mattiasNYC said:
JohnRoberts said:
I believe a successful brand/company involves a lot more than just assembling some raw material into a serviceable garment. There is good will and intellectual property (called property because it is) associated with the SKUs that affect desirability to customers. Then there is marketing/merchandising and a slew of other overhead costs that must be funded for the business to afford to continue.
Yes, but back when I studied finance we called "profit" what was left after deducting all costs from revenue. That's really the basics of it. What you point out above is just what constitutes costs. We don't need to delve into accounting deeply to understand the point I'm making. Re-read what I wrote if it was unclear.
Not to get too far off into the weeds, and I never studied finance besides the school of hard knocks, profit is good but cash flow is king, and lack of it can kill a business. I was president of a company back in the '80s that was growing at 50% annually making a 5-10% profit margin, with slow paying dealers who dragged their feet for months before paying invoices. So we would have the buy the raw components, assemble them into products, sell them, ship them, then wait several months to be paid. We were too small to go public and we had tapped out our personal credit lines. So not to confuse the issue you need more than profit on paper, you need adequate working capital if you don't have quick enough sales turns to generate adequate cash flow from operations. We were profitable and growing, but so cash poor we had trouble buying parts.
JohnRoberts said:
Finally the investors who funded starting up the business, and providing working capital, deserve some return on their investment or why would anybody ever invest?
That's obviously true in a capitalist system. But the way I see it our discussion moves between what is and what ought to be, between technicalities of the capitalist system and the "value" of various traits of it. But if you have other non-capitalist systems, then by definition you don't need an owning class that invests capital in order to create wealth. What you need - and this has been true through the history of mankind - are labour and resources. Labour and resources exist regardless of whether the system chosen is capitalism or socialism or anarchim or whatever....
yes, arguably when they built the pyramids using forced (I assume) labor they created wealth. The compelling virtue of capitalism IMO is that the profit motive fuels, innovation, growth, and competition. This competition affords consumers more choices and better prices.
The government monopoly post office made sense years ago when it was not cost effective to deliver mail to remote parts of the country. This was an important and useful infrastructure that helped business communicate in the last century. But this monopoly did not foster competition and efficiency so without too much effort private package companies were able to do better and cheaper, while still making a healthy profit for themselves.
JohnRoberts said:
Where can I make 10% on 10,000? I really would like to know. As I mentioned most bonds, CDs, and safe interest paying accounts are paying low single digit interest. Higher yields come with much higher risk, which is why they are called Junk bonds.
Yeah, but my point was simply that the playing field isn't level. The above doesn't disprove that.
Level means level or equal opportunity to advance. Many modern business success stories (like the facebook guy) made his fortune from a good idea, and good execution not some advantage from a huge pile of inherited wealth. He did have a number of people willing to invest in his "good" idea early on, but it was not a sure thing back then, or now, while he seems to keep executing well.
Note: I was approached by some investment bankers back in the '80s willing to provide working capital for our fast growing company in return for an ownership share. While I was more than willing to end up with a smaller fraction of a going concern than a large fraction of nothing, my partners did not share my willingness to dilute their ownership. I resigned and sold them my share in trade for finished goods that I could resell. In hindsight I did much better than they did, since they ended up bankrupt a few years later, but i will never get those 3 years back, and regret the missed opportunity.
JohnRoberts said:
You are confusing the product of labor, and products of intellectual work... I have 9 patents, a few of which have made a bunch of money for the company I assigned them to as work for hire. I do not begrudge them that profit, since they invested in me by paying me a decent salary and providing me with support. My job was to solve problems and I did OK.
IP like a patent can create more wealth even after the labor involved has been finished.
Another thing you (should) learn early on, if you take a shovel and dig a ditch by yourself you can only dig a small hole. If you hire a team of men with shovels you can make a bigger hole faster, and finally if you buy or rent a power back hoe you can make a big hole quickly. Any smart business type learns to multiply his or her productive output by using employees and/or technology. Mass production is all about multiplying individual productive output beyond the capability of simple 1x labor.
I'm not confusing things actually. What you say above I'm well aware of. Again you seem to be talking about how things work while missing my point. My point was exactly what you said above which was that the incentive is to benefit from the work of other people. To me it doesn't matter much if it's the slacker wanting a government handout or if it's the wealthy person benefitting from the labour of others.
Intellectual work such as the work you describe above should be rewarded exactly the way it was to you - by a salary. You did work when you came up with that intellectual "property". After you had invented or improved whatever that was your work was done. Suppose I invent a new technology for making TV screens. Once it's invented, if I do nothing else, I do nothing else (duh) - I am no longer working. My opinion is that we should get rewarded for our labour, not for our NOT working. You SAY the same thing when you talk about "slackers", but say the opposite when talking about ownership (albeit using different terminology).
The patent system provides a fixed term monopoly or exclusive use for protected inventions. This patent protection has value beyond typical engineering effort. Compensation for creating this extra value is a matter of possible negotiation between the inventor and employer but without any specific agreement inventions that are inspired by work projects (like mine were) and supported by the employer (they paid for all the legal expenses) should be work for hire. Inventions not related to work projects is a gray area. I negotiated a fairly long list of previous ideas with my employer that I retained ownership of. (Ideas are cheap tho.)
JohnRoberts said:
But again; the capitalist system is based on government force as well.
Capitalism requires rule of law and government force to protect property rights.
Exactly. This is why you in my opinion shouldn't use the argument of "force" the way you do.
Government force routinely protects private property. Who do you think stops pirates and the like from stealing even more booty. It is one of the primary tasks of government. IMO
JR
