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It is possible to create value and not profit. Economic value exceeds or matches market value. Market value drives revenue. Profit is a function of revenue and
by generated 8y ago
It is possible to create value and not profit.
Economic value exceeds or matches market value. Market value drives revenue. Profit is a function of revenue and cost.
These are well defined terms; please be careful saying things like "If they aren't making a profit they aren't creating value." It detracts from your otherwise strong argument.
If that line were true, non-profit organizations wouldn't exist.
- roenxi 8y agoNow that you have pointed it is obvious that, say, a non profit can create value without creating a profit or that there might be externalities. But we aren't really talking about that sort of concern here, we are talking about for-profit companies that aren't doing research and any externalities are tenuous. It is completely unreasonable to say that such a company could be creating value. They are clearly a wealth transfer mechanism from who-knows-where to consumers. It doesn't make sense if it isn't malinvestment. People love to pull out hypothetical externalities to justify things they like that just aren't worth doing; they aren't going to justify running a corporation at a loss.