04 June 2019

Capitalism destroys value

I've said this before, but it's been awhile and @GreatDismal had a short thread reminding me of it.

Value is the ratio between benefit and cost.  It's contextual; five hundred dollar shoes that let you walk without pain (unlike all those other shoes) are great value.  Maybe not for someone else, but for you.

In general, if a business is trying to deliver value, they're competing to sell you something that gives you greater benefit per unit cost.  A value-delivering business needs to be making a profit -- they want to stay in business, and using profit as a measure of value-add if you're not making a profit there's no general agreement that you're adding value -- but must not be, cannot be, motivated by profit.

A profit-maximizing business -- the point is to make as much money as possible -- has to do at least one of reduce the benefit or increase the cost.  That is, they deliver less at a particular price (increasing their profit margin) or charge more for the same delivery (increasing their profit margin). 

Once you accept profit maximization as a legitimate objective, this is systemic; intent doesn't much enter into it.  As a result, you get people lamenting that it's no longer possible to buy a new-made pair of pants of the quality that was generally available in 1980.  The drive for maximized profit -- capitalism -- has destroyed the ability within human civilization.  (This is far from the only example!)

Think of profit-maximization as a virtue is analogous to a fungal parasite, slowly pulling all the nutrients out of its living host organism.   It's not markets, it's not exchange; it's about the destruction of value to capture a greater share of the money.  (Money which is useless after the inevitable collapse.)

Greed remains a sin.


orc said...

"Think of profit-maximization as a virtue is analogous to a fungal parasite"

More of a cancer. fungal parasites reproduce, cancers just burn out the host body then die.

Graydon said...


I'm not going argue against any analogy that gets the essential elements -- fatal because diversion of resources to destructive things -- correct.