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Operating Margins

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Re: Operating Margins

#91

Post by spongebobstoes »

zackmorris wrote: post #73

This 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.…

> crypto exchanges, stock exchanges, banks, toll road operators, financial services and asset management

While these are bogeymen, they do provide clear services that people need.

Banks should be obvious. A toll road is the worst offender in the list, it's tough to justify the eternal regressive tax.

The rest falls into financial markets. A steelman argument here could be that those services all make the power of compound interest broadly available. It's maybe the only exponential power available to average people.

I think there's a good argument that financial markets are a big reason that people can ever retire.

Re: Operating Margins

#92

Post by antisthenes »

spongebobstoes wrote: post #91
zackmorris wrote: post #73

This 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.…

> crypto exchanges, stock exchanges, banks, toll road operators, financial services and asset management While these are bogeymen, they do provide clear services that people need. Banks should be obvious. A toll road is the worst offender in the list, it's tough to justify the eternal regressive tax. The rest falls into financial markets. A steelman argument here could be that those services all make the power of com…

> I think there's a good argument that financial markets are a big reason that people can ever retire.

There isn't. The reason people can finally retire in the 20th and 21st centuries is due to extreme exploitation of fossil fuels and using multiples of stored energy to make goods, which would normally be unavailable compared to the energy budget coming from the Sun in a given year.

You can argue in some way that the financial markets made this wealth easily accessible to the average joe through a 401k, but it could have been just as easily allocated using a different not-for-profit mechanism.

Re: Operating Margins

#93

Post by boramalper »

takinola wrote: post #90
zackmorris wrote: post #73

This 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.…

> 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. OK, I'll bite. This is a very ungenerous take. Entities that aggregate and provide capital create enormous real human value. In fact…

See: Mortgages are a manufactured product (2022) by Patrick McKenzie (patio11)

https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...

Re: Operating Margins

#94

Post by KK7NIL »

boramalper wrote: post #93
takinola wrote: post #90

Earlier quoted context omitted.

> 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. OK, I'll bite. This is a very ungenerous take. Entities that aggregate and provide capital create enormous real human value. In fact…

See: Mortgages are a manufactured product (2022) by Patrick McKenzie (patio11) https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...

What point are you trying to make?

That article could be reduced to one phrase: "banks off-load mortgage risk by selling that debt to investors". But that doesn't drive clicks or strike the fear of corporations into your soul.

Re: Operating Margins

#95

Post by itake »

jimnotgym wrote: post #69
baxtr wrote: post #47

Earlier quoted context omitted.

Do you mind sharing a link of your linking for (a)? Thank you

I'll summarise the thinking for you. If you got $1m in profit that sounds great. But if you had to invest $1bn to get it, that sounds less good, because you could have made more by putting the money in the bank at a much lower risk. Profit only makes sense when considered against the amount of capital required.

Isnt thay accounted for in the revenue - profit equation?

The cost of capital is expressed in their balance sheet as expenses or depreciation. Pay back loans, investors, etc are all considered when calculating profit.

Re: Operating Margins

#96

Post by chad_c »

toomuchtodo wrote: post #84
candiddevmike wrote: post #79

Earlier quoted context omitted.

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.

Longer life expectancy has led to stagnation due to those older in power and owning wealth to have reduced risk appetite for investment and innovation, leading to maintaining the status quo and their quality of life for the balance of life remaining. They are stealing from the future through the demand for profits today. Peter G. Peterson wrote about this in Gray Dawn 25 years ago, Scott Galloway talks about it today…

So that’s where the South Park Epsiode name comes from. Holy cow.

Re: Operating Margins

#97

Post by Swenrekcah »

takinola wrote: post #90
zackmorris wrote: post #73

This 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.…

> 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. OK, I'll bite. This is a very ungenerous take. Entities that aggregate and provide capital create enormous real human value. In fact…

These entities facilitate value creation yes, but they do not create much value and certainly not in proportion to the profits they extract.

I have met people who sincerely seem to believe that if an entity makes money then it must be societally useful because otherwise the market would not reward them with profits.

This seems to me like a self-help belief for people in these lucrative but ultimately not very meaningful positions.

Re: Operating Margins

#98

Post by phkahler »

zackmorris wrote: post #73

This 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.…

>> This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity.

9th from the bottom is EV charging. You might think that's going to improve quality of life, but the reality is these are companies trying to be middle men in a commodity market. They want to profit from delivering electricity to locations along the highway. It's kind of stupid because most people can charge at home overnight and be good for the next day or three. OTOH if you're going on a long trip you'll want to plan stops at these places but since you're planning you can check prices too.

Re: Operating Margins

#99

Post by redwood »

itake wrote: post #95
jimnotgym wrote: post #69

Earlier quoted context omitted.

I'll summarise the thinking for you. If you got $1m in profit that sounds great. But if you had to invest $1bn to get it, that sounds less good, because you could have made more by putting the money in the bank at a much lower risk. Profit only makes sense when considered against the amount of capital required.

Isnt thay accounted for in the revenue - profit equation? The cost of capital is expressed in their balance sheet as expenses or depreciation. Pay back loans, investors, etc are all considered when calculating profit.

In theory but that's where the accounting games come in: how you choose to capitalize the expenses over what time horizon and how you recognize the returns are extremely relevant. While you might point out that there are commonly accepted accounting principles, you'll also note that people use all kinds of different approaches for different types of businesses were where they argue the commonly accepted model is not quite the right fit the shape of the business

Re: Operating Margins

#100

Post by alexashka »

zackmorris wrote: post #73

This 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.…

> Sometimes it feels like everything that I care about most has been marginalized and commodified to the point of financial inviability

Every day is a new chance to re-examine what you most care about and make some surprising discoveries.

Or not :)

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