This chapter explains how moat erosion can take place. Technology changes can erode moats in a drastic way. There are tons of examples for this right from Typewriters to cameras. Kodak and Polaroid were once strong moat companies and they have lost out completely to today's digital camera world.
If the companies customer base is very concentrated, then that moat is risky. If the competitors are engaged in a self destructive competition then the moat could be risky as well.
Some strong moat companies that generate great return on capital may invest in businesses that they do not have competitive advantage in and that could erode the overall moat of the company and destroy shareholder value. They would be better off to return back the money to shareholders instead. One good example, I can think off is Deccan Chronicle. It has a very good newspaper publishing business which give good return on capital. The management instead of returning that money to the shareholders have invested in Odyssey retail, which not only sucked all the capital and is high on debt but always made big losses. This and other business made the return on capital worse than a savings deposit.
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