[lotsofpulp]

> We’re going to focus on maintaining that enormous success. We’re not going to focus on growth.” (I can already hear the spreadsheet squinting logic about how growth is necessary for some reason)

Where is Xerox going to get the money to do R&D to not be obviated? Replace Xerox with any other business.

All the businesses obviated by spreadsheets, mobile networks, smartphones, GPS? Maintaining success is continuing to make bets and moving forward, and bets require money. More money means bigger bets.

Another example, you have two businesses, one with a 5% profit margin (because they feel like 5% is enough), one with a 10% profit margin. The one with 10% profit margin is going to be able to continue renovating the business, upgrading the facility, buying more land, hiring better employees with higher payrates.

What will happen to the 5% profit margin business? Do you think customers will keep rewarding them (assuming the 10% profit margin business is worth the additional marginal cost)? You can insert restaurant, hotel, retail store, etc in here.

Note that having a higher profit margin is not the only way to survive, having a lower profit margin to better compete on price and gain market share is another way too. Balancing the two and delivering the right product at the right price for your customers is the key skill, but it’s a moving target.

[krebby]

The issue is that this leads into Dutch Disease. When a single tulip bulb can buy you a house, why bother becoming a carpenter? Society needs carpenters way more than it needs tulip growers.

That 10% growth rate may or may not be factoring in some externalities that the 5% growth has to

[lotsofpulp]

I am not seeing the connection to the Dutch Disease as described in Wikipedia:

https://en.wikipedia.org/wiki/Dutch_disease

My point was businesses compete with each other, and money is one of the tools used to compete.

And growth rate and profit margins are not the same.

[krebby]

I think we're broadly in agreement but I'm responding to the bit about "What will happen to the 5% profit margin business? Do you think customers will keep rewarding them?".

If you only ever reward investments with high rates of return it leads to atrophy in boring yet essential sectors of the market. Supermarkets, like you mentioned, have a very low profit margin (usually 1-3%). Can you imagine what would happen if no one was willing to invest in a supermarket?

[lotsofpulp]

Yes, well customers evaluate different products and services at different price points. Grocery store experiences and products are fungible enough that it drives margins down that low:

>Note that having a higher profit margin is not the only way to survive, having a lower profit margin to better compete on price and gain market share is another way too. Balancing the two and delivering the right product at the right price for your customers is the key skill, but it’s a moving target.

[SoftTalker]

Investing is about risk vs. reward.

Some investors will seek a 10% return in exchange for higher risk.

Others will be happy with a 3% return that is much lower risk.

Portfolios will include some of both types of investments depending on goals and risk tolerance.