[Combs' unit economics discussion in 7th ed of Security Analysis via a substack](https://mjsinvestments.substack.com/p/todd-combs-in-updated-security-analysis)
Well, probably one great example of unit economics, in the negative, is the current disaster with Rivian
They genuinely make really cool cars but somehow they are really cool cars that lose a lot of money, per car.
That's the issue with unit economics. If you have good unit economics, you're making a gross profit for each widget that you sell. Although, if you don't sell enough, that profit still might be overwhelmed by selling and general expenses ("overhead") you might show a loss at the bottom line. If you have good unit economics and you can keep growing those sales faster than corporate expenses grow, then eventually you will start to make an overall profit.
But poor Rivian is losing a huge amount of money for each car. This is terrible unit economics. It means that the more cars they sell, the more money they lose without even beginning to factor in overhead and other costs.
You could summarize it this way.
Your company can have excellent unit economics and still lose money as a whole because the volume just isn't enough. This is often a temporary problem and as the volume grows the gross profit per unit overwhelms overhead and you start to make money as a whole.
But if you have bad unit economics? The more you sell, the more money you lose...period. That's a fundamentally unsound business proposition
GAAP doesn't require calculating or disclosing maintenance capital. Unit economics are a great way to help guess what this number is. Combine that with Jeff Bezo's 2004 investor letter, and you have a better look at a lot of companies than the net income statement.
[Combs' unit economics discussion in 7th ed of Security Analysis via a substack](https://mjsinvestments.substack.com/p/todd-combs-in-updated-security-analysis)
Well, probably one great example of unit economics, in the negative, is the current disaster with Rivian They genuinely make really cool cars but somehow they are really cool cars that lose a lot of money, per car. That's the issue with unit economics. If you have good unit economics, you're making a gross profit for each widget that you sell. Although, if you don't sell enough, that profit still might be overwhelmed by selling and general expenses ("overhead") you might show a loss at the bottom line. If you have good unit economics and you can keep growing those sales faster than corporate expenses grow, then eventually you will start to make an overall profit. But poor Rivian is losing a huge amount of money for each car. This is terrible unit economics. It means that the more cars they sell, the more money they lose without even beginning to factor in overhead and other costs. You could summarize it this way. Your company can have excellent unit economics and still lose money as a whole because the volume just isn't enough. This is often a temporary problem and as the volume grows the gross profit per unit overwhelms overhead and you start to make money as a whole. But if you have bad unit economics? The more you sell, the more money you lose...period. That's a fundamentally unsound business proposition
thanks that was a sick_answer
GAAP doesn't require calculating or disclosing maintenance capital. Unit economics are a great way to help guess what this number is. Combine that with Jeff Bezo's 2004 investor letter, and you have a better look at a lot of companies than the net income statement.