Rich businesses, poor businesses

I couldn't overhear a couple of men talking about Robert T. Kiyosaki's amazing book - Rich Dad, Poor Dad. The most important lesson, they said, was the generation of assets which give revenue. The word "asset" was suitably defined in terms of the revenue earned by the capital investment. They recited an interesting example of a house which, if kept vacant was a "liability" as you are losing an opportunity in utilizing the asset. Similarly, if given on rent - it is an "asset" owing to the fruitful use of capital.

Whats true for an individual must surely be true for an organization aswell. Let take an example - online share trading companies. Platforms like ICICI Direct, HDFC Securities, IndiaBulls etc. have today built up a technological backbone. These require minimal maintenance and yet there is no stopping the customers who want to use this facility. The fee (account opening and brokerage) can be quipped as rental income for these technology buildings.

The NOIDA Toll Bridge Co. Ltd. is a similar and very interesting example. It's almost a monopoly for travelling from Delhi to Noida and vice-versa. No one can do a thing about it. You can't fly from Noida to Delhi or perhaps take a boat from Delhi to Noida. Going around the toll bridge is rather expensive. Take situation 2 - what if NTBCL increase the toll fare from 30 rupees for a 4-wheeler to 40 rupees. Can anyone do anything about it?

In essence, these are true monopolies. In a previous blog, I had mentioned brand names which have a similar power. Paras Pharmaceutical has some of the most important brands in it's repetoire - Borosoft, D Cold, Dermicool, ItchGuard, Livon, Krack, Moov, RingGuard, Stopache etc.

That is one key difference in Rich and Poor businesses.