"For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles which are a real commodity product. And one day, the people came to Warren and said, "They've invented a new loom that we think will do twice as much work as our old ones." And Warren said, "Gee, I hope this doesn't work because if it does, I'm going to close the mill." And he meant it. What was he thinking? He was thinking, "It's a lousy business. We're earning substandard returns and keeping it open just to be nice to the elderly workers.B ut we're not going to put huge amounts of new capital into a lousy business." And he knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners. That's such an obvious concept ‑ that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that's still going to be lousy. The money still won't come to you. All of the advantages from great improvements are going to flow through to the customers. Conversely, if you own the only newspaper in Oshkosh and they were to invent more efficient ways of composing the whole newspaper, then when you got rid of the old technology and got new fancy computers and so forth, all of the savings would come right through to the bottom line. In all cases, the people who sell the machinery ‑ and, by and large, even the internal bureaucrats urging you to buy the equipment show you projections with the amount you'll save at current prices with the new technology. However, they don't do the second step of the analysis which is to determine how much is going stay home and how much is just going to flow through to the customer. I've never seen a single projection incorporating that second step in my life. And I see them all the time. Rather, they always read: "This capital outlay will save you so much money that it will pay for itself in three years." So you keep buying things that will pay for themselves in three years. And after 20 years of doing it, somehow you've earned a return of only about 4% per annum. That's the textile business"
guys who run servers in their company datacenters........ they will be gone in few years as consolidation to the cloud is just picking up steam
You say there is very little margin in the cannabis business? Kind of hard to believe. I assume legalizing it pushed the profit margins down, but once it spreads more and more, there will be plenty of profit to be made.
I don't see that. It's a low barrier to entry and they are still competing with the illegal operations - that don't pay taxes. Taxes will be a more substantive burden going forward.
Well, the original example was a small margin business that didn't increase profits by applying new technology to production. I don't think cannabis is low margin and what would be new technology in it?
Synthetic. It's already here. It is so cheap and easy to come by that it was available briefly as a street drug in parts of the U.S. before being clamped down on. Got a very bad name quickly because so easy for an idiot to overdose, but at the correct levels the effect is the same, as the chemistry is the same as Natural THC. Same, or very similar, functional group at the active center, and very cheap to synthesize compared to obtaining natural THC the hard way. This allows Pharma to draw a distinction and help keep Natural weed away as a medicinal competitor. The article I've linked to is wrong, of course. The synthetic is safer than the natural, not more dangerous. The synthetic doesn't wreck your lungs!!! Safety for the synthetic is strictly a matter of dosage and individual metabolism and chemistry. It is complete nonsense to state that the natural product is in any way superior from a medicinal standpoint. https://herb.co/marijuana/news/synthetic-thc-fda-approval That's would be like saying willow bark tea is better than aspirin, rose hips are better than synthetic vitamin C. That's all complete nonsense. N.B. The synthetic forms are not identical to THC, which has several chiral centers and would be difficult to synthesize. The synthetic forms all have a functionally active group that is identical to, or mimics, the THC active site, but the remainder of the molecule is different. The synthetic and natural forms all bind the CB1 receptor, but the synthetic forms can be tailored to possess other desirable properties such as the rate at which they are metabolized, etc. Natural products provide the inspiration for many useful medicines. Then the Analytical, Natural Product and Synthetic Organic Chemists take charge, and with the help of the Physiologists, something truly wonderful often results. The synthetic will be expensive in the U.S., cheap in other countries.