Comment by Anderkent | Hacker News Reader

Comment by Anderkent | Hacker News Reader

> Consider an elementary proposition: companies exist to make money, not to lose it.

I'm not sure I agree with that proposition, at least in the general form in which it's stated.

Yes, the objective of any particular company is to make money. But is that why companies exist? We support the concept of a company, build laws and systems that allow one to be created. And clearly the reason we have those laws and system isn't so that the company can make money.

So the instrumental goal of a company is to make money, but the terminal value of companies existing is something different. Perhaps it's that they help us collaborate on issues that outscale any particular mind (though in that we have to be mindful of the Moloch [1] and keep in mind that corporations think in alien ways [2])...

If so, corporations exist to solve human issues primarily; and making money is only a measure of how successful they are at that.

1: http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

2: http://www.antipope.org/charlie/blog-static/2010/12/invaders...

You might like to look up work on the Theory of the Firm, as to why companies exist. I'm not suggesting it's the answer but I did find it interesting.

http://en.wikipedia.org/wiki/Theory_of_the_firm

I model people's motivations (and systems made out of their motivations, to a lesser extent) as tangly, illegible, time-varying weighted directed graphs of weighted goals, where none of the nodes seems to actually persistently have indegree == 0 or outdegree == 0. The use of "terminal" and "instrumental" here isn't very clear to me. [http://lesswrong.com/lw/l3/thou_art_godshatter/]

But, to me, "company" usually means something like "an organization with higher-level goals that include selling things to customers and making money for its other stakeholders". When that's not the case, I think of words like "charity", "non-profit", and "club".

Well, "non-profit" is just shorthand for "non-profit company", right? At least that's what I'm used to, though googling now seems to bring up "non-profit organisation" as the more popular term...

Regarding 'terminal' and 'instrumental', perhaps the better descriptors would be 'direct' and... uh, not sure, let's take indirect by symmetry.

The direct goals of a company is to make money. The reason we want to have organisations that focus on making money is because .. (we believe that organisations with larger positive impact are better posed to make more money, we want to harness the self-interest to improve efficiency, etc etc). The point is just having a company that makes a lot of money but doesn't improve the world is counterproductive.

In one line of reasoning, money is a proxy for happiness (I'd rather change this to value... but this doesn't matter because this example is so distilled). So, companies exist to make people happy. This works by providing a good or service that makes a customer happy in exchange for money, which the company can then use to give to employees and shareholders so they can be happy too. Since the company creates a profit, happiness generation can be sustained for multiple parties well into the future.

That's an organization or club, not a company.

Well, a company is a type of an organisation, isn't it.

A club is usually focused on providing value to their members, rather than the world at large; I'm not sure how it's similar.

The members of a company are generally its owners or shareholders, and the company exists to carry out its objects - if the objects of the company are commercial, that usually means providing a return to shareholders.

But the point made by Thiel was not meant to be some existential musing on the purpose of companies generally. The proposition that "companies exist to make money, not lose it" is "elementary" because he is there referring only to companies with commercial objects. In other words, 'for profit' companies exist to make money, and at least for those companies it is a mistake to focus on other metrics to the exclusion of profit.

As for the historical relationship between the development of company law and commerce, a good place to start would be the history of limited liability companies and corporations (in the UK, US and elsewhere) and the effect of limiting liability on entrepreneurship.

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