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In this Discussion
- 1234 July 2011
- Death July 2011
- ed_chigliak July 2011
- flossy_log_lady July 2011
- Leland September 2011
- lml__0_0__lml July 2011
- Loose_Thread July 2011
- ManInTheIvoryTower July 2011
- Matthew July 2011
- MirandaJuly July 2011
- YoursTruly July 2011
Can someone explain
in layman's terms
why companies have to keep increasing their profit margins to remain viable as companies? I know there's probably some super basic economics involved that I'm unaware of, but I just don't understand why after say... a company makes 10 million in profits in a year...why then does a company have to push so hard to make 11 the following year even in rough economic times? If the economy is doing badly doesn't this just inevitably mean screwing the little guy? Why can't that same company make do with making 8 million in profits for a couple of years and keeping the workers that they have? Is there just a lack of patience in the business world? Are markets not built to wait for growth? Do markets just give up on a company that is not growing therefore screwing the company further? Is it just corruption? I just keep hearing at various jobs I've had, and on the news, and other places that companies need to keep growing to remain viable and it sorta sounds like a crock of shit, but maybe it isn't? Money and markets are just very weird to me because it is all just 100% abstract and sorta made up essentially...right? Like math and infinity? Just something a bunch of people agreed on for a system that helps explain things.
why companies have to keep increasing their profit margins to remain viable as companies? I know there's probably some super basic economics involved that I'm unaware of, but I just don't understand why after say... a company makes 10 million in profits in a year...why then does a company have to push so hard to make 11 the following year even in rough economic times? If the economy is doing badly doesn't this just inevitably mean screwing the little guy? Why can't that same company make do with making 8 million in profits for a couple of years and keeping the workers that they have? Is there just a lack of patience in the business world? Are markets not built to wait for growth? Do markets just give up on a company that is not growing therefore screwing the company further? Is it just corruption? I just keep hearing at various jobs I've had, and on the news, and other places that companies need to keep growing to remain viable and it sorta sounds like a crock of shit, but maybe it isn't? Money and markets are just very weird to me because it is all just 100% abstract and sorta made up essentially...right? Like math and infinity? Just something a bunch of people agreed on for a system that helps explain things.
Comments
I have no idea what I'm talking about, but yeah, my sense is that it's just a system a bunch of people agreed on.
Late capitalism is surreal and a bummer. It will be interesting when it collapses--what will be next? Probably something even worse.
Let's say I go public and sell 100 shares of myself. My shares sell for $1 a share. People buy them because I am worth more than $100, so $1 a share is a bargain. In a few years the price is $8 a share and growing because I keep making more and more money.
But then, I make the same amount of money as I did last year. Fewer people buy the stock and so it stays at $8. No big deal right?
Well, if they had invested in another company, then they could have turned their $8 into $9. So they start selling shares in me in order to invest elsewhere. Now there are more sellers than buyers and the price drops. And drops. And drops. Now my shares are only worth $0.20 and another company says, 'Hey, he's still making money..." And they buy all 100 shares of me and I now no longer exist.
If you aren't growing you are dying.
if someone buys all the stock of your company
then they are in charge
thing.
Is that what "going public" essentially means? That is the risk involved? Why wouldn't buying all the stock of a company be limited to a big show of confidence? If the company screws up then you sell that stock. Why is power in the company involved?
i.e. if Mike was public and I bought all of KmikeyM's stock and told him that he had to walk around in his underwear whilst painted up as a clown to "increase profits" he would most likely, politely, tell me to get fucked.
Why don't things work that way? They should.
Am I misunderstanding something?
You can't actually be a company, you just make them to separate your personal self from your business endeavors. There are a lot of laws that make it impossible to incorporate as a person that exist because it would be a great way to avoid paying taxes.
Also a great way to dump toxics in the water.
Mikey should like it. It is about an honorable Republican.
Also, I've probably said it too frequently here over the years, but I really think folks should follow Paul Krugman's blog. It is full of excellent economics lessons like this mea culpa from Brad Delong.
Basically the political economy stuff that has been happening since about 2004 is pretty much completely different than anything in the last seventy-five years or so.
After the Big Depression in the 1930's a lot of banking and investment rules were drawn up, basically to keep financial professionals from dealing in make-believe money. From about 1980 to the present, those rules were taken apart and make-believe money started flooding into banks and stock markets around the world. (That's what the Sheila Bair piece is about). The crash in 2008 was about all the largest bankers in the world realizing that, "Hey wait a minute... A whole lot of our money is make-believe! What are we gonna do?"
Fortunately for them, the US government decided to say, "That's okay guys, as long as you don't make any more make-beleive money, we'll pretend that all your money is real." That's kind of calmed things down for a minute. But the scary thing is that the government (with Obama in charge) has decided to go forward without reinstating the rules that more or less kept the financial industry out of make-believe money from 1935 - 2005.
The other sad thing is that financiers and governments are now saying, "Hey, our money got pretty crazy there for a minute! We better just slow down and take it easy for a while and cut back on spending." They are basically letting all the rich folks keep their make-believe money while cutting back on putting money into regular folks' hands, either through jobs or services like medical care.
Governments are being really mean to their own people right now in a way that hasn't happened since like our great-grandparent's time.
Just sayin'.
There are two different kinds of make-believe. The kind where a group of people share a set of rules, occasionally changing them with the consent of the participants (theater arts, Dungeons & Dragons, democracy). And then there's the kind where any individual gets to make up whatever shit comes into their mind as they go along (Laissez-faire capitalism, Calvin-ball, MMA).
Krugman is pondering this whole money thing too: http://krugman.blogs.nytimes.com/2011/07/11/monetary-rage/
http://www.dvorakgame.co.uk/index.php/Rules
I guess this is from the BBC Tuesday morning. We miss the question from the host which must be something like, "What do you think of the rescue plan for the Greek economy and the Eurozone generally?"