Herbert Dow founded Dow Chemical in Midland, Michigan when he invented a way to produce bromine cheaply. He sold the chemical for industrial purposes all over the US for 36 cents per pound at the turn of the 20th Century. He couldn’t go overseas, however, because the international market was controlled by a giant German chemical cartel that sold it at a fixed price of 49 cents per pound. It was understood that the Germans would stay out of the US market so long as Dow and the other American suppliers stayed within its borders.

Eventually Dow’s business was in trouble and he had to expand. He took his bromine to England and easily beat the cartel’s fixed price of 49 cents per pound. Things were okay for a while until a German visitor came to Michigan and threatened Dow that he had to cease and desist. Dow didn’t like being told what to do and told the cartel to get lost.

Shortly thereafter German bromine started appearing for sale in the US for 15 cents per pound, way below Dow’s price. The cartel flooded the US market, offering the chemical way below their own costs, intending to drive Dow out of business. But Dow outsmarted them. He stopped selling in the US market entirely and instead arranged for someone to secretly start buying up all the German bromine he could get his hands on. Dow repackaged it as his own product, shipped it to Europe, and made it widely available (even in Germany) at 27 cents per pound. The Germans were wondering 1) why wasn’t Dow out of business and 2) why was there suddenly such demand for bromine in the US??

The cartel lowered its price to 12 cents and then 10 cents. Dow just kept buying more and more, gaining huge market share in Europe. Finally the Germans caught on and had to lower their prices at home. Dow had broken the German chemical monopoly and expanded his business greatly. And customers got a wider range of places to buy bromine at lower prices.

Dow went on to do the same trick to the German dye and magnesium monopolies. This is now the textbook way to deal with predatory price cutting.

[via David Fry]

Remember the summer we met, in the middle of the city, it was a hot summer, and everywhere we went there was fire.  Walking in your summer dress, I thought there was nothing better.  Every now and then the wind would blow hard, and you could smell the salt in the air coming off the river.  I told you it was my favorite, and you laughed.  We sat on the steps leading into the harbor talking until well past dusk.  I grabbed your hand, and you smiled.  It was intense, but comfortable.  

I would not hear from you for a long time after that.  We went out again, but the wind had stopped blowing, and the middle of the summer haunted our conversation and thoughts.  We watched a small child desperately eye our water, as his mother pulled him down the street.  You said it made you uncomfortable, and I knew the conversation had changed.  We stopped into a cafe, and stared at the menus.  It was too hot to order.  You told me you weren’t sure what we were doing, and I knew the moment we had shared, was only in my head.  I ordered a coke and only drank half.