August 12, 2005
Commodities and Sun's Schwartz
Jonathon Schwartz loves to lambaste people, particularly if they are associated with Linux or Windows. In this weblog he blasts anyone who says that "to commoditize" is bad. According to Schwartz:
"What do oil & gas, telecommunications, and financial services have in common?
They're all commodities."
Sorry Johnathon, actually oil barrels, wheat, pork-bellies and orange juice are commodities and there are commodity markets that go to support them.
As a product becomes a commodity profit margins typically drop (unless there is a limited supply such as oil). So instead of Sun's lovely 60% profit margins or Microsoft's 86% profit margins they will be more likely be a 10-20%. It this a potential business? Yes. Can Sun survive on thin profit margins? That remains to be seen.
What do most of people who make in the 2-10 dollars a day range do? They make commodities such as Coffee, Chocolate, and pick fruit such as oranges. Good luck Jonathon.