One evening when I was in graduate school, I was invited to an event held by the Young Presidents Organization (YPO). At the time, I didn’t even know what YPO was, but it sounded interesting, so I went. I ended up in a conversation with a guy who mentioned, in passing, that he’d flown in for the event on his plane. As also evidenced by his apparel and expensive watch, I knew this guy had made it, so I asked him about his company. “Oh,” he said, “I make bike reflectors.” “What?” I responded. “You make bike reflectors?” He replied, “Yeah. Turns out that no one really cares about bike reflectors, so I pretty much own the market.”

As a budding young MBA, I reflected on this experience as I returned to my apartment. How big would the market be for bike reflectors? How could anyone afford a private plane and wear Rolex watches making something so basic? As I thought about it, I realized it was simple—create a monopoly. Monopolies have pricing power, and pricing power means outsized profits. READ MORE