advantages protect what a company has already built, they do not guarantee continued relevance with customers. Customers act out of self-interest, buying from whoever offers the most value, and so-called “customer loyalty” lasts only as long as that remains true. Companies that sustain profitable growth over long periods often combine competitive advantage with customer advantage–keeping competitors at bay while delivering superior value to customers.

The power of investing lies not only in the rate of return, but in how long those returns can continue. Longevity of compounding often matters more than the rate itself. That insight shifts our focus: not just to companies that generate high returns, but to those built to sustain them. With a longer horizon, endurance becomes a central question of any investment. Our ability to answer this question improves when we evaluate customer advantage and competitive advantage together. Companies that balance their advantages across multiple dimensions are more likely to endure than those that rely on a single source of strength.

At its core, great investing is about owning great businesses. In my earlier years, I defined "greatness" primarily through competitive advantage–the ability to earn and defend high returns on capital. While moats are valuable, I've come to see that they are not enough. A more holistic view that incorporates both competitive and customer advantages leads to better decisions. When both elements are present in a business, I call this combination “Enduring Economics.” It is my benchmark for identifying great companies.

Enduring Economics = Competitive Advantage + Customer Advantage 

To evaluate customer advantage, we begin by asking what customers care about most in a specific industry. In most purchase occasions, there are two or three core attributes that matter most. Often, these sources of customer value extend far beyond tangible product features to include social and psychological factors as well. After identifying the key value drivers, we can work backward to see if a company has developed capabilities that deliver leading value in these key areas. Speaking with customers and using the product are especially helpful here.

While competitive advantage exists in many forms–network effects, switching costs, economies of scale, and so on–the sources of customer advantage are equally diverse, but less studied. One powerful form currently represented in our portfolio is what I call "radical customer alignment" (RCA).

Radical Customer Alignment

Radical customer alignment is an operating philosophy designed to deliver superior value to customers. To achieve RCA, a company deliberately builds its business and culture around the attributes customers care most about. Amazon, for example, exemplifies RCA by relentlessly improving in the areas e-commerce customers value most: low prices, broad selection, fast delivery, and frictionless transactions. Amazon’s structural alignment with customer needs raises the odds that customers will keep coming back well into the future.

As we noted in Customer Centric, putting customers first often conflicts with short-term shareholder interests, even though it can enhance long-term value. I label RCA as "radical" because it requires a deep commitment to overcome the tension it creates with shareholders, something most companies will not or cannot do.

Wise is a company from our portfolio that demonstrates radical customer alignment. Wise recognized early on that its customers care most about low prices, speed, and transparency in cross-border transfers. Consequently, Wise built its entire organization around delivering leading performance in each of these areas. Each autonomous local team inside Wise works daily to improve speed, cost, and transparency of its services, and does not need to ask permission if they’re working towards these goals. By designing the company to stay aligned with customers, Wise increases the likelihood of staying relevant with its customers in the future.

In summary, Enduring Economics is Bonsai’s framework for determining whether a company qualifies as a "great business." This two-step approach assesses whether a company has both a sustainable competitive advantage and a meaningful customer advantage. Wise exemplifies this framework in that its radical customer alignment creates a sustainable customer advantage, and its scale and unique infrastructure provide a competitive advantage. By focusing on both competitive and customer advantages, we don’t just identify companies capable of defending against competition today, we uncover businesses designed to remain relevant in their broader ecosystems for the long term.