Warren Buffett has a classic saying: In commodity businesses, high costs essentially mean a death sentence.

What is a commodity business? Simply put, it’s a market where products or services are so homogeneous that competition boils down to price. Airlines, energy companies, and raw material suppliers all fall into this category. In these fields, it’s hard to build an advantage through brand loyalty or technological innovation because customers only care about who offers the lowest price.

This also explains why profit margins in such industries are generally low, yet companies are all desperately optimizing costs. Because in a homogeneous competitive environment, **cost control ability is the only reliable moat**. The one who can push costs down the furthest will survive longer. Conversely, companies with inflated costs will be the first to be eliminated during industry downturns.