Mechanics of B Club

Every business would face competition. The whole process can always be replicated by another person to derive exact same profits. To stay alive business must defend itself. The way a business can do this is by,

  • Prevent replication. This can be done either using trade secrets or patents.

  • Brand pysc. Even though two products are identical, make special connection with customer to prefer yours.

  • Exploration: Produce multiple versions, variants and possible replacements yourself before competition does.

  • Barrier to entry: For example, create product quality to level that it would be impossible to replicate withouyt large capital expenditure. Create laws for safety, permits,. Exclusive contracts with suppliers and so on.

  • Lower margines: Make business unattractive to enter for others compared to other high margin businesses.

Above strategies allows to keep a business alive and may be move in to centi-millionair region. However getting to B club (billionair region) is virtually impossible. To earn $1B over 5 years, one must sell enormous amount of products to generate huge revenues. Given the population size and contrained material needs of human, this is very hard to accomplish. The easiest path to B club is via dipping in to “river of money” aka IPOs. To do this, one must sacrify few of above protections and go from defensive to offensive mode (i.e. instead of protecting business against competition, eat other businesses). While this leaves business vunerable, it has potential for showing significant growth which then can be justified to show need for large capital for further expansion and IPO. in current economic situation, general population is forced to generate continuous stream of capital which must be “invested”. This has created huge supply of capital while demand is rather small. This means, IPOs can yield very large factor of actual value. This is what eliminates barrier to B club.

Shital Shah

A program trying to understand what it’s computing.

comments powered by Disqus