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by lotsofpulp 902 days ago
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.

1 comments

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?

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.

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.