3 ms·
Profitability is the one objective measure we can use to tell whether a company (or even people) are generating value. Everything else is subjective and genera
by xyzelement 4y ago
Profitability is the one objective measure we can use to tell whether a company (or even people) are generating value.
Everything else is subjective and generally leads to decay.
- brookst 4y agoDisagree. Profitability is a trailing indicator. That objective measure would say to cut all R&D. And there are plenty of objective measures: gross margin, EBITDA, ROA, ROE, lots more. And those are just financial measures! Installed base, CLV, NPS, there are many many objective measures.
- jeffreyrogers 4y agoIf you assume markets are roughly efficient then eliminating all R&D would cause stock prices to tank (assuming R&D is important to the long-term success of the business). I think many people on HN are biased against business concerns (as opposed to technology ones) and wrongly think they could run a business better than they really could.
- layer8 4y agoProfitability does not imply that any value is being generated beyond the profit, in particular when you factor in all the externalities. Conversely, generating value also doesn’t imply that the enterprise will be profitable. The correlation is rather limited. The art is finding a way to both generate actual value and also be profitable.