I have thought about this a lot over the years and tried to spot these companies - many of them are the type of business that Berkshire Hathaway would love to find.

Some of them are a little more visible simply because they’ve scaled and developed a moat - logistics, particularly trucking in the UK, and international cargo shipping, stand out here for me. But also social care, floristry and grocery wholesaling, weird sectors in aviation (I worked in that for a while), all sorts.

And then I look at family businesses that shouldn’t be able to exist all the time. In my nearest town centre there is a grocer, a fish shop and a butchers on the high street. Common sense tells us the extra large supermarket built on the outskirts of the town in the 1990s should have obliterated them, but no.

In the UK there is a common assumption that a lot of vape shops, barbers and even some takeaways are fronts for money laundering (and that definitely happens - there is a chicken shop in one Northern town I know that to my knowledge has no ability to actually sell you chicken, nor can the 4 others next door to it). But there are definitely some that are making good money via the legal route.

As a software guy I look for opportunities to sell to them and there’s one theme that stands out across many of them that is also an invisible sector: have you noticed how many small companies make and sell touchscreen tills/cash registers? In the UK it seems to be a thriving cottage industry.

Here is the entire article compressed from 21k characters to 176:

It’s easier to get away with large margins and not spawn competitors if nobody scrutinizes you, and it’s easier not to get scrutinized if you are small or the domain is boring.

Not a knock on the article. It’s nice to double-click on a concept and explore it with examples and from many angles. But for me, it would have been easier to start with that framing, because it took way too long to understand the purpose of the article, atleast for me.

It makes me think of my college girlfriend. Her dad owned a bar, only one, that he eventually expanded to several, but even with only one, they had a home address on a canal on a small island south of Long Beach, vacationed all over the world for weeks at a time, owned a boat, dude bought his daughter a slightly less than million dollar Victorian in San Francisco in 2007 that is probably worth $10 million by now.

He'd started in his 20s as an industrial process engineer and eventually opened a string of carpet stores, then got into restaurants, earned a commercial real estate license and started buying his own stored instead of leasing, then had the opportunity to buy this bar, a rundown, tiny, poorly lit dive in Belmont Shore, a terrible place in a great location, and it eventually became the number one seller of Jameson on the entire west coast. What made owning a bar so profitable? No food, which is low margin, expensive and difficult to get approval for, requires more skill on the part of your labor to make well and handle. Low labor costs because they earn tips and don't need a real salary. Fixed space cost since he owned the building. But more than anything, sheer luck. At some point in the late 90s, his bar acquired a reputation as an easy place to get laid and it's had lines a hundred feet out the front door every night of the week ever since. Neither he nor his staff played any role in this. It's random rumors from college students creating a trend and he's the benefactor. Ended up with a cash business that 20 years ago was earning revenue in excess of $5 million a month.

How is a competitor supposed to enter the market and replicate that? Land is scarce, so you can't just pop up into the same location if there isn't an empty building already. You can't replicate a multi-decade earned reputation except by waiting decades and earning it yourself. You can't magically become the place young people want to be even if you serve exactly the same drinks with roughly identical looking bartenders in a roughly identical looking interior. More succinctly said, you can't copy the intangibles.

If you spend any time trying to find such companies you'll see that for every invisible profitable company you'll find 20 invisible unprofitable disaster companies.

Search funds have existed for a long time now, and it's hard work.

There's a whole genre of YouTube cartoon videos about this.

Dry cleaners.[1]

Parking lots.[2]

7 boring businesses.[3]

[1] https://www.youtube.com/watch?v=_B0cASirKyE

[2] https://www.youtube.com/watch?v=La4SAUvmKz4

[3] https://www.youtube.com/watch?v=ebaiF97mCtM&pp=ugUEEgJlbg%3D...

My impression is that these companies are less invisible than ever thanks to the massive growth in private equity since Ross' era (the 50s-80s). I keep hearing stories about pest control businesses and HVAC companies that get inundated with messages from search funds.

There are many opportunities to start the your own invisible company. I once started a small business ($33k/year) that sold exactly one product to one company for a few years. One thing the article glosses over in the Steven Ross discussion is that this guy was clearly entrepreneurial: he was able to see the gaps and find or build solutions to fill them. You can in fact build a business around solving a "simple" problem for one business, and because it is a small scale you are essentially invisible to the would-be competition.

There is a bit of a trap for smart people with high agency where they assume "well, someone else will just go do <thing>". They assume this b/c they probably have multiple examples in their own life of being the only person to do <thing> when no one else was.

That being said, if I've learned anything during 20 years in various industries ranging from publishing to hedge funds:

1. People have very different brains

e.g. quants can't do sales and vice versa.

2. People don't have infinite time and money

Even billionaires have items on their "want to do" list that don't get done b/c it's either too complex, would require too many people, too much time etc

3. Some people are great at systems building and other are terrible

This could really be downstream of item 1 but it's worth pointing out that building a system of people and processes is it's own specific skill. If you live in an organization where specialization is rewarded, you'll find that there are fewer and fewer people who have this skill.

4. People underestimate what it takes to do <thing>

The classic case is the HN "Oh you want to start a software consulting company b/c you like programming? That's like saying you want to start a pizza parlor b/c you like making pizza. Making the pizza is only 10% of the job."

Reminds me of the dark forest

https://en.wikipedia.org/wiki/Dark_forest_hypothesis

Anyone know how to find these invisible companies? The article mentioned adjusting your search filters? What search device are they using?

   ...and stigma could be overcome for a price

Fortune's Formula by William Poundstone strongly insinuates Kinney Services got started as a gambling front, so possibly a poor example of a boring business turning a healthy profit.

Constellation Software (mentioned in the article) is such an interesting company.

> Economists aren’t naive, so they don’t really believe these things entirely. But they assume they are mostly correct over the medium to long term.

Spoiler alert from the article: turns out economists are wrong. This will sound inflammatory, but has the field of Economics produced anything of value to society? It seems to be a social "science" based on incorrect generalizations about human psychology and studies that don't replicate. At the end of his long career, Alan Greenspan (their Michael Jordan) basically said "whoops, I was wrong that people would behave rationally."

What does humanity get from the field of economics that justifies the amount of attention and status we give economists?

One of my favorite topics, and one that many people argue exists. The conventional thinker really dislikes this concept, as if it points out some personal flaw of theirs. I mention that only because it really sticks out, the personalized perspective people take on this idea of invisible companies they cannot see.