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
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|2 years ago
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|2 years ago
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?