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Situation A: Person makes $100K a year for 40 years. Situation B: Person makes $4M in year 1. Assuming 0% inflation etc, how is situation B a failure?
by throwaway22032 3y ago
Situation A:
Person makes $100K a year for 40 years.
Situation B:
Person makes $4M in year 1.
Assuming 0% inflation etc, how is situation B a failure?
- mynegation 3y ago> Assuming 0% inflation This is very unrealistic assumption. Also, even in zero inflation, time value of money is non-zero.
- deleted 3y ago[deleted]
- Goronmon 3y agoSituation B is a failure because private equity buys your company and expects $4m a year for 40 years.
- jfengel 3y agoConsidered in terms of the overall economy, it's a "failure" in that a smooth economy is better than one that progresses in fits and starts. A company that provides jobs over many years (even with employees changing over time) is more helpful in keeping people employed and productive than one that comes in, makes a bunch of cash, and departs. It's also better as a way to smoothly expand the economy. An existing company can do research and development more easily than a brand new one. The overhead of starting a new company is a net drain on the economy. Not every company is going to be like that. Some really will do best by doing one thing and disappearing. Even if it does, it's not a "failure" from all perspectives. But there are ways to look at it where there were better outcomes, and it "fails" relative to that.