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But what even happens to profit? It disappears from the cycle. The value created is lost because it’s no longer used to improve the firm that created the value.

But what even happens to profit? It disappears from the cycle. The value created is lost because it’s no longer used to improve the firm that created the value. It’s redistributed to various yacht companies and the like. Additionally the profit incentive is in direct conflict with the productivity goal, as additional profit may not arise as a result of additional productivity, given the cost of pursuit. And while yes, big tech firms may have pursued growth, correctly so, many existing firms did not, and I didn’t think we were limiting our discussion to the tech industry, and we can be sure those tech firms have since shifted gears.

Jensson 3y ago
> But what even happens to profit? It gets invested into companies that doesn't make profit yet. Where did you think investment capital comes from? So profits is the company paying it forward, the company lived off investments at the start and later pay that forward in the form of profits to build new companies via investments. > It’s redistributed to various yacht companies and the like. Only a tiny part of profits goes to luxury consumption, rich people generally don't consume a lot relative to how much they have, otherwise they wouldn't continue to get richer.
- redcobra762 3y ago
  Profits don’t pay interest, interest payments are expenses, and those payments can be what goes into new firms as funding. An entrepreneur provides a resource, I wouldn’t deny that, but every other resource has a price. Why does entrepreneurial effort get to be uncapped? Shouldn’t it have a price too, a specific value, tied to what it gives a business?
  - Jensson 3y ago
    Investment capital isn't a loan, it is a profit sharing agreement so you don't pay interest, you pay dividends to them when you make profits. Nobody loans money to risky startups, that sort of agreement isn't a good fit for risky ventures since the risk is high and the payout is low. Profit sharing is how they can get money to start making profits.
    - redcobra762 3y ago
      But it is a loan; you get funds up front, with an agreement of payment later. In a broad sense that is the very definition of a loan. The problem here is the agreement is uncapped, leading to things like a preference for additional profits over additional productivity.
      - Jensson 3y ago
        > But it is a loan; you get funds up front, with an agreement of payment later. In a broad sense that is the very definition of a loan. No, you don't promise to pay anything back, you promise to give them a share of the profits, no profits means you don't have to pay anything. When you take a loan you promise to pay it back, profit sharing doesn't come with such a promise. > The problem here is the agreement is uncapped, leading to things like a preference for additional profits over additional productivity. It is uncapped because otherwise nobody would give you any money. If you want peoples money you need to give them a good reason to give it to you, and sharing a fraction of the profits you make is the only thing you can give them to make it worth it to them to give you money. If you have a very stable business idea with no risks, then some people would be willing to give you a loan. But that doesn't cover most startups. Instead you have to sell a share of your profits.
        deleted 3y ago
        [deleted]
        redcobra762 3y ago
        Firstly, you just keep describing a loan and then demanding it’s not a loan. A distinction without a difference. Secondly, people take out loans all the time for small businesses. Thirdly, whatever you want to call it is not a boolean endeavor; investment wouldn’t drop to zero if a limit to profits were introduced, it would drop proportionately to the cap. The question was how to spur productivity growth, and I think an answer involves looking at the conflicting nature of profit motives. I don’t know what the answer is, but I think looking there will be more fruitful than blaming technology, based on my limited exposure to classical economics.
robertlagrant 3y ago
> The value created is lost because it’s no longer used to improve the firm that created the value. It’s redistributed to various yacht companies and the like. It's not "redistributed". There aren't parental figures just apportioning money as they see fit. People are spending money on what they find valuable. Partly that's on the firm. Partly that's on salaries, particularly in places where creating competitors is easy and the incentives are good for people to want to take that risk. Partly on maintenance and the like. Then a chunk of the next lot must be given to the government or directors will be locked in jail. Finally, out of what's left, comes the money you're talking about. That can be reinvested, or pulled out. It doesn't "disappear".
- redcobra762 3y ago
  It disappears from the industry that created the value, the industry arguably best poised to increase productivity, was my point. Yachts and fancy cars are part of the economy too, but they’re not the best place for resources to go if you want to increase innovation and productivity.
  - robertlagrant 3y ago
    Yes they are. Things are often invented in fancy cars that get market-tested (at the rich customer's expense) and ones that are popular come to the mass market once the kinks have been ironed out. Also, people who work on yachts buy cars.
    - redcobra762 3y ago
      Yachts and fancy cares are the best industry in the world for resources to go in order to maximally spur overall economic innovation and productivity?
      - robertlagrant 3y ago
        > Yachts and fancy cares are the best industry in the world for resources to go You're doing a trick of pretending that an example that's been successfully countered wasn't just an example, but the only thing in question. Obviously CEOs spend on various things, as do we all. > in order to maximally spur overall economic innovation and productivity If I buy a Mars Bar I'm not putting my money into what's going to maximally spur overall economic innovation and productivity. You're creating a ludicrously high bar for their spending, that you're now pretending is all on yachts and cars, to clear - one which most people's spending also wouldn't clear, if we even knew what would clear it.

Jensson 3y ago

> But what even happens to profit? It gets invested into companies that doesn't make profit yet. Where did you think investment capital comes from? So profits is the company paying it forward, the company lived off investments at the start and later pay that forward in the form of profits to build new companies via investments. > It’s redistributed to various yacht companies and the like. Only a tiny part of profits goes to luxury consumption, rich people generally don't consume a lot relative to how much they have, otherwise they wouldn't continue to get richer.

redcobra762 3y ago
Profits don’t pay interest, interest payments are expenses, and those payments can be what goes into new firms as funding. An entrepreneur provides a resource, I wouldn’t deny that, but every other resource has a price. Why does entrepreneurial effort get to be uncapped? Shouldn’t it have a price too, a specific value, tied to what it gives a business?
- Jensson 3y ago
  Investment capital isn't a loan, it is a profit sharing agreement so you don't pay interest, you pay dividends to them when you make profits. Nobody loans money to risky startups, that sort of agreement isn't a good fit for risky ventures since the risk is high and the payout is low. Profit sharing is how they can get money to start making profits.
  - redcobra762 3y ago
    But it is a loan; you get funds up front, with an agreement of payment later. In a broad sense that is the very definition of a loan. The problem here is the agreement is uncapped, leading to things like a preference for additional profits over additional productivity.
    - Jensson 3y ago
      > But it is a loan; you get funds up front, with an agreement of payment later. In a broad sense that is the very definition of a loan. No, you don't promise to pay anything back, you promise to give them a share of the profits, no profits means you don't have to pay anything. When you take a loan you promise to pay it back, profit sharing doesn't come with such a promise. > The problem here is the agreement is uncapped, leading to things like a preference for additional profits over additional productivity. It is uncapped because otherwise nobody would give you any money. If you want peoples money you need to give them a good reason to give it to you, and sharing a fraction of the profits you make is the only thing you can give them to make it worth it to them to give you money. If you have a very stable business idea with no risks, then some people would be willing to give you a loan. But that doesn't cover most startups. Instead you have to sell a share of your profits.
      - deleted 3y ago
        [deleted]
      - redcobra762 3y ago
        Firstly, you just keep describing a loan and then demanding it’s not a loan. A distinction without a difference. Secondly, people take out loans all the time for small businesses. Thirdly, whatever you want to call it is not a boolean endeavor; investment wouldn’t drop to zero if a limit to profits were introduced, it would drop proportionately to the cap. The question was how to spur productivity growth, and I think an answer involves looking at the conflicting nature of profit motives. I don’t know what the answer is, but I think looking there will be more fruitful than blaming technology, based on my limited exposure to classical economics.

robertlagrant 3y ago

> The value created is lost because it’s no longer used to improve the firm that created the value. It’s redistributed to various yacht companies and the like. It's not "redistributed". There aren't parental figures just apportioning money as they see fit. People are spending money on what they find valuable. Partly that's on the firm. Partly that's on salaries, particularly in places where creating competitors is easy and the incentives are good for people to want to take that risk. Partly on maintenance and the like. Then a chunk of the next lot must be given to the government or directors will be locked in jail. Finally, out of what's left, comes the money you're talking about. That can be reinvested, or pulled out. It doesn't "disappear".

redcobra762 3y ago
It disappears from the industry that created the value, the industry arguably best poised to increase productivity, was my point. Yachts and fancy cars are part of the economy too, but they’re not the best place for resources to go if you want to increase innovation and productivity.
- robertlagrant 3y ago
  Yes they are. Things are often invented in fancy cars that get market-tested (at the rich customer's expense) and ones that are popular come to the mass market once the kinks have been ironed out. Also, people who work on yachts buy cars.
  - redcobra762 3y ago
    Yachts and fancy cares are the best industry in the world for resources to go in order to maximally spur overall economic innovation and productivity?
    - robertlagrant 3y ago
      > Yachts and fancy cares are the best industry in the world for resources to go You're doing a trick of pretending that an example that's been successfully countered wasn't just an example, but the only thing in question. Obviously CEOs spend on various things, as do we all. > in order to maximally spur overall economic innovation and productivity If I buy a Mars Bar I'm not putting my money into what's going to maximally spur overall economic innovation and productivity. You're creating a ludicrously high bar for their spending, that you're now pretending is all on yachts and cars, to clear - one which most people's spending also wouldn't clear, if we even knew what would clear it.