90% profit is a market failure, you should not be able to overcharge your customers almost 10x in a working market.
This is obviously something Tony put a lot of time and effort in, and it paid off. Good on him!
But I have a problem with making money without doing any work. If you put in a week of work, then you should be paid for a week of work, you should not profit from indefinitely selling the result of that work again and again. Or even worse, make it into a subscription so that you do not even have to sell it again and again but can just repeatedly extract money from your customers.
And a subscription means you are administering a server (or some menagerie of “serverless” resources) which is an ongoing service that requires maintenance and cost, so that’s what people are paying for, a premium to not have to do that administration themselves.
Like you just want people to suffer? It pains you if people make money without a sufficient amount of hardship?
Just take the general gist, if you are not working, then you should not be making money. And I do not want people to suffer, I want them to be better off. There are many people that actually do hard or badly paid work, software development is not one of them.
If you overcharge your customers to be able to hang out at the beach half of the week, then you are just taking money away from them that they could otherwise spend on say higher priced vegetables improving the wages of seasonal workers.
Maybe another way to see it is that I dislike people that are already well off not being satisfied. What if everyone wanted to only work four hours a day and earn $45k per month? Does this sound like an sustainable idea?
> What if everyone wanted to only work four hours a day and earn $45k per month? Does this sound like an sustainable idea?
With sufficient automation, sure. The goal should be that we all have everything we need without anyone having to work.
With regards to the seasonal workers, you are of course right. I replied to so many comments that probably most of them ended up not very clear. What I had in mind was that if you would not overpay in some area you would have more money left for other things, so you could more easily decide to buy things produced under better conditions with more fair wages or whatnot.
You would probably also see less need to push back in case of price increases, say you could be more supportive of seasonal workers unionizing to demand better wages or whatever. So I did not want to say that wages have to increase, but not throwing money out of the window for app subscriptions would give you more freedom for other buying decisions that could lead to an improvement.
You completely ignore expected value. The most likely outcome is that you make nothing for your five days of work. A functioning market requires outsized returns to compensate for the huge failure risk that goes unseen.
90% chance of making nothing, 10% chance of making 10x your salary is a stable state that is not exploitable.
do you think the same for authors and musicians?
I would say it lies in the nature of being an artist that the products are unique and unpredictable. Competition applies to a much smaller extent. You write one great novel at age 20, should you be able to live on the royalties for the rest of your life? In the end the consumer decides anyway, if they buy enough books at a high enough price, then you can.
As I wrote in another comment, there is also a moral aspect to this. If people willingly pay your subscription fee, then this is what it is. But do you find it good to sell your software at an inflated price in order to make yourself a nice life? How would you feel if everyone else did the same, if the supermarket staff would all only work half a day, make $45k a month and put the bill for that onto your grocery prices? I bet you would hope that competition solves the issue, otherwise your subscription income will no longer afford you a nice life.
Why is this different from software?
The software priced here is very cheap. DevUtils costs lifetime less than what an hourly wage of SWE intern costs.
I don’t even know what logic is implied in here regarding the supermarket staff.
Why should you make $100/hr just because you did some studying 10 years ago? If you do a week of work, you should just be paid for that week of work, not for your 10 years of past experience and your week of work, right?
It seems like you're taking a pretty weird stance against market economics, made more strange by not proposing socialist/egalitarian policies as a potential improvement ("I have a problem with making money without doing any work")
I have nothing against market economics in general, I would welcome competitors driving those outsized profits down. When I say everyone should earn roughly the same, then this is what I think would be a desirable state, but in this case market dynamics are unlikely to yield this result because not everyone can switch to doing every possible job for all kinds of reasons.
This is what makes unskilled jobs pay relatively bad despite this work being important and often hard or unpleasant, but the mechanism to change that, leaving for better payed higher skilled jobs to reduce supply is just not available to many.
So I would think that I am in general in favor of market dynamics, but it has to be a working market.
My original comment was just meant as a general comment that this kind of profit is not supposed to exist. I am not sure if I want to call it unethical but I am really tempted to do. You make yourself a nice life and others do the work.
evidently, these people, who are paying money are finding value in it and they care.
> And who could not live without that?
What does this even mean? What difference is it from people who want their landscaping or house look a certain way so they pay money to others to do that for them. at the
> or do it manually with Paint at the cost of some additional time?
time is valuable or they just dont want to do it.
I don't understand the logic of all of these. What???
Clearly there are factors affecting the willingness of competitors to provide a cheaper offering, you just listed them.
profit happens when I can give you 10 units of value that costs me 1 unit of value. depending on risk factors, we split the difference. ie: if I give you the tool that does it for you, I get all 9 units because all risk is mine. if I tell you how to do it I get maybe 1 unit because most risk is yours.
what you're referring to is arbitrage. efficient markets kill arbitrage (zero risk profit)
You can see how this interpretation clashes with another dogma of economics: that the price of sth is the price that someone is willing to pay for it.
I read your message as saying that this software should be cheaper (arguing working markets but I think it is really a moral argument). This seems like the opposite of markets determining its worth.
Another argument against 90% being a market failure is that this will inspire competition of copycats with lower margin over time. Corrections and competition are not instant.
You can see how this interpretation clashes with another dogma of economics: that the price of sth is the price that someone is willing to pay for it.
There is no conflict here. On the one hand the price can be as high as what customers are willing to pay, but on the other hand competitors should show up in order to take some of your profits by offering a lower price.
I read your message as saying that this software should be cheaper (arguing working markets but I think it is really a moral argument).
Sure, there is also a moral aspect to this, overcharging your customers in order to be able to relax on the beach is not the most ethical thing, but the economy cares relatively little about ethics. So the best one can do is to hope that market forces will correct this.
Another argument against 90% being a market failure is that this will inspire competition of copycats with lower margin over time. Corrections and competition are not instant.
Yes, I did not spell this out precisely enough, it is of course only a market failure if it persist. But given that many of those projects seem relatively simple, how long should one wait before declaring a market failure? Maybe there are already cheaper alternatives but people do not know about them? That is itself a market failure.
If we accept the notion that whether a market efficient vs inefficient depends on whether there is another conceivable outcome that is not zero sum, we can summarize your argument to this:
there are no profits in efficient, free markets, therefore the existence of profits can be deemed market failures.
so, what other reasons can there be to the existence of profits while achieving maximum efficiency on a market? inelastic demand comes to mind for one which in itself has nothing to do with market failures. there are others, like high barriers to entry or innovation advantages or economies of scale. none of them are indicators of market failure HOWEVER they do suggest further analysis into the market conditions and more importantly the behavior of the players as some companies might be more exposed to act in a way that leads to market failure if these parameters persist. however we would need to assess whether markets with persistent high profit margins are more prone to failure than markets with persistent low or mid margins.
which captures my argument: the persistence of 90%+ profit margins in itself are not a good indicator of market failure. while this is true, we can see that market failure can be present in software markets but that has to do with the market structure due to the behavior of the players not the size of the profit margins.
this is why I think your argument while sounds sensational and a great catchphrase for a political rally, it lacks substance and cannot adequately capture reality.
Right. Are you sure you haven't switched definitions in the discussion? Did the original 90% profit margin you quoted include costs of risk (assuming it can be quantified)?
> but that are mostly uneccesary (sic) details for this discussion.
LOL
Here are some. You need time, you may need additional education before you can even start to tackle programming. You might have to move. You might just not be smart enough. You might not be an autodidact and need a teacher which might cost money. You need a computer for which you might not have the money.
But yes, you might not be smart enough. Which was the point. The supply of people smart enough to program is smaller than the supply of people smart enough to clean toilets. Programming is a more complex and difficult skill than toilet cleaning, which is why it’s more highly compensated. So is being a CEO. Like these are clearly not equivalently difficult things, so why do you think they should be compensated equivalently?
Ignoring everything, I also think it would be natural that everyone has the same wage - if you work for an hour it costs you an hour of your lifetime, no matter what you do. You get a bonus for unpleasant, physically demanding, or dangerous work. Every deviation from that due to supply and demand seems generally undesirable. For unskilled labor the abundance of supply - everyone can do unskilled labor - is used to bring the wages down to the bare minimum, often in combination with those jobs being unpleasant work. On the other end a lack of supply allows workers to demand inflated salaries compared to their time investment taking money away from everyone consuming products and services they are involved in.
And I am aware that we need some differential in wage levels to steer what kind of jobs people want to take and that some jobs need longer education and therefore should pay more to compensate for the time spend in education and whatnot. This is just what I think should be the ideal situation under completely idealized and unrealistic circumstances. Or phrased in another way, I think it would be good to make policies that try to make everyone earn the same amount as long as they do not compromise important signaling functions of wage differentials.
And you would be incorrect that this is natural. If two monkeys are gathering bananas and one is faster or cleverer than the other, why would it be natural that they end up with the same amount of bananas? Yes, it's still an hour of your life, but some people use their hours better than others and get more done with them.
I would say we both worked for an hour, so we both get half of the revenue. You want three quarters of the revenue because you made three quarters of the the widgets?
I of course understand that we would want something like that in practice as an incentive, otherwise I could be very lazy and make you do all the work. But let us forget about practical aspects, let us assume we both work to the best of our abilities, we can not find a more productive replacement for me, and so on. We are also not competing, you could of course offer your widgets cheaper than me and put me out of business.
Why do you think it would be more natural or better that we get compensate based on the amount of widgets each of us produced instead of what it cost each of us to produce them, an hour of work?
Long story short, the price should equal the costs of production, that is the goal. Any deviation from that just exists as a signaling mechanism to steer the system and decide the distribution.
[1] Actually up to the smaller of the value the product provides to them and the money they have available, see also [2].
[2] Note that the available products do not go to the consumers valuing the products the most, they go the consumers capable to pay the highest price. With enough money I could buy up all the heart surgeries because I like collecting them and deprive everyone else of heart surgeries even though they actually need them and value them much higher than me but just do not have the necessary money to outcompete me.
Don't knock the power of a job where you can 100% turn your brain off at work, and 100% turn work off at home, either.
everyone wondering if you have a cogent point should read this first to realize you have no idea what you are talking about
If you mean the latter please show us some examples of public cos with a 90% net profit margin. I don’t think there are many.
People with a lucrative gold mine don't talk about it until the mine has run dry and their winnings are secure in the bank.
And Google, Facebook - they are something entirely different, they have a monopoly on their ad machine so they can charge whatever they want - and give something back in R&D in exchange - a company that struggles to keep its lights on can't innovate much (Zero to One is a nice take on this). For the latter, I'm not saying it is good or bad, it has benefits and drawbacks and it's the way it is and it's certainly not limited to virtual products. The Train Monopoly Co in my country has made the tickets practically 2x as expensive in just 1 year and what can I do? They could increase the price even further and I would still be riding with them because there are no other options.
[1] http://libgen.is/book/index.phpmd5=21EE8F203D5C3F9530D55985B...
[2] https://press.uchicago.edu/ucp/books/book/chicago/B/bo375063...
Zero economic profit holds only in equilibrium and there are no markets where equilibrium ever holds for long because the global and local economy is constantly in flux and entrepreneurs are constantly trying to find new ways to solve old problems cheaper or new markets or ways to solve a problem when one of the inputs suddenly dectupled in price.
The system is working well if 90% of revenue is profit at pip squeak levels, yes. If Microsoft could manage 90% profit margins on billions of dollars of working capital that would be concerning. Individuals or small companies finding tiny market imperfections and becoming wildly rich exploiting them is the system working, incentivising people to produce value.
Schumpeter: Entrepreneurs make new things and that’s great. Outside capitalism those people turn that energy into taking more of the pie, as warlords or tax farmers. Capitalism is better.
McCloskey: Capitalism is good because it inculcates patience, diligence and tolerance in people.