5 ms·

This is overly simplistic. I don’t fault you for it, but it shows a lack of understanding how a business functions. There is a lot of overhead that goes into r

by Nemi 2y ago

This is overly simplistic. I don’t fault you for it, but it shows a lack of understanding how a business functions. There is a lot of overhead that goes into running a business, as others have mentioned. Taxes. Rent. Utilities. Licenses. Certifications. HR, testers, project managers, product managers, people managers, directors, marketing, customer service, sales, C suite, and on and on. I know right now you might be saying “those people don’t even do anything! Developers are the only people making the damn product!”. Again, a business is kind of like a product of its own. It takes many moving parts to take a usable product and get it to market, fight off competition, work with government for regulations (or keep from getting regulated), find and get customers, etc. Once you try and “go it alone” you will realize that creating the product is only one small part of making a functional and profitable business. I run a small business. I don’t use half of those roles I mentioned and there is still a lot of overhead. It is very easy to underestimate the amount of extra work involved.

ever1337 2y ago
And yet you still turn a profit at the end of the day, i.e., money that's not going to 'overhead'. Let's not kid ourselves. Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit.
- Nemi 2y ago
  As it should be. I am not begrudging anyone of that. As a matter of fact, I often mentor employees on treating their career as a business, and build it accordingly. Just like a strong business, you should be selling your services for as much as reasonable, and if your employer is not paying the appropriate price then find another “buyer”. To maximize the price you can sell your ‘product’ (you), you should be making career decisions that strengthen your offering. This can be taken too far (those that only look for promotions at the expense of real work), but it can be done ethically very easily.
  - h2zizzle 2y ago
    >As it should be. No, this is just the (insane) status quo. Ideally, however, businesses exist to carry out a mission (beyond making money). Part of this mission is supporting the livelihoods of employees; part of it is giving a return to investors; part of should be some social net good (maybe within a larger societal context, if not unilaterally). Much as "maximizing" the price at which you sell yourself (ick) often ends in workaholism, broken personal relationships, unhealthy relationships to material goods, and a generally deleterious existence as the opposite of a happy, upstanding, and well-loved member of society, "maximizing shareholder value" usually ends in a business that is either a hated monopoly or a bankrupt shell (often both, in that order). In both cases, hyperfocus has lead to the loss of the entire reason for pursuing the venture in the first place. Profit is just a KPI for something else that you're supposed to be doing (and often a bad one, depending on what that something else is).
    - SR2Z 2y ago
      > Ideally, however, businesses exist to carry out a mission (beyond making money). I mean, sure, but the defining difference between a business and a nonprofit is making money. It's important for companies to provide value to society but the way we measure that is by how much they earn. Despite several hundred years of people trying to come up with better ways to do this, this is the only one that seems to work.
      - h2zizzle 2y ago
        Non-profit organizations are often colloquially called "non-profit businesses" in recognition of the fact that they are organized and operate as any other business would - in developing business plans, filing with the IRS, hiring employees, minding balance sheets, etc - except in ways related to their purposely not seeking a profit (though revenue is another matter). >but the way we measure that is by how much they earn Again, it's a flawed heuristic. Military contracting is wildly profitable. Value to society is questionable. >this is the only one that seems to work. Analysis of the subtle successes of social democracies and "Gross National Happiness" are just two examples that put the lie to this myth.
- collingreen 2y ago
  I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach that doesn't really cover companies that aren't stagnant or dying. I agree with your general point that a business CAN increase profit by reducing costs, including by reducing employee compensation (and there are lots of shortsighted, greedy people out there) but increasing revenue instead is often much more significant and, in theory, can increase both employee take home and company profit. A business is a mechanism to turn labor and other resources into revenue and often aligns with paying for more expensive talent in order to provide more valuable revenue. Businesses that are failing or stagnant can't grow revenue anymore and have to cut costs instead. I don't think the imbalance between workers and companies is in a zero sum, adversarial relationship. I think the imbalance is in who gets to decide what to grow and what to cut (which is one place where collective bargaining helps a great deal).
  - Xmd5a 2y ago
    >I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach You misunderstood the post you're replying to. Workers vs CEOs (not companies).
  - ever1337 2y ago
    The aim of the worker is not usually to kill the firm, I assumed that went without saying, as that would ultimately 'minimize' their wages. But the reason to work in a society where one needs money is to receive a wage, as maximal as possible. These incentives will always contradict whatever real but necessary need there is for 'genuine interest' or 'social tendencies'. Constantly businesses attempt to harness this value, (which is the source of revolutions in productivity beyond the daily rote labor) through trying to present the relationship as anything but transactional. But as their interest in this value is ultimately a monetary interest, what the worker returns to them will be done on a transactional basis. An inhuman force rules over all.
- AdieuToLogic 2y ago
  > Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit. Business owners are also responsible for ensuring their employees (and payroll taxes) are paid whenever revenue dips into the "L" part of "P&L". Wise owners ensure some portion of profit is retained such that temporary market adversity does not immediately result in terminating their employees. People who have never had these concerns make sweeping statements such as the one quoted.
  - ever1337 2y ago
    You are correct that the interest of a business owner is not to kill their firm.
- mrangle 2y ago
  Before maximizing wages and minimizing profit, your interest as workers is to assure that the owner is provided with enough financial motivation to both stay in business and not find substitute employees or solutions for the work that you do.
  - ever1337 2y ago
    When I use the word maximization I am not referring to an abstract idea, I am referring to a negotiation with material necessity.
- try_the_bass 2y ago
  > Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit. Is it? I know a handful of small business owners, and generally their interest is running their business well and keeping their customers happy. Sure, they want to be profitable, but profit isn't their primary motivator. Ditto on the worker side. Your outlook on this is wildly cynical
  - ever1337 2y ago
    They may have a moral sentiment and so too do employees - but the market is the ultimate condition for any moral sentiment to survive. You have no company, you no longer 'satisfy' customers. I am not referring to a moral idea, but a cold reality of business.
    - try_the_bass 2y ago
      ... What? I can't follow what you're trying to say here. It sounds like you're contradicting what I was replying to?
      - ever1337 2y ago
        It's not that profit is one 'motivator' among others, it is the sole and ultimate condition for the survival of a business.
musicale 2y ago
Can you estimate the actual overhead rate? Maybe 100%-200%?
- Nemi 2y ago
  It varies greatly per company and industry. You are talking about Net Margin and it can vary a lot. A company like google has a 28% net margin. That means that after paying all expenses for employees and rent and everything, they have 28% left over from revenue as profit. This is very good. Amazon (being a hybrid retailer/tech company) has 9.29% net margin. Target has a net margin of 3.84%. Believe it or not, many public companies have a negative net margin, meaning they spend more than they bring in. Lyft had a negative net margin until just this year. A few years ago, they had a negative net margin of -70%! That means if someone didn’t keep putting money into the company they would have “ceased as a going concern”, as they say. Their most recent year they had a 0.39% net margin. Go Lyft!
  - musicale 2y ago
    If "employees" includes the CEO, then low net margin would not refute GP's claim that > Almost all of the value they create goes into the pockets of their CEO

by Nemi 2y ago

ever1337 2y ago

And yet you still turn a profit at the end of the day, i.e., money that's not going to 'overhead'. Let's not kid ourselves. Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit.

Nemi 2y ago
As it should be. I am not begrudging anyone of that. As a matter of fact, I often mentor employees on treating their career as a business, and build it accordingly. Just like a strong business, you should be selling your services for as much as reasonable, and if your employer is not paying the appropriate price then find another “buyer”. To maximize the price you can sell your ‘product’ (you), you should be making career decisions that strengthen your offering. This can be taken too far (those that only look for promotions at the expense of real work), but it can be done ethically very easily.
- h2zizzle 2y ago
  >As it should be. No, this is just the (insane) status quo. Ideally, however, businesses exist to carry out a mission (beyond making money). Part of this mission is supporting the livelihoods of employees; part of it is giving a return to investors; part of should be some social net good (maybe within a larger societal context, if not unilaterally). Much as "maximizing" the price at which you sell yourself (ick) often ends in workaholism, broken personal relationships, unhealthy relationships to material goods, and a generally deleterious existence as the opposite of a happy, upstanding, and well-loved member of society, "maximizing shareholder value" usually ends in a business that is either a hated monopoly or a bankrupt shell (often both, in that order). In both cases, hyperfocus has lead to the loss of the entire reason for pursuing the venture in the first place. Profit is just a KPI for something else that you're supposed to be doing (and often a bad one, depending on what that something else is).
  - SR2Z 2y ago
    > Ideally, however, businesses exist to carry out a mission (beyond making money). I mean, sure, but the defining difference between a business and a nonprofit is making money. It's important for companies to provide value to society but the way we measure that is by how much they earn. Despite several hundred years of people trying to come up with better ways to do this, this is the only one that seems to work.
    - h2zizzle 2y ago
      Non-profit organizations are often colloquially called "non-profit businesses" in recognition of the fact that they are organized and operate as any other business would - in developing business plans, filing with the IRS, hiring employees, minding balance sheets, etc - except in ways related to their purposely not seeking a profit (though revenue is another matter). >but the way we measure that is by how much they earn Again, it's a flawed heuristic. Military contracting is wildly profitable. Value to society is questionable. >this is the only one that seems to work. Analysis of the subtle successes of social democracies and "Gross National Happiness" are just two examples that put the lie to this myth.
collingreen 2y ago
I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach that doesn't really cover companies that aren't stagnant or dying. I agree with your general point that a business CAN increase profit by reducing costs, including by reducing employee compensation (and there are lots of shortsighted, greedy people out there) but increasing revenue instead is often much more significant and, in theory, can increase both employee take home and company profit. A business is a mechanism to turn labor and other resources into revenue and often aligns with paying for more expensive talent in order to provide more valuable revenue. Businesses that are failing or stagnant can't grow revenue anymore and have to cut costs instead. I don't think the imbalance between workers and companies is in a zero sum, adversarial relationship. I think the imbalance is in who gets to decide what to grow and what to cut (which is one place where collective bargaining helps a great deal).
- Xmd5a 2y ago
  >I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach You misunderstood the post you're replying to. Workers vs CEOs (not companies).
- ever1337 2y ago
  The aim of the worker is not usually to kill the firm, I assumed that went without saying, as that would ultimately 'minimize' their wages. But the reason to work in a society where one needs money is to receive a wage, as maximal as possible. These incentives will always contradict whatever real but necessary need there is for 'genuine interest' or 'social tendencies'. Constantly businesses attempt to harness this value, (which is the source of revolutions in productivity beyond the daily rote labor) through trying to present the relationship as anything but transactional. But as their interest in this value is ultimately a monetary interest, what the worker returns to them will be done on a transactional basis. An inhuman force rules over all.
AdieuToLogic 2y ago
> Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit. Business owners are also responsible for ensuring their employees (and payroll taxes) are paid whenever revenue dips into the "L" part of "P&L". Wise owners ensure some portion of profit is retained such that temporary market adversity does not immediately result in terminating their employees. People who have never had these concerns make sweeping statements such as the one quoted.
- ever1337 2y ago
  You are correct that the interest of a business owner is not to kill their firm.
mrangle 2y ago
Before maximizing wages and minimizing profit, your interest as workers is to assure that the owner is provided with enough financial motivation to both stay in business and not find substitute employees or solutions for the work that you do.
- ever1337 2y ago
  When I use the word maximization I am not referring to an abstract idea, I am referring to a negotiation with material necessity.
try_the_bass 2y ago
> Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit. Is it? I know a handful of small business owners, and generally their interest is running their business well and keeping their customers happy. Sure, they want to be profitable, but profit isn't their primary motivator. Ditto on the worker side. Your outlook on this is wildly cynical
- ever1337 2y ago
  They may have a moral sentiment and so too do employees - but the market is the ultimate condition for any moral sentiment to survive. You have no company, you no longer 'satisfy' customers. I am not referring to a moral idea, but a cold reality of business.
  - try_the_bass 2y ago
    ... What? I can't follow what you're trying to say here. It sounds like you're contradicting what I was replying to?
    - ever1337 2y ago
      It's not that profit is one 'motivator' among others, it is the sole and ultimate condition for the survival of a business.

musicale 2y ago

Can you estimate the actual overhead rate? Maybe 100%-200%?

Nemi 2y ago
It varies greatly per company and industry. You are talking about Net Margin and it can vary a lot. A company like google has a 28% net margin. That means that after paying all expenses for employees and rent and everything, they have 28% left over from revenue as profit. This is very good. Amazon (being a hybrid retailer/tech company) has 9.29% net margin. Target has a net margin of 3.84%. Believe it or not, many public companies have a negative net margin, meaning they spend more than they bring in. Lyft had a negative net margin until just this year. A few years ago, they had a negative net margin of -70%! That means if someone didn’t keep putting money into the company they would have “ceased as a going concern”, as they say. Their most recent year they had a 0.39% net margin. Go Lyft!
- musicale 2y ago
  If "employees" includes the CEO, then low net margin would not refute GP's claim that > Almost all of the value they create goes into the pockets of their CEO