Transcription
So, if you want to know what competitive advantages really look like, or markets where you're going to benefit from growth really look like, they are local. It's very hard to dominate big global markets. Nobody, anytime in the next 50 years, is going to dominate global automobiles. Apple is going straight down the tubes. Nobody has ever dominated electronic devices. It may take longer because Apple has a good record, but trust me, we've seen it in related industries for Sony, for Motorola, for the Finns whose name I'm forgetting at the moment, who made cell phones, Nokia. They had nothing like the margins of Apple, and the margins of Apple have gone down by at least a third in the last 16 to 18 months, and they're not going to last forever.
You can't dominate a big market. If you look at the people who dominate markets, they are local in geography. The most profitable grocery store company in the United States is H-E-B, but how many people know who they are? What market do they dominate? South Texas. Not even Texas is open, and they're very disciplined about keeping people out of that market and dominating that particular market.
Walmart taught investors about density. If you look at this video of Walmart expansion, it looks like a bad case of ringworm. They started out dominating South Central Arkansas, then the rest of Arkansas, then the South Central United States, and then expanded from there. When they ran into Target on the West Coast, Sam Walton was smart enough to stop expanding. That was successive local market dominance. When they went overseas to markets that were dominated by other people, they did nothing but lose money there. Only two successful international ventures are Canada and Mexico, which are adjacent to their dominant markets in the United States.
And services, you want to dominate geographic markets in a very disciplined way. And manufacturing, it's niche markets. If you look at personal computers, it is not the IBMs and the Apples who pioneered the field who made the money. It's the specialized companies like Microsoft that started in system software and basically did a Walmart with adjacent software. It's Oracle at the databases. It's Google, it does only search. It's Intel, that did only CPU chips. So, what you've got to think about is dominating local markets.