Tim O'Reilly: The heart of what is best in capitalism

https://plus.google.com/107033731246200681024/posts/iZvW7pgcy6m

by Sato • 15 years ago

38 44 15 years ago

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Thrymr• 15 years ago

This line is great: "profit in a business is like gas in a car. You don't want to run out of gas, but neither do you want to think that your road trip is a tour of gas stations."

DanielRibeiro• 15 years ago

It is orignally from another great article of Tim O'Reilly: Work on Stuff that Matters[1]

[1] http://radar.oreilly.com/2009/01/work-on-stuff-that-matters-...

crikli• 15 years ago

I've used a similar analogy frequently, that profit is to my business as fuel is to an aircraft. I want as much profit as I can get not because I'm greedy but because I want to stay in their air as long as possible, constantly making longer and more adventurous flights.

My biz might be just a little four-place Cessna right now but my goal is to someday be a nice Boeing Business Jet.

OstiaAntica• 15 years ago

The problem isn't Wall Street greed. The problem is that the government rescued the banks with public bailouts, at a time when a true capitalist system would have put them out of business.

samstave2• 15 years ago

You are seeing a delineation between wall street/banks/government which is not there.

The problem IS [wall street/banks/government] GREED

All of Obama's top advisers are GS and banking cartel.

Thus we transfer all our wealth to them.

Just like when all of Bush/Cheney's cabinet (including Cheney) were all from the MIC cartel - we transferred all our wealth to them.

This is 30 minutes worth your time:

http://www.youtube.com/watch?feature=player_embedded&v=K...

eru• 15 years ago

Just call it regulatory capture, and principal agent problems.

lukifer• 15 years ago

David Icke? The guy who thinks the world is run by alien reptiles? Really?

I'm the biggest conspiracy theorist there is (Conspiracy 0: hijacking the term "conspiracy"), but this guy flips my bozo bit.

That said, his description of fractional reserve banking is mostly accurate; it just seems an odd source when there are so many good video and text diatribes on the subject.

russell• 15 years ago

There was a time, before the Federal Reserve, when banks were not rescued, but failed. In the 19th century banks failed and there were panics and depressions every decade or two. What we have now is way better. The problem now is that banks can reliably depend on being rescued every decade or so. In the 70's it was loans to SA dictators, in the 80's it was the savings and loan crisis. the it was devaluation of the ruble which took out Long Term Capital Management, then the current mess of housing mortgages and derivatives. At one time there were $60 trillion of worthless paper sailing through the system.

The problem in the rescue this time is that the TARP money went to rescue the banks, not to the middle class that needed it. The "too big to fail" banks got bigger. Glass-Stegall was not restored. The Republicans stonewalled any meaningful regulation. And of course Congress was bought and sold.

Capitalism is the economic engine of our society, but it cannot be allowed to complete freedom without being regulated to conform to the economic and social needs.

megablast• 15 years ago

Lots of banks fail, a couple every week over the last few years. They are small banks though. The problem is when banks get too big, and there failing would have a huge effect on the economy. That is why banks should not be allowed to get that big, but for some reason no one is interested in changing the laws.

anamax2• 15 years ago

> The problem is that the government rescued the banks with public bailouts, at a time when a true capitalist system would have put them out of business.

Umm, the bank bailouts aren't the big problem. They turned a profit, and since the subprime crisis was mostly due to govt action....

The big problem is the other bailouts and subsidies. They're never going to pay off.

Sato3• 15 years ago

Those who think the bank bailouts aren't the big problem may want to read this famous article, "The Great American Bubble Machine"[1].

[1] http://www.rollingstone.com/politics/news/the-great-american...

rayiner• 15 years ago

No True Scottsman, huh?

brc11• 15 years ago

I always get a prickly uncomfortable feeling whenever a business leader comes out and says 'profits aren't the most important thing'. It's this type of wording that can give life to stupid ideas such as 'you can run a business without making a profit'.

I also lose respect for business leaders who try and paper over their success with motherhood statements like 'I wasn't in it for the money', when clearly they enjoy the trappings of wealth.

People should be proud to state they are chasing a profit, proud to make profits, proud to have successful, profitable businesses. It's impossible to make profits without providing value for other people. Profits (for the most part, over the long run) are just a recognition that you're productive and are providing something of value.

My take on this particular piece is that a focus on short term profits is a mistake, and that a focus on long term value through great products and innovation is the right choice. Because long term value creation should necessarily result in profits.

But I just wish more people would have the gumption to say 'I made a big set of money hats for myself, my investors and my employees, and I feel great about it'.

jhancock• 15 years ago

As a long time small business owner, I can say that "profit" is not the key element, but rather "cash flow". It may seem a minor nit, but I think helps to distinguish between short term profit and long term. Its nice to have a billion in the bank and only focus on long term goals. Few companies have this luxury. For all the rest, we focus on meeting our monthly payroll.

mousa3• 15 years ago

I wish people would stop trying to paint their own motives on other people. There is no reason for him to trumpet that he loves profit if that not his main motive. These guys have money and successful companies it's possible they would make some sacrifices to the bottom line to impact on the world if it if they have that disposition. You think someone like Elon Musk is only thinking bottom line when he has poured all his money into three industries that haven't ever been profitable?

brc11• 15 years ago

I certainly hope Elon Musk has profit as his motive, otherwise his lifes work will end up in vain.

As O'Reilly said - you need to make it to the next gas station. If Elon Musk wants to launch rockets and make new car companies he's going to need to be profitable in that enterprise, or it's going to hurt a lot of people in a pretty short amount of time.

My point is this - he has to have profit as his main motive or he would fail. If you're going to change the world, you have to last long enough to do so. In order to do that, everyone involved has to be getting out more value than they are putting in. And that is profit.

Sato3• 15 years ago

> It's this type of wording that can give life to stupid ideas such as 'you can run a business without making a profit'.

It is stupid.

The point here is, I think, money is a means to an end, rather than an end in itself. And such an idea has been spreading.

brc11• 15 years ago

I think we agree. But my point is that statements like that from O'Reilly (and Bill Gates, at other times) allow shallow-thinking people to start formulating ideas that businesses shouldn't make a profit.

Yes, money is a means to an end, rather than the end itself. You can't take it with you, and stored money is useless unless deployed as investment.

But there is no other viable way to that end, as much as people like to pretend there is. When we lose sight of this, we slip into muddle-headed thinking and everyone loses out. Eventually, an unprofitable enterprise will lose staff, investors, suppliers and will die.

It's as though we're all riding a train called 'profit' to our destination, but everyone in the dining car is pretending we're really levitating on a magic carpet of good intentions to our destination, because is is impolite to talk about the train that is carrying us along. The 'train' needs to be brought back into our conversations.

It's as though we've traded the Victorian distaste for discussions about sex with a modern distate for discussions about making money, even though everybody does it as much as they can.

yequalsx4• 15 years ago

But sometimes the value added is not morally obtained. Western countries derive a lot of value from resource rich countries that are impoverished. Unfortunately that value often times comes at the expense of great environmental and social damage done to these countries.

Chasing profits for the sake of profit without regard to morality is bad. As a famous saying goes, the love of money is the root of all evil. It's not true in every case but the spirit of the adage is true and society ought not to forget this.

brc11• 15 years ago

I disagree with you on so many levels it would be hard to know where to start. Yours is the type of comment I referenced as woolly thinking that comes from people declaring that profits aren't really necessary.

Of course environmental degradation is a poor outcome for everyone involved. But that has nothing to do with making profits. An unprofitable enterprise is more likely to be damaging the environment than a profitable one.

pullo• 15 years ago

there are few experts if any on what is moral profit (is a doctor making money of sick people moral? ). look around you. everything you see and use is obtained from earth. there is a cost to mining earth this way and it is not reserved to rich countries.e.g ghost towns in US caused by fracking. beyond this , your statement is too generic to even repudiate.

brc11• 15 years ago

I'm glad I'm getting downvotes on my various comments here. I hope this means this basic idea is getting through peoples conciousness and making an impact, and it's not just 'a downvote for you, I don't agree'.

The fact is, just about everything that you sit on, touch and use was created for and sustained by profitability. From the ISP you connected to, to the device you used, all were designed and built by people using doing their best to make a profit in providing something of value to you.

Somehow we've ended up in a place (again) where making a profit is seen as a dirty business. I would expect to find that if I were posting to a socialist forum. But on a site revolving around startups and technology the last thing people should be doing is treating and using profit as a dirty word, something not to be uttered in polite company.

The fact is, if we're in a startup or technology company of any kind, we have to do things that create value for our customers and investors. It's moral to work hardest and smartest and try and win, certainly more moral than trying to slack off and hope someone else creates the value and masks our lack of effort. And in working hardest, smartest, doing that process we will create value for everyone involved. And that is profit.

yequalsx4• 15 years ago

Many of the great inventions/discoveries in the history of science were not made for profit. Newton would not have been a better mathematician had he been paid more. Da Vinci would not have painted better had his profit margins been higher. Feynman's insights would not have been more profound had his desire to win been greater.

Profit is not necessarily good or necessarily bad. There are cases where it's incentives are good. There are cases where it is bad.

eligottlieb• 15 years ago

>But I just wish more people would have the gumption to say 'I made a big set of money hats for myself, my investors and my employees, and I feel great about it'.

It would be great if making money for employees counted as a plus on the balance sheet. Instead, giving money to employees counts as an expense. Isn't capitalism wonderful?

brc11• 15 years ago

>Isn't capitalism wonderful? Compared to everything else that has been tried, yes it is.

By the way, a balance sheet shows assets vs liabilities. The profit/loss statement is where you expense employee costs, as you should.

Making money for an employee counts as a plus for the employees and their families and communities. So I fail to see that as a problem.

erikpukinskis• 15 years ago

you're productive and are providing something of value.

Not really. People pay will pay for things that are useless, or even hurting them. I don't think I'd be proud of myself for making a profit selling meth.

You should be proud of providing something of value. But making a profit isn't enough to judge whether you're doing that.

brc11• 15 years ago

Well, that's an interesting side discussion in itself : what is value.

Let's leave the edge cases out of it, and rephrase : if you're pursuing a legal activity using legal means, and you've made a legitimate profit from selling honest products then you should be proud of what you have done. Think Steve Jobs rather than Pablo Escobar. Even then, some would (and do) say that Steve Jobs flogged a lot of overhyped and overpriced products to uncritical acolytes. I would answer that he did so honestly and the people purchased of their own free will, so they did receive value for it.

I'd leave morals out of that it because morals change a lot over time and between societies. As a rough meme - legality is kind of codified morals of a particular society. So if you're doing things within the legal framework then you're OK.

Of course there are douches making illicit profits doing illegal and immoral things. But these people would be conducting illicit activities no matter what the framework they operated under. At least in a free society you're able to avoid them.

mkr-hn• 15 years ago

You don't have to toss everything else just to have a non-profit motivation. People can have more than one guiding motivation at the same time. Would it be easier on you if he put it another way? "Profit isn't my main motivation, but I understand that the company needs to be profitable to support my primary motivations."

brc11• 15 years ago

Yes I think that would be a major improvement.

My main thing here is not necessarily O'Reilly himself, but the culture that seems to be coming out that making a profit is a dirty business, and something you don't admit to.

Because of this, many business leaders don't talk about making money, which leads to a lot of people getting the wrong idea about what it means and what it takes to get into business and stay in business.

Sure, you can be Bill Gates and change the world with philanthropy, but in order to get to that position, you need to spend a lot of time focusing on profits to build the wealth.

People want to skip straight to the wealth dissemination part and miss the part about making a profit, which just leads to misery for all involved.

I understand this is an unpopular idea and I've taken some criticism in this thread, but I really take pg's essay on thinking the unthinkable and saying the unsayable to heart. I seriously believe we've got to a point where you can't say 'I made a profit' without society in general looking down at you. And so I want to say the unsayable in this case and force people to really think about this.

bluedanieru• 15 years ago

>It's impossible to make profits without providing value for other people.

Counterpoint: killing people and taking their money.

chrismealy• 15 years ago

Hint: that's not capitalism.

Tim O'Reilly: The heart of what is best in capitalism

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