Sunday, January 12, 2014

Why Profit is Mandatory

I have to snicker every time I overhear some naive 20 something faux-intellectual blather on about about "bad" profit is.

"Profit is evil."
"Profit is bad."
"How dare you profit off of (fill in the blank here)"
"Excessssssss profits"

And the reason I laugh is because saying "profit is bad" is like saying,

"gravity is bad"


"water is bad"


"the laws of physics are bad."

So let us all pour ourselves a very cappy cap drink, saddle in, and enjoy ourselves a much-needed lesson in the concept of "profit.".

When people hear "profit" they usually associate it ONLY with profits that are begotten by businesses.  Corporate profits, Wall Street, 401k's, etc.,  But profit in the literal sense is merely "excess money" or "excess resources."

For example if I start a business and I invest $20,000 in doing so, and that company then generates $30,000 in sales, that excess $10,000 in money is profit.  This is the example we are all familiar with, but this concept can be applied elsewhere.

Say an individual has an option to stay at home on Saturday day.  He isn't going to go to work without having some kind of incentive to work.  So in order for him to get off his butt and work you are going to have to pay him.  You are going to have to pay him an amount of money that is more valuable to him than his leisure.  i.e. - you are going to have to make it profitable for him.

In other words, profit doesn't just apply to just those evil, rich private sector businesses, but EVERY single economic entity in the world.

and yes, even (ironically)

And the reason why is very simple - nothing would get done without the incentive for profit.  None of those economic actors would go into action, labor away, or produce anything without it.

Leftist of a particularly idiotic and idealistic stripe contest otherwise.  They often pine wistfully for a "world without profits."  But simply ask yourself what kind of a world would that be?

Without profits not one single business would be started.  Why would any would-be entrepreneur sacrifice his time, his money, and his labor NOT to make any money?  And with no businesses who, precisely, would be producing all the goods and services you and all those lovey lefties need to survive? (just ask those Venezuelans about toilet paper and electronics).  This goes a long way in explaining why there were lines for simple staples like BREAD in the Soviet Union.

Also without profits why would anybody go to work?  I'm not allowed to keep the fruits of my labor?  Forget the fact no companies are hiring because none exist because profit has been outlawed; people wouldn't show up to the work in the first place if they weren't getting paid.

What about all the suppliers, consultants, energy providers, accountants, lawyers, and other third parties that go into supporting a business?  If they are not allowed to profit why would anybody provide internet access to the company, computers, legal services, etc. if there was no profit?  What the left (and most non-accounting people on the right) fail to realize is that it isn't just the "evil rich business owners" that gets profits, but all his suppliers, vendors, employees, he pays.  In other words ALL of his expenses are other people's profits.

And finally, the favorite den of leftists - government and non-profit.

The ultimate hypocrisy I've ever witnessed of the left is their constant villainization of wealth, money, and profit, but in the same breath their CONSTANT clamoring for more of it.

The public baby-sitters schools are CONSTANTLY begging for more money.
The non-profits are ALWAYS short of cash. 
The universities just need more money for those poor children

but not one of these hypocritical fucks ever live up to their "charitable image" accepting lower pay or (GASP!) actually VOLUNTEERING.

No, I'm terribly sorry, profit is an absolute necessity for this or any other economy to work.  And the only people who advocate otherwise are the types too lazy to expend the 5 minutes of effort to think their ideology through.


Remember to vote for "Bachelor Pad Economics" in Rate Market's "Consumer Choice Awards" (page 2, Category #6)


Anonymous said...

Business without profit is akin to a farmer putting a bushel of seed into the ground, working his ass off all season and harvesting a bushel of grain. It would be totally pointless.

TheTooner said...

No, the point would be to have a bushel of grain to eat. Which is about as good as prospect for life as it sounds, i.e. not good enough. And so begins the search for betterment through growing excess produce to trade for other stuff with people who produce excess of whatever they produce, which leads to the betterment of everyone lives. Until some bright spark realises that what he can most easily produce an excess of is ideas about how other people should live their lives, and he wants you to trade your excess produce for his.

Southern Man said...

My uber-liberal sister and her uber-liberal lesbian "roommate" opened a very chic, very hip coffee shop a few years ago. To my astonishment, it's still open. I was there today (nephew's birthday party) and overheard them earnestly tell friends that their mission was to serve the greatest coffee ever or something like that. I butted in and said "If your primary mission isn't to earn profit for the owners and stakeholders, what you have here is a hobby, not a business." Their sputtering was glorious to behold.

Anonymous said...

The truth is that 3D printing and other self-production technologies will reduce the profit margins and the profit opportunities because people will be able to directly produce for themselves and by themselves without engaging into the market.

So your mandatory profit is something that will have to be rethought.

Captain Capitalism said...

Who produces the 3D pritners and are they incented by profit? Or are they just magically made by the government?

Anonymous said...

More accurately, profit is the net value created by the business. The costs of the business are the value of its inputs, priced at fair market value. The income of the business is the fair market value its customers put on its output. The difference between the value of its inputs (labor, rent, raw materials, etc) and the value of its output (product or service) is PROFIT, or net gain in value.

Example: I rent a factory, hire craftsmen and support staff, buy raw materials, design services, etc all at the going rate, and produce something (say, shoes) that sell for more than my input costs. I created value. Anyone else could have consumed the same inputs at the same prices but I consumed them and produced more. People freely gave me more value for my product than it cost to make - net creation of value.

Profit = creation of value by the enterprixe.

Anonymous said...

"but not one of these hypocritical fucks ever live up to their "charitable image" accepting lower pay or (GASP!) actually VOLUNTEERING."

I'm ready to fight hard, to sacrifice both my life and my afterlife and burn in hell forever in order to destroy capitalism and eliminate the profit motive.

YES gravity is bad, YES the laws of physics are bad. NO I will never accept them !!!

Anonymous said...

"More accurately, profit is the net value created by the business."

You can't have it both ways, Hayek refuted the labor theory of value.

If you claim to be a libertarian then the Austrian school of economics teaches that value is in the eye of the beholder.

It is not the seller that produces value, it is the buyer that values your production.

Under the Austrian school of economics whenever you start a new production of something, no matter how much efforts and wealth you invested in that production, you never know if it will be valued by the market and therefore you are taking risks.

You cannot claim to produce value under this scheme.

Value is what other people are willing to pay for your stuff. Under capitalism you are always a hostage to the market.

It's this logic of having to sell your production and having to buy the production of others that I'd like to break.

If you want to honestly claim that your system is about freedom, then nobody should have to anything.

If it is a mandate to trade through the market then you will have to admit that capitalism is not freedom and that some people are structurally hostages and in bondage because of the profit motive.

For me, it makes no sense that everything must be bought and sold. If we want to end poverty we will have to break this mandate and provide alternatives to the market economy such as producing for yourself and by yourself.

Anonymous said...

"Why would any would-be entrepreneur sacrifice his time, his money, and his labor NOT to make any money?"

Well money is a very expensive way to compensate people. There are possible compensations. Being a musician will give you sex. Some people work for status, so you could compensate them by giving status to them directly (instead of overcomplicating it by giving them money to buy status stuff with). Some people like their jobs, like the uber-liber cafe owners. If all else fails you can put people who wont work in gulag ;)

Anonymous said...

I work day in and day out to create value for my company and they give me income in return for my labor.

I reinvest the excess that I use after my living expenses to become stake holders in other companies whereby in return they pay me their profits which when it reaches in excess of my cost of living I will be able to retire and our capitalist system will take care of me.

I laugh at the University educated idiot drowning in self created debt with no marketable job skills wearing his Che Guevara tee shirt thinking everyone else who figured out things for themselves is evil.

Snap said...

Anon 5:28, how precisely do you propose to do that? In any system, there are haves and have nots. Even in communism/socialism. History proves this. People will always seek to improve their station in life, and there will always be a way to do that for those willing to try.

Pete Brewster said...

I'm sure it's good coffee---they must be doing something right if they're still open. You don't stay in business long providing crappy service unless you're the government or the drinking buddy of the right politicians. And a lot more women ought to be paying their own taxes, not spending men's.

I'd bet my last dime though that they swore up and down they'd never stand for some man telling them to go make them a sandwich!

Green Steelhead said...

Hey, Anon @4:23....The world is going to change again with 3-D printing, isn't it? Just like the old structure of massive factories belching smoke and mass producing widgets died with technology, so are the remaining factories and companies going to change with new technology like 3-D printing.

Still, my Anon friend, you discount how lazy modern man is. Yes, we could print all kinds of cool shit with 3-D printers, but the fact is that people won't. They will find new, lower cost products made by new 3-D printing farms and delivered by Amazon.

The real loser will be the heavily industrialized countries like Mexico, China, India, etc. Their massive plants will go dark as the market shifts to cheaper 3-D made products. That is where things will become unglued as their slaves realize their jobs are dying rapidly. Your communist friends in China won't be too happy.

Of course, you will deny this. I will point to the fact that people have had the opportunity to plant, grow and preserve (can, freeze or dry) their own food for more a century, yet it is a lost art as we consume more prepackaged food and fast food now than ever. We have techniques, methods and equipment to do it quickly and efficiently, but people don't....why?

The bottom line is that people do not take the time, have the talent or don't give a care to actually get their hands dirty. There will always be someone to supply the demand, and the money will change hands. People will be paid for what they know and what they can do. PROFIT...will always exist in one form or another. It will even exist in your socialist or communist utopia (if you survive long enough through the great purges).

But you go right ahead and volunteer with ALL your ALTRUISTIC intentions. At some point, you will need a crumb of someone's PROFIT to quench your thirst (you will die in 3 days without water), put food in your stomach (you will die in 30 days without food) and pay your fucking taxes (the government needs to be paid). Volunteers are not PAID. You'll have some real world problems, comrade.

Rail against profit until your ears bleed....just remember the socialist and communist world is very hard and unforgiving, comrade.

Anonymous said...

Captain Capitalism: "Who produces the 3D printers and are they incented by profit? Or are they just magically made by the government?"

Well, they are produced by other 3D printers, of course! It's turtles all the way down.

Ed said...

@anonymous 5:28. You might can go right on thinking that gravity is bad or the laws of physics are bad - gravity doesn't care. Reality exists, deny it all you want; your denial won't help you levitate.

Max said...

Dear steelhead,

Did you ever read about the concept of comparative advantage? The most valuable resource I have is time and I like to spend it in a way that is wholesome for me. I could plant my own food on some field, but it would take a long time to learn and even more time and energy to maintain. I chose to work a different trade and let someone with a lot more experience and efficiency do it for me. This way both safe time and we are better off in the end.

Anonymous said...


"Reality exists, deny it all you want;"

You have no idea who you're talking to and speaking of reality you can't see the big picture, let alone the complete picture.

I literally will break the laws of reality and bend it to my will. You just wait and see.

I don't like reality and I don't have to accept it.

Tyranny also exists and it is an inseprable part of reality. Yet you libertopians are all ready to fight for freedom to the bitter end.

Think of my fight against reality as a fight against tyranny. It's the same thing.

Reality will be sorry that it messed with me.

Anonymous said...


"Still, my Anon friend, you discount how lazy modern man is."

I'm not lazy, I will 3D print and self produce everthing I want all day long.

There is no profit in that, just me making what I want for myself and by myself.

Anonymous said...


"Their massive plants will go dark as the market shifts to cheaper 3-D made products."

The government will simply seize all factories and retool those factories and retrain their staff to mass produce weapons all day long they and then they will come and pulverize your sorry libertarian ass like it deserves.

Anonymous said...

"I laugh at the University educated idiot drowning in self created debt with no marketable job skills wearing his Che Guevara"

Laugh all you want, those "idiots" have enough skills to handle weapons and it is a certainty that, with your attitude towards them, you will be fighting against them in the future when another capitalist motivated by insane profits will hire them all in his private military.

Comrade Green Steelhead said...

Oh, Anaon, you are right. My bad. You were right all along.

You completely missed my point about food production and preservation (as I predicted), Anon, but that's ok, Brah.

Reality is just a social construct, developed by the Capitalist pigs who feed on the sweat and labor of the masses. Profit? Shit, that is just scamming the people to work harder and longer so the fat cats in charge can buy another house in Tampa/Vail or another SUV. Power to the People, man!

Yeah, I was wrong. The governments can soak up all of the dead industrial buildings, and they will put people to work building buses and trains, Volts and Prius, bombs and tanks. They have unlimited resources since, well, they can print and print and print and print that script.

There is no limit on that credit card, so let's see what that fucker can really do. Mincome, universal insurance, social security, transportation, housing, jobs, clothes, a pot in each kitchen (printed from a 3D printer) and a chicken in each pot. Let's go, man. I am ready to put on my grey jumpsuit and do my Mao stretches in the giant factory before my shift.

During our regulated 15 minute breaks, we can sip some coffee brewed from the magic 3D printer thingee and talk about how much better life is. No stress, no bills, no health issues, no problems, no evil patriarchy or fat cats telling us how to live and consume. We have people who are experts in production, living standards, transportation standards and family/health planning that will worry and take care of that shit. The beauty is: all work for the government and none are looking for a profit. We just need to coexist in harmony and produce what we want.

You are right. That future is bright.

It's all good, man. It is all freaking good.

Anonymous said...

@ Comrade Green Steelhead

Can I get some soma instead of coffee? Thanks.

Anonymous said...

I've worked for a large "non profit" gov't contractor for 20+ years. Non profit my ass; we are all about the money, we just don't have stockholders. We eat it all ourselves. You should see all the Benzes and Beemers and Lexi in the parking decks.

Yes, I'm a whore and yes, we are a huge part of the problem. A few of us understand that we're helping to dig our own graves but it's really, really hard to just walk away from the overflowing feeding trough. My net worth is fighting with my self worth and the former is winning.

Anonymous said...


"The governments ... They have unlimited resources since..."

If I want it, and I do want it, governments will effectively have unlimited ressources.

The market has treated me so harshly, so poorly and with such utter contempt and disdain that I want only the government to benefit from whatever value I can create.

Right now, the number 1 complaint of libertarians, conservatives and capitalists is that governments must tax in order to spend. Everybody hates taxes.

Well it could be worse, the government might actually find a way to spend all it wants without the need of taxing anybody.

When that happens, since nobody will be a taxpayer anymore, nobody will have a say in how the government spends.

Your "reality", your laws of physics and your laws of economics are no match for what's coming.

In a not so distant future, you will have to face a government with unlimited ressources that is no longer limited by the taxpayer's ability to spend.

The final conclusion of this Hegelian dialectics.

We don't live in reality and you don't even know it.

Green Steelhead said...

Anon: You may drink with the Director of Culinary Consumption and Director for Universal Health and Halitosis Reduction determine.

Just remember:

"Work shall set you free" and "ultimate freedom from life comes through slavery".

Welcome to the Brave New World.

Just remember: you never know who is working for The Government Borg....some are closer than you think.

Green Steelhead said...

One more thing, Anon...just remember, "work will set you free".

You should watch this....if you must skip most of it, I would say the last 20 minutes are all you need to see. Your government will always love and care for you.

Anonymous said...

"For example if I start a business and I invest $20,000 in doing so, and that company then generates $30,000 in sales, that excess $10,000 [minus expenses] in money is profit."

Added two helpful words in [].