Costs

In his book FROM BAUHAUS TO OUR HOUSE Tom Wolfe made an observation that beautiful architecture is not too expensive, it is merely more expensive. It is matter of choices in allocation that decides what our architecture looks like, not economics.

Bankers spend a lot of money to do banking. Doctors spend lot of money to do medicine. Insurance companies spend a lot of money to do insurance, and so on. This does not mean it costs as much as they spend to provide their services, it just means that what they spend, say X, is what it is. Rarely does it costs as much as they spend to achieve their goals. But given what they spend, they of course are obliged to charge to cover the costs of what they spend.

IN a country where the industrial policy is "get big or get out" the subsidies and barriers to entry erected to benefit big business give those businesses the opportunity to spend more than it costs, because there is no real competition to encourage efficiency.

IN all work the payoff is not the paycheck or the profits, but the work. People who collect paychecks are usually unhappy with their work, and thus their lives.

In self-employment, at once the work is satisfying, but the paycheck or profit may be risible, especially at the start. But wait, all allocations are directed to the work, which makes you happy. Profits are not the motivation in business, any more than one forms a company so he can have a photocopy machine.

So what is the role of this stuff we call profits? Drucker called profits "just another business expense." Profits do appear to be a residual, that is "what is leftover after all expenses are paid." And certainly, try as they might, businesspeople do wish to have as wide profits as possible, although knowing full well the more they charge now the earlier they invite competition and the less the duration of the revenue stream for the product.

To a business person, what do profits represent? The opportunity to invest in more and better of what one is doing right now. "Our customers want their computers to cause them to create content" The fastest best source of finance to achieve this goal is profits. the work is the payoff, the profits are no more significant in lie than the computer or the truck. Profits are a means to an end, and of course every bit as abusable as any other means.

In natural law one cannot gain exceptional wealth, because you will only own what you work. On the other hand the arts and sciences would be far more advanced, as they always are in a free market, and charities direct and effective. But the majority always votes down freedom.

Concern for profits at once misunderstands its role, misdirects efforts and malinvests resources. If you wish to be successful, you cannot worry about profits.

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