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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 to

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. 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.

BobbyTables2 11mo ago
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.
candiddevmike 11mo ago
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.
- toomuchtodo 11mo ago
  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. https://openlibrary.org/books/OL385129M/Gray_dawn https://openlibrary.org/books/OL385129M/Gray_dawn https://www.ted.com/talks/scott_galloway_how_the_us_is_destroying_young_people_s_future https://www.ted.com/talks/scott_galloway_how_the_us_is_destr...
  - chad_c 11mo ago
    So that’s where the South Park Epsiode name comes from. Holy cow.
jldugger 11mo ago
> the bottom 7 lowest-margin industries ... (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. Critically, all the revenue for things you mention have yet to materialize, so they will show up in this naive analysis as losers. What they really represent is _opportunity_. Some may materialize but others have been around for decades and it turns out the "application for profit" step is much harder than anticipated. > margin (profit) is inversely correlated with value to humanity. You say this like it's a bad thing, but arguably the most valuable things to humanity are food, water, and shelter. These are simultaneously so important and so cheap that they embody the term "commodity," and that's a good thing! A _ton_ of human ingenuity from every society and culture has been applied to making these things better and cheaper and more plentiful. The same thing is happening to solar power (mostly for geopolitical reasons), which is conspicuously not on either of your lists. Shelter is the one bit in the hierarchy of needs that got weird. Since it's not a consumable, there's incentive to treat it as an investment. In theory there's nothing wrong with that, but the incentives combined with local politics can become toxic. So many voters in the US own real estate (with leverage!) that everyone agrees by default that prices must never go down. That leads to a trap where politics revolve around housing prices never falling.
tshaddox 11mo ago
> This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity. Of course, this pretty closely matches the basic Econ 101 explanations of competition and free markets. The entire goal of competition is to reduce prices, specifically to get the market price of a good to trend down towards the marginal cost. The thing that's supposed to be good for society isn't that some people get very rich by selling things at high profit margins, but rather that the stuff we want is available at the lowest feasible price.
- hiAndrewQuinn 11mo ago
  I was about to say "Wait, you want to live in the world where gene therapy is as heavily marked up as toll roads?" in the same spirit as this. Low profit margin is the good outcome, not the bad outcome.
  - tomjakubowski 11mo ago
    You seem to be in agreement with the top-level poster, then. "Margin is inversely correlated with value to humanity" corresponds to "low margin is the good outcome", presuming that you see value to humanity as the good outcome.
takinola 11mo ago
> 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, I would argue that most of the improvement in modern life that we all take for granted is because capital markets are available and accessible at scale. Where does the biotech company working on the new gene therapy get the billions it takes to develop and bring that drug to market? Where does the aircraft leasing company get the money to pony up for aircraft at hundreds of millions a pop? I think it is fair to argue about whether the financial services use their position fairly/wisely/etc but it is unfair to dismiss the industry as "middlement using other people's money to extract wealth".
- boramalper 11mo ago
  See: Mortgages are a manufactured product (2022) by Patrick McKenzie (patio11) https://www.bitsaboutmoney.com/archive/mortgages-are-a-manufactured-product/ https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...
  - KK7NIL 11mo ago
    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.
- Swenrekcah 11mo ago
  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.
spongebobstoes 11mo ago
> 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.
- antisthenes 11mo ago
  > 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.
phkahler 11mo ago
>> 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.
alexashka 11mo ago
> 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 :)
didibus 11mo ago
Why doesn't competition drive their margins to be smaller? That's what I'm curious about. Article says Unit Economies or regulatory monopoly, but I'd be interested in something that goes deeper, specifically around financial services.
pinkmuffinere 11mo ago
> stock exchanges, banks, toll road operators, financial services and asset management are in … rent-seeking. This is an absolutely insane take. If you truly believe it, then I propose two tests: 1. You should start a business that provides the same services without rent seeking. If they’re really these low-value things that are just charging high prices, then you should be able to setup very attractive alternatives, make a ton of money yourself, and improve the world in a big way. 2. If you don’t have the energy or willingness to start them yourself, you could limit your use of them to the absolute bare necessity. If you believe they extract value, you could probably do better for yourself by using them less.
squirrellous 11mo ago
Agree with the general point. I’d maybe add that a lot of times it’s the scale of the profit that makes something a net negative for humanity, not the percentage based margin. A lot big tech started small and in the early stages created a ton of positive value, sometimes with a respectable margin, but once they are at billions of market capitalization and starts chasing profits for investors, the positive societal value gets eroded.
AnthonyMouse 11mo ago
> 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. You're missing how the calculation works. Suppose you work in a lab doing genomics etc. You get paid, say, $100,000/year, and you require some equipment which costs another $100,000/year to pay off and which goes to pay the salaries of the people who invented or manufactured it. Then your lab has $210,000/year in revenue, which means $10,000 in profit and a margin of ~5%, which isn't super high. That's good! It means the people paying for your services aren't paying a huge margin on top of your salary to receive your services so more people can afford it. Or it means you're getting paid $100,000 instead of $60,000, the latter of which would have quintupled the investors' profit but reduced your incentive to do that work, reducing the quality of the people they can attract to do it. Whereas industries with high net margins are the ones that are the most dysfunctional or captured by incumbents. It's no surprise that all the finance stuff is there at the top since that's the most thoroughly captured industry in the country. But that doesn't mean you want other things to be like that, it means you want those things to be more competitive so the money is going to customers as lower prices or workers as higher wages instead of going to fat cats as higher margins.
- ghiculescu 11mo ago
  This is true. But there’s another side to it too, which is that if the industry was more profitable it would (probably) attract more investment, specifically in the form of new companies.
  - AnthonyMouse 11mo ago
    That depends what the startup costs look like. If the barriers to entry are low then you don't need a lot of investment to enter the market -- which is one of the things that causes margins to be lower, because otherwise people would keep doing it until the returns fell below the normal market rate of return. The industries with excessive margins are the ones where the incumbents make it prohibitively expensive for anyone to invest in those industries by entering them as a new business, as opposed to buying the stock of the incumbents. Which is one of the risks to their investors -- their stock prices are thereby inflated and they're running the risk both that voters will never get mad enough to actually push through regulatory reform and that the huge market incentive to find a way to disrupt them will never actually find a way do it.

BobbyTables2 11mo ago

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.

candiddevmike 11mo ago

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.

toomuchtodo 11mo ago
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. https://openlibrary.org/books/OL385129M/Gray_dawn https://openlibrary.org/books/OL385129M/Gray_dawn https://www.ted.com/talks/scott_galloway_how_the_us_is_destroying_young_people_s_future https://www.ted.com/talks/scott_galloway_how_the_us_is_destr...
- chad_c 11mo ago
  So that’s where the South Park Epsiode name comes from. Holy cow.

jldugger 11mo ago

> the bottom 7 lowest-margin industries ... (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. Critically, all the revenue for things you mention have yet to materialize, so they will show up in this naive analysis as losers. What they really represent is _opportunity_. Some may materialize but others have been around for decades and it turns out the "application for profit" step is much harder than anticipated. > margin (profit) is inversely correlated with value to humanity. You say this like it's a bad thing, but arguably the most valuable things to humanity are food, water, and shelter. These are simultaneously so important and so cheap that they embody the term "commodity," and that's a good thing! A _ton_ of human ingenuity from every society and culture has been applied to making these things better and cheaper and more plentiful. The same thing is happening to solar power (mostly for geopolitical reasons), which is conspicuously not on either of your lists. Shelter is the one bit in the hierarchy of needs that got weird. Since it's not a consumable, there's incentive to treat it as an investment. In theory there's nothing wrong with that, but the incentives combined with local politics can become toxic. So many voters in the US own real estate (with leverage!) that everyone agrees by default that prices must never go down. That leads to a trap where politics revolve around housing prices never falling.

tshaddox 11mo ago

> This is maybe the first dataset I've seen that clearly illustrates how margin (profit) is inversely correlated with value to humanity. Of course, this pretty closely matches the basic Econ 101 explanations of competition and free markets. The entire goal of competition is to reduce prices, specifically to get the market price of a good to trend down towards the marginal cost. The thing that's supposed to be good for society isn't that some people get very rich by selling things at high profit margins, but rather that the stuff we want is available at the lowest feasible price.

hiAndrewQuinn 11mo ago
I was about to say "Wait, you want to live in the world where gene therapy is as heavily marked up as toll roads?" in the same spirit as this. Low profit margin is the good outcome, not the bad outcome.
- tomjakubowski 11mo ago
  You seem to be in agreement with the top-level poster, then. "Margin is inversely correlated with value to humanity" corresponds to "low margin is the good outcome", presuming that you see value to humanity as the good outcome.

takinola 11mo ago

> 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, I would argue that most of the improvement in modern life that we all take for granted is because capital markets are available and accessible at scale. Where does the biotech company working on the new gene therapy get the billions it takes to develop and bring that drug to market? Where does the aircraft leasing company get the money to pony up for aircraft at hundreds of millions a pop? I think it is fair to argue about whether the financial services use their position fairly/wisely/etc but it is unfair to dismiss the industry as "middlement using other people's money to extract wealth".

boramalper 11mo ago
See: Mortgages are a manufactured product (2022) by Patrick McKenzie (patio11) https://www.bitsaboutmoney.com/archive/mortgages-are-a-manufactured-product/ https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...
- KK7NIL 11mo ago
  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.
Swenrekcah 11mo ago
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.

spongebobstoes 11mo ago

> 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.

antisthenes 11mo ago
> 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.

phkahler 11mo ago

>> 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.

alexashka 11mo ago

> 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 :)

didibus 11mo ago

Why doesn't competition drive their margins to be smaller? That's what I'm curious about. Article says Unit Economies or regulatory monopoly, but I'd be interested in something that goes deeper, specifically around financial services.

pinkmuffinere 11mo ago

> stock exchanges, banks, toll road operators, financial services and asset management are in … rent-seeking. This is an absolutely insane take. If you truly believe it, then I propose two tests: 1. You should start a business that provides the same services without rent seeking. If they’re really these low-value things that are just charging high prices, then you should be able to setup very attractive alternatives, make a ton of money yourself, and improve the world in a big way. 2. If you don’t have the energy or willingness to start them yourself, you could limit your use of them to the absolute bare necessity. If you believe they extract value, you could probably do better for yourself by using them less.

squirrellous 11mo ago

Agree with the general point. I’d maybe add that a lot of times it’s the scale of the profit that makes something a net negative for humanity, not the percentage based margin. A lot big tech started small and in the early stages created a ton of positive value, sometimes with a respectable margin, but once they are at billions of market capitalization and starts chasing profits for investors, the positive societal value gets eroded.

AnthonyMouse 11mo ago

> 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. You're missing how the calculation works. Suppose you work in a lab doing genomics etc. You get paid, say, $100,000/year, and you require some equipment which costs another $100,000/year to pay off and which goes to pay the salaries of the people who invented or manufactured it. Then your lab has $210,000/year in revenue, which means $10,000 in profit and a margin of ~5%, which isn't super high. That's good! It means the people paying for your services aren't paying a huge margin on top of your salary to receive your services so more people can afford it. Or it means you're getting paid $100,000 instead of $60,000, the latter of which would have quintupled the investors' profit but reduced your incentive to do that work, reducing the quality of the people they can attract to do it. Whereas industries with high net margins are the ones that are the most dysfunctional or captured by incumbents. It's no surprise that all the finance stuff is there at the top since that's the most thoroughly captured industry in the country. But that doesn't mean you want other things to be like that, it means you want those things to be more competitive so the money is going to customers as lower prices or workers as higher wages instead of going to fat cats as higher margins.

ghiculescu 11mo ago
This is true. But there’s another side to it too, which is that if the industry was more profitable it would (probably) attract more investment, specifically in the form of new companies.
- AnthonyMouse 11mo ago
  That depends what the startup costs look like. If the barriers to entry are low then you don't need a lot of investment to enter the market -- which is one of the things that causes margins to be lower, because otherwise people would keep doing it until the returns fell below the normal market rate of return. The industries with excessive margins are the ones where the incumbents make it prohibitively expensive for anyone to invest in those industries by entering them as a new business, as opposed to buying the stock of the incumbents. Which is one of the risks to their investors -- their stock prices are thereby inflated and they're running the risk both that voters will never get mad enough to actually push through regulatory reform and that the huge market incentive to find a way to disrupt them will never actually find a way do it.