Theme: Incentives

CORPORATIONS AND RETURNS
–“Most corporations have a negative return on investment when adjusting for inflation.”– @henge_j

Well, these things are true – in part. In fact, the hard part of any business is the multipliers you produce on inflation. Your corner gas station <1%, your grocery store 1%, half of the small businesses fail (but half of them don’t and if you want to become wealthy building a small business and selling it is the most reliable way to do so. The vast majority of deca-millionaires achieve wealth by this method of small business growth), most businesses meet or beat the rate of inflation when it’s ‘normal ‘ in the 3% range.

But that doesn’t mean that the fundamental conflict between inflation and the shortage of money, and the capacity for state debt, isn’t the fundamental problem faced by all people in history. It only means that with just over a century of experience we haven’t fully separated the treasury from the government as we have the courts, and constrained governments from effectively buying votes or donors with the power of debt.

Now, how do we do this without currency? We do it currently with oil markets.

There is no escape from the game of maintaining monetary velocity to maintain purchasing power (value), while at the same time maximizing possible investments in speculative search for returns on investment, especially when returns on investment continue to increase in time horizon. This means that both military competitive investment at the top, infrastructure investment, education investment, and the spectrum of industrial to consumer investments at the bottom, are necessary at all times. And it also means, quite to the dismay of the financial, isurance, pension private sector, that they provide consumers no value that wouldn’t better be provided at national scale cutting out the middleman, and providing the treasury with income.

Here are the round numbers at scale for the USA.

EBITDA DEFINED
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric that measures a company’s profitability by calculating its earnings before accounting for non-cash expenses such as depreciation and amortization, taxes, and interest payments. This is the true measure of the profitability of a business from operations. The difference between EBITA and Net Profit is the cost of money and taxation.

EBITDA Margin Ranges by Sector, High to Low
Software & Services:
High: 40-50%
Average: 30-40%
Low: 20-30%

Pharmaceuticals & Healthcare:
High: 35-45%
Average: 25-35%
Low: 15-25%

Telecommunications:
High: 35-45%
Average: 25-35%
Low: 15-25%

Real Estate:
High: 30-40%
Average: 20-30%
Low: 10-20%

Consumer Goods:
High: 25-35%
Average: 20-30%
Low: 10-20%

Energy & Utilities:
High: 20-30%
Average: 15-25%
Low: 5-15%

Financial Services:
High: 20-30%
Average: 10-20%
Low: 5-10%

Manufacturing & Industrial:
High: 20-30%
Average: 10-20%
Low: 5-10%

Transport & Logistics:
High: 15-25%
Average: 10-15%
Low: 5-10%

Retail & Wholesale:
High: 10-20%
Average: 5-10%
Low: 0-5%

EXPLANATION BY SECTOR
Public Companies
Indices as Indicators: The long-term performance of stock market indices like the S&P 500 and the NASDAQ often outpace inflation. For instance, the average annual return for the S&P 500 has been around 10% before inflation since its inception.
Dividend Yields: Some mature companies might not show a high rate of growth but offer dividends that, when considered as part of total ROI, can also outpace inflation.
Blue Chips: Established companies with stable earnings, often called “blue chips,” usually have a long track record of beating inflation.
Market Timing: Returns can also depend heavily on market timing. Buying during a downturn and selling during an upturn can beat inflation by a significant margin.

Small Businesses
Survival Rates: A significant number of small businesses fail within the first few years, offering negative ROI.
Capital Efficiency: Some small businesses require less capital up-front and can generate ROI more quickly, making it easier to outpace inflation.
Niche Markets: Small businesses serving niche markets often have a better chance of generating high ROI, provided the niche is profitable.

Sector-Specific
Tech & Innovation: Industries rooted in technology and innovation have generally shown strong growth and ROI, particularly in the 21st century.
Traditional Industries: Sectors like manufacturing or utilities often offer moderate ROI but are usually stable.
Cyclical Industries: Sectors like real estate or commodities can provide returns that either vastly outperform or underperform inflation, depending on economic cycles.

Global Perspective
Emerging Markets: Countries with rapidly growing economies can offer investment opportunities with ROIs that easily outpace inflation. However, these come with high risk.
Currency Risks: Inflation must be considered not just for the country of the investment but also against any currency risk that might negate high ROI.

Time Frame
Short-Term: Due to market volatility, short-term ROI may not consistently beat inflation.
Long-Term: Historically, long-term investments have a better chance of beating inflation, as markets tend to grow over time.

Economic Conditions
Boom Periods: In a robust economy, more companies will likely offer an ROI that outpaces inflation.
Recessions: During economic downturns, fewer companies will likely beat inflation, and some might even offer negative ROI.

Reply addressees: @henge_j