May 10, 2017 Mental Models

Geoff’s Mental Model #1: “Market Power”

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” – Warren Buffett A business with market power is a good business. A business without market power is a bad business. In that quote, Buffett gives a clear definition of market power...

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