This is clearly true but I wonder how much it's an artefact of the Western economic model. I came to a similar insight in the last couple of years, which was "the companies skimming the most cream off the top, are often the most abstracted away from providing a concrete benefit to society".
It's like there's this inherent recursive aspect to shareholder capitalism. The profitable businesses are those which provide a service to businesses which provide a service to businesses which... which provide a service to the public.
All of FANG seems like a counterexample. But in general it is probably true that the most profitable activities are very scalable, which is the opposite of concrete, hands-on interaction with the public.
Not really; both Facebook and Google basically only make money by providing a service to businesses, and even for Amazon, the most profitable area (AWS) is B2B.
It is basic economics 101: in the long run, Perfect Competition tends to yield zero profit. It is nothing to do with capitalism or meta-services, it applies to all economic activity. As Peter Thiel controversially but truthfully claims: competition is for losers.
In any value chain, you should seek the role that has the most control with the least competition. Often this is based on constrained resources: the supply of shovels in San Francisco is much more constrained and easy to monopolize than the area of land or length of rivers in California that might have some gold.
Creating or preserving the monopoly will also benefit from barriers to entry, such as conspiracy (oligopoly), regulatory protection (licensing, tariffs) or just plain old intimidation (mafia, law suits).
Another result is that when one constraint or barrier is removed, profits fall in that process, and shift to the next most constricted step of the value chain, much like the maximum pressure and minimum flow in a network of pipes with various diameters and valves. In general, this means that as artificial constraints are reduced (free trade, cartel busting...), the control of some underlying physical resource becomes most profitable, often property (assuming planning laws are never relaxed :), or certain scarce commodities.
For example, in tax-free and low tax economies (HK, SG, GCC) the profit often shifts to property (commercial and residential), so that what a worker gains in net income, they pay in extortionate rents, based on restricted land (HK, SG) or oligopolistic control of land and property (GCC). Low taxes are often a way of government forgoing revenue to the benefit of local landlords or property developers. Startups in Silicon Valley are ways of exploiting geeks to work hard chanelling money from VCs to local landlords.
This is clearly true but I wonder how much it's an artefact of the Western economic model. I came to a similar insight in the last couple of years, which was "the companies skimming the most cream off the top, are often the most abstracted away from providing a concrete benefit to society".
It's like there's this inherent recursive aspect to shareholder capitalism. The profitable businesses are those which provide a service to businesses which provide a service to businesses which... which provide a service to the public.