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The observation is that companies don't do things that lose money. Or if they do, they run out of money and have to stop. There is no "should" here. Just a de
by BurningFrog 3y ago
The observation is that companies don't do things that lose money.
Or if they do, they run out of money and have to stop.
There is no "should" here. Just a description of how the world works.
- fireflash38 3y agoI believe the argument is not that it's negative profit... It's just less profit than other pharmaceuticals. And without knowing the specifics, there can be a lot of value from continuing to produce those sorts of things, if it's within reason. I mean shit they probably spend more on ads saying how great they are than it would cost to actually be great (by saving lives with cheaper meds)
- xyzzy123 3y agoRight, from a private capital perspective, it's a misallocation of resources. If a company can make X% return on capital (researchers, equipment, marketing, regulatory engagement, office space etc) working on communicable diseases, but Y% >> X% doing something else, a responsible steward of somebody else's pile of money is supposed to direct the capital towards Y.
- llamaimperative 3y agoIt’s called opportunity cost, which when inflicted regularly enough and to a great enough degree starts to just look like general incompetence.
- s1artibartfast 3y agoLess profit than anything theoretically, and in practice, less than the US treasury bond rate. If the company is spending $1B/yr for a 1% return in that division, but the return on bonds is 5%, the financial answer is to liquidate, and put the cash in bonds.
- BurningFrog 3y agoOK, I agree with this. My claim was a bit too strong. But I think my general point stands.