These days, a large portion of the population seems to be up in arms over corporate profits and the way a handful of people in the world are getting forever richer while the rest of us are struggling to pay for our next visit to the grocery.

And that's understandable enough, and I would count myself among those who are up in arms.

The thing I ultimately have a problem with is not so much the fact that there are people making obscene amounts of money as the whole underlying idea that as long as companies strive to maximize shareholder value "the economy" is going to be doing well. And if the economy is doing well, then everyone is doing well.

There's a fundamental fallacy in there having to do with what marketplaces have the freedom and ability to do.

Part of that has to do with this idea that profitable companies are going to hire more people to create goods and services which is good for the world, right?

Perhaps in some fantasyland, according to some theory, that might be right but in the reality of the world we live in the reason companies hire more workers is because there's demand for their products, and if there's no demand for their products — because people are out of money — then they're definitely not going to be hiring more people to make products that people aren't buying and can't afford to buy!

But the other, and potentially more worrisome, part of the equation is this idea that when companies are doing well and making profits we end up with better markets and better selection for everyone.

That's just another falsehood based on assumptions that don't hold up in the real world. If your objective as an organization is to maximize your profit, you're not going to be producing what people are asking for you're going to be producing what you can make the most profit at.

We see that play out everywhere in the economy from overpriced housing, to overpriced vehicles, to grocery stores dropping the cheapest brands off the shelves and replacing them with premium brands all of which represent things that people can't really afford, but the marketplace is not affording them the option to buy a lower cost item because lower cost items are not as profitable.

So we actually end up with a situation in which the pursuit of profit is not creating a marketplace with more selection but is creating a marketplace with less selection.

One of the reasons I don't like so-called economists is that they tend to arrive at their conclusions and opinions about the world from reading books and reports and white papers, but not from actually having even the most fundamental knowledge of industrial psychology and human psychology.

If I were the one creating the curriculum all economists would be required to take at least two years of psychology as part of the curriculum to become an economist! Numbers don't matter if you don't have an understanding of human motivation!

Anyway that's how I have a real problem with this idea of the relentless pursuit of profit.

And on that light note I think I'm going to end this little rant… sorry for the somewhat strident tone!

Thanks for coming to visit!

=^..=