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The perfect business...


elltel
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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

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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.

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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.

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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

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