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> It is the goal of every business to maximise profits. As a business, it is your responsibility to price your products in a way that will yield the most profit

> It is the goal of every business to maximise profits. As a business, it is your responsibility to price your products in a way that will yield the most profit. This is how the article starts, and it might be somewhat off-topic, but I disagree. Plenty of businesses (at least privately held ones) have the goal of simply making enough for the owners to get by. Not to optimize for the absolute maximum. And why should they be responsible to do so?

emptybits 1y ago
Agreed. Related: the widely held belief that a corporation's singular goal is to maximize shareholder value.
- andoando 1y ago
  It might not be the case legally, but it is the sole metric that stockholders value.
  - eCa 1y ago
    It’s not. Plenty of investors might skip investing in arms, petro, cigarettes or betting for moral reasons, even though it might yield more money.
briandoll 1y ago
In short, the leadership team has a fiduciary responsibility to their investors. Privately held lifestyle businesses don't, at least not as much.
- lesuorac 1y ago
  But there's no concrete definition of fiduciary! One can easily argue that by having flat pricing they're doing their fiduciary responsibility because it's setting the company up to succeed in the long run through strong consumer trust. One can argue that by having regional pricing they're doing their fiduciary responsibility because it's setting the company up to succeed by having success in more markets. The takeaway from Dodge vs Ford [1] is that not fiduciary duty means dollars at any cost. It's that you need to have a reason that is good for the shareholders. If you don't bother to claim it's good for the shareholders then you're not doing your fiduciary duty. [1]: https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
  - fluoridation 1y ago
    "Shareholder primacy" implies that at any time a decision needs to be made that puts the interests of shareholders against those of anyone else, the shareholders' should take priority. Since pricing affects revenue and revenue affects shareholders in some way, pricing should be structured such that revenue is maximized. So it doesn't need to be the maximum price possible, but it does need to be whatever price yields the greatest revenue.
    - jszymborski 1y ago
      Right, but destroying customer trust will also destroy shareholder interests
    - hnthrowaway121 1y ago
      But surely it’s debatable whether increased short term revenue benefiting shareholders this year is better or worse than longer term plays with the chance of higher returns later, or that avoiding some sources of revenue for ethical reasons protects the brand’s reputation and image in the market.
      - fluoridation 1y ago
        If a decision puts at odds the interests of two different sets of shareholders at two different points in time, why should the interests of the more distant one be given priority over those of the current one?
        deleted 1y ago
        [deleted]
        lesuorac 1y ago
        Why are they different shareholders? Trivially, the company can expect that it's current shareholders will hold the stock for a long time and so there's no reason to "juice" the current price at the cost of future price. But also simply, making long term plans is easily arguable to be in fiduciary duty as a future shareholder would be willing to pay more to the current shareholder for a company in good health.
- gruez 1y ago
  >Privately held lifestyle businesses don't, at least not as much. Only because if they're the sole owner, there's nobody with standing to sue. There's no special legal classification for "Privately held lifestyle business". If such businesses have minority shareholders, you still have fiduciary duty to them, and can't use it as a personal slush fund, or manage it incompetently.
- deaux 1y ago
  The leadership team absolutely does not have any responsibility to maximize short-term profit, whichis the claim this thread is about. It has a responsibility to not actively and intentionally destroy the company, and to not use the company's resources for purely personal gain in a way unrelated to the company. That's it. This is also why you never hear about any company getting sued for anything related to this (let alone succesfully). Because it doesn't happen, as it's not a thing and any lawyer would immediately tell you you don't have a case.
tirant 1y ago
I agree. The objective of every business is to be decided by their owners. That claim is indeed not always valid. That might be the case for basically every publicly traded company but for sure not for many small businesses.
TZubiri 1y ago
Funnily enough, when incorporating, "to make profit" is usually not part of the stated mission, usually it's something along the lines of "to make chess software"
- wahnfrieden 1y ago
  Those missions are generally for employee alignment, recruiting, customer facing marketing. “Making money” doesn’t work for employees that don’t share ownership of the business and are paid at market rate (IOW as low as the market will bear)
  - chrisfosterelli 1y ago
    Obviously money is important. We live in a capitalist world. It lets an org invest in future, greater service to its mission. But it's not WHY a business exists. It's just a measure. It's sort of like saying that you exist to breathe oxygen or pump blood. It's necessary and important, but suggesting that's your mission would be a little reductive.
    - wahnfrieden 1y ago
      There’s a reason boards study financials and hide them from employees
      - chrisfosterelli 1y ago
        The reasons are because it's their job to ensure the organization's future, and financials are the specifics of how the company plans to do that, and because providing financial information to more people than necessary increases the risk that it leaks to competitors and inside traders.
  - TZubiri 1y ago
    Not really, they are part of the charter granted by government and they bind the company in its legal capacities. Companies are de jure entities, they exist not de facto, but by registration with the state. For many reasons, you or others cannot go to courts and claim different things about a company as a separate entity from its owners without previously having declared to the state and courts that such a company exists and what the rules of the company were. The mission of a company are thus part of the rules defined for a company at creation, such that if an owner made its riches in oil prospecting, but also had a company whose mission was software development, then other partners of the second company, or creditors in case of bankruptcy, would have no claim to riches that came from oil prospecting. For example.
BurningFrog 1y ago
It's not a perfect model of the world, but empirically it's a very useful one, so economists often use it to understand the world.
johndhi 1y ago
surely it's the goal of most pricing strategies, though, right?
realityfactchex 1y ago
Yeah, it's a myth, and a pervasive one. Decent description at [0]. Not only that, but people actually think they know that. Since people believe it, it's "real to them". IMO, this helps make it easier to go from "we're going to make the best widgets and be good, responsible, ethical corps" to "we will extract as much value as possible from customers, anything within the law is fair game, external consequences not being our concern". [0] https://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders https://skeptics.stackexchange.com/questions/8146/are-u-s-co...
- wahnfrieden 1y ago
  Why is the idea of quality oriented “getting by” businesses popular here, but worker cooperatives generally scorned? A worker owned coop is more resilient to deciding to focus on quality and affordability than a business with investors and hierarchical ownership that can change (after a death or a sale etc)
  - JanNash 1y ago
    Valid inquiry!
  - bee_rider 1y ago
    Worker co-ops are scorned here? I think they just don’t come up much due to the nature of the industry. Like all [citation needed] nerds I consumed a ridiculous amount of fantasy fiction growing up, and think programming is as close to magic as we’ll ever get in the real world. If somebody made a “Programmers Guild” in the style of a wizard’s guild, who among us wouldn’t join such a thing?
    - giancarlostoro 1y ago
      > If somebody made a “Programmers Guild” in the style of a wizard’s guild, who among us wouldn’t join such a thing? HN is the wizard's guild.
dpoloncsak 1y ago
Many of those businesses eventually get acquired or crushed by the guys who do put profit over everything else. Sure, Amazon made drivers piss in bottles. They also put killed (or atleast, put the final nail in the coffin) your local brick and mortar xyz store.
deaux 1y ago
This isn't a "disagree or agree" topic. It's a "wrong or right" topic, and even at 13 years old I could've told you that you're right and they're wrong. Of course this isn't the goal of every business, and it's trivially verifiable. They effectively put out a statement saying "the earth is flat, water is dry and sunlight is wet".
SergeAx 1y ago
In most jurisdictions shareholders may sue management for deliberately lost profits.

emptybits 1y ago

Agreed. Related: the widely held belief that a corporation's singular goal is to maximize shareholder value.

andoando 1y ago
It might not be the case legally, but it is the sole metric that stockholders value.
- eCa 1y ago
  It’s not. Plenty of investors might skip investing in arms, petro, cigarettes or betting for moral reasons, even though it might yield more money.

briandoll 1y ago

In short, the leadership team has a fiduciary responsibility to their investors. Privately held lifestyle businesses don't, at least not as much.

lesuorac 1y ago
But there's no concrete definition of fiduciary! One can easily argue that by having flat pricing they're doing their fiduciary responsibility because it's setting the company up to succeed in the long run through strong consumer trust. One can argue that by having regional pricing they're doing their fiduciary responsibility because it's setting the company up to succeed by having success in more markets. The takeaway from Dodge vs Ford [1] is that not fiduciary duty means dollars at any cost. It's that you need to have a reason that is good for the shareholders. If you don't bother to claim it's good for the shareholders then you're not doing your fiduciary duty. [1]: https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- fluoridation 1y ago
  "Shareholder primacy" implies that at any time a decision needs to be made that puts the interests of shareholders against those of anyone else, the shareholders' should take priority. Since pricing affects revenue and revenue affects shareholders in some way, pricing should be structured such that revenue is maximized. So it doesn't need to be the maximum price possible, but it does need to be whatever price yields the greatest revenue.
  - jszymborski 1y ago
    Right, but destroying customer trust will also destroy shareholder interests
  - hnthrowaway121 1y ago
    But surely it’s debatable whether increased short term revenue benefiting shareholders this year is better or worse than longer term plays with the chance of higher returns later, or that avoiding some sources of revenue for ethical reasons protects the brand’s reputation and image in the market.
    - fluoridation 1y ago
      If a decision puts at odds the interests of two different sets of shareholders at two different points in time, why should the interests of the more distant one be given priority over those of the current one?
      - deleted 1y ago
        [deleted]
      - lesuorac 1y ago
        Why are they different shareholders? Trivially, the company can expect that it's current shareholders will hold the stock for a long time and so there's no reason to "juice" the current price at the cost of future price. But also simply, making long term plans is easily arguable to be in fiduciary duty as a future shareholder would be willing to pay more to the current shareholder for a company in good health.
gruez 1y ago
>Privately held lifestyle businesses don't, at least not as much. Only because if they're the sole owner, there's nobody with standing to sue. There's no special legal classification for "Privately held lifestyle business". If such businesses have minority shareholders, you still have fiduciary duty to them, and can't use it as a personal slush fund, or manage it incompetently.
deaux 1y ago
The leadership team absolutely does not have any responsibility to maximize short-term profit, whichis the claim this thread is about. It has a responsibility to not actively and intentionally destroy the company, and to not use the company's resources for purely personal gain in a way unrelated to the company. That's it. This is also why you never hear about any company getting sued for anything related to this (let alone succesfully). Because it doesn't happen, as it's not a thing and any lawyer would immediately tell you you don't have a case.

tirant 1y ago

I agree. The objective of every business is to be decided by their owners. That claim is indeed not always valid. That might be the case for basically every publicly traded company but for sure not for many small businesses.

TZubiri 1y ago

Funnily enough, when incorporating, "to make profit" is usually not part of the stated mission, usually it's something along the lines of "to make chess software"

wahnfrieden 1y ago
Those missions are generally for employee alignment, recruiting, customer facing marketing. “Making money” doesn’t work for employees that don’t share ownership of the business and are paid at market rate (IOW as low as the market will bear)
- chrisfosterelli 1y ago
  Obviously money is important. We live in a capitalist world. It lets an org invest in future, greater service to its mission. But it's not WHY a business exists. It's just a measure. It's sort of like saying that you exist to breathe oxygen or pump blood. It's necessary and important, but suggesting that's your mission would be a little reductive.
  - wahnfrieden 1y ago
    There’s a reason boards study financials and hide them from employees
    - chrisfosterelli 1y ago
      The reasons are because it's their job to ensure the organization's future, and financials are the specifics of how the company plans to do that, and because providing financial information to more people than necessary increases the risk that it leaks to competitors and inside traders.
- TZubiri 1y ago
  Not really, they are part of the charter granted by government and they bind the company in its legal capacities. Companies are de jure entities, they exist not de facto, but by registration with the state. For many reasons, you or others cannot go to courts and claim different things about a company as a separate entity from its owners without previously having declared to the state and courts that such a company exists and what the rules of the company were. The mission of a company are thus part of the rules defined for a company at creation, such that if an owner made its riches in oil prospecting, but also had a company whose mission was software development, then other partners of the second company, or creditors in case of bankruptcy, would have no claim to riches that came from oil prospecting. For example.

BurningFrog 1y ago

It's not a perfect model of the world, but empirically it's a very useful one, so economists often use it to understand the world.

johndhi 1y ago

surely it's the goal of most pricing strategies, though, right?

realityfactchex 1y ago

Yeah, it's a myth, and a pervasive one. Decent description at [0]. Not only that, but people actually think they know that. Since people believe it, it's "real to them". IMO, this helps make it easier to go from "we're going to make the best widgets and be good, responsible, ethical corps" to "we will extract as much value as possible from customers, anything within the law is fair game, external consequences not being our concern". [0] https://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders https://skeptics.stackexchange.com/questions/8146/are-u-s-co...

wahnfrieden 1y ago
Why is the idea of quality oriented “getting by” businesses popular here, but worker cooperatives generally scorned? A worker owned coop is more resilient to deciding to focus on quality and affordability than a business with investors and hierarchical ownership that can change (after a death or a sale etc)
- JanNash 1y ago
  Valid inquiry!
- bee_rider 1y ago
  Worker co-ops are scorned here? I think they just don’t come up much due to the nature of the industry. Like all [citation needed] nerds I consumed a ridiculous amount of fantasy fiction growing up, and think programming is as close to magic as we’ll ever get in the real world. If somebody made a “Programmers Guild” in the style of a wizard’s guild, who among us wouldn’t join such a thing?
  - giancarlostoro 1y ago
    > If somebody made a “Programmers Guild” in the style of a wizard’s guild, who among us wouldn’t join such a thing? HN is the wizard's guild.

dpoloncsak 1y ago

Many of those businesses eventually get acquired or crushed by the guys who do put profit over everything else. Sure, Amazon made drivers piss in bottles. They also put killed (or atleast, put the final nail in the coffin) your local brick and mortar xyz store.

deaux 1y ago

This isn't a "disagree or agree" topic. It's a "wrong or right" topic, and even at 13 years old I could've told you that you're right and they're wrong. Of course this isn't the goal of every business, and it's trivially verifiable. They effectively put out a statement saying "the earth is flat, water is dry and sunlight is wet".

SergeAx 1y ago

In most jurisdictions shareholders may sue management for deliberately lost profits.