I like your style - clear, on point, and no attempts to sell me anything. It’s honestly refreshing to read
Thank you for the kind words.
Operating Margins
71–80 of 130 posts
Re: Operating Margins
#72[deleted]
Re: Operating Margins
#73This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity.
Other than Ports, the top 7 highest-margin industries (stock/crypto exchanges, stock exchanges, banks, toll road operators, financial services and asset management) are in financialization and rent-seeking, basically acting as middlemen that use other people's money to extract wealth.
Meanwhile the bottom 7 lowest-margin industries other than LiDAR and aircraft leasing (CRISPR, gene therapy, hydrogen fuel cell, genomics and mRNA therapeutics) arguably have some of the greatest potential to improve quality of life and help the planet.
Sometimes it feels like everything that I care about most has been marginalized and commodified to the point of financial inviability. Meanwhile people who simply came out on the winning side of the multiverse and pulled up the ladder behind them are doing so well that they mock the rest of us for working by actively making our lives harder at every opportunity.
Re: Operating Margins
#74This ignores the capital intensity of different businesses, and the rate of return on that invested capital , which is tied up in the business.[a] -- [a] Warren Buffett has written and spoken extensively about return on invested capital for more than six decades.
Do you mind sharing a link of your linking for (a)? Thank you
Buffett routinely mentions it in his annual letters:
https://www.berkshirehathaway.com/letters/letters.html
A good place to start is by reading his thoughts on See's Candy as of 2007 (~four decades after he bought it):
https://berkshirehathaway.com/letters/2007ltr.pdf (search for "See's Candy")
Re: Operating Margins
#75Earlier quoted context omitted.
For the benefit of you and other small viewport users, here's an image of the plot, with a line indicating where the median is the same as the mean. https://i.xkqr.org/medianvsmeanmargin.png Though I do recommend exploring the plot on a full-size monitor too – it's zoomable etc.
Thanks. Guess you hacked the Plot.ly widget? Graph also needed dotted lines for 0s in y and x axis since some data points are close to those values.
> Guess you hacked the Plot.ly widget?
Paintbrush in Gimp on top of screenshot.
Re: Operating Margins
#76This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity. Other than Ports, the top 7 highest-margin industries (stock/crypto exchanges, stock exchanges, banks, toll road operators, financial services and asset management) are in financialization and rent-seeking, basically acting as middlemen that use other people's money to extract wealth.…
I also feel similarly when I was finishing grad school.
I learned advanced engineering topics only to find that the “hot” areas were social media and cell phones.
Not sure what, but always assumed there would be better uses of such an education.
I was largely mistaken.
Re: Operating Margins
#77It's sad to see that the highest operating margins are not industries that produce actual value but financialized slop makers.
Re: Operating Margins
#78Generally "income" refers to net income, which, then invalidates "divide a company's income by its revenue, and you get the operating margin". Perhaps the author means to say "operating income". In any event, operating profit and even net income don't give you a good approximation of cash (unless you're doing cash accounting, which no real company is doing) because they include non-cash charges such as depreciation and amortization.
Re: Operating Margins
#79This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity. Other than Ports, the top 7 highest-margin industries (stock/crypto exchanges, stock exchanges, banks, toll road operators, financial services and asset management) are in financialization and rent-seeking, basically acting as middlemen that use other people's money to extract wealth.…
All of the money is mostly tied up in safe bets for boomers. You don't see capital chasing big bets because folks would rather get their 4-7%+ "guaranteed" than risk it on a startup.
There's probably some meta commentary on the global risk climate in general since COVID here.
Re: Operating Margins
#80> Divide a company's income by its revenue If I'm a person who believes income is the same thing as revenue, how would you explain this division to me in a way I'd understand? Or does "income" in this case mean "profit"?
You need to deduct Cost Of Goods and Services, or COGS, from revenue in order to determine income. Then you have other things like taxes and depreciation, then you get profit.
This is not correct. Your calculation gives gross margin. However, gross margin doesn't account for all the other operating expenses associated with running a business. If you also include those, you get operating profit. Finally, if you then also account for values (negative and positive) associated with financing, investing, and taxes, you get to to net income. Net income is "the bottom line". It is what is generally referred to as "profit" by investors. And, its not the same thing as positive, neutral, or negative cash flows.