Companies Build “Capabilities” Before They Build “Moats”: La protezione delle opere d’arte passa dal trust

Alessio Frateily

Hatched by Alessio Frateily

Aug 12, 2023

4 min read

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Companies Build “Capabilities” Before They Build “Moats”: La protezione delle opere d’arte passa dal trust

In the world of business and art, there are two concepts that play a crucial role in creating value and preserving assets: capabilities and trust. While they may seem unrelated at first, there are common points that connect these two ideas and highlight their importance in building a strong foundation.

When it comes to companies, moats are often seen as the ultimate goal. Moats are the economic advantages that set a company apart from its competitors. They represent the sustainable, long-lasting value that a company can offer. However, moats are not built overnight. Companies must first develop capabilities before they can establish a moat trajectory.

Capabilities, also known as powers, are the intangible assets that enable a business to operate more effectively and earn returns above others in the market. These capabilities can be customer captivity or resource captivity. Customer captivity refers to the ability to acquire and retain customers more easily and at a lower cost. Resource captivity, on the other hand, refers to the ability to produce products more efficiently.

While capabilities may not be as glamorous as moats, they are the stepping stones towards building a strong competitive advantage. Companies must focus on developing these capabilities before they can establish a moat. By investing in these intangible assets, companies can position themselves for long-term success.

Similarly, in the world of art, the protection of art collections requires careful planning and strategy. A fragmented collection without a clear vision and management strategy can lead to a loss of value. Collectors who acquire valuable artworks, whether it be a painting, a vintage car, or an NFT, have a vested interest in preserving and increasing the value of their collection.

To achieve this, collectors can utilize two vehicles for managing and conserving their art collections: foundations and trusts. Foundations, specifically philanthropic foundations, can be created to promote and disseminate art, culture, and artworks. The recent simplifications in the legal requirements for establishing philanthropic foundations have made them an attractive option for art collectors.

On the other hand, trusts are often chosen to protect and guarantee the value of art collections. Trusts provide protection without sacrificing private interests. They can ensure the continued appreciation of an artwork even after the death of the artist, especially when there are no heirs or when the heirs have little interest in art.

Trusts offer significant tax benefits as well. Transferring a collection into a trust has no immediate tax implications. The assets are not subject to donation or inheritance tax until the trust comes to an end, which can be several years or even decades. Additionally, trusts can optimize tax profiles, especially when it comes to indirect taxes such as VAT.

The choice between a trust and a foundation depends on the level of flexibility and control desired. Trusts offer more flexibility and are often favored by international collectors due to their ability to protect assets and preserve their value. Foundations, on the other hand, have a more public-oriented purpose and are suitable for promoting art and culture.

In conclusion, whether in the world of business or art, the importance of building capabilities and protecting assets cannot be overstated. Companies must focus on developing their capabilities before they can establish a moat and create sustainable value. Similarly, art collectors must carefully consider their options and choose the best vehicle for managing and preserving their collections. In both cases, strategic planning and a long-term vision are key.

Actionable Advice:

  • 1. For companies: Prioritize the development of capabilities before focusing on building a moat. Invest in intangible assets that will give you a competitive advantage in the market.
  • 2. For art collectors: Consider the benefits of trusts in protecting and preserving the value of your art collections. Trusts offer flexibility and tax advantages that can benefit both the collector and the artwork.
  • 3. For both companies and collectors: Create a clear vision and strategy for the future. Understand the long-term goals and take steps to achieve them, whether it be through capability-building or asset protection.

By understanding the importance of capabilities and trust, companies and art collectors can build a solid foundation for success and ensure the longevity of their assets.

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