Stratrix
Business Model

The Cross-Subsidy

Which part of the business quietly funds the rest?

70%
of the 20 settled decisions on record were never reversed
14 stood2 reversed4 held in part2 too early to call

This measures whether a decision STUCK, not whether it worked. A decision counts as held when the company never undid it — BlackBerry's refusal to take BBM off its own handsets held, and BlackBerry went to 0.5% of the smartphone market. Held over settled: 20 records whose verdict is in, from forks between 1956–2026, with 2 still too early to call and counted in neither. It is what happened to the companies on record, not the odds for your decision: the corpus covers decisions documented well enough to verify, which skews toward companies that lasted long enough to be written about.

The market’s view. Across the 7 cases where the company’s shares can be followed for three years, the median return was −15.5 pts against the S&P 500, and 43% beat it. These are well-documented decisions, not a random sample, so read this as context, not a forecast. Derived from market data.

Samsung, McDonald's, Sears, Amazon, Ryanair, UnitedHealth Group, Disney, Delta Air Lines and 12 more faced this decision. Below is what was on the table, what each chose, and what it returned.

The cases

  1. 2022

    Samsung

    Held in part

    Whether to cut memory output in the downturn or keep building counter-cyclically

    • Hold capex, keep building — Refuse output cuts and invest through the trough to absorb sharechose this
    • Cut capex like rivals — Reduce production and investment as prices collapse

    Stated reasonThe theory that a strong player who keeps building through a downturn absorbs abandoned share and emerges larger

    What happened
    • 2023 chip division operating result: chip division lost roughly KRW 14.87 trillion; group profit KRW 6.57 trillion
    • 2023 cash return on DRAM: plunged to roughly 3% in 2023, from more than 30% before the pandemic
    • 2025 DRAM revenue share leadership: SK Hynix overtook Samsung in DRAM revenue share, 36% to 34%, ending Samsung's lead since 1992
    Read the full analysis →
  2. 1956

    McDonald's

    Held

    Whether to own the real estate under future franchises rather than only license the brand

    • Own the ground, sublease — Buy land and sublease packaged with a license to franchiseeschose this
    • License brand only — Collect royalties on the brand without owning the real estate

    Stated reasonOwn the real estate future franchises would be built on so headquarters could pass costs to franchisees with a markup

    What happened
    • 2009 Rent from franchised restaurants: $4,841.0 million in rent versus $2,379.8 million in royalties
    • 2008 Locations where McDonald's was lessee: the company was the lessee at 13,620 restaurant locations
    • 2019 Net property and equipment: real estate on the books grew to a net $24,160.0 million at year-end 2019
    Read the full analysis →
  3. 1981

    Sears

    Reversed

    Whether to buy brokerage and real estate firms to build a financial supermarket inside its stores

    • Buy into financial services — Acquire Dean Witter and Coldwell Banker to cross-sell to retail customerschose this
    • Stay focused on retail — Remain a department-store retailer without a finance arm

    Stated reasonDiversification riding the retail base, expecting cross-selling to its 36 million customer families

    Committed$607 million (Price for Dean Witter)

    What happened
    • 1993-03-01 Divestiture of financial units: Dean Witter Discover became an independent public company
    • 1993-05 Coldwell Banker sale: Coldwell Banker Residential sold to The Fremont Group and executives
    • 1995 Allstate spun off: Allstate spun off to shareholders, completing the retreat
    Read the full analysis →
  4. 2003

    Amazon

    Held

    Whether to build a data-center competency into a sellable cloud service, funding patience for thin retail

    • Build cloud as a service — Externalize data-center competency as a sellable AWS offeringchose this
    • Keep infrastructure internal — Use the data-center skill only to run Amazon's own operations

    Stated reasonAWS was a deliberately built competency whose high margins let Amazon run retail thin on purpose for years

    What happened
    • 2024 AWS operating income: $39.8 billion of operating income on $107.6 billion of revenue
    • 2024 AWS operating margin: 37.04% in 2024
    • 2024 North America retail operating income: $25.0 billion of operating income at a 6.44% margin
    Read the full analysis →
  5. 2006

    Ryanair

    Held

    Whether to charge for checked bags while cutting fares to match

    • Charge bag fee, cut fares — Introduce a €2.50 bag fee and refund it via a matching fare cutchose this
    • Keep bags free — Continue offering checked baggage as a free courtesy in the fare

    Stated reasonTo punish the bag and nudge passengers to carry on, grounding the slowest, most expensive part of the operation

    What happened
    • 2012 ancillary revenue: €886 million against €3,439 million of scheduled revenue
    • 2026 ancillary revenue: ancillary revenue rose 6% to €4.99 billion against total group revenue of €15.54 billion
    • 2025 ancillary share of revenue: 35.7% in FY2023, 32.0% in FY2024, 33.8% in FY2025
    Read the full analysis →
  6. 2011

    UnitedHealth Group

    Held

    Whether to unify its back-office services businesses under a single Optum brand

    • Unify under Optum brand — Give the three services units one coherent brand and leadership teamchose this
    • Keep units separate — Leave Ingenix, pharmacy and care services operating under their own names

    Stated reasonTo give three sprawling units a coherent story and a leadership team

    What happened
    • 2017 Optum share of group operating earnings: 14.8% in 2011, climbing to 44% by 2017
    • 2018 Optum annual revenue crossing $100B: Optum crossed $100 billion in annual revenue for the first time in 2018, up more than 11% to $101.3 billion
    • 2024 Optum revenue from affiliated customers: $150.9 billion of 2024 revenue booked from 'affiliated customers', nearly 60% of Optum's entire reported revenue
    Read the full analysis →
  7. 2019

    Disney

    Held

    Price Disney+ deliberately below cost to buy reach, letting profitable old businesses cover the loss

    • Price low to buy reach — Set $6.99 below cost to maximize subscriberschose this
    • Price for margin — Set a price to protect streaming margins

    Stated reasonDisney wanted to reach as many people as possible in its first serious streaming foray

    What happened
    • 2019-12-28 Direct-to-Consumer & International operating loss: loss widened to $693 million, up from $136 million a year earlier
    • 2020 Total segment operating income: fell to $8,108 million from $14,847 million, down 45%
    • 2020 Media Networks operating income: rose on affiliate revenue growth and lower programming costs even as DTC losses widened
    Read the full analysis →
  8. 2023

    Delta Air Lines

    Held in part

    Whether to make dollars spent the sole path to Medallion status, deleting miles and segments

    • Make spend the only currency — Delete miles and segments, gate status on dollars onlychose this
    • Raise dollar bar, keep flying — Ration overcrowding while keeping flying as a qualifying path

    Stated reasonA pandemic capacity problem: nearly double the normal number reached Diamond, creating demand beyond Delta's ability to serve it

    What happened
    • 2023-10-18 Diamond MQD threshold: Diamond cut from 35,000 to 28,000 MQDs
    • 2023-10-18 sole-spend mechanic retained: MQDs remained the sole metric, with no return of miles- or segment-based qualification
    • 2023-10 competitor response: JetBlue and Alaska offered to match status; Southwest said it would ease qualification
    Read the full analysis →
  9. 2026

    Samsung

    Held

    Whether Samsung's memory division should nearly double the internal DRAM transfer price it charges its own phone-and-appliance division during the upcycle

    • Raise internal DRAM price — Charge DX near-market prices, booking margin inside DSchose this
    • Hold internal price steady — Shield DX margins by keeping the transfer price low

    Stated reasonThe transfer price shifts margin from the low-multiple consumer business to the high-multiple commodity business, optimizing the part of Samsung the market rewards most

    What happened
    • 2026 DS share of group operating profit: DS accounted for 93.8% of total operating profit
    • 2026 DX division operating profit: DX division operating profit fell 38% YoY
    • 2026 Group operating profit: Operating profit of KRW 57.23 trillion, a 756% jump, a record
    Read the full analysis →
  10. 1967

    Berkshire Hathaway

    Held

    Whether to buy an insurer to use its float as investable capital rather than treat it as a regulatory necessity

    • Buy insurer, invest float — Acquire National Indemnity and treat its float as investable capital.chose this
    • Park float in bonds — Treat float as a regulatory necessity held in safe bonds.

    Stated reasonThe gap between collecting premiums and paying claims was a borrowing facility the world had failed to value, providing cheap leverage to fund investing

    Committed$8.6 million (Price paid for National Indemnity Company and National Fire & Marine.)

    What happened
    • 2024-12-31 Insurance float: about $171 billion at year-end 2024, up from $19.4 million in 1967
    • 2024 Underwriting gain: $9.02 billion underwriting gain across all insurance operations in 2024, after ~$1.2 billion in Helene and Milton claims
    Read the full analysis →
  11. 2001

    Microsoft

    Held

    Whether to launch and price the Xbox below cost, subsidized by other businesses

    • Price Xbox below cost — Sell hardware at a negative margin to build a living-room beachheadchose this
    • Price to cover hardware cost — Avoid subsidizing every console sold

    Stated reasonA deliberately loss-making land grab for the living room it could afford because Windows and Office generated enough cash

    What happened
    • 2002-12 Home & Entertainment operating loss: operating loss of roughly $348 million, up from $180 million a year earlier
    • 2005 segment improvement drivers: improvement driven by lower Xbox console unit costs and higher-margin software sales
    Read the full analysis →
  12. 2008

    GE

    Held in part

    How to fund GE Capital when wholesale markets froze: reach for the government's FDIC debt guarantee or find another path

    • Use FDIC guarantee program — Lobby to qualify and issue notes backed by the U.S. governmentchose this
    • Take TARP equity — Accept Treasury equity injection with executive-pay limits

    Stated reasonGE Capital could not roll its short-term funding when wholesale markets froze, so it sought the FDIC guarantee — and avoided the pay limits TARP banks accepted

    What happened
    • 2013-07-08 Regulatory status: FSOC designated GECC a nonbank SIFI
    • 2016-06-29 Business dismantling and SIFI status: FSOC rescinded the designation after GE exited most lending and cut assets by over 80%
    Read the full analysis →

The other 10 on record

2013The Washington Post CompanyHeld2015Alphabet (Google)Held2018CVS HealthHeld in part2019SonyHeld2020United AirlinesHeld2024ComcastHeld1988Philip MorrisReversed1997PepsiCoHeld1993IBMToo early to call2025PepsiCoToo early to call