Seven Powers Diagnostic
Map your business against the seven durable sources of competitive advantage.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 90%
Adapted from Hamilton Helmer's book, this framework treats 'power' as a combination of a customer benefit and a competitive barrier that together produce sustained, non-arbitraged profit margins. Patrick O'Shaughnessy used it explicitly to audit OSAM's businesses, checking which of the seven types—counterpositioning, scale economies, switching costs, network economies, process power, branding, and cornered resource—the firm already possessed or could engineer. The exercise forces founders to move past vague 'moat' language into a precise test: does this advantage protect long-term differential profit, and can it survive a well-resourced competitor trying to copy it? It's especially useful when deciding where to invest scarce resources for defensibility rather than just growth.
Origin
Patrick was introduced to Hamilton Helmer's 'Seven Powers' through Keith Rabois on Invest Like the Best, then sat down roughly three years before this conversation to literally apply the framework to his own businesses.
Core principles
- 01Power = benefit to the customer + barrier to competitors, not just a moat metaphor
- 02Brand is built from high-quality, low-variance outcomes sustained over time, not logos or messaging
- 03Counterpositioning works when the incumbent's own business model makes copying you unattractive
- 04Cornered resources must be genuinely non-arbitrageable, not just 'good people' who can be hired away
How to run it
- 1
Define the specific benefit and barrier
Articulate exactly what benefit your business delivers to customers and, separately, what stops a well-funded competitor from replicating it.
Pro tip If you can't name a concrete barrier, you likely don't have a power yet, just a temporary lead.
- 2
Test for brand power via quality and time
Assess whether you've delivered a high, consistent quality bar long enough that customers trust you by default.
Pro tip Ask 'how many years ahead would a competitor need to start to catch up on trust alone?'
Watch out A single viral hack can create attention but not durable brand power without sustained consistency.
- 3
Look for counterpositioning against incumbents
Identify a strategy that is attractive to you but unattractive for the market leader to copy because it conflicts with their existing business model or economics.
Pro tip Target incumbents whose margins or culture make the new approach uneconomical for them, not just difficult.
- 4
Search for a cornered resource
Look for a unique asset, dataset, or person you can secure exclusively through a creative trade (e.g., open access in exchange for IP rights) rather than simply outbidding competitors for talent.
Pro tip Structure the deal so the resource can't simply be re-hired away by a rival with more capital.
Watch out Most 'talented people' are not cornered resources—they are arbitrageable unless bound by a structural arrangement.
- 5
Revisit scale, switching cost, network, and process power
Systematically check the remaining powers against your business to see which are present, nascent, or absent.
Watch out Don't force-fit a power that isn't really there; false confidence in a nonexistent moat is dangerous.
In the wild
Patrick argued Canvas is counterpositioned against the most sophisticated quantitative hedge funds, who could technically build a competitor but won't because their proprietary, performance-fee business model conflicts with Canvas's transparent, asset-fee model.
→ OSAM gained a multi-year head start building a software-driven advisor platform without fear of its scariest potential competitors entering.
OSAM gives away its data library and team access to independent researchers like the pseudonymous 'Jesse Livermore' in exchange for owning the resulting intellectual property, attracting extraordinary talent that traditional firms keep proprietary.
→ OSAM secured deep, differentiated research contributions from people it could not have hired outright.
Common mistakes
Treating brand as logo/marketing
Patrick stresses brand power actually comes from consistent, high-quality, low-variance delivery sustained over time, not visual identity or messaging.
Assuming talented people are cornered resources
Unless structurally locked in through a unique arrangement, skilled individuals can be hired away by competitors and don't constitute a true power.
Is it for you?
Best for
Founders and operators trying to decide where to invest for long-term defensibility rather than short-term growth.
Not ideal for
Early-stage companies with no customers yet, where there is no track record to evaluate against any of the seven powers.
From the transcript
“I do think brand is is like the most straightforward one that I don't need to spend a lot of time on, which is just…”
“Maybe my favorite, and I know it's Hamilton's favorite too, because he's always said that to me when we've talked about it is counterpositioning.”
From the episode
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