The Perfect Business (2014) [pdf]

It's striking how much modern software development can match this theoretical ideal business, even though SaaS hadn't really taken off when he wrote this.

Really excellent read. Very amusing to see his analysis of Apple and Microsoft, which seemed basically accurate until the iPhone came out.

Agreed, but also don't underestimate Coca-Cola, McDonalds, or Starbucks. McDonalds for example, is mostly a real estate company which franchises the McDonalds brand, infrastructure, and IP. So, they (1) sell the world, (2) have relatively inelastic demand, (3) cannot be easily substituted due to their brand value, (4) requires minimal labor since you can ignore the employees at the franchises, (5) has low overhead, and (7) enjoys cash billings.

For point (6) about the capital, an argument can be made that large amounts of capital aren't necessarily bad. They can also lead to massive moats. Many great companies boil down to being able to significantly reduce costs over time. For example, Carnegie and Frick invested heavily in capital expenditures so that they could reduce costs over time. Once this happened, they could outprice the competitors leading to more money for Carnegie and Frick which lead to them being able to reduce costs further. A similar example nowadays is TSMC. They spend 36B on CAPEX in 2022.

He mentions that the original version is from the 1970s, and he added to it over time. So the original sensibility is pre-PC, but yeah SaaS would have been around by this last edit.

The definition of ideal here is based on:

- minimizing risk

- maximizing profit

- making as much money as possible

Up until the 80s, capitalism would optimize for this result with businesses that still somehow benefited society in one way or another. Once the computer revolution made it possible to operate at a higher abstrac level, especially on financial markets, the optimization game has become a many-times derivative of the basic needs of functioning societies.

Today the perfect business responding to those tenets is very much a business that could potentially be detrimental or world-ending for society, especially with the advent of AI. In some ways, the pesky humans are an annoying hindrance in the process of extreme optimization.

We still look at this maximization problems with the frameworks and cultural upbringing we solidified with pre-internet-revolution capitalism, with the winners dwelling on their survival bias, and the losers being pushed further down, inequalities growing rampant, and societal fabric being sacrificed at the altar of capitalist absolutism.

Dropshipping is a great business idea. Amazon's price fixing has made it a zero sum game