Profit categories

The notion of sector definitions has been touched on in this space before, in the context of software- and data-driven convergences that are stripping sector distinctions of their meaning…

… and, by extension, diluting the analysis of comparable companies in valuation exercises or competitive ranking.

Now, a new idea has emerged, via Fred Wilson, to clarify the vagueness and cast some of the tortured formula aside…

… in favor of a simpler and more current approach based simply on financial benchmarks.

There is an elegance to this idea that cuts through the growing pointlessness of seeking to fit business models and performance measures into a box that was designed eternities ago… when the retailer still had shelves, the car company wasn’t a payment processor, the consumer hardware company didn’t produce television shows, and the hosting infrastructure provider didn’t compete with UPS.

Maybe Fred didn’t go all the way to a rigidly binary construct based on software (or software margins) as the demarkation line…

… but perhaps this is implied,

and correct for our time,

with just one further qualifier…

one other sub-grouping of haves and have-nots that similarly cuts through the murkiness of the environment:

Tomorrow I might riff on regulatory arbitrage, a related subject.

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