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'[OT] was [EE] Small-Production PCB Manufacturer Ex'
2007\03\18@171817 by Rob Robson

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face
Vitaliy wrote;

> What expertise -- stuffing circuit boards? The local community should get
> an
> education, find a better job -- and let people in developing countries
> have
> an opportunity to earn a living.

Hmm.  I don't really see that the presence of entry-level jobs in a
community is a deterrent to education.  Most of us had one or two
mind-numbing jobs at some point (ususally while attending university), and
you don't meet a lot of people who abandoned their educational ambitions to
keep them.  Besides, few communities could function without a pool of people
to perform the dirty work, even if the individuals within that changing pool
later move on to bigger and better things.  Besides, if farming out these
kinds of jobs to developing nations is benevolently hastening their
development (as you suggest), presumably there will come a point when it the
grunt work is unwanted everywhere.  I can't see this being the objective of
those who are looking to maximize their profits by scouring the world for
the cheapest labor.

>>  If you can still provide a decent living for yourself and for your
>> employees this way, why not keep it local?
>
> Because if outsourcing makes economic sense, and I don't outsource, my
> competitor will -- and she will drive my employees and I out of business.

It comes down to what you mean by "economic sense".  It sounds like the OP
has a healthy operation that employs local labor.  What's wrong with that?
What does it matter if he _could_ extract some more profit by firing his
employee(s) and outsourcing his grunt work to an offshore provider?  My
point is that there is a lot to be said for keeping things local as long as
the business can sustain it.

Of course there are highly price-driven sectors where competitors are
engaged in a cat-and-mouse game to shave costs for fear of losing customers
and/or shareholders to one another.  This is likely why is getting hard to
find good-quality examples of many consumer goods.  But the risk of placing
too great an emphasis on maximizing profit is that it becomes too easy to
ignore other factors, especially when real or imagined market pressures may
be leading you blindly past one of your own ethical boundaries.  Think of
what happened at Enron in terms of decisions made by individuals.  In
engineering, things can go sideways when trying to maximize a single
parameter while ignoring the effects of others.  Business is no different.

> The long term consequences of the "keep it local" mindset are (when
> enforced
> at the national level): loss of productivity, higher cost of living,
> unemployment. When left unenforced, this mindset ruins its own followers
> (a
> good thing for the rest of us).

I agree to a certain extent, but we're not talking about nations closing
their borders to international commerce.  We're talking about an individual
weighing the merits of retaining in-house production vs. farming it out to
the lowest bidder when there is no real need to do so.

RR

2007\03\19@035608 by Vitaliy

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Rob Robson wrote:
>> What expertise -- stuffing circuit boards? The local community should get
>> an
>> education, find a better job -- and let people in developing countries
>> have
>> an opportunity to earn a living.
>
> Hmm.  I don't really see that the presence of entry-level jobs in a
> community is a deterrent to education. Most of us had one or two
> mind-numbing jobs at some point (ususally while attending university), and
> you don't meet a lot of people who abandoned their educational ambitions
> to
> keep them.

The scarcity of entry-level jobs is a good incentive to get an education.
Also, there are jobs that cannot be outsourced, and will always be there
(mostly in the service sector). One of my jobs while in college, was
delivering pizzas.

> Besides, few communities could function without a pool of people
> to perform the dirty work, even if the individuals within that changing
> pool
> later move on to bigger and better things.

I agree. Hopefully, by the time the pool runs out, we'll have enough
engineers to build the robots who'll do the dirty work. If that doesn't
happen, no big deal -- "janitor" and "garbage man" will become respected and
well-paid positions, maybe on par with "software architect".

> Besides, if farming out these
> kinds of jobs to developing nations is benevolently hastening their
> development (as you suggest), presumably there will come a point when it
> the
> grunt work is unwanted everywhere.  I can't see this being the objective
> of
> those who are looking to maximize their profits by scouring the world for
> the cheapest labor.

I would definitely prefer to live in a world where there is more equality.
Free trade has helped the situation in the past, and has done a better job
at it, than government-forced systems (e.g., communism). Just look at the
economic histories of Taiwan, Singapore, and South Korea. Fifty years ago,
they were the places you went to find cheap labor. Today, their per capita
incomes are among the highest in the world.

{Quote hidden}

As long as you don't force other companies to abide by the same rules -- I
have no problem with it.

> Of course there are highly price-driven sectors where competitors are
> engaged in a cat-and-mouse game to shave costs for fear of losing
> customers
> and/or shareholders to one another.  This is likely why is getting hard to
> find good-quality examples of many consumer goods.

Competition is the reason a person can buy a DVD player for $30. It is also
the driving force behind improving quality. "Made in USA" does not guarantee
quality.

If a poor quality product remains on the market, blame the consumers, not
the manufacturer. They are the ones who voted for the product with their
dollars. Usually, it means that the quality is acceptable, and higher
quality is not worth the extra cost.

> But the risk of placing
> too great an emphasis on maximizing profit is that it becomes too easy to
> ignore other factors, especially when real or imagined market pressures
> may
> be leading you blindly past one of your own ethical boundaries. [snip]

By definition, the primary purpose of a business is to make money. If that's
not your main goal, then you're a non-profit organization, a church, or a
government agency -- but definitely not a business.

Profit maximization and moral integrity are not mutually exclusive. "Profit
maximization" does not mean that you mistreat your employees, cheat your
customers, or lie to your shareholders. It means that you find ways to
reduce your costs -- by increasing efficiency.

Besides, I can see a struggling business that is trying to keep its
workforce local at all costs, being more vulnerable to the pressure to
compromise (out of desperation).

> I agree to a certain extent, but we're not talking about nations closing
> their borders to international commerce.  We're talking about an
> individual
> weighing the merits of retaining in-house production vs. farming it out to
> the lowest bidder when there is no real need to do so.

Naturally, if there is no real need -- there's no point to outsource.

Vitaliy

2007\03\19@105908 by Gerhard Fiedler

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Vitaliy wrote:

> By definition, the primary purpose of a business is to make money.

By what definition? The legal definition depends on the exact form of
business, but AFAIK they all only include that one of the goals is to
create a profit. I don't think it is required that this be the primary
purpose.

There are many things that you may want to achieve with a business, besides
a profit. Where in the list of priorities the owner (or whoever makes such
decisions in a particular business) puts the profit depends on that
person's (or group's) priorities.

IMO the difference to a non-profit organization is not that in a business
the profit is the highest priority, but that it is in the list of
priorities, somewhere.

(I interpreted "making money" as "creating a profit". At least this is the
one that distinguishes a for-profit business from a non-profit
organization.)

Gerhard

2007\03\19@202132 by Vitaliy

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Gerhard Fiedler wrote:
>> By definition, the primary purpose of a business is to make money.
>
> By what definition?

Webster's dictionary, and common sense. :)

> The legal definition depends on the exact form of
> business, but AFAIK they all only include that one of the goals is to
> create a profit. I don't think it is required that this be the primary
> purpose.

I think for the purpose of this discussion, the legal definition is
irrelevant.

> There are many things that you may want to achieve with a business,
> besides
> a profit. Where in the list of priorities the owner (or whoever makes such
> decisions in a particular business) puts the profit depends on that
> person's (or group's) priorities.

Well, but as I said -- if making money is not the main purpose of your
organization, then by definition, your organization is not a business. Can
you think of a business whose primary goal is *not* creating profit?

> IMO the difference to a non-profit organization is not that in a business
> the profit is the highest priority, but that it is in the list of
> priorities, somewhere.

Sure, and I'm not saying that it should be the ONLY goal of a company.
Supporting the Boy Scouts, building sports arenas, and donating money to
charities are all worthy endeavors, but none of them are as important as
creating profit.

Best regards,

Vitaliy

2007\03\19@204032 by Recon

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Vitaliy wrote:

{Quote hidden}

What about all the NON PROFIT businesses?

{Quote hidden}

2007\03\19@210232 by Vitaliy

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Recon wrote:
>> Can
>>you think of a business whose primary goal is *not* creating profit?
>>
>>
>>
> What about all the NON PROFIT businesses?

The proper name for those is "nonprofit organization". The term "nonprofit
business" is self-contradicting and therefore confusing.

-->When people say "business", they mean "for-profit business." The short
form for "nonprofit business" is "nonprofit" -- as in, "Starting a
Nonprofit".

Vitaliy

2007\03\19@211543 by Timothy J. Weber

face picon face
Vitaliy wrote:
> Well, but as I said -- if making money is not the main purpose of your
> organization, then by definition, your organization is not a business. Can
> you think of a business whose primary goal is *not* creating profit?

Some businesses have as their primary purpose (explicit or implicit)
"allowing as many of my neighbors as possible to earn a decent living."
 Profit (for the business owner(s) alone) is essential to that, but
insufficient.
--
Timothy J. Weber
http://timothyweber.org

2007\03\19@211858 by Gerhard Fiedler

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Vitaliy wrote:

>>> By definition, the primary purpose of a business is to make money.
>>
>> By what definition?
>
> Webster's dictionary,

Can you cite something? I used the online version, and they do not seem to
agree with you. They say (among other, here not relevant meanings) in
<http://www.m-w.com/dictionary/business>:

   3 a : a usually commercial or mercantile activity engaged
   in as a means of livelihood : TRADE, LINE <in the restaurant
   business> b : a commercial or sometimes an industrial
   enterprise; also : such enterprises <the business district>
   c : dealings or transactions especially of an economic
   nature : PATRONAGE <took their business elsewhere>

Nothing that would support your opinion. They only mention profit once,
indirectly ("means of livelihood"), and nowhere state that it is the
primary purpose.

> and common sense. :)

Let's leave common sense out of this. Common sense doesn't really deal in
definitions -- which is the question.


>> The legal definition depends on the exact form of business, but AFAIK
>> they all only include that one of the goals is to create a profit. I
>> don't think it is required that this be the primary purpose.
>
> I think for the purpose of this discussion, the legal definition is
> irrelevant.

Ok with me, but what other definition do you base your phrase on?


>> There are many things that you may want to achieve with a business,
>> besides a profit. Where in the list of priorities the owner (or whoever
>> makes such decisions in a particular business) puts the profit depends
>> on that person's (or group's) priorities.
>
> Well, but as I said -- if making money is not the main purpose of your
> organization, then by definition, your organization is not a business.

You're repeating yourself, without bringing forth any substantiation of
your "definition". In my definition, profit usually is one of the
priorities, but doesn't have to be the primary one.

> Can you think of a business whose primary goal is *not* creating profit?

Lots. For example, self-realization can be the primary goal for someone to
create a business. Profit is usually necessary in such a case, but not
necessarily the most important thing. I can envision (and there possibly
are) businesses whose primary goal is to destroy other businesses, and
profits are completely irrelevant for them. There are businesses whose
express purpose is to make a loss (to provide other businesses with a
possibility to use this loss). And so on... take any 100 businesses and
analyze their priorities. You'll probably find much more than "making
profit", and while everybody likes a nice profit, there always will be
decisions that put profit maximization behind something else -- which, by
your definition, would make them... what exactly? they're not non-profits,
but they're not businesses in your sense either.

As far as I'm concerned, there's nothing in the term "business" that
implies any specific primary goal. <http://en.wikipedia.org/wiki/Business>
also doesn't seem to think it's as simple as you state it. The highest they
get to WRT profit is "one of their main objectives" -- not /the/ primary
goal. But mostly, they garnish similar statements with "usually" or
"typically", which is not quite what "by definition" means.


>> IMO the difference to a non-profit organization is not that in a
>> business the profit is the highest priority, but that it is in the list
>> of priorities, somewhere.
>
> Sure, and I'm not saying that it should be the ONLY goal of a company.
> Supporting the Boy Scouts, building sports arenas, and donating money to
> charities are all worthy endeavors, but none of them are as important as
> creating profit.

Well, that's your opinion (obviously), and I'm not saying you're not
entitled to it. But that's still a long shot from "by definition" (if we're
talking about something like a common definition, not your own, personal
one).

Gerhard

2007\03\19@235945 by Vitaliy

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Timothy J. Weber wrote:
>> Well, but as I said -- if making money is not the main purpose of your
>> organization, then by definition, your organization is not a business.
>> Can
>> you think of a business whose primary goal is *not* creating profit?
>
> Some businesses have as their primary purpose (explicit or implicit)
> "allowing as many of my neighbors as possible to earn a decent living."
>  Profit (for the business owner(s) alone) is essential to that, but
> insufficient.

The question is, "who is my neighbor?"

[...refusing the temptation to cite the parable...]

I am an ethnic Russian who was born in a country where Russians are a
minority, and in recent years have become second class citizens. I moved to
the States as a teenager, and although I identify with many American values
and principles, I don't think I will ever fully assimilate (become like a
natural born American). I'm giving you this background so you can better
understand my world outlook.

To most Americans, American lives are worth more than the lives of people of
other nationalities. I like the concept of a world as a "global village",
and I know and may care more about some of my "neighbors" who live in China
or Finland, than about the person who lives in a house next to mine.

Given this definition of "neighbor", your definition of the primary purpose
of a business takes on a whole new meaning, doesn't it?

-Vitaliy

2007\03\20@004830 by Ling SM

picon face
>>By definition, the primary purpose of a business is to make money.

Nothing is 100%, I think at least 80% of the people or businessman
accept that definition.

But one of the obvious problems is the "time" duration is not captured.
 Is it profit maxisation over 1 day, 1 week, 1 month, 1 year, 1 decade,
or even longer?  There are countless examples of high-paying CEO being
airlifted into a company, then show impressive results over the next few
quarters, but destroyed the employees' lives, the customers' trust, and
eventually the whole company in a few years.  Along the way, he/she
could have killed off some companies who employed a longer term profit
maxization strategies.

Ling SM

2007\03\20@012105 by Vitaliy

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Gerhard Fiedler wrote:
> Can you cite something? I used the online version, and they do not seem to
> agree with you. They say (among other, here not relevant meanings) in
> <http://www.m-w.com/dictionary/business>:

I like this definition better (since it supports my point of view):
http://dictionary.reference.com/browse/business

busi·ness
-noun

     2. the purchase and sale of goods in an attempt to make a profit.
     3. a person, partnership, or corporation engaged in commerce,
manufacturing, or a service; profit-seeking enterprise or concern.


[snip]
>> Can you think of a business whose primary goal is *not* creating profit?
>
> Lots. For example, self-realization can be the primary goal for someone to
> create a business. Profit is usually necessary in such a case, but not
> necessarily the most important thing.

Define "self-realization", and what the measure of this "self-realization"
is. Also explain how the goal of creating a profit would interfere with it.

> I can envision (and there possibly
> are) businesses whose primary goal is to destroy other businesses, and
> profits are completely irrelevant for them.

I can't envision, nor have I ever heard of any such businesses. What would
be the motive? There are more direct means of satisfying one's sadistic
impulses.

> There are businesses whose
> express purpose is to make a loss (to provide other businesses with a
> possibility to use this loss).

I don't understand, please explain.

> And so on... take any 100 businesses and
> analyze their priorities. You'll probably find much more than "making
> profit", and while everybody likes a nice profit, there always will be
> decisions that put profit maximization behind something else -- which, by
> your definition, would make them... what exactly? they're not non-profits,
> but they're not businesses in your sense either.

Unless you provide concrete examples, I don't think we'll get anywhere.
Behind what, exactly?

> As far as I'm concerned, there's nothing in the term "business" that
> implies any specific primary goal. <http://en.wikipedia.org/wiki/Business>
> also doesn't seem to think it's as simple as you state it. The highest
> they
> get to WRT profit is "one of their main objectives" -- not /the/ primary
> goal. But mostly, they garnish similar statements with "usually" or
> "typically", which is not quite what "by definition" means.

It would be interesting to hear the opinions of business owners (of which
there are many on this list). What is the primary goal of *your* business?
How do you justify it?

>> Sure, and I'm not saying that it should be the ONLY goal of a company.
>> Supporting the Boy Scouts, building sports arenas, and donating money to
>> charities are all worthy endeavors, but none of them are as important as
>> creating profit.
>
> Well, that's your opinion (obviously), and I'm not saying you're not
> entitled to it.

You can't sustain the activities I listed above, unless your business is
profitable. You may have a different opinion, but it will obviously be
wrong. ;)

> But that's still a long shot from "by definition" (if we're
> talking about something like a common definition, not your own, personal
> one).

I think we already established that the word "business" can have different,
and perhaps conflicting, definitions (see above). Instead of arguing which
definition is the Only True and Correct One, let's focus on specific ideas
and examples.

What, besides making a profit, are some other primary objectives of a
business?

This discussion has already identified one -- providing employment to people
who live within a certain radius of your business (or, for businesses
located close to the national border, on the basis of nationality).

Vitaliy

2007\03\20@014321 by Vitaliy

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Ling SM wrote:
>>>By definition, the primary purpose of a business is to make money.
>
> Nothing is 100%, I think at least 80% of the people or businessman
> accept that definition.
>
> But one of the obvious problems is the "time" duration is not captured.
>  Is it profit maxisation over 1 day, 1 week, 1 month, 1 year, 1 decade,
> or even longer?  There are countless examples of high-paying CEO being
> airlifted into a company, then show impressive results over the next few
> quarters, but destroyed the employees' lives, the customers' trust, and
> eventually the whole company in a few years.  Along the way, he/she
> could have killed off some companies who employed a longer term profit
> maxization strategies.

Ling, have I ever said "make profit at the expense of X", where X is
employees' lives, customer's trust, etc.? My company employs eight people,
all of them American citizens (both natural born and naturalized). We pay
competitive wages and benefits, and based on the retention rate and informal
interviews, the employees are happy to work here. We always try to be fair
to the customer, and when in doubt, always err on the side of the customer.
We never cheat our vendors. I can even say that I enjoy what I do (for the
most part). And yet the main reason our company exists, is to make profit --  
this is the only way we can continue to provide employment, and pay our
vendors. There is nothing shameful in it.

You can make a car into a flower bed, but then it's pupose in life is to be
a platform for flowers, not a means of transportation. Some people breed
horses for personal enjoyment, and call it a business. But I agree with IRS
that horse breeding that year after year breaks even or even loses money, is
a hobby, not a business.

You make a good point regarding the period we should consider. Obviously,
the goal should be to maximize the earnings of a company over the long term,
and companies that employ such strategies will win in the end.

Vitaliy

2007\03\20@041023 by Russell McMahon

face
flavicon
face
{     mostly Vtialiy.
>>  probably Vitaliy
>    mostly Gerhard.
|     mostly Russell

   no guarantees :-)

{ I like this definition better (since it supports my point of view):
http://dictionary.reference.com/browse/business

busi·ness
-noun

     2. the purchase and sale of goods in an attempt to make a
profit.
     3. a person, partnership, or corporation engaged in commerce,
manufacturing, or a service; profit-seeking enterprise or concern.

| What both these do is to say that making a profit is one of the
bases of a business - neither say that it is either the major or sole
aim.

[snip]
>> Can you think of a business whose primary goal is *not* creating
>> profit?
>
> Lots. For example, self-realization can be the primary goal for
> someone to
> create a business. Profit is usually necessary in such a case, but
> not
> necessarily the most important thing.

{ Define "self-realization", and what the measure of this
"self-realization"
is. Also explain how the goal of creating a profit would interfere
with it.

| "Self realisation" may mean "achieving one's aims in life". These
may include altruistic behaviour, perceived good for others, perceived
good for one-self not measure in monetary terms and more.  The
achievement of non-monetary profits would be excluded by many hard
liners from the concept of profit but, if I deem that such results
increase my perceived capital, then they do.

| One problem when such things  are debated is that some people
consider that they have a right to "make a profit" from certain things
and in certain areas "because they can" and argue that what they are
doing detracts not a white from the capital or profits of others or
abrogates any ownership by others. Alas, it's common for such
claimants to measure capital in terms only that they may agree with.
Also ownership and profit. Some would (and do) argue that if there is
material on or under your land that "you are not using" then they have
a "right" to profit from its utilisation as "you are not using it" or
"you do not own it", while paying you, at most, a consideration for
the inconvenience that they put you to by accessing "their" new found
capital via your property. {{Terms in [  ] relate to matters which are
liable to be a matter of dispute, Any terms not in [ ] generally have
a relatively commonly agreed meaning. }}

| In my case, as a specific example, I have for many years *NOT* run
my business with the sole or even major aim of maximising financial
profit. 'Self realisation' is a relatively reasonable term for what I
have been interested in achieving. In the near future I am currently
intending (hoping :-) ) to increase absolute $ profit level greatly
for a while, but even this is part of my overall desire for "self
reali[s|z]ation so maximising profit per se is still not my primary
focus. Maximum 'self realisation' may or may not include maximising
profit at any given time and, in my case, usually doesn't. [[My
projected profit levels for the year starting June 1st are $450,000
+/- $500,000. Hopefully it won't be too too close to the bottom of
that range :-) ][In case anyone missed it, that's a joke, but not
wholly without merit at either extreme. I hope, and alas :-) ]

> There are businesses whose
> express purpose is to make a loss (to provide other businesses with
> a
> possibility to use this loss).

{I don't understand, please explain.

| This is not uncommon, but arguably they usually do so in the
interests of making a net overall profit at the expense of others.
This is usually a legal albeit usually immoral enterprise.
Individuals, while making individual positive profits from directors
fees or salaries or other transactions, operate a company, or, often,
a group of companies so that money can be manipulated, so that the
company or companies invo;lved lose money. To do this they usually
need to disadvantage other people or companies. Given a suitable tax
regime the tax loss incurred can be sold, along with the company, to
another company for a positive sum, thereby contributing a negative
amount to their tax liability. Properly handled this is legal. As the
loss usually has to come from somebody else's funds they are
effectively selling the taxable percentage of someone else's funds at
a profit to somebody else. As the persons whose funds they are
benefiting from usually entered into a business arrangement in the
hope of making a profit (and of not losing their original funds) and
as these people generally do not profit when the "losses are sold", if
the endeavour is intentionally set up to achieve these ends then it is
legalised theft. Worse, the ratio of profit made to loss incurred is
relatively small (as it is some proportion of the tax due on the
amounts involved and this must then be sold at a discount to make it
attractive) then they are stealing $N for every $ they make.

{It would be interesting to hear the opinions of business owners (of
which
{there are many on this list). What is the primary goal of *your*
business?

| As above.

{How do you justify it?

|' Self realisation' is a primary goal.
Profit is simply one tool amongst many.

>> Sure, and I'm not saying that it should be the ONLY goal of a
>> company.
>> Supporting the Boy Scouts, building sports arenas, and donating
>> money to
>> charities are all worthy endeavors, but none of them are as
>> important as
>> creating profit.

| They certainly could be for some.
None are for me, when put in those terms.


{You can't sustain the activities I listed above, unless your business
is
{profitable. You may have a different opinion, but it will obviously
be
{wrong. ;)

| No.
But that wasn't what was being said.
Ignoring for now the fact that it IS possible to run a profitable
business without making a profit (see scam merchants example above),
the question was whether maximising profit was the necessary aim of a
business or whether achieving a profit was the primary aim. I submit
that neither MUST be the case.

{What, besides making a profit, are some other primary objectives of a
{business?

| Making 'things' better.
| Making things different.

|Neither of these is necessarily a "do gooder" objective, especially
the latter.

| I imagine that 'Greenpeace' or "Friends of the Earth' could quite
well run businesses that meet many definitions (indeed, most
definitions) of what a business is. And some would tremble or gnash
their teeth with fury at their business aims (I won't even mention
your name and you'll know who you are :-)) (although it actually
applies to several on this list.).

| I saw an Oxfam store when I was in Oxford in 2003 - an appropriate
place for one :-). I do believe that they were running a business and
I do believe that they wished to 'turn a profit' but I'd doubt that
was top of their list of business aims.

| The Salvation  Army here (and no doubt there)(almost wherever
"there" is) run some very nice "opportunity shops". They are run as
businesses. The local manager probably IS given the aim of maximising
profit, but will have very very strict guidelines set on maximum
pricing. Overall the op shop businesses (which they undoubtedly are)
are certainly not aiming to maximise profit. Anyone, regardless of
income or capital level, can buy there at the same prices. Our local
shop is very nicely presented and sell some very reasonable product at
extremely good prices. I'm happy to buy there and they are happy to
sell to me. There is no doubt that the overall business puts
"providing opportunities for people in the community" ahead of
"making a profit for the Sallies". Some would say this is a terrible
thing to do and that such businesses should not be allowed. But not
very many :-).



       Russell


2007\03\20@045514 by Jinx

face picon face
> You can't sustain the activities I listed above, unless your business
> is profitable. You may have a different opinion, but it will obviously
> be wrong. ;)

Could you say a 'business' has to be at least self-sustaining to be
considered in any way successful ? For example could you call a
non-profit organisation a business ? - it trades, makes money,
spends money, pays wages, etc, but at the end of the day, or the
financial year, its bank account may not have changed much. And
it probably grew during the year too. Would you consider donations
as "propping up", like an injection of funds into a commercial venture,
as without them the organisation would fail or fail to grow ?

2007\03\20@051613 by Ling SM

picon face
>have I ever said "make profit at the expense of X", where X is
employees' lives, customer's trust, etc.?

> most part). And yet the main reason our company exists, is to make profit --  
> this is the only way we can continue to provide employment, and pay our
> vendors. There is nothing shameful in it.

Vitaliy, No I did not imply that either :-)

Making profit is not evil, but if "time" factor is considered then the
equation changes quite a bit.  "Time period" is only one factor that was
left out in the profit paramount drive. Guess, you must have noticed
that my position is not against making profit, but making profit and at
the same time protecting and nurturing the environment that enable
continuous profit making.  Yet, if you look at almost all accounting
reports, the only focus is "profit" in the shortest measured period of 1
quarter.  This is the only language and religion of Wall Street.

> You make a good point regarding the period we should consider. Obviously,
> the goal should be to maximize the earnings of a company over the long term,
> and companies that employ such strategies will win in the end.

Guess we are in agreement somewhat.  But I don't rule out "No profit"
business , as they may be the one that has the longest term perspective
in their business strategy.

Ling SM

2007\03\20@053324 by Alan B. Pearce

face picon face
>Yet, if you look at almost all accounting reports, the only
>focus is "profit" in the shortest measured period of 1 quarter.
>This is the only language and religion of Wall Street.

The other thing that bugs me is that the focus seems to be on maximising
profit at the expense of everything else, rather than making "sufficient
profit" to give investors a return, as well as generally allowing the local
workers and environment sufficient income and protection.

Companies have done this in the past - examples like Cadburys who built the
Bourneville village for the factory workers. Other examples exist as well, I
am sure.

2007\03\20@080200 by Gerhard Fiedler

picon face
Vitaliy wrote:

> Gerhard Fiedler wrote:
>> Can you cite something? I used the online version, and they do not seem to
>> agree with you. They say (among other, here not relevant meanings) in
>> <http://www.m-w.com/dictionary/business>:
>
> I like this definition better (since it supports my point of view):
> http://dictionary.reference.com/browse/business

Not exactly Webster's :)

> busi·ness
> -noun
>
>       2. the purchase and sale of goods in an attempt to make a profit.
>       3. a person, partnership, or corporation engaged in commerce,
> manufacturing, or a service; profit-seeking enterprise or concern.

I disagree -- not with the definition, but with your interpretation. IMO it
doesn't support your view, it supports mine. Two of the three definitions
state that making profit is a part of a business, one doesn't state it, and
none states that it is the highest priority of a business.

To make this clear: I never doubted that making profit is a part of most
businesses (even though it seems there are definitions that go beyond
this), but I don't see that it is necessarily the highest priority -- which
is what you said is the definition of "business".


>>> Can you think of a business whose primary goal is *not* creating
>>> profit?
>>
>> Lots. For example, self-realization can be the primary goal for someone
>> to create a business. Profit is usually necessary in such a case, but
>> not necessarily the most important thing.
>
> Define "self-realization", and what the measure of this
> "self-realization" is.

I don't have to, the person who runs such a business would do it -- as
Russell has :)  I also run a business, and my primary goal with that is to
be able to work from home, for a number of reasons. Obviously I need to
make enough money to live, but I'm sure that I could have made more money
not working from home (whether in my own or in another business) than I
have so far. So I definitely did not maximize my profits, giving higher
priorities to other considerations.

> Also explain how the goal of creating a profit would interfere with it.

Not "creating a profit", but maximizing profit. Maximizing profit would
have interfered with my primary goal of working from home, in many
occasions.


>> I can envision (and there possibly are) businesses whose primary goal is
>> to destroy other businesses, and profits are completely irrelevant for
>> them.
>
> I can't envision, nor have I ever heard of any such businesses. What
> would be the motive? There are more direct means of satisfying one's
> sadistic impulses.

Oh thee innocent :)  Capitalism has many ugly faces (I don't want to stir a
religious war, and I'm not saying it has only ugly faces :). Some of the
real big conglomerates (they are not single businesses, but collections of
many businesses) try many things when they want to get into a market.
Trying to go from 0% market share to 90% market share means to destroy
businesses. A company may be created to get into a market with dumping
prices, being charged of dumping, but while the lawsuit is going on, the
main competitors are going broke. Eventually the dumping company gets fined
and possibly goes bankrupt, but the market break is there. Which gives a
break to another company. The primary goal of the dumping company was not
to make profit, but to shake the market. You doubt this happens?

Of course, such maneuvers (especially them) usually do have the goal of
maximizing someone's profit -- but not necessarily the concerned business's
profit.


>> There are businesses whose express purpose is to make a loss (to provide
>> other businesses with a possibility to use this loss).
>
> I don't understand, please explain.

See Russell's answer. AFAIK there are also other mechanisms (funds where
companies can "buy" losses; seems to be useful tax-wise in certain
situations).


>> And so on... take any 100 businesses and analyze their priorities.
>> You'll probably find much more than "making profit", and while
>> everybody likes a nice profit, there always will be decisions that put
>> profit maximization behind something else -- which, by your definition,
>> would make them... what exactly? they're not non-profits, but they're
>> not businesses in your sense either.
>
> Unless you provide concrete examples, I don't think we'll get anywhere.
> Behind what, exactly?

For example, a company may decide to keep an elderly employee on payroll
until retirement, even though his productivity -- in terms of profit
maximization -- may have tanked. (I'm not implying that all elderly
employees have low productivity, but some do.) There are many such
decisions, where profit maximization -- whatever period -- is not the
primary goal. Other people provided other examples: businesses where the
main goal is to provide a livelihood for a local group of people, to foster
change in some area (environment, for example), to provide a certain work
environment not found elsewhere... use your imagination. All these require
profit, but it's not necessarily their primary goal.


> It would be interesting to hear the opinions of business owners (of which
> there are many on this list). What is the primary goal of *your* business?
> How do you justify it?

You've read Russell, and mine above. I'm sure there are others. I imagine
that most small business owners could make more (personal) profit by
putting their efforts into a big company, using all the mechanisms big
companies provide to make profit. Yet they run their small businesses;
usually not because of personal profit maximization, but because of
something else. This may even be your case :)


>> Well, that's your opinion (obviously), and I'm not saying you're not
>> entitled to it.
>
> You can't sustain the activities I listed above, unless your business is
> profitable. You may have a different opinion, but it will obviously be
> wrong. ;)

Of course not. You constantly mistake 1) "making a profit is necessary for
a business" for 2) "making profit is by definition the primary goal of
every business". 1) is what we agree on, but you claim 2) -- and everything
that you can come up with only substantiates 1), not 2). There hasn't been
a single definition of business so far (besides yours, of course :) that
states that making (or maximizing) profit is the primary goal of every
business.

Of course, usually a business has to be profitable (even though there are
exceptions, see above) -- but that's a long shot from profit making or
maximizing being the primary goal. It just says that it is /a/ goal, among
possibly others, possibly more important ones.


> What, besides making a profit, are some other primary objectives of a
> business?
>
> This discussion has already identified one -- providing employment to
> people who live within a certain radius of your business (or, for
> businesses located close to the national border, on the basis of
> nationality).

Providing means of living for family members. For a group of friends to be
able to work together. Providing a certain work environment (5 o'clock tee,
no air conditioning and open windows with flowers outside, playtime with
children every day between 14h and 16h, ...). Fostering certain changes
(environmental, technological, social). Being your own boss. Pride in
ownership. Inability to "work for someone else". Inability to work with
someone else. Fulfilling a dream (be that what it may be) while making a
living with it.

All of these may or may not result in a profit, but making profit (or even
maximizing it) is not necessary.

BTW, your original term was "making money". That's not quite up to
"definition standards" :) Even non-profits "make money" in the sense that
they have income. (Almost) every person makes money. We then moved to
profit; seems to be more "business". But even that is not really clear. Is
the salary that the owner receives a profit? In a way it is, legally it
isn't. You see, when you want to get to definitions (as in "by
definition"), things get complicated. Few things are "by definition" :)

Gerhard

2007\03\20@082924 by Alan B. Pearce

face picon face
>> And so on... take any 100 businesses and analyze their priorities.
>> You'll probably find much more than "making profit", and while
>> everybody likes a nice profit, there always will be decisions that put
>> profit maximization behind something else -- which, by your definition,
>> would make them... what exactly? they're not non-profits, but they're
>> not businesses in your sense either.
>
> Unless you provide concrete examples, I don't think we'll get anywhere.
> Behind what, exactly?

The sort of example I think of here is the "tied cottage" that is part of
working on many UK estates. Once an employee retires they may well be
allowed to live out the rest of their life - and possibly that of their
spouse - in the cottage that came with the job, in recognition of their
contribution to the estate. The estate would be perfectly entitled to send
them on their way, and put a new employee who is taking over the position,
into the cottage.

Keeping the retired employee in the cottage is a cost to the estate, in
terms of maintenance - and may end up with additional costs such as keeping
the garden tidy as the ex-employee ages and can no longer do so, apart from
the cost of finding a new cottage for the replacement employee.

2007\03\20@084414 by Jinx

face picon face
> For example, a company may decide to keep an elderly employee
> on payroll until retirement.........There are many such decisions,
> where profit maximization -- whatever period -- is not the primary
> goal

You can't deny that altruism has PR value though. A company that
doesn't appear ** to throw widows and orphans out in the snow
because they've outlived their usefullness or makes a fuss about doing
its bit for the environment is going to be seen more favourably by the
consumer

** appearances can be deceptive !

2007\03\20@121150 by Timothy Weber

face picon face
Vitaliy wrote:
{Quote hidden}

Thanks!

> To most Americans, American lives are worth more than the lives of people of
> other nationalities. I like the concept of a world as a "global village",
> and I know and may care more about some of my "neighbors" who live in China
> or Finland, than about the person who lives in a house next to mine.

I find the global village concept attractive as well.  I was raised in
America by Americans to believe that Americans are generally
overprivileged and ought to do more to give back to the rest of the world.

(And I'm currently mulling over with my business partner whether to
build an upcoming [hardware] product in-house, through an assembler in
our state, or through an assembler in China or elsewhere - so this is a
hot topic for me.)

> Given this definition of "neighbor", your definition of the primary purpose
> of a business takes on a whole new meaning, doesn't it?

First, I wouldn't say it's my definition, just one possibility.  It's
one that's attractive to me, for sure.

Second, while it's attractive to think of the world as a global village,
 that concept can't replace the concept of the "real" village.  To me,
diverse culture is a good thing, and it starts with local culture, in
the real village - i.e., the people you physically see and interact with
day to day.

The modern world has tended to replace physical interactions with more
and more abstractions.  Heck, I'm a software engineer; I love making
things that consist of almost nothing but abstractions.  But I'm also
conscious that abstractions get a bit dangerous when they're unchecked.
 That is, human-designed abstractions have a way of collapsing when you
lean on them in unexpected ways.

Examples: Virtual online communities enable unprecedented cross-cultural
contact; they also can give rise to bewilderingly violent arguments that
would never happen if the antagonists were looking at each other in
physical space.  Money is tremendously useful as a marker for value;
confusing it with value - or treating it as the only value - has caused
continuous trouble since its invention.  The rise of corporations,
nations, and international organizations has allowed humans to
coordinate their individual actions into incredible power; servicing the
needs of these abstractions over the needs of the humans in them has
squandered that power in wars and other conflicts.  SPICE simulators... Etc.

The real, physical village provides substantial social benefits to its
members.  The global village made up of neighbors who have never seen
each other and who interact only via abstractions may also have some
benefits, but we need to be careful not to trust it to behave just like
the real village.

This is a complex topic and I think I can't shoehorn my views on it into
a reasonable PIClist post...  "Think globally, act locally" points to
it, but is almost uselessly general...

I'll just assert the value of BOTH global equity AND working with people
in the flesh whose kids play soccer with your kids.
--
Timothy J. Weber
http://timothyweber.org

2007\03\20@144614 by Gerhard Fiedler

picon face
Jinx wrote:

>> For example, a company may decide to keep an elderly employee on payroll
>> until retirement.........There are many such decisions, where profit
>> maximization -- whatever period -- is not the primary goal
>
> You can't deny that altruism has PR value though. A company that doesn't
> appear ** to throw widows and orphans out in the snow because they've
> outlived their usefullness or makes a fuss about doing its bit for the
> environment is going to be seen more favourably by the consumer

Of course. But it depends on the objective -- we were talking about
priorities. For some, this may well be a PR decision (and as such part of
profit maximization).

But for others, it's about feeling good doing the "right thing". For still
others, it's simply what they do. And for some, it might be /the/ reason to
have their own business being able to do this despite it not being
profitable.

Gerhard

2007\03\22@081040 by Russell McMahon

face
flavicon
face
>> There are businesses whose express purpose is to make a loss (to
>> provide
>> other businesses with a possibility to use this loss).
>
> I don't understand, please explain.

See Russell's answer. AFAIK there are also other mechanisms (funds
where
companies can "buy" losses; seems to be useful tax-wise in certain
situations).

___

In my country we have a recognised category of company specially set
up to allow losses to be transferred to other areas. It's called a
LAQC (?Loss acquiring qualifying company?) and it has certain rules
about who can run one etc. I think It's mainly to allow small numbers
of investors to transfer tax losses across ventures.

I had it recommended literally yesterday that I set one up for a
specific purpose. I can buy a house for no $ down, rent it to the
government (NZ Housing Corporation for rental to State sponsored
tenants) at 0.1% of value per week, get a 10 year contract with 5 year
optional right of renewal on top of that and have all maintenance and
repairs paid during that time. I'd need to put a modest amount of
money in over time but the *PROJECTED* return over 15 years is 10% to
15% per annum compound. A significant part of the structuring is to
provide a net tax loss which is then offset against other income.
Without the tax losses it wouldn't work. The LAQC structure is
specifically set up by the government and tax department to allow this
sort of thing to be done. Fascinating :-).

What this does is to leverage ones savings by using the equity value
in ones own existing home as security for the loan allowing no $ down
and an interest free loan. That way the return on the money one puts
in *SHOULD* be much higher than one can otherwise usually get with a
capital guaranteed investment. There are certain assumptions about the
behaviour of the housing market and inflation which are historically
good but MAY prove to be long term bad. One can get out early by
selling the house with contract to another investor at a discount.
They get the same deal but a shorter term which may suit them better.

FWIW, for various reasons I'm probably not going to do this.



       Russell



2007\03\23@050527 by Vitaliy

flavicon
face
Jinx wrote:
>> You can't sustain the activities I listed above, unless your business
>> is profitable. You may have a different opinion, but it will obviously
>> be wrong. ;)
>
> Could you say a 'business' has to be at least self-sustaining to be
> considered in any way successful ? For example could you call a
> non-profit organisation a business ? - it trades, makes money,
> spends money, pays wages, etc, but at the end of the day, or the
> financial year, its bank account may not have changed much.

It's funny you say that, as most is true for most companies. It's actually
considered bad business practice to keep a large sum in the bank -- the
money must be invested somewhere (people, machines, R&D, etc). Otherwise,
you're not using your money to its full efficiency, if I can put it that
way.

> And
> it probably grew during the year too. Would you consider donations
> as "propping up", like an injection of funds into a commercial venture,
> as without them the organisation would fail or fail to grow ?

It depends, you can also look at donations as profit if you wanted to. In
exchange for their money, people are getting something in return, if only
the positive feeling of having accomplished something good. At this point,
it gets really confusing, because now you can (like Russell) argue that it
doesn't have to involve money at all. I drink a glass of water on a hot day
(investment), so I can increase my well-being ("profit"). So I *am*,
literally, a business.

I think it makes a lot more sense to define a business in terms of its
goals. Is the main purpose of your enterprise to use the resources available
at your disposal to make money, or is it something else?

Best regards,

Vitaliy


2007\03\23@051229 by Vitaliy

flavicon
face
Ling SM wrote:
>> You make a good point regarding the period we should consider. Obviously,
>> the goal should be to maximize the earnings of a company over the long
>> term,
>> and companies that employ such strategies will win in the end.
>
> Guess we are in agreement somewhat.  But I don't rule out "No profit"
> business , as they may be the one that has the longest term perspective
> in their business strategy.

Ling, it may help to define "no profit" -- how do you understand it? If I'm
investing all the profit my company makes into new equipment, advertising,
etc -- would that mean I'm not making any profit? When do you count profit
(instantaneously, weekly, quarterly, annually, once every decade)?

Maybe more importantly, HOW do you count profit? Do you include the
employee's salaries in the cost of the product, or do you count it as
profit? What if the employee is a CEO who makes 10M a year? Should any
portion of the raw materials or unsold inventory be counted as profit?

What if you spent the difference between what it cost you to produce a
product, and what you sold it for, on new equipment? Marketing? Employee
training? New office building?


This conversation got started when I innocently (or so I thought) suggested
that from a business point of view, it is better to sell more units at a
lower price, and make more money, rather than to sell fewer units at a
higher price, if the _total_ profit for the former is higher.

What that means, is that the business will try to decrease the cost of a
product, usually by increasing productivity (more units built per worker per
unit of time) -- by improving the technology, processes, employee training,
working conditions, et cetera. Increased productivity means higher pay for
the worker. By definition, lower prices benefit the consumer. More money is
good for the business (you can spend it on new equipment, hire more
employees, offer benefits or paid vacations). Everyone wins.

This seems very plain to me, but for reasons I don't completely understand,
it is not for a lot of other people. For some reason, "maximizing profit" is
associated with trampling over the environment, moral values, one's own
neighbors, self-actualization, younameit.

Vitaliy



2007\03\23@052900 by Vitaliy

flavicon
face
Alan B. Pearce wrote:
> >Yet, if you look at almost all accounting reports, the only
>>focus is "profit" in the shortest measured period of 1 quarter.
>>This is the only language and religion of Wall Street.
>
> The other thing that bugs me is that the focus seems to be on maximising
> profit at the expense of everything else, rather than making "sufficient
> profit" to give investors a return, as well as generally allowing the
> local
> workers and environment sufficient income and protection.

What if maximizing profit was NOT "at the expense of everything else", would
you accept the idea?

> Companies have done this in the past - examples like Cadburys who built
> the
> Bourneville village for the factory workers. Other examples exist as well,
> I
> am sure.

As a worker, I would not want the company to decide where I must live. It
costs money to build the buildings, why don't you just give me the money,
and let me buy a house where I choose to buy it? There are other benefits
which the village provided that were not equally valuable to all employees,
which means they have resulted in economic loss. In that respect, I like
Henry Ford's approach better -- pay the worker a high salary so he would be
able to buy the automobile he's helped build (or spend the money on
something else).

Economic freedom is very close in my mind to personal freedom.

Vitaliy

2007\03\23@055104 by Jinx

face picon face
> exchange for their money, people are getting something in return, if
> only the positive feeling of having accomplished something good

If I can take that off at a tangent, because I think this fits in somewhere,
I'm just not sure exactly. Or maybe I am but I don't fancy writing a long
piece on green or political issues

There's the recycling business. Now, some recycling may be completely
ineffectual, if you consider what little impact there is taking such a small
proportion of waste out of the usual dumping,. But it has emotional and
feel-good value for the people who bother to attempt to recycle their
house-hold rubbish. Some waste is worth recycling - either to reduce
serious pollution or to recover resources (heavy/precious metals etc).
I'd have to say though that, because of re-processing costs, common
materials like plastic, glass, are not really economically viable. However,
the (vote-buying political ? "We Care") will is still there from local and
central government to keep those businesses going

http://en.wikipedia.org/wiki/Recycling_criticism

Ever see the Penn & Teller Bullshit ! episode "Environmental Hysteria" ?

========================

BTW, just to gossip on green things

Al Gore's carbon credits

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=54528

"Gore stands to make a lot of money from his promotion of the alleged
'global warming' threat, which is disputed by many mainstream scientists.
In other words, he 'buys' his 'carbon offsets' from himself, through a
transaction designed to boost his own investments and return a profit to
himself," Hobbs writes. "To be blunt, Gore doesn't buy 'carbon offsets'
through Generation Investment Management - he buys stocks."

2007\03\23@060856 by Vitaliy

flavicon
face
Russell McMahon wrote:
     2. the purchase and sale of goods in an attempt to make a
profit.
     3. a person, partnership, or corporation engaged in commerce,
manufacturing, or a service; profit-seeking enterprise or concern.

| What both these do is to say that making a profit is one of the
bases of a business - neither say that it is either the major or sole
aim.

To me, it's obvious from the way they're worded, that "profit" is the key
word.. but this is getting nowhere (we'll just have to agree to disagree, as
far as what these dictionary definitions REALLY mean).


| [snip]The
achievement of non-monetary profits would be excluded by many hard
liners from the concept of profit but, if I deem that such results
increase my perceived capital, then they do.

Addressed in my previous post. Once you take "profit" to make anything but
money (or at least, depreciable things), you can start calling anything you
want "business."

| One problem when such things  are debated is that some people
consider that they have a right to "make a profit" from certain things
and in certain areas "because they can" and argue that what they are
doing detracts not a white from the capital or profits of others or
abrogates any ownership by others.
[snip]

Again, the slippery slope argument. The implication is, maximizing profit =
harming others (the environment, moral values, etc). Not true.

| In my case, as a specific example, I have for many years *NOT* run
my business with the sole or even major aim of maximising financial
profit. 'Self realisation' is a relatively reasonable term for what I
have been interested in achieving.

I have a hard time believing this. You chose "self realization" over putting
food on your family's table? I know you can argue that "sustainability" is
not the same as "profit seeking", but what if it got to the point where you
were about to lose your house because you didn't make a mortgage payment --  
wouldn't you drop everything (including "self realization"), and do whatever
is necessary to increase the profitability of your business? In this sense,
profit is the main goal.

If you had another source of income (a "real" job), I would say that your
"business" was really not a business, but a hobby.

| In the near future I am currently
intending (hoping :-) ) to increase absolute $ profit level greatly
for a while, but even this is part of my overall desire for "self
reali[s|z]ation so maximising profit per se is still not my primary
focus. Maximum 'self realisation' may or may not include maximising
profit at any given time and, in my case, usually doesn't. [[My
projected profit levels for the year starting June 1st are $450,000
+/- $500,000. Hopefully it won't be too too close to the bottom of
that range :-) ][In case anyone missed it, that's a joke, but not
wholly without merit at either extreme. I hope, and alas :-) ]

Sorry, I don't get the joke (NZ humor? Something to do with the value of
$NZ? ;)

> There are businesses whose
> express purpose is to make a loss (to provide other businesses with
> a
> possibility to use this loss).

{I don't understand, please explain.

| This is not uncommon, but arguably they usually do so in the
interests of making a net overall profit at the expense of others.
This is usually a legal albeit usually immoral enterprise.
[snip]

I would not use the word "businesses" to describe these dishonest
activities, as I wouldn't use the word to describe selling cocaine.
Conducting business is not a zero-sum game. It should not result in a loss.

|' Self realisation' is a primary goal.
Profit is simply one tool amongst many.

But you choose to have a balance between pure 'self realization' and 'making
a profit', no? Ideally, of course, the two would coincide -- this situation
is often referred to as "getting paid to do what I enjoy", or "getting paid
for what I would be doing anyway".

{What, besides making a profit, are some other primary objectives of a
{business?

| Making 'things' better.
| Making things different.

|Neither of these is necessarily a "do gooder" objective, especially
the latter.

In other words, 'self realization'?

| The Salvation  Army here (and no doubt there)(almost wherever
"there" is) run some very nice "opportunity shops". They are run as
businesses. The local manager probably IS given the aim of maximising
profit, but will have very very strict guidelines set on maximum
pricing. Overall the op shop businesses (which they undoubtedly are)
are certainly not aiming to maximise profit. Anyone, regardless of
income or capital level, can buy there at the same prices.

The last statement is also true of supermarkets, whose major aim is to be
profitable.

| Our local
shop is very nicely presented and sell some very reasonable product at
extremely good prices. I'm happy to buy there and they are happy to
sell to me. There is no doubt that the overall business puts
"providing opportunities for people in the community" ahead of
"making a profit for the Sallies". Some would say this is a terrible
thing to do and that such businesses should not be allowed. But not
very many :-).

I like the Salvation Army, so I'm part of the many. I would simply say that
the Salvation Army is not a business, they're a *charity*. Different goals,
different names.

Vitaliy

PS I'm spending way too much time on this thread (being less productive,
which is not conducive to maximizing profit :)

2007\03\23@061628 by Alan B. Pearce

face picon face
>What if maximizing profit was NOT "at the expense of everything
>else", would you accept the idea?

Depends how it is done. The current thinking seems to run along the lines of
holding pay rises to well below inflation rates, but expecting ever higher
percentages of profit.

If everyone gets a fair share I don't have a problem with the "maximising
profit" mantra, but it does seem that it is being done at the expense of
those providing the material that makes the profit. One of the examples of
this is the way supermarkets screw down the supplier price to below economic
levels, but the supermarket is making the highest percentage profit on an
item in the whole chain from original supplier to the customer. This is not
letting each stage in the chain have a "fair share".


{Quote hidden}

In these times then yes I would agree that one is probably better being paid
a higher wage, and deciding where to have your home. But at the time that
Cadbury built the village it would have been unusual for the normal factory
worker to own their own home, it would have been rented accommodation
somewhere. What the Cadbury company did was build a village that had a
quality of life far above the normal factory worker living standards.

With modern mobility I do agree with your point, although from the worker
point of view buying a house a fair distance away and then having to pay
travel costs, along with dealing with the travel time, is reducing the
quality of life. Unfortunately it also causes housing prices close to major
work centres to rise astronomically.

However current day workers do get some of the "benefits" that make
companies attractive to work for. Items like company vehicle, gym
membership, subsidised medical insurance, childcare allowances, etc,
sometimes done as a selection that the employee can choose from up to a
value, that allows the employee to maximise the benefits they get to suit
their lifestyle. These would be valid substitutes for the "Cadbury village"
benefit of that time.

2007\03\23@061655 by Jinx

face picon face
> As a worker, I would not want the company to decide where I must
> live. It costs money to build the buildings, why don't you just give me
> the money

In the past, regions with specialised and concentrated industries built
towns for the workers. The potteries, steel and cotton mills, coalmines
and shipyards in Northern England for example. That's why there is
so much terraced housing oop north. That sort of housing, built on that
scale, is cheap, and convenient for both the worker and the employer.
You could rent-to-buy, like state housing, if you wanted to

You're free to live anywhere you choose, and commute, but for 100
years after the Industrial Revolution, when the Great got put in Britain,
you more than likely had to walk to work. Yes, there was some
ghetto-isation, but you had community spirit too. Like the neighbour-
hoods of New York or any big city

The down-side of course is that if the company failed, so did the town.
In the North of England, and around what were once industrial centres
like Detroit and Pennsylvania, there are vast poverty-stricken tracts of
empty and unsellable housing

Is it too obvious to say that symbiosis is the name of the game ? Workers
and companies need each other. In times when I think people appreciated
having a job more than they do now, to be housed by the company, even
if it was a bit basic, was a real bonus

2007\03\23@062920 by Jinx

face picon face
> If everyone gets a fair share I don't have a problem with the
> "maximising profit" mantra, but it does seem that it is being
> done at the expense of those providing the material that makes
> the profit

I know the supermarket example really makes you feel for the
supplier. A Panorama show a few years back looked at the
effect on the community by malls, shopping hubs etc (Something
Wal-Mart This Way Comes)

Then there's the comparison of Michael Jordan's fee to the
Nike workers. And The Gap, and DKNY, and ......

(flip, this social commentary stuff is all interesting but I'm supposed
to be sorting out nested FSR loops and tables !!)

2007\03\23@064343 by Vitaliy

flavicon
face
Gerhard Fiedler wrote:
> I like this definition better (since it supports my point of view):
> http://dictionary.reference.com/browse/business

=Not exactly Webster's :)

Yes, I made a mistake -- it's not Webster's dictionary. :)

> busi·ness
> -noun
>
>       2. the purchase and sale of goods in an attempt to make a profit.
>       3. a person, partnership, or corporation engaged in commerce,
> manufacturing, or a service; profit-seeking enterprise or concern.

=I disagree -- not with the definition, but with your interpretation. IMO it
doesn't support your view, it supports mine. Two of the three definitions
state that making profit is a part of a business, one doesn't state it, and
none states that it is the highest priority of a business.

"Profit-seeking enterprise" to me seems to imply pretty strongly that profit
is key, but I think it's pointless to argue about this, because now we're
talking about *how much* profit is a part of doing business, which we won't
be able to get from the definitions themselves. (Wouldn't it be great, if
the definition said something like "business is 10% about making a profit,
and 90% about self-realization" :)  And what do enthymologists know about
the meaning of business, anyway? ,)

=To make this clear: I never doubted that making profit is a part of most
businesses (even though it seems there are definitions that go beyond
this), but I don't see that it is necessarily the highest priority -- which
is what you said is the definition of "business".

I could theoretically make more money by choosing a different profession
(real estate, or whatever). However, I chose to go into a field that I like
(computer engineering). But now that I'm doing what I like (building
hardware and writing programs), I'd like to do it as efficiently as
possible. In other words, get more return on investment. In other words,
make profit.

I think you and I agree more than we disagree (although it doesn't seem that
way, due to the limited nature of human communication).

> Define "self-realization", and what the measure of this
> "self-realization" is.

= I don't have to, the person who runs such a business would do it -- as
Russell has :)  I also run a business, and my primary goal with that is to
be able to work from home, for a number of reasons. Obviously I need to
make enough money to live, but I'm sure that I could have made more money
not working from home (whether in my own or in another business) than I
have so far. So I definitely did not maximize my profits, giving higher
priorities to other considerations.

Sure, working from home had higher value to you, than the money difference.
However, I'm sure that now that you're working from home, you are trying to
minimize your costs of developing a product, and increase its value as much
as you can?

> Also explain how the goal of creating a profit would interfere with it.

= Not "creating a profit", but maximizing profit. Maximizing profit would
have interfered with my primary goal of working from home, in many
occasions.

OK. See above.

>> I can envision (and there possibly are) businesses whose primary goal is
>> to destroy other businesses, and profits are completely irrelevant for
>> them.
>
> I can't envision, nor have I ever heard of any such businesses. What
> would be the motive? There are more direct means of satisfying one's
> sadistic impulses.

= Oh thee innocent :)  Capitalism has many ugly faces (I don't want to stir
a
religious war, and I'm not saying it has only ugly faces :). Some of the
real big conglomerates (they are not single businesses, but collections of
many businesses) try many things when they want to get into a market.
Trying to go from 0% market share to 90% market share means to destroy
businesses. A company may be created to get into a market with dumping
prices, being charged of dumping, but while the lawsuit is going on, the
main competitors are going broke. Eventually the dumping company gets fined
and possibly goes bankrupt, but the market break is there. Which gives a
break to another company. The primary goal of the dumping company was not
to make profit, but to shake the market. You doubt this happens?

I'd like to point out that in the meantime, the consumers are benefiting
enormously from the low prices. At the same time, the company that
supposedly benefits from this price war is weakening itself (by definition,
dumping means it's selling below cost).

Another point. Yes, companies may go out of business -- but the
infrastructure and the human capital are still there! As soon as the Big Bad
Company stops dumping, prices go back up -- providing the incentive to
people to start new companies.

In rare cases where the company is too entrenched (Standard Oil, Bell,
Microsoft) I believe it is the government's responsibility to break up the
monopoly in the interest of the society as a whole.


=I imagine
that most small business owners could make more (personal) profit by
putting their efforts into a big company, using all the mechanisms big
companies provide to make profit. Yet they run their small businesses;
usually not because of personal profit maximization, but because of
something else. This may even be your case :)

Yes, absolutely. :)

=BTW, your original term was "making money". That's not quite up to
"definition standards" :) Even non-profits "make money" in the sense that
they have income. (Almost) every person makes money. We then moved to
profit; seems to be more "business". But even that is not really clear. Is
the salary that the owner receives a profit? In a way it is, legally it
isn't. You see, when you want to get to definitions (as in "by
definition"), things get complicated. Few things are "by definition" :)

My original term (if you go back far enough) was "maximizing profit". :)

As I said, we agree on more things than we disagree (you wrote something
that I haven't read yet, but I then wrote the same thing in another post --  
regarding owner's salary). Maybe eventually we'll find a compromise. :)

Vitaliy

2007\03\23@072201 by Alan B. Pearce

face picon face
>Is it too obvious to say that symbiosis is the name of the game ?
>Workers and companies need each other.

Amen. The last company I worked for in NZ got very close to me telling them
that they needed people to work for them to do their business, and for the
shareholders to get a return on their investment. I didn't have to work for
them - they weren't the only job in town (I guess I did eventually
effectively tell them that when I handed in my notice ;)).

2007\03\23@074048 by Vitaliy

flavicon
face
Timothy Weber wrote:

> I find the global village concept attractive as well.  I was raised in
> America by Americans to believe that Americans are generally
> overprivileged and ought to do more to give back to the rest of the world.

By the way, I did not mean to imply that *only* Americans value the lives of
their countrymen above those of other countries. Nothing could be further
from the truth. Everybody does it.

Nor did I mean to say that *all* Americans think that way. But I watch the
news, and I see the casualty figures for the most recent war -- and every
dead American soldier is accounted for. There's no running total for dead
Iraquis. I also see Russian news agencies reporting the number of Russian
dead in a recent disaster; the news on Telemundo and Galavision is about
dead Mexican miners, or the trapped Mexican climbers.

[snip]

{Quote hidden}

The question is, where do you draw the boundary? Who lives in your village?
Defining the boundary using the criterion of "physical contact" has
interesting implications.

Does that mean that you should try to produce everything locally, using only
people that you physically interact with? Obviously, your company can't
produce everything it needs, so it cannot really be the village. Ok, so --  
same neighborhood? Same city? State? Country? Where do you draw the line?

[snip]
>  That is, human-designed abstractions have a way of collapsing when you
> lean on them in unexpected ways.
>
> Examples: Virtual online communities enable unprecedented cross-cultural
> contact; they also can give rise to bewilderingly violent arguments that
> would never happen if the antagonists were looking at each other in
> physical space.

And yet I think the benefit of virtual communities far outweighs their
drawbacks. I find that I can express myself much better through the written
(typed) word, and I can have a positive exchange of ideas with far more
people, than I could in "real" life.

Take this discussion for example: would you call it bewilderingly violent? I
think after the initial intoxicating feeling of freedom and impunity, people
tend to come to their senses and realize that online discussions are not
much different from the ones taking place in real life, and that if you want
respect, you must give respect to others. In time, my "online" self starts
to sound more like my "real" self.

>  Money is tremendously useful as a marker for value;
> confusing it with value - or treating it as the only value - has caused
> continuous trouble since its invention.  The rise of corporations,
> nations, and international organizations has allowed humans to
> coordinate their individual actions into incredible power; servicing the
> needs of these abstractions over the needs of the humans in them has
> squandered that power in wars and other conflicts.  SPICE simulators...
> Etc.

Not too long ago, I too came to the realization that "it's all about
people". Too much focus on the abstract leads to bad things -- compare the
French revolution with its abstract ideas, to the American revolution with
its emphasis on the rights of the individual.

However, you can't deny the value of money as a tool. And, as many other
tools, it can be used to benefit or harm the humans.

{Quote hidden}

I'm sure there are lots of people who are close to you geographically, whom
you have never met personally. If you're a CEO, and your company is big
enough, you may never meet some of your employees, and your kids will never
play soccer with theirs. So why does it matter whether the worker lives in
your town, or on another continent? People everywhere have families,
children, and dreams of a better future.

Think of "outsourcing" a job to another country, as freeing up local
resources for jobs where they can be used in a more productive way. Then
some guy from Japan or Korea may decide to expand his company into San Diego
or Montgomery, Alabama -- and use the local labor to design cell phones, or
build automobiles. Wouldn't that more fun, than stuffing boards?

Vitaliy

2007\03\23@075013 by Vitaliy

flavicon
face
Alan B. Pearce wrote:
{Quote hidden}

TANSTAAFL. Somebody's paying for it either way.

The company (or the estate) may choose to do it, by keeping a part of the
new employee's salary to pay for the cottage (sounds like Social Security in
the US). Or it may choose to pay the new employee (the son of the retiree) a
higher salary so he can support his father. Or people get together and vote
for a State Pension Plan. Or the estate pays the employee a decent salary to
begin with, so he can put enough money away, and support himself in
retirement.

Vitaliy

2007\03\23@075826 by Vitaliy

flavicon
face
Russell McMahon wrote:
{Quote hidden}

TANSTAAFL. Where does the government get the money, to subsidize this
program? It can (A) print the money (steal from ALL citizens), or (B) impose
taxes (Take the money from your neighbor, and give it to you. Or, take the
money out of your left pocket, and put it in your right).

Either way, wasteful and unfair.

2007\03\23@082956 by Vitaliy

flavicon
face
Alan B. Pearce wrote:
> Depends how it is done. The current thinking seems to run along the lines
> of
> holding pay rises to well below inflation rates, but expecting ever higher
> percentages of profit.

Keep in mind that there is always competition for labor. Right now, the
unemployment rate in the US is below what the economist call the "natural"
level (5%), IMO in part because of the war in Iraq. As an employer, I can
tell you that it's harder to hire people now than it was during the
recession (a lot less applicants), and you have to offer more (money,
benefits, paid time off) to get people to join and to stay. Of course, I
will take labor scarcity over economic recession any day.

> If everyone gets a fair share I don't have a problem with the "maximising
> profit" mantra, but it does seem that it is being done at the expense of
> those providing the material that makes the profit. One of the examples of
> this is the way supermarkets screw down the supplier price to below
> economic
> levels, but the supermarket is making the highest percentage profit on an
> item in the whole chain from original supplier to the customer. This is
> not
> letting each stage in the chain have a "fair share".

I don't feel a tiny bit sorry for the US farmers. It seems very wrong to me
that the taxpayers have to subsidize the farmers, and in addition to that
pay higher prices at the supermarket because the farmers are paid by the
government to *not* plant their fields, thus artificially increasing demand,
and the price!

How do you think the suppliers are able to sell their produce at "below
economic levels", and still stay in business? Why do you think they choose
to stay in the farming business, and are not looking for opportunities
elsewhere?

Vocal minorities skew the public opinion, and take the attention away from
the fact that the silent majority is paying the price. Unfortunately,
farmers and steel workers are not productive members of society, as measured
by the value of the work they do minus the price the society pays to keep
them employed in their current occupation.

> In these times then yes I would agree that one is probably better being
> paid
> a higher wage, and deciding where to have your home. But at the time that
> Cadbury built the village it would have been unusual for the normal
> factory
> worker to own their own home, it would have been rented accommodation
> somewhere. What the Cadbury company did was build a village that had a
> quality of life far above the normal factory worker living standards.

Hm. So why not give the money to the worker, and have them decide where to
build the home, what color to paint it, and which builder to hire?
Bourneville was a commune -- everyone was more or less the same, conformity
was encouraged, and the the leadership knew best what is good for the
worker.

There are examples of successful communes, but I don't believe in communism
on a large scale, and I prefer the uncertainty of freedom over the stability
of bondage.

> However current day workers do get some of the "benefits" that make
> companies attractive to work for. Items like company vehicle, gym
> membership, subsidised medical insurance, childcare allowances, etc,
> sometimes done as a selection that the employee can choose from up to a
> value, that allows the employee to maximise the benefits they get to suit
> their lifestyle. These would be valid substitutes for the "Cadbury
> village"
> benefit of that time.

True. :) People do like to be taken care of, I guess the ticky part is
finding the right balance.

Of course, a lot of the benefits that companies offer make perfect economic
sense. Due to a number of factors, the value that a worker gets from the
benefit is often significantly higher than the cost of the benefit to the
company. When offered a $2/hr raise, or medical and dental benefits, most
workers would choose the latter, even though the cost of the benefits may
really be only $1.50/hr. The reason it's a good value for the employee, is
because she may not be able to get the same competitive rates on her own,
and she may not be comfortable with the amount of administrative overhead
(let the company take care of the paperwork).

Vitaliy

2007\03\23@084801 by Gerhard Fiedler

picon face
Vitaliy wrote:

> "Profit-seeking enterprise" to me seems to imply pretty strongly that
> profit is key, but I think it's pointless to argue about this, because
> now we're talking about *how much* profit is a part of doing business,
> which we won't be able to get from the definitions themselves.

And later (out of order):

> My original term (if you go back far enough) was "maximizing profit". :)

I think it's time to go back to the start of this discussion. It was your
comment on March 19:

"By definition, the primary purpose of a business is to make money. [...]
Profit maximization and moral integrity are not mutually exclusive."

To which I answered:

"By what definition?"

The point I questioned was that "making money" (interpreted as "profit
maximization") is necessarily the primary purpose. It is not, in my case,
so that would make my business not a business in your sense.


> I think you and I agree more than we disagree (although it doesn't seem
> that way, due to the limited nature of human communication).

I think so, too; there are many issues that we agree on around the core
issue. But the core issue is whether maximizing profit is necessarily the
/primary/ purpose of a business -- and it seems to me you think it is, and
I think it isn't.

I agree that making /a certain/ profit is /an important/ goal of /almost/
all businesses. But that's still a long ways from making profit
maximization the primary goal of all businesses.


> Sure, working from home had higher value to you, than the money
> difference. However, I'm sure that now that you're working from home,
> you are trying to minimize your costs of developing a product, and
> increase its value as much as you can?

Almost, but not quite. There are still other considerations. Sometimes I
take on jobs because I think I learn something or have a good time while
doing it -- not necessarily maximizing profit (in the "business" sense of
balance sheet profit). It may end up creating some unexpected profit, but
that's a side effect and not the main consideration when making such
decisions. And all this doesn't take the other one away: I still see
opportunities that would provide more profit but require that I physically
separate home and work, and don't go there, thereby definitely not making
maximizing profit my primary goal.

I'm almost certain that you do similar things. There are many things that
are not illegal and would help increasing profit, but that you may not do.
I don't know how your profit situation is and what decisions got you there,
but I'm almost sure that if you had fewer scruples, you could have more
profit than you do. So there's a point where you give your "feel good"
value a higher priority than profit maximization -- showing that profit
maximization is not your primary goal.

It probably is "primary" as long as none of the other, "more primary" goals
are not conflicting with it :)


You said that "Profit maximization and moral integrity are not mutually
exclusive." I'd say they are not necessarily mutually exclusive, but there
are some decisions where you have to decide and take either the one or the
other -- unless you define that profit maximization is /always/ ("by
definition" :) morally integer. I don't think it necessarily is -- which,
obviously, brings up the possibility that you have to choose between them.

If you choose your moral integrity at this point, you put it above profit
maximization, thereby not giving it the highest priority. You don't see the
different priorities you give to different considerations as long as they
point in the same direction; but you see them usually clearly in situations
where they point in different directions.

Gerhard

2007\03\23@085509 by Vitaliy

flavicon
face
Jinx wrote:
> In the past, regions with specialised and concentrated industries built
> towns for the workers. The potteries, steel and cotton mills, coalmines
> and shipyards in Northern England for example. That's why there is
> so much terraced housing oop north. That sort of housing, built on that
> scale, is cheap, and convenient for both the worker and the employer.
> You could rent-to-buy, like state housing, if you wanted to
>
> You're free to live anywhere you choose, and commute, but for 100
> years after the Industrial Revolution, when the Great got put in Britain,
> you more than likely had to walk to work. Yes, there was some
> ghetto-isation, but you had community spirit too. Like the neighbour-
> hoods of New York or any big city

Ok, makes sense. It's like buying health insurance on the company scale --  
it's cheaper that way. You do sacrifice a measure of flexibility, though.

> Is it too obvious to say that symbiosis is the name of the game ? Workers
> and companies need each other.

I'll agree with that. Companies need people, and people need companies.
Moreover, companies *ARE* people (plus the means of production :).

Vitaliy

2007\03\23@090741 by Gerhard Fiedler

picon face
Vitaliy wrote:

> Ling, it may help to define "no profit" -- how do you understand it? If
> I'm investing all the profit my company makes into new equipment,
> advertising, etc -- would that mean I'm not making any profit? When do
> you count profit (instantaneously, weekly, quarterly, annually, once
> every decade)?
>
> Maybe more importantly, HOW do you count profit? Do you include the
> employee's salaries in the cost of the product, or do you count it as
> profit? What if the employee is a CEO who makes 10M a year? Should any
> portion of the raw materials or unsold inventory be counted as profit?

Just to clarify how I understand it (this may help understanding my posts):
I consider "profit" in this discussion all the money that real people take
out of the business: workers' salaries, investors' dividends, and, yes, CEO
salaries :)  This includes also growth of the company's assets. In a way,
taxes paid and money given to charity are also part of the generated
profit, in that this is money that benefits (in theory, at least) the
community.

There's still the period question. But then, the original question was
about intent, and there the period is the one used by the intent.


> This conversation got started when I innocently (or so I thought)
> suggested that from a business point of view, it is better to sell more
> units at a lower price, and make more money, rather than to sell fewer
> units at a higher price, if the _total_ profit for the former is higher.

One problem with profit maximization is that there are many things that
have value but don't appear in the balance sheet. A healthy (physically and
emotionally) work and living environment, for example. Some of it may be
profit-relevant in longer terms, but much of it isn't, or only in so long
terms (centuries, for example) that nobody uses it in profit calculations.


> By definition, lower prices benefit the consumer.

Yes, but not always when you start taking side-effects into account. There
are many cases where cost minimization and profit maximization benefited
some consumer (money-wise), but severely penalized (health-wise) other
people (like workers, or people who live around the plant). Most of our
current environmental and work environment regulations only came after some
disaster (caused by profit maximization, usually) already had happened.

This is an ongoing process. Which says that if you give profit maximization
the highest priority, you are bound to sooner or later cause some
irreparable harm to someone -- or to many, if you're really into big-time
maximization :)

Gerhard

2007\03\23@091412 by Alan B. Pearce

face picon face
>> Is it too obvious to say that symbiosis is the name of the game ? Workers
>> and companies need each other.
>
>I'll agree with that. Companies need people, and people need companies.

Umm, not necessarily. Companies need people to be a work force, and a
market. People don't necessarily need companies -it is possible to be self
sufficient and have quite a reasonable living on your own plot of land, with
not a company or any form of commercial operation in sight. Not everyone
regards this as the best economic model though, and so some form of
interaction with other people is generally seen as being desirable, for the
best prosperity.

2007\03\23@092427 by Jinx

face picon face
> > Is it too obvious to say that symbiosis is the name of the game ?
> > Workers and companies need each other.
>
> I'll agree with that. Companies need people, and people need
> companies. Moreover, companies *ARE* people (plus the
> means of production :).

If I can blur that somewhat - there's the perception that a big
multi-national is little more than an ants nest. The anonymous
individual is simply a Work Unit, not as important as the company
policy/mission or, what you might say is the ant equivalent, the
"natural instinct", to make money and devour everything around
you. Well that's my perception anyway - faceless corporations

And consider out-sourcing - to India or over the border for
example, or indeed moving the whole operation to another
country to save money. Who's driving that - the customer
demanding lower prices, or the company demanding lower
costs. A bit of both I guess

2007\03\23@093102 by Alan B. Pearce

face picon face
>Just to clarify how I understand it (this may help understanding
>my posts): I consider "profit" in this discussion all the money
>that real people take out of the business: workers' salaries,
>investors' dividends, and, yes, CEO salaries :)  This includes
>also growth of the company's assets. In a way, taxes paid and money
>given to charity are also part of the generated profit, in that
>this is money that benefits (in theory, at least) the community.

I wouldn't include wages and salaries as part of the profit, these are
expenses involved in generating the profit. They also appear in some
non-profit organisations. If there are any profit dependant bonuses to be
paid out, then these are not an expense in returning a profit, but a part of
a dividend payout (the dividend being against the work input instead of
money invested).

>There's still the period question. But then, the original question
>was about intent, and there the period is the one used by the intent.

Well, to me the period is whatever period the dividend (or where-ever else
the profit goes) is paid over. So for a company trading "profitably" it
would normally be regarded as a year, although they may pay one or more
interim dividends within that year, but could also be taken as, say, 5 years
for a start up to go from setting up to turning in an annual profit, some of
which will be offset against the lack of profit during the setup time. But
during the time when it is not returning a profit on investment it may well
still be classed as profitable while the losses are getting less, provided
it has enough capital to get to the point where it does provide a return on
investment.

2007\03\23@112537 by William Chops Westfield

face picon face

On Mar 23, 2007, at 2:11 AM, Vitaliy wrote:

> This conversation got started when I innocently (or so I thought)
> suggested that from a business point of view, it is better to sell
> more units at a lower price, and make more money, rather than to
> sell fewer units at a higher price, if the _total_ profit for
> the former is higher.
>
It is not an unreasonable idea for a company to have in mind both
a maximum size and a maximum growth rate that they wish to achieve.
Selling more units at a lower price requires a different size and
style of business, and perhaps I'm not interested in giving up my
weekly soldering and assembly binge to become a manager of an
external resource that does it for me, no matter how much more profit
I'd make. (or perhaps I'm not any good at the latter...)  Growing
a business if far from a trivial exercise, and many companies fail
trying to do it.  Ask me how many cisco Founders were left a year
or so after the VC money showed up...


> Increased productivity means higher pay for the worker.

Maybe.  Maybe it just means having to work harder per dollar earned.
It's one thing to work those 60 hour weeks because you're having a
swell time building the future, and another to be doing so because
it's an unwritten assumption that it's a business requirement...

BillW

2007\03\23@155841 by Gerhard Fiedler

picon face
Vitaliy wrote:

>> Keeping the retired employee in the cottage is a cost to the estate, in
>> terms of maintenance - and may end up with additional costs such as
>> keeping the garden tidy as the ex-employee ages and can no longer do
>> so, apart from the cost of finding a new cottage for the replacement
>> employee.
>
> TANSTAAFL. Somebody's paying for it either way.
>
> The company (or the estate) may choose to do it, by keeping a part of the
> new employee's salary to pay for the cottage (sounds like Social Security in
> the US). Or it may choose to pay the new employee (the son of the retiree) a
> higher salary so he can support his father. Or people get together and vote
> for a State Pension Plan. Or the estate pays the employee a decent salary to
> begin with, so he can put enough money away, and support himself in
> retirement.

Not really. The estate gives something that may not cost them anything (or
not much compared to its market value) and may not lose any profit (or not
much). If it is a big estate, and they have enough cottages, this is
certainly valid. They wouldn't want to rent the cottage to a stranger (so
they don't lose out on a lot of profit), and it may not cost them much more
to leave the person living there than it would cost to leave the cottage
empty. (Assuming that it would remain empty... depends on the number of
cottages, that's why I said "big estate".)

Anyway, there are examples where such "synergy" works better than routing
everything through the market. There must be a reason most companies prefer
employees -- having them is usually are more expensive and less flexible
than working with long-term contractors.

Gerhard

2007\03\23@161642 by Gerhard Fiedler

picon face
Alan B. Pearce wrote:

>> Just to clarify how I understand it (this may help understanding my
>> posts): I consider "profit" in this discussion all the money that real
>> people take out of the business: workers' salaries, investors'
>> dividends, and, yes, CEO salaries :)  This includes also growth of the
>> company's assets. In a way, taxes paid and money given to charity are
>> also part of the generated profit, in that this is money that benefits
>> (in theory, at least) the community.
>
> I wouldn't include wages and salaries as part of the profit, these are
> expenses involved in generating the profit. They also appear in some
> non-profit organisations.

That's exactly the point. I know that in traditional accounting (as imposed
by tax laws), salaries are not part of the profit, but then you end up with
non-profits where someone makes $10M a year as "salary". While this may be
legally a non-profit without profit, for the sake of this discussion I
think those $10M are profit disguised as salary.

Most owners of small companies know that they can to quite some degree
exchange their salary for their profit, and they do so considering what
causes them less tax, among other considerations. In this sense they are
interchangeable.

I also don't quite see the difference in principle (I of course see it in
legal terms and tax-wise) between the "cost" that a salary causes to the
company and the "cost" that dividends (that may be deemed necessary to make
the stock attractive enough) cause the company. The one invests work and
gets paid a salary, the other invests money and gets paid a dividend. If
the offered salary is too low, the people with "good work" to offer take it
elsewhere. If the offered dividends are too low, the people with enough
money to invest take it elsewhere.

So I think it makes more sense to use as profit everything (at least as far
as it is present in the balance sheet or can be represented by money) that
people take out of the operation.

Gerhard

2007\03\23@191935 by Jinx

face picon face
> > I'll agree with that. Companies need people, and people need companies

> Umm, not necessarily. Companies need people to be a work force, and a
> market. People don't necessarily need companies -it is possible to be self
> sufficient and have quite a reasonable living on your own plot of land,
with
> not a company or any form of commercial operation in sight. Not everyone
> regards this as the best economic model though, and so some form of
> interaction with other people is generally seen as being desirable, for
the
> best prosperity.

Alan, my nephew and I were acting like idiots and talking 'moron', then
I remembered Rinkworks. You'll be pleased to know they've added
"Hacker"

http://www.rinkworks.com/dialect/

Others - http://www.advancedlanguage.com/distorting.htm

This is you and Vitaly as a dateless 17 year olds

> > i'll agreE with that companeIS need LAMERZ, and lam3rxzn e3d companeiz

~~ UMM, N0T nECESSAR17Y companeis need dO0dz to be a wirk force,
4nd a nm4rekt!!!!!!1 LA/\/\ERZ DONT NEWCESSARI7Y NEED
C0MPANEI S-IT SAI POSIBL ETO BE SEFL SUFFICEINT AND
HAVE QUITE A RE4SONABLE LIV1NG ON YOR OWN P;LOT OF
ALND, WITH NOT S COMPANY OTR ANY FORM OF
COMMERCIALOPERATiON IN SIGJHT. not everyoNe regArds this
as teh beste cOnomic model Th0ugh, and So some gf0rm of inntaractiom
with ohter de\\\\////\\\\////dz si gnarally seen as bieng deisrabl3, fro reh
bes
tporspeRity!!!!!!!!!!!!!!!!!!!!1~~

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