Technological innovations and EBITDA margins | Notes | Alex Vale
Industries are essentially games. Each industry has players competing to take similar inputs and produce similar outputs - faster and cheaper than everyone else. The inputs, rules, and outputs differ within each but the essence is the same.
As with all games people end up finding the best ways to win. The longer a game has been played with the same inputs, rules, and outputs, the more likely it is that the best ways to win have been found. Once everyone knows the best ways to win, everyone will begin playing like that.
Industry’s measurement of this is EBITDA margin. Individual industries have an uncanny way of grouping around a margin range and, just like with games, the more mature and stable an industry the tighter and more well-defined the ‘ways to win’ are.
Look at airlines. In the 1960s airliner technology was essentially linear. Want fly 5x more people? You’ll need to buy 5x more planes.
