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> why is the cereal business so profitable? My mind was boggled until I realized that he said this in 1994. The cereal business has been collapsing for years.

• adventured 10y ago
  Adding further to the comedy of the switch, airlines in the US are now very profitable and doing tremendous thanks to a reduction in competition / consolidation. In the history of US aviation, airlines have never been so profitable as they are right now. Munger was wrong because he left out critical qualifiers. A 'pure' commodity can be wildly profitable, if you have a restriction on competition - a cartel or otherwise - that prevents a race to the bottom on price. You don't necessarily have to shift the ratio to the extreme either, there's a line where if you lower the competition beneath that, the profitability becomes significant while still retaining a modest amount of competition. Munger should have known better than to say that, oil is the most obvious demonstration, but there are countless others. Airlines today are nicely profitable for exactly the same reason AT&T and Verizon can still print large profits in a commodity wireless business (even with T-Mobile doing a great job chomping at their heels).