elltel Posted January 4, 2011 Share Posted January 4, 2011 Hello all. Just wondering if we could through our collective knowledge work out which company Richard Russell is referring to in his article entitled the "perfect business". The link is below, but here are the paragraph's which mentions this "company".... " I once asked a friend, a prominent New York corporate lawyer, "Dave, in all your years of experience, what was the single best business you've ever come across?" Without hesitation, Dave answered, "I have a client whose sole business is manufacturing a chemical that is critical in making synthetic rubber. This chemical is used in very small quantities in rubber manufacturing, but it is absolutely essential and can be used in only super-refined form. "My client is the only one who manufactures this chemical. He therefore owns a virtual monopoly since this chemical is extremely difficult to manufacture and not enough of it is used to warrant another company competing with him. Furthermore, since the rubber companies need only small quantities of this chemical, they don't particularly care what they pay for it -- as long as it meets their very demanding specifications. My client is a millionaire many times over, and his business is the best I've ever come across." I was fascinated by the lawyer's story, and I never forgot it. " http://ww2.dowtheoryletters.com/ Thanks everyone... Elltel Link to comment Share on other sites More sharing options...
Myth465 Posted January 4, 2011 Share Posted January 4, 2011 Sounds similar to what rare earths were before the big China incident. The perfect business is always a small monopoly. With that said I have no idea. Link to comment Share on other sites More sharing options...
elltel Posted January 4, 2011 Author Share Posted January 4, 2011 indeed... although rare earth isnt that rare.. it's just the process is hard to get to them (and has a lot of costs). If the price of rare earth keeps on going up then the mines that used to exist will re-open. Link to comment Share on other sites More sharing options...
Myth465 Posted January 4, 2011 Share Posted January 4, 2011 Ya its a trap. New mines will crash prices, but they will come online due to politics. Aside from that it had all the properties you alluded to. Vital, great margins and high returns but insignificant to total cost of goods (it costs something like .001 for the metal that makes a cell phone vibrate), and very little other interest in bringing on additional supply due to it collapsing the small insignificant market. China inmo kinda screwed up, there will be new supply now because its now viewed as strategic by the US and Asian allies. I would hate to have been the guy who owned the rare earth mines down there, hopefully they are state owned. Link to comment Share on other sites More sharing options...
augustabound Posted January 4, 2011 Share Posted January 4, 2011 Hello all. Just wondering if we could through our collective knowledge work out which company Richard Russell is referring to in his article entitled the "perfect business". I guess there's no hint as to when this comment was made, or if the company is public? Link to comment Share on other sites More sharing options...
rogermunibond Posted January 4, 2011 Share Posted January 4, 2011 http://portal.acs.org/portal/PublicWebSite/education/whatischemistry/landmarks/newproducts/CTP_004465 Pretty good history of synthetic rubber. There is one candidate, dodecyl mercaptan, also known as OEI "one essential ingredient." During WWII, GR-S or government rubber-styrene was produced by all 4 of the major rubber companies under a shared agreement. After 1955, the government got out of this business. Not sure if there was only 1 company producing OEI, but that would be the search target for me. Link to comment Share on other sites More sharing options...
beerbaron Posted January 4, 2011 Share Posted January 4, 2011 In the book Innovation and Entrepreneurship, Mr. Drucker talks about a guy that invented an enzyme for cataract surgeries. Without this enzyme there is a 1% risk of infection, no doctor would take the risk to create an infection just to save a few bucks. So the enzyme was used in all cataracts operations, it's price was low enough that a new entrants would not consider it. Same elements as your story... now can you find me a public company or two with those attributes :) BeerBaron Link to comment Share on other sites More sharing options...
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