Capitalism Quote by Jeremy Grantham
“Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system and it is not functioning properly.”
About This Quote
Profit margins tend to revert to average; persistent high margins signal market failure or lack of competition.
In simple terms: High profits should attract rivals; if not, the system is broken.
Watch for abnormal profit trends.
Themes
Mood
Type
When to use this quote
- investment analysis
- policy review
- business strategy
Key Concepts
Questions to Reflect On
- Are you assuming competition will always correct excess profits?
- What structural changes could prevent mean reversion?
If margins stay high, other factors may be at play.