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Comment by innguest | Hacker News Reader

> "The factory that makes a product in China extracts the least margin even though it could be argued that they do the "real" work, but that’s not how the world works. The closer you are to the money the more you can extract both as a percentage of value and as a total profit."

I only realized this a few years ago and I think young people should be explained this before they go to college (that is, before they choose a major).

Had I known this then I would have chosen a different career path. The first two paragraphs of TFA should be enlightening to those about to make this choice.

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Aren't there plenty of exceptions to this though? Microsoft's margins on Windows is higher than what the OEMs can get for their PCs.

(assuming "closer to the money" is a synonym for closer to the end user)

If I tried to generalize this, I'd say "closer to the customer's understanding" (which I would argue is often deeply tied into marketing), not necessarily "closer to the customer's money": to most users, they have a "Windows PC of some sort" and not "a Dell Inspiron"; even those in the latter camp don't go "the latest and best production of FoxConn, my favorite producer of consumer electronics".

what might be interesting in that case is to compare Intel's margins pre and post their "Intel Inside" campaign.

I don't think "closer to the money" means "closer to the user", otherwise cashiers would be paid handsomely.

I'm sure I don't know this well enough to try to explain it, but as a throw-away attempt at it, I'd say it means "having more decision-making power" or "being able to effect more change".

IMO, “closer to the money” means “closer to the purchasing decision”. At the cashier’s desk, the purchasing decision is already made – cashiers are here to process the transaction.

You can build the best product ever, if nobody wants to buy it you are not going to make anything out of it. That’s why companies try to influence people’s behaviors by spending (investing?) money in advertising and hire sales teams.

I would argue that manufacturing isn't real work. The "closer you are to the money", the more decisions you are making. That's where the value is.

I would argue that manufacturing is real work. No matter how brilliant your advertising strategy is, or how well you sell the sizzle, someone has to make the steak.

Anyone can make the steak. All they are doing is following directions. They are as interchangeable as the parts they are assembling. That's why they don't get paid well.

Yes, but a steak has intrinsic value; you can't eat advertising.

This is a bit of a strawman. The fact is that the people (on the assembly line) following instructions are less valuable (and thus will get paid less) to a firm than the people "at the top of the money funnel" who are the decision makers.

Whether or not advertising has intrinsic value doesn't affect this.

I would also argue against the idea that a steak (or anything else) has intrinsic value. I think all of it's value is extrinsic - it comes from people wanting it and being willing to pay a certain amount for it.

But... after the advertising does its work and brings people in, the customer's experience with the product supplants their experience with the advertising. Try to keep people coming back after you've fired your chefs and decided to only employ part-time cooks, because you believe any idiot can cook a steak.

I think the attitude that labor is qualitatively unskillful or that even unskilled labor isn't critical to the value of a company (where that labor produces the product the company sells) is misguided. Quality often matters in surprising areas throughout the process, as does experience. If people come in expecting a great steak and they get something the busboy tossed into a microwave, they're just going to feel lied to. And rightly so.

I agree with you.

I'm surprised that you replied to my comment with this comment, as I fail to see the thread that links the two.

I was saying that the value of the steak comes from people, and not from the steak.

Sorry, I was replying to dfxm and to you collectively and now I see I probably should have split it up into separate comments or something. I don't think the steak's extrinsic value (which definitely exists, and is generated by advertising and the 'decision makers') is greater than its intrinsic value, which I do believe is real and comes from labor... but quibbling over that might be splitting hairs.

Perhaps that's the mindset I'm trying to get into.

It still feels weird to think about the process making the product as not the most important, and not where the "real work" is. I've been slowly coming to terms with myself and accepting/discovering how the world actually works, and accordingly trying to change fields from IT to business.

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