Profit Efficiency

Profit isn’t pulling its weight. I’d argue its generally not necessary. Its not the bottom line. Quality of life and standard of living for the population is bottom line. Profit is a kind of externality, its a cost and not an end in itself. It also presents a very toxic destabilizing cost in the possibility of wealth concentration.

Societies need to be ranked not on GDP/GNP/DJIA but in profit vs quality of life and standard of living and the trends. I suspect this would complement some other measures like Gini coefficient but the point is we need to figure what we get from profit and then begin to reduce it to make it more efficient.

I think the capitalist class needs to be eradicated (peacefully) I think its a huge waste and a massive point of instability especially in a society where social mobility has reversed. Its just a liability. I am of the opinion that machine coding can do a better job than profit. Its time to get rid of unneeded layers including non employee owners, management, and investors. Those who actually produce the ideas and do the work need to get the product and the rest needs to be distributed equitably. But this is the opposite of the Ayn Rand fantasy and recognizes that most people will be automated out of work and that fake work doesn’t cut it and is a kind of crime, much better to pay people the equivalent amount to exercise, eat right and stay home. A new way to slice the pie is implied.

Profit needs to be de-emphasized. To begin with its broken. Nothing could have been more broken or backwards or stupid than the notion that the point of a business is return on equity. No, greed is not the point of any business that should be allowed to exist. Profit needs to be placed on trial and convicted. Profit is not as a reason for doing things, it needs to be de-legitimized not prioritized. The only reason for businesses are required to make a profit is not because the so-called owners and their profit motives matter much but because its a tax evasion strategy to allow the to claim none. Its not about meritorious entitled owership, the owers of big firms are hangers on like credit cards that can’t be paid off. Let firms and municipalities staight fund profits and let munis stop negotiating away their tax bases, that stuff is criminal graft.

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In the case that we are moving to a world in which everyone has what they need, then money might become less important to people and just functional for business.

We have an economic crisis principally on the back of a financial crisis. Too much easy money from leveraging has made the West consume too much and the East over produce… we’re burning the planet on the back of a daft idea of perpetual growth and the math doesn’t add up; reality is being to push back. The other effect is that easy money disengaged negative feedback, which is the more serious problem relative to politics and people’s becoming lazy - they’ve lost ability to deal with problems appropriately and expect just to throw money around to solve all problems.

I wonder there is an option to warp money and push it back to an ideal Gini or anywhere inbetween; strip out the top end risk and reboot, which would solve alsorts of problem and be a shot in the arm for those parts of the economy that are producing something worthwhile. Pensions and other important elements could be resolve artificially if a nation wanted that. Out creditors have the inverse problem that we do, so resetting money and allowing the economies to continue and resolve those without the stress from money, would be easier… certainly easier that heading down a path to WWIII.

The difference relative to history is that we have computers that could reset balances… in the past there were either sovereign defaults or not… the Roman Empire tried to collect their debt and apparently that didn’t work out. Money is not as important as wealth; and wealth is not as important as people… but try telling anyone who control the power and wealth currently… they are too busy inflicting their stupidity on the rest of us.

So in reply to your talk of profit… the focus on profit is a symptom of the bigger problem with money; debt; and over leveraging.

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@davidpbrown Thank you I liked that post quite a bit. Its hopeful. In just that order money, wealth, people. Take Wall St., there used to be some consideration of the fundamentals of the business and the ethics and contribution by the people actually investing. It was a more honest process and it meant something.

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I suppose safe net shouldn’t reward farmers then? We can’t have them freely exchanging one thing for another, after all! Dirty profiteers with their maidsafecoins and farming rigs

I am sure this technology would materialise without any of that and safe net will arrive via an immaculate conception.

Either that, or your post is fatally flawed.

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The reason there is massive debt us due to forced association. State debt and state enforced monopolies - especially on fiat money and land ownership.

It isn’t investment and profit that are bad. It is the use of violence to take stuff from others and to prevent them from competing for a share of it.

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I’m interested in your view that profit is unnecessary in an economic system. Few people think that profit, money, or GDP is the ‘bottom line’ for life & happiness, but I’m interested in how you think profit might be done away with on a purely economic level.

If someone uses resources to provide a product or service that they sell in free exchange and make a profit, it’s the profit that shows that they’ve created value. If there is no profit, they should stop carrying out that activity as the use of resources does not create value exceeding the resources alone.

If you did away with profit, what mechanism would ensure efficiency in normal economic activity and resource use? Why would people stop inefficient activity, or seek out efficient activity?

@DavidMc0 Thank you. Its a mechanism that can work and it has its place. I think the reason that we allow it, because remember half the world had made it a crime for a good number of years, is the hope that those who behave responsibly and insight-fully will do it, that their profit signals a track record of societal return on equity. Which is of course different than people who simply leverage the coercive power of money to get more of it to useless or destructive ends. I think this is where people get confused about the nature of progressive taxation. Its meant to curb the destructive use of money much more than its meant to confiscatory. Neal Gabler’s article “Disincentivising Greed,” seems to explain this well. Those in the highest brackets keep their associated money if they do reasonable things with the power of that money, they pay the brackets tax if they do unreasonable things as a disincentive. Historically in the US when those brackets came about it was either that or wealth ceilings.

But as to your actual question. Its been an intuition I’ve had for a long time. My sense is that most blue chips could be converted to no profits without much problem and the management and executive compensation could be cut way way down to Japanese levels without any problem. This means divesting the private ownership. To me in large so called public firms the people who do the firms actual work and the customers are the actual stake holders. As soon as its possible to automate away the managers and executives of large firms I think that should be done as well. Its a step toward democracy in the dictatorship work place.

Daniel Pink cited some research showing that people really aren’t that motivated by money that it doesn’t translate into performance etc. That was used as another excuse to try to cut worker pay and bonuses and benefits and be harder on wage negotiations. In the US they paid more for so-called leaders. In MIT Presses the 2nd Machine Age the worst part of the book talks about how revolutionary
MIS allows even small differences in manager/executive ability (whatever that is) to translate into huge gains in the firm and justifies the superstar pay of US managers. Certainly these execs and higher level managers aren’t employees and if you look at the US economy all its done is hollow it out and make it weaker, more brittle and more extractive. Also more likely to collapse. The US has gone back to paying dividends- which are an incredible waste.

The places where profit makes the most sense are in small innovative firms (which can be crowd sourced for start-up) and with visionaries. But again visionaries are not money motivated. Look at Irvine, and Musk and Jobs. Jobs started taking $1 a year and kept it that way. He didn’t give a damn about the stock holders, they never would have got the useless payouts that Cook has given. That could have been ploughed back into R&D. If someone wants a slice of the returns of an innovative firm they need to do more than throw money at it. Gambling isn’t enough, they need to take an active role. We have an inflation biased system, that means there are other means for capital preservation than stock investing and profit to keep money from eroding against inflation. They can go overheat the bond market.

But just to really focus this. What does a visionary do with their money? They focus into their vision an attempt to realize it. That is the maximum return on equity for society and that is the only place that return on equity is really meaningful. Nothing will ever beat that. Even Jack Welch recognized this stuff when he criticized the standing of stakeholders. Incredibly ironically given his matchless record in doing it the wrong way, he recognized they are last place. To me they aren’t even that, after employees society is the stake holder in large organizations.

As for return on equity for people who put their money in a group like SAFE, an open group no less. Well these people are my ideal entrepreneurs. They are visionaries who are actually down in it trying to make the world a better place. That also is maximum societal return on equity and high profit efficiency. But once again the point for these people is not so much profit, they aren’t shallow. If they get profit where is it going? Right back into the next life changing innovative idea. They are activists for everyone’s better future not destructive, extractive rent seekers. There is always this concern in capitalist society that the coercive power of capital will rot, it will degrade and go to waste and we won’t be able to build a bridge when we need to. I don’t have any fear about with the folks associated with Maidsafe at any level. I think Irvine in one post said he would do it or die trying. That’s perfect!

@Traktion , I hear you about land and forced association but after having gone through Capital in the 21st Century I just don’t think that’s supported by the long historical record. My opinion based on the quality of the writing is that the detractors of his data likely have their heads up their asses, I came away with the impression that the man would be constitutionally incapable of lying or skewing or fudging.

So really our capital is rotting and our money isn’t serving us when we have low profit efficiency and that’s in addition to all the added externality costs and risk with money. 1970s Social Democracy Sweden was highly profit efficient and per Wikipedia “The increasingly profit inefficient US economy is the primary reason for its rapid decline as an economic superpower.”

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My view is that land is where the rubber hits the Tarmac. Statism itself relies on land borders and that itself is an extension of private land boundaries.

Without land, we cannot survive. This is why the law of rent is true. It is also why so many people try to become landlords, so that they too can skim from the profits of others.

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If you take it at the lowest level where someone is renting out a former residence and having to keep it up and charging a reasonable rate it doesnt seem so bad. They are providing a service that can help someone get a start. But the banks in some ways are like slum lords. Why dont people pay off houses and live in them generationally? I hope a new homestead is part of decentralization and the IOT model. The generational arrangement builds community, and not being in debt helps put some upward pressure on wages.

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