Home/Newsletter/Canals are a better metaphor for modern defensibility than moats.

Trace Cohen·April 30, 2026

Canals are a better metaphor for modern defensibility than moats.

The next great moats may not look like walls at all.

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For years, software moats were defined by separation: proprietary data, switching costs, closed ecosystems and lock in. The assumption was that durable advantage came from keeping competitors out and customers in. That framework made sense in an earlier era of software, but it feels incomplete for a world shaped by APIs, agents and interoperable systems, where many of the strongest companies are not winning by widening moats around themselves, but by building canals between participants.

That distinction matters because a canal creates defensibility differently. It does not protect value primarily through exclusion, but compounds value through flow. Data moves through it, models route through it, agents coordinate through it, trust accumulates through it. The more activity that passes through the system, the stronger and harder to displace the system becomes. In that sense, the route itself becomes the moat.

You can see this across the entire technology stack.

At the compute layer, Nvidia$NVDA, Advanced Micro Devices$AMD, Broadcom$AVGOand Taiwan Semiconductor Manufacturing Company$TSMincreasingly look like canals for intelligence itself, where workloads, training and inference flow.

At the infrastructure layer, Amazon$AMZN, Microsoft$MSFT, Alphabet$GOOGL, Oracle Corporation$ORCLand Cloudflare$NETincreasingly function as canals for cloud, networking and edge routing. Even Fastly$FSLYand Confluent$CFLTfit the pattern.

At the data layer, Snowflake$SNOW, MongoDB$MDB, Elastic$ESTCand Datadog$DDOGincreasingly look like canals for data in motion, not just data at rest.

At the orchestration layer, Palantir Technologies$PLTR, ServiceNow$NOW, Salesforce$CRMand UiPath$PATHincreasingly sit in the flow of decisions, workflows and agents. That may become one of the deepest canal layers of all.

At the transaction layer, Visa$V, Mastercard$MA, Adyen$ADYEN, Block$XYZ, PayPal$PYPLand Coinbase$COINall behave like canals for financial flows.

At the developer and application layer, Shopify$SHOP, Twilio$TWLO, GitLab$GTLB, Adobe$ADBE, HubSpot$HUBSand Atlassian$TEAMall share the same property: they become stronger as more builders, businesses and transactions flow through them.

Even the physical world increasingly has canal businesses. Uber$UBERroutes mobility, Tesla$TSLAincreasingly routes energy and autonomy, and NextEra Energy$NEEmay be a canal for future power flows.

Different layers. Same pattern.

That is what makes canal thinking powerful. It reframes defensibility away from asking how to deepen lock in and toward asking how to become a route others cannot afford to bypass. As systems become more connected, the highest leverage may sit less with whoever owns an isolated application and more with whoever orchestrates movement across ecosystems.

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