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> 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

> 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.
        Jensson 3y ago
        > Firstly, you just keep describing a loan and then demanding it’s not a loan Selling a part of your future profits is not a loan. That is your made up definition. It is impossible to discuss with you if you change the meaning of words like this to suit your own views.

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.
      - Jensson 3y ago
        > Firstly, you just keep describing a loan and then demanding it’s not a loan Selling a part of your future profits is not a loan. That is your made up definition. It is impossible to discuss with you if you change the meaning of words like this to suit your own views.