If a company like amazon generates very little corporate profit, is that unproductive growth? Aggregate corporate profits are not the only stat that matters when discussing economic growth/value.
Of course not. There would be more employees, more taxes paid, more buildings being built, more assets, etc. thus more money going into the economy.
I've always dreamed that companies should run with zero profit (like the outdoor store co-ops like REI or MEC in Canada). They could price their products so they don't make any "extra" money each year after all expenses and salaries, etc.
I think we'd live in a better world if a company like Apple didn't exist to make ever increasing profits, but existed just to create the products they create.
The whole point of profits and investing is to hook up the "skin in the game" of investors to viability of project. That's the definition of capitalism.
It's interesting though that there are certainly extremely successful companies like MEC in Canada and REI in the US who don't follow this model.
Their customers are extremely happy. Their staff get paid. The y create excellent value for customers. BUT they don't make a profit. Nobody can get rich from owning a slice of it.
Why couldn't more companies be like that?
Isn't that precisely what you get from competitive pressure in a free market? Things end up priced barely above production costs.
> I think we'd live in a better world if a company like Apple didn't exist to make ever increasing profits, but existed just to create the products they create.
That would be a nicer world to live, true. Unfortunately, we've created a system in which the primary reason for a company to exist is to make profits - and then we pit companies against each other to minimize profits made. The end result is a lot of creativity unleashed in the process of innovating, cheating and defrauding your way into not being a commodity.
Evidently no. Companies are making hundreds of millions in profit every ear, they're paying their CEOs tens of millions as a "bonus".
They're they're making a lot, LOT more than just "barely above production costs"
The other part of my comment also mentioned that companies do everything they can to avoid being commoditized: that's another source of inefficiency/surplus revenue. The market is in flux; commoditizing takes time.
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https://www.modernhealthcare.com/article/20181030/NEWS/18103...
It's not about what percentage of their revenue it is, it's about how that money that should go to adding customer value, not making exceedingly rich people richer.
500 million dollars could change the lives of tens of thousands of people that Aetna calls customers... but instead it goes to ONE person.
It doesn't have to be that way.
Everything can be improved, and we should strive to improve everything. I'm very aware of companies that operate very well without making a profit. They add a lot of value to society, the employees get paid and they're even expanding (MEC in Canada). But no profit. Nobody who doesn't work there gets richer. So why don't Apple work that way. Why doesn't Comcast work that way.
CEO pay represents a huge surplus of money (profit) that wasn't needed. The products and services offered by the company could have just been discounted that much, or the employees could all have been paid more, not just one person.
It's very hard defend the argument "CEO pay represents a huge surplus".
How much value does that CEO being by his skills/decisions? Why would he be hired with the salary he receives (that he does not get to decide) if he didn't create more value than what he costs? It's just like any other employee, except a more competitive space and where decisions have larger profit effects.
You are against join stock companies, but not interest bearing loans/bonds or arbitrarily high salaries for managers? Why?
Also, heavy CAPEX or any other form of internal reinvestment does not mean there should be no profits. Look at Google, Facebook, Apple, Microsoft - all those companies were bootsrapped mostly through internal cash flow. All of those companies were profitable when IPOing (just look at historic S-1s).
Even if CAPEX generates profits, if the returns were lower than your capital cost then company would have been better off not investing and returning that instead to shareholders.
Presentation on this very topic: https://youtu.be/c20_S-QgvsA?t=730
Edit: What I'm saying is that profit is a lagging indicator of CAPEX, and your lack of profit now could be the result of bad CAPEX 5 years ago, or good CAPEX 5 years ago, plus aggressive new CAPEX now.
CAPEX is written down via depreciation charges over many years. I.e. if you buy something for $1M, and it has an accounting life of 10 years, you book $100k losses per year.
What you're thinking about is called "cash flow", not "profits".
Same amount of profits (DCF + discounted terminal value) spread over fewer shares implies a higher share price.