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31 December 2007 @ 05:29 pm
Profiteers  
My observation regarding the profit motive and what actions it will likely cause under given circumstances follow. It is as much for my own benefit to write this out as anything else. Feel free to comment or critique my understanding of this.

The idea behind selling something is, at the basic level, to bring in more tangible resources than you expend in making the product being sold.

An individual who makes a product and sells that product can do just about anything in terms of setting a price point. Compare three musicians selling their music without knowing one another's prices and you will see all sorts of variation. One musician may decide that he's in it for the music and only wants to charge enough to make ends meet and still be able to make music. Another musician may have dollar signs in his eyes and will charge like he's already selling out stadiums. A third musician may want nice things but recognize that fame builds over time, as do profits, and so will charge somewhere in the middle. The commodity value of the product may not vary as much; what the market is willing to pay for the product tends to fall in a certain range, variation dependant on the whims and likes of the buying pool, quality of the workmanship, et cetera. A musician may seek to improve the recording quality, get more talented backup singers, jazz up the packaging or the advertising, add some extras like "making of" videos, all in an attempt to improve the product. This isn't always because the musician just wants increased profits; the musician may want to put out a better product out of pride. Profit isn't always the central motive of an individual seller when that person is also a creator.

A corporation on the other hand will do whatever it can to maximize profit on product. A corporation will pay those who make the product as little as possible and will then charge the maximum that the market will bear. A corporation will minimize outlay to improve the bottom line. A corporation with shareholders is bound, sometimes legally required, to maximize profits. While it is supposedly required to obey the law, a corporation will do anything to maximize material gain; immaterial damage caused or even material damage outside of the corporate purview will be ignored. A corporation's manufacturing facility can operate at a lower profit margin if it respects environmental safety regulations and concerns, or it can improve the bottom line by cutting corners and skirting the edge of illegality and dumping waste products in a manner that will damage the environment. There is no question what will happen here; a corporation will always seek the highest profit. There are reams of evidence that corporations will plan in extreme detail how to resolve potential problems from cutting corners or flouting the law; one glaring example was a situation where Ford Motor Company could either redesign the fuel tank and rear bumper assembly of the Pinto car line or pay to settle lawsuits resulting from deaths caused by the design flaw. A cost-benefit analysis led to Ford's decision to go with the settlement option, leaving a dangerous design flaw in the Pinto because the analysis showed that statistically, it would be less expensive to pay out money to the survivors and families of those killed due to the flaw. This is one example, but ask yourself how many cost-benefit analyses like this have been done about which the public remains unaware.
 
 
Current Mood: thoughtfulthoughtful
Current Music: Law and Order: Criminal Intent (original opening)
 
 
 
guruwench on December 31st, 2007 11:42 pm (UTC)
It's interesting that you bring up the Ford Pinto case; that example was used in one of my university classes (sociology, social deviance & social control, technically a criminology class; was the sociology of crime & punishment). It was in the section dealing with corporate/white-collar crime. Darned if I remember exactly what the discussion was, but it related to the corporation being held accountable for the deaths it chose not to prevent by refusing to do a recall. I'd have to go look up the text now to find what we discussed exactly.
Traveler Farlandertwfarlan on January 1st, 2008 12:47 am (UTC)
It was brought up in my civil law course as part of my Criminal Justice degree, as well. It, alongside the case of the woman who sued McDonalds because her coffee was too hot, is one of those cases every tort discussion inevitably raises.
Ace Lightning: weirdacelightning on January 1st, 2008 12:15 am (UTC)
in northern New Jersey, close to Newark Airport, there is an oil refinery complex that has been there since 1909. the equipment is ancient, and certainly doesn't comply with current environmental, or even safety, standards. the plant is well-known for belching noxious petrochemical fumes, as well as for exuding toxic by-products into the surrounding wetlands. now, the EPA fines them for every day the plant flouts environmental regulations. but it would cost far more to shut down the plant and modernize it so that it could comply. so the plant continues to operate, paying its daily fines and spewing Hephaestus-only-knows-what into the environment.

a few miles away is a somewhat smaller refinery, much more recently built. that one is quite literally cleaner than the average home kitchen. they adhere to stringent environmental regulations, and probably never have to pay a fine. interestingly enough, their brand of gasoline is generally sold cheaper than the stuff from the toxic plant up the road...


Traveler Farlandertwfarlan on January 1st, 2008 12:49 am (UTC)
The law is faulty in that example. The fines are clearly no deterrent; they are the lesser of two negatives. They fail to achieve what is the stated goal of applying them: to dissuade the offender from continuing to offend. There should be a cap, a point after which the offense is not allowed to continue, written into the law and enforced firmly.
Ace Lightning: earthacelightning on January 1st, 2008 08:21 am (UTC)
the fines are a joke - a few hundred dollars a day, i think. putting a cap on them sounds like a very good idea; but what would you suggest as a penalty, and how would you go about imposing it?

Traveler Farlandertwfarlan on January 1st, 2008 03:22 pm (UTC)
Total facility shutdown, access granted only to pre-approved workmen involved in solving or cleaning up the offending issue.
Ace Lightning: New Jerseyacelightning on January 1st, 2008 10:22 pm (UTC)
enforced how, and by whom?

Traveler Farlandertwfarlan on January 1st, 2008 10:36 pm (UTC)
Same as when a fire marshall or inspector orders a worksite shutdown for violations of safety and fire codes, enforced by local constabulary. Anyone found in the locked-down site after that point is arrested and fined.
Ace Lightning: earthacelightning on January 1st, 2008 10:40 pm (UTC)
it takes time to shut down an oil refinery safely. you can't just walk away from it at the end of a shift. i'm pulling numbers out of my arse, but i'd say it might take most of a day at least. now, perhaps if some of the "enforcers" were petroleum engineers themselves, they might be able to tell when it made sense to evacuate all workers from the premises...

Wolfteddywolf on January 1st, 2008 03:57 pm (UTC)
Jail time for the person making the ultimate decision to keep it running, perhaps?
Ace Lightning: scathachacelightning on January 1st, 2008 10:23 pm (UTC)
it's never one individual - it's always a committee or team, for that precise purpose; when they are blamed for something, each one points their finger at one of the others, and shrieks "it wasn't me, it was him!"

Traveler Farlandertwfarlan on January 1st, 2008 10:38 pm (UTC)
Right, and because of that, putting away only one person while allowing the facility or business to continue operations would be pointless. You'd be handed over a scapegoat after months, maybe years of wrangling and misdirection in court, all the while letting the offending issue continue. Nope. Total shutdown of the facility, enforced by arrest of anyone found on-site after lockdown.
Ace Lightning: New Jerseyacelightning on January 1st, 2008 11:16 pm (UTC)
no argument there. but, again, shutdown of something like an oil refinery is a complicated and time-consuming process.

Traveler Farlandertwfarlan on January 2nd, 2008 01:35 am (UTC)
There are shutdown procedures for building sites, too. Unstable walls have to be shored up, electricity has to be interrupted, et cetera. Point is, with those procedures expected and planned for, an enforced shutdown is not impossible. If it's a full day process, so be it. By the end of that process, the refinery is shut down and the site is closed off to all employees.
Ace Lightning: gearheadacelightning on January 2nd, 2008 06:03 am (UTC)
the process of constructing a building can be interrupted, and resumed pretty much where it left off. but certain industrial processes depend far more strongly on the "flow" of activity. they take a long time to shut down, and another long time to start back up. petroleum refining and steel smelting are two of the worst in that regard (and, of course, they're two of the worst polluters, too). as you point out, this causes serious disruption of the company's profits. i would love to see the Tosco refinery forced to shut completely down, and forced to implement various safety and environmental improvements before it's allowed to start back up.

Wolfteddywolf on January 2nd, 2008 12:15 am (UTC)
Then jail them *all*. It's not a zero sum game. When a gang plots a kneecapping of a rival gang member, you don't try to divvy up the jail time by how many people are in on the plotting, you get all of them.
Ace Lightning: earthacelightning on January 2nd, 2008 12:23 am (UTC)
jail the entire board of directors of ExxonMobil? we can only hope...

Wolfteddywolf on January 2nd, 2008 12:30 am (UTC)
Oh, I know. Thing is, they put profit ahead of public trust and public health in those private decisions, and that should be punishable. When they do that, it doesn't matter how nice a suit they wear or which country club they belong to. They deserve prison. Just like the thugs in leather who kneecap neighbors.

Edited at 2008-01-02 12:31 am (UTC)
Traveler Farlandertwfarlan on January 2nd, 2008 01:40 am (UTC)
This is why shutting down the physical facilities is more damaging than just jailing people. People in corporations are just cells; they're replaceable. The organism of corporate production goes on doing what it was doing. Boards, CEOs, these people tend to arrange complex webs of plausible deniability that act as shields from repercussions. Charge people, make arrests, sure, and take the time to sort out culpability and who knew what when AFTER the facilities are shut down. You want to see a corporation scramble to help clear up a matter? Deny it production facilities.
Ace Lightning: dragonhillacelightning on January 2nd, 2008 05:58 am (UTC)
you're right - ideally, the facilities should be shut down and those responsible for the mess should be prosecuted. and prosecute them as individuals, so their legal costs and whatnot at least have to come out of their personal fortunes, not out of the corporate well.

(although, given my brief relationship with corporate structures, "piercing the corporate veil" opens another whole can of legal worms.)

Ace Lightning: earthacelightning on January 2nd, 2008 05:51 am (UTC)
the difference being that the gang in the Armani suits can afford better lawyers than the gang in the leather jackets... and the suits probably went to the same prep schools as the government officials who choose how and where to enforce the law.

throw the rascals out, the whole lot of 'em, i say, and at least get a fresh set of rascals...


Merlinmerlin_t_wizard on January 1st, 2008 03:50 am (UTC)
On the other hand, a corporation's public image and the perceived quality / reliability of it's products are both non-tangible but nevertheless important long term considerations for the bottom line. Unfortunately, these days there doesn't seem to be much consideration for anything past the present financial quarter.
Traveler Farlandertwfarlan on January 1st, 2008 04:51 am (UTC)
Corporations already deal with people's perceptions. That's advertising, spinning perception of your product to make it seem more attractive than rival products. It takes a lot to get through the thick layer of apathy most of the consumer base is buried in, aside from dealing with the purchasing public's desire to spend the least of their own resources possible.
Merlinmerlin_t_wizard on January 1st, 2008 05:33 am (UTC)
All too true. Occasionally however, a corporation makes a big enough mistake to actually penetrate that apathy. Ex: Sony BMG and rootkits.
Traveler Farlandertwfarlan on January 1st, 2008 05:46 am (UTC)
True. Breaking through the apathy required more than just one bad act, however. The BMG rootkit situation was a bad idea, followed through badly, and then compounded by mishandling in the media. The final sinker on that one was leaked memos, though, detailing the corporate understanding that they knew the rootkits would cause a potential backlash and privacy concern. The Ford example I originally cited was such a series of bad moves, another in which leaked memos revealed the contempt in which the corporation in question held the consuming public.
Wolfteddywolf on January 1st, 2008 04:01 pm (UTC)
There are a very few corporations that do not follow the general model above, but they are the exception rather than the rule. Your observations match my own.

I would add one additional wrinkle: there are some corporations that look at the bottom line, but they look at the long-term as opposed to the short. They are still in it for maximizing monies, but they realize that they can make more money over the long haul by staying active.

This is increasingly lost in the fasterfasterfaster! money churn of the modern age, however.
craigers01 on January 2nd, 2008 02:07 pm (UTC)
I just want to point out that not all corporations aren't the evil overlord illuminati that this discussion has tended to favor. Yes, ultimately they all want to make money (the same way everyone who posted here wants to make money), but it isn't necessarily all about profit. For example, we decided to implement our "Sales office of the future" furniture product for those in our service department, even though those people will never see a single customer. We did this because the SOOF furniture is nicer than the old Herman Miller stuff we were using, and wanted the employees to get the new stuff. It's costing my department about $1,000,000 per half floor that we remodel. We weren't required to do it. We weren't order to by the state. We didn't do any kind of cost/gain analysis to see if the furniture would increase productivity. We just wanted them to have the new stuff. Of course, we then proceeded to make the upgrades as cheeply as safely and legally possible. We worked nights (at a premium) to minimize employee downtimes and disruption. We recycled the old furniture and turned a lot of it over to local charity organizations, even though it had already passed it's depreciation point and we didn't get any tax breaks on it. We even paid people to haul used chairs around to local schools and churches to give away.