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Thread: Why a Business Must Be Profitable

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    Lightbulb Why a Business Must Be Profitable

    by Frederick Mann


    Some people are concerned when they find out that we are a profit-making business. Some people even denounce us, because they believe that profit is evil.

    We do our best to provide our customers and the world in general with value. Many of our customers apply the information they purchase from us to save money, to make more money, and to improve their lives in many ways. We believe that the quality of our information is such that most of our customers receive more in value than they pay for our information. We attempt to have win-win transactions with our customers.

    Profits and losses are indications of whether we're doing the right things or not.
    It's how the people in the marketplace tell a business what is needed and wanted, what should be eliminated, what should be expanded, what needs to be improved, etc. Profits and losses constitute important feedback that improves economic efficiency.

    Profits also enable us to grow. If what we're doing is good, then we need to grow so we can do more good. If we don't make profits, then there's something wrong with what we're doing, and we deserve to go out of business.


    Why profits are good and why they work. Some time ago I visited Albuquerque, NM. On the eastern outskirts of the city is the longest cable car in the world. I took the ride to the top of the mountain. As I was going up I wondered: "Why is this cable car here? What useful purpose does it really serve? Why is it possible for people to spend time and money riding up and down the mountain in this cable car? How can they afford it?"

    There’s something very important here to think about. The reason we can do all these things — build and ride in cable cars, go to the movies, play golf, watch football, etc. — that on the face of it don’t seem very productive, is that someone is producing more than they consume. Most fundamentally, profit is the difference between what’s being produced and what’s being consumed — surplus production. Therefore profit is a very noble value. All our buildings, roads, communication systems, computers, and other manifestations of advanced civilization came about because some people produced more than they consumed; they made a profit.

    Another major implication of surplus production or profit is that the economy isn’t a zero-sum game. It’s an expanding pie. So the fact that you make a profit means you’re expanding the pie. Because of this, you can enjoy guilt-free success by producing more than you consume; you don’t have to "steal" success. (See Report #TL13A: The Millionaire's Secret (I), for a detailed description of these things.)

    The following article tells you more about why it's necessary to make profits:


    Make a Profit or Die

    by Harold Porter


    There are LAWS in the universe.

    Some people elect "legislators" to "represent" them in Washington (or somewhere). These "legis-lators" have in that title the two Latin words: legis meaning "law" and lator meaning "proposer." The "laws" they propose are not LAWS; they are the momentary whims of the "proposers" (or the "people"). They are elected to "make laws" and - darn it - they do!

    Twenty-five years ago I became concerned that we were losing our freedoms in the USA as a result of those well-meaning (?) legislators. I began a search to find a country that was free. That search ended with the belief that the USA was one of the freest on Earth. Bad as it is, it's the best available. Following that pitiful search, I became involved with a venture to start a new country. In blissful ignorance, I thought that a beautiful tropical island, good principles, enthusiastic people, grit, determination, and great ethics would create a paradise that couldn't fall. To my consternation, I discovered that the organization of the country included no technique for generating profit. Failure to generate a profit will inevitably result in failure of the organization. Great surprise!

    After that loss of emotion, money, time, friends, and - very nearly - the loss of my life, I began to understand how little I understood about the LAWS of the universe concerning the rise and fall of organizations ... countries included.

    As a generalized principle:


    All Organisms Must Show a Profit - Or Die


    Examples abound. They include all life, from the smallest amoeba to the largest star.

    Entropy is a word physicists use to describe the concept that unrecoverable losses occur in any closed system; that the system "runs down" as time passes. A thermodynamicist uses the "second law" [of thermodynamics] to describe the same phenomenon. The vulgar express the same idea with fewer words on a bumper sticker: "Shit happens." We all know - intuitively - that things need lubrication, paint, maintenance, and replacement or they will fray, deteriorate, wear out, or plain "break." This is a LAW.

    Where does one get the resources for maintenance? If a system simply "breaks even," there is no available source for counteracting entropy. Only if one creates more than that which is necessary to "function" - a "profit" - are there assets which can be used for upkeep.

    Yet some people see "profits" as evil. Ants - yes, I mean the little buggers in the garden - know enough to produce profits. Yet people occasionally, and mistakenly, think that profits are an unnecessary function, and are somehow sinister.

    Whales and sea lions store fat. Potato plants produce tubers. Grasses make rhizomes, dogs bury bones, squirrels cache nuts, woodpeckers store seeds, ... Yet humans are so "smart" they make claims to the contrary. In all of life, profit yields success and failure to make a profit results in death.

    John Scarne wrote "The Bible" on gambling. In it he spends a lot of time telling people that "the house" is going to win because they've stacked the odds in their favor. Scarne spends many pages showing "the uninitiated" that even if the odds were "even," you still wouldn't win because your "bank" is so much smaller than that of the casino. His point is that strings-of-losses occur and when you can't cover the losses you leave the table with less money than you had when you arrived. Good point! You must show a profit!

    In business, the difference between phenomenal success and dismal failure is often tiny. As a percentage, it is almost always less than ten percent, and is regularly less than five percent. There are charlatans who say things like: "General Motors made two-hundred-million dollars last year. They can afford to give us a 7% raise." These people don't understand that one year of profit means little to the life or death of an organization. They don't understand that the profit-ratio (= 0.002 in this hypothetical case) is so tiny that the organism could die with the first tiny fluctuation of the market.

    Some years ago NASA asked the question, "We can usually recognize life on Earth. How would we recognize life on another world?" The most reliable answer was: "Look for something that has processes running in the opposite direction of entropy."

    Among humans, the exceptions to the principle are almost always non-voluntary. States support themselves by theft. Religious organizations usually support themselves by threats, often hidden as "you won't get into heaven" or some such.

    Most organizations find some technique for producing value and selling it at a profit; even the Sierra Club has found that it cannot live solely upon "mooch"ing; it makes money from selling calendars and other items - at a profit.


    Source:
    BuildFreedom.com

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    Reading a lot of the literature he has sent me it tends to be extreme capitalism- people who don't believe in paying taxes and so forth.

    Here's the thing I've worked for a lot of these people. They worship wealth. To the point that they destroy it. There are things more important than profit- like honor. In the long term an honorable company will make more profit. The West is over concerned with short term profits. You can cut corners and cheat people and make short term profits. You also must look at your relationships with others which are important. I don't think you should worship profit above all else:

    *honor- deal honestly with others- have a good reputation. Most modern companies try to act like a-holes then advertise their way to having a good name. But at least they realize the value of a good name- this is brand loyalty. Deliver quality and it pays. But also have a good reputation with employees other businesses etc. This is often missing in business today
    * Relationships: build lifelong relationships with customers and employees and always treat the people right who helped you get there- your family, friends etc.
    * Profit: of course seek profit, though many companies lose money the first few years, but you build up a repuatation, relationships, business contacts and buzz about your product/store.

    Here's the problem too many people look only at profit. And I think looking at life as a business I don't agree with it really. We all must be productive to survive. 'profit' kind of entails that semetic, trader, carpet baggar mentallity of commerse. We can be productive without being 'profitable' such as producing things ourselves.

    The obsession with profit is why disgruntled employees are coming back and shooting up buildings or ramming planes into them. You can't destroy lives, lie, cheat, and steal your way to maximum profit. You have to balance that with an honorable lifestyle that considers the human element of life.
    “success and survival are above all the rule of life. As such it is the highest command of moral law” –Lord Livwell (me)

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    Well my wife's family has a moderate size business.Most of the workers are family members who have married into the family like myself.The men,or the Spess men who control the business are very profit driven.They have to be.
    They want everyone to eat and have a warm place to sleep every night.
    If you live in America you almost worship the one who feeds you.We all know the alternative situation we my find ourselves in if it weren't for "Profit Driven Individuals",Homelessness.It is rampant in the states.There is nothing worse then finding ones self crashing under a 30 million dollar bridge.It sucks and I know from experience.I thought when I was younger that there was a land of milk and honey where you could lay around all day,listen to music and smoke pot.
    Greed is a disease in America and I am sure it is to in Europe.As long as you have money you will have greed.It is like yin and yang.I don't know how you could ever eliminate greed.Greed is whats taking our jobs away in America and placing them in India,Mexico and China.It makes me upset that 65 years ago we financed China and most of the world in a war against Japan and others.Now,in 2010 we are in debt to China to the sum of trillions of dollars.
    Somebody please explain this to me.It is like we are being destroyed from the inside out.Until Americans get a back bone and really stand up to corruption,life will only get worse and we will see history repeat itself.

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    Quote Originally Posted by Ahnenerbe View Post
    We do our best to provide our customers and the world in general with value. Many of our customers apply the information they purchase from us to save money, to make more money, and to improve their lives in many ways. We believe that the quality of our information is such that most of our customers receive more in value than they pay for our information. We attempt to have win-win transactions with our customers.
    Information is not property, and therefore generation of profits off of information is not only immoral but unjustified. Information can be replicated with no mental or physical labor and likewise it is not even useful until it is interpreted by a person. Moreover, once it is passed along to another being there is literally no restricting it. Ideas can go from being to being and therefore are owned by all.

    Furthermore, why restrict information at all? It is reminiscent of the Dark Ages in which the church sought to keep information being open and free to all. By restricting access of information you restrict the advancement of our folk.

    Profits and losses are indications of whether we're doing the right things or not. [/B]It's how the people in the marketplace tell a business what is needed and wanted, what should be eliminated, what should be expanded, what needs to be improved, etc. Profits and losses constitute important feedback that improves economic efficiency.
    Not at all. Growth is not at all equatable with "doing the right things or not". Ever heard of monopoly? Goldman-Sachs is the biggest bank in the world, I would definitely not say they are doing the "right thing". Oil Corporations are also generally very profitable yet are completely corrupt. This guy speaks like a true libertarian, "The magic of the market" works everything out; this fallacy is only real in the minds of a select few libertarians thankfully.


    Profits also enable us to grow. If what we're doing is good, then we need to grow so we can do more good. If we don't make profits, then there's something wrong with what we're doing, and we deserve to go out of business.
    Wrong. As said before, growth and profits has nothing to do with whether something good is going on. Likewise growth is not always a good thing, even more so if what you're doing is not good to begin with.


    Why profits are good and why they work. Some time ago I visited Albuquerque, NM. On the eastern outskirts of the city is the longest cable car in the world. I took the ride to the top of the mountain. As I was going up I wondered: "Why is this cable car here? What useful purpose does it really serve? Why is it possible for people to spend time and money riding up and down the mountain in this cable car? How can they afford it?"
    It is there because someone had a good idea to put it there, and invented a cable car. It is there because countless workers toiled mentally and physically to get it there.

    There’s something very important here to think about. The reason we can do all these things — build and ride in cable cars, go to the movies, play golf, watch football, etc. — that on the face of it don’t seem very productive, is that someone is producing more than they consume. Most fundamentally, profit is the difference between what’s being produced and what’s being consumed — surplus production. Therefore profit is a very noble value. All our buildings, roads, communication systems, computers, and other manifestations of advanced civilization came about because some people produced more than they consumed; they made a profit.
    Profit is not a noble value. Profit implies an unequal and unfair exchange. Producing more than you consume is called surplus value and profit is the portion of the surplus value produced by the workers that goes to the owner of capital (capitalist) for personal gain. Part of the surplus value goes to the owner of capital so he may go and expand his ownership of capital on a competitive market and part goes to his personal gain, THAT is correctly defined as profit.

    Another major implication of surplus production or profit is that the economy isn’t a zero-sum game. It’s an expanding pie. So the fact that you make a profit means you’re expanding the pie. Because of this, you can enjoy guilt-free success by producing more than you consume; you don’t have to "steal" success. (See Report #TL13A: The Millionaire's Secret (I), for a detailed description of these things.)
    Wrong. Because profit isn't generated by owning anything, profit is only generated by workers who put capital to use. Workers produce, owners decide what to do with what the worker's produce, and of course it is in their interest to give some of what the worker produces back to him so he comes back the next day and generates more profit. That is called wages.

    I won't take the time to reply to the entire spiel, but most of it seems just a huge justification for Libertarianism and the Free Market. The Free Market and search for profit has brought more ruin to the west than any other "ideology". This article by Frederick Mann totally ignores how profit is generated and its source. Typical of free market apologists. Likewise, companies are only required to grow in a competitive market. It is like a big race to see who can own more capital and thus generate more profits through the hiring of workers to work their capital.

    You might say "but competition is how we get better products!". To say that the ONLY reason we are where we are today is because someone was interested in making a quick buck is an insult to our folk if you ask me. Our folk is naturally creative and creates for pleasure, for the good of one another, to see their creations come to life; NOT so we can drive a sports car while our neighbor drives a sedan.

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