By "best business", I don't just mean highly profitable, but also the elegance of addressing the market need, the scalability of the solution, the ease/capital-efficiency of launching and running it, the potential positive external effects it has.
We came up with a list that was as wide as Google, Kiva and Cash4Gold. What's your preferred "best business" and why?
I also really admire Wal-Mart. An example: I pay $50 to ship money between Japan and the US, which is fairly competitive for international wire transfers from first world financial institutions. Wal-Mart wanted to offer financial services to Mexican immigrants to let them ship money between the US and Mexico. They said "Screw it: this is going to cost $2.99. Until we find a way to lower the price." They impress me with their relentless, all-consuming, borglike quest for improved efficiency, which I think does wonderful things for poor people. I wish all businesses I deal with had Wal-Mart forever nipping at their heels. (For example, I wish they could bring that pricing pressure to bear on my behalf for financial services.) I know, I know, I'm supposed to feel class-based superiority to their customers and pretend that their $12 China-made shirts are grossly inferior to my $100 China-made shirts... but I've never been good with that sort of mental gymnastics.
Oh, and one from the home team: I love Toyota. I don't even care for cars -- I just love their much-vaunted management style. They got to "you can apply statistics to a business and roflstomp over your competitors with it" decades before us web folks showed up at the analytics party.
To me, there are multiple inputs: profitability, efficiency, building value for customers, ethical behavior, innovative-ness, leadership, brand.
Companies like Swoopo / C4G are really profitable, but they score very low on everything else (except perhaps brand). They prey on people's stupidity, which can be really good for a smash and grab type operation (high profitability over a short time), but I don't see them being sustainable in the long run (could be wrong on this -- anyone know how long C4G has been around?)
Companies like Apple are 2nd tier to me -- their strength is in leadership and branding (they aren't bad in the other areas, but they aren't really that innovative except for form factor).
My all star list has companies like Amazon on it. Started as a bookstore, now is one of the leading providers of cloud services (in addition to everything being sold there). They put a huge investment early on in infrastructure, which was a really interesting tactic that looks to be paying off.
Seems like the best businesses always do four things: 1) know what their market needs, 2) develop something novel that fulfills that need, 3) communicate to their market about their product or service, and 4) charge appropriately to make money.
Many of them seem to have focus.
Also, Coca Cola type companies. They've been around so long, they make so much money, and they're so rock solid.
Convincing people they need a carbon rock through a brilliant marketing campaign ("A Diamond is Forever" named best advertising slogan of 20th century by Advertising Age). This slogan convinces Americans and global consumers to change their courtship practices; that it is completely normal and expected to spend 2 months salary on a diamond engagement ring as a symbol of love.
Another ad urged consumers to hold on to family diamond Jewelry as heirlooms. This cutoff the aftermarket of diamonds and increased the market power of the firm.
De Beers then artificially keeps the prices very high. These carbon rocks aren't rare in the natural world. The company restricts supply through a cartel system. Less than 200 companies are allowed to buy from the firm.
EXPANDED: not only that, but the new coffeeshops in order to compete have to offer much better coffee than the pre-Starbucks generation. And of course, the product is addictive, so they are not going away any time soon.
Here's a short article about the founder, Jack Taylor, and how he did it: http://magazine.wustl.edu/Summer03/mywashington.html
http://stableboyselections.com/2008/03/25/charlie-munger-tur...
Warren Buffett allegedly described the tobacco business as the easiest in the world: "You make it for a nickel, and sell it for a dollar, to addicts with tremendous brand loyalty."
Lots of software companies turn out to be great businesses, because you can combine very low marginal costs with lots of ways to cheaply experiment.
You're sold relief from disaster priced solely on the probability of your likelihood of enduring said disaster.
This basic concept is the foundation of every insurance business in the world, and it's highly profitable and stable.
Traditional Banking.
Here's some money that we borrowed from other people. As long as we charge you more to service that debt than we pay others for entrusting their money to us, we're golden.
Ebay, despite its problems with scammers, is a good example: a store that sells almost everything, with no inventory costs.
But, when you get to a point where no-one really no-one can agree on what you are selling and if you are selling it at a good price or not. Well, you have got it made.
The business has managed to create one of the strongest global brands after more than 350 years in its market, and is expected to produce the best quality product among its competitors without charging the highest prices.
Amazon, DELL, eTRADE, etc.
