Thursday, 28 April 2022

Profit versus prosperity

The  goal of corporations is to maximise profits for investors.

This concept has directed and justified the behaviour of corporations for centuries. But is it sensible, is it right, is it useful?


Profit is a holy cow of the Capitalist economic system. It is the fuel that drives the market engine. 

Capitalism focuses on the creation and accumulation of capital through profits derived from trade. The Free Market System focuses on the freedom of individuals to trade with each other. Both favour private property, open competition, and minimal regulation, and rely on the price mechanism.


Profits provide the incentive for investment. Non-shareholders are specifically excluded from a share of profits. Shareholders control corporations. They have a perverse incentive to maximise the profits which accrue only to them, through the appointment of managers whose main aim is to maximise profits. Not surprisingly, these perverse incentives lead to perverse outcomes.


The 21st century has seen the rise of several mega-corporations with unprecedented control over  health, energy, the flow of information, money and goods. These corporations have been very profitable, and have made many investors stupendously rich. They tend to make large annual profits. But have they increased the sum total of human prosperity? In their quest for profit, do they undertake evil acts to the detriment of society? How do you reconcile the freedom to trade with accountability for the consequences of that trade?


Merck discouraged the use of Ivermectin, an effective treatment for Covid but no longer profitable to Merck, in favour of high profit drugs such as Molnupiravir and Remdesivir, with known serious side-effects. Pfizer aggressively promoted their highly profitable mRNA vaccine, despite dangerous reports from their testing process.There are thousands of similar stories.


Most companies and corporations do not make high profits. The average profit margin  for American corporations is around 5%, for those that make any profit at all. Corporations making low profits may be even more desperate to increase profits than wealthier ones. However, I would contend that companies make high profits mostly because of 3 factors

  1. Reduced competition, possibly through monopolistic practices (Banks, oil companies)

  2. Regulatory capture - they manipulate politicians and legislatures to their advantage (Pharmaceutical companies)

  3. Better products and processes (Tesla and Apple)


What can be done to reduce the perverse incentives of shareholder profit? In most countries high wealth is heavily taxed, but the richest are most adept at avoiding taxes. In many countries, the rich provide considerable philanthropy, mostly aimed at the poor of third world countries. Wealth tends to be distributed and reduced across generations of the same family, but not if the family is careful. I have no quarrel with the acquisition of wealth through legal means, only with the perverse incentives that the profit motive gives rise to.


I propose a new goal for corporations. It is based in part  on ideas suggested by Klaus Schwab in his recently published book “Stakeholder Capitalism”. 


The  goal of corporations is to maximise shareholders.


Annual profits above a specific percentage (say 10%) would be used to buy and distribute shares to stakeholders in the corporation. Stakeholders are individuals whose actions contribute to the corporate profit, but do not receive that profit. This would be employees, suppliers, customers, agents, retirees, charities. A company would establish a register of stakeholders, just like the shareholders register. Each year an allocation of shares would be made to these stakeholders funded by the profit in excess of 10%. Various criteria for allocation would be established, such as years of service, previous receipts, age, etc. 


I believe that the incentive to accumulate excessive profit for the benefit of just a few would be diluted by this approach. I believe that an increase  in shareholders amongst stakeholders would be beneficial to the corporation, as more individuals would be motivated by the success of the corporation. I believe this would be beneficial to the prosperity of the community in which the corporation operates. Like Maggie Thatcher, I believe a share-owning population is superior to a population dependent on government largesse.


How would this new goal be implemented? While some may feel tempted to enact laws to enforce this approach, I believe that would be counter-productive.  Let individual corporations freely choose to adopt this approach because it is the right thing to do, because it may result in increased revenue, and because of peer pressure from the public. For example, many corporations adopt counter-productive policies for the alleviation of global warming, because of the public pressure to do so.


Let us remove the excuse of maximising profits from our business language.


Appendix

Definitions

  1. The  goal of corporations is to maximise profits (return on investments) for investors.

    1. Corporation

      1. a legal business entity that is owned by its shareholder(s). It possesses many of the same rights as an individual. The corporation is liable for the actions and finances of the business – the shareholders are not.

    2. Maximise

      1. Make as large as possible.

    3. Profits

      1. the excess of returns over expenditure, after taxation

    4. Investors

      1. Individuals or corporations that make money available to a corporation in expectation of a profit.


  1. What Is profit (Return On Investment)?

    1. Getting more than you put in?

      1. Is this physically possible? Seems to contradict 1st law of thermodynamics (Energy cannot be created or destroyed).

      2. Is this morally acceptable?

      3. Financially, where does the increase in value of investment come from? Is new money created, or is it taken from a 3rd party.

    2. Re-arranging stuff to be more efficient or useful (intellectual investment).

    3. Growing stuff

      1. Turning seed and soil into food.

      2. Mixing labour with nature to achieve growth.

  2. What is the goal of most individuals? To maximise return on investment? To survive and reproduce? To make a mark on history?  Examples

    1. Children

  1. if you invest resources in children, they will pay back your investment in old age (perhaps)

  1. Experiences

    1. no physical component, ephemeral

    2. hard to measure, hard to quantify

  2. Friends

    1. Investing in friends for profit is regarded negatively

  3. Life partners

    1. While desirable, probably not profitable

  4. Financial investments

    1. Profitable investments provide satisfaction, security, comfort, retirement

    2. Only 10% appear to achieve this goal. (Independent retirement stats)

    3. Dependent on previous successful investments, inheritance, chance

    4. Subject to risk of loss

  5. Physical investments

    1. Who dies with the most toys wins

    2. Transitory

    3. Useful - housing, transport, food, entertainment

The role of profits

  1. Profits provide the incentive for investment

  2. Investment is linked to growth

  3. Growth is linked to increase in prosperity (Happiness and contentment arising from financial success) for shareholders

    1. Growth may occur at the expense of non-shareholders

    2. The search for growth may exceed good judgement and ethical limits

      1. Weapons industry stimulating demand by promoting conflicts

      2. Pharmaceutical industry stimulating demand for dodgy drugs

      3. Advertising industry stimulating fake demand for non-useful products

      4. Banking industry selling known dodgy assets

      5. Industries suppressing competitive inventions or patents

  4. Alternatives to profit motive

    1. Stakeholder empowerment

    2. Regulation

    3. Taxation

    4. Public shaming

    5. Non-profits, who invariably get their funding from for-profit companies

Questions and observations

  1. With massive reductions in competition in many industries due to consolidation and mergers, the US economy has become profit inefficient, with record profits occurring in recent years.[3] This creates a deadweight loss to the economy.

  2. Critics of the profit motive contend that companies disregard morals or public safety in the pursuit of profits

  3. Competition is the key tool by which markets overcome the individual firm's profit maximization incentive. In the absence of meaningful competition, profit may be unrestricted

  4. Profit is the reward for business success.

  5. is the quest for profit a perverse incentive with a frequent bad outcome? Should laissez-faire apply? Do people have a right to spend their money as they see fit? Corporations do not use coercion to achieve profit. They engage in willing buyer/willing seller transactions.Do corporations have no option but to maximise profits? If they don’t make a profit, they go out of business. Is there a model which would provide reasonable alternatives to the maximise profits paradigm.

  6. As an individual, is your goal to maximise profits? Is this not akin to maximising food consumption, or sexual activity, or wealth accumulation. Does wealth accumulation justify lying, shady practices, harm to others. Why then do we give corporations a free pass for profit.






Sunday, 10 April 2022

Just because it is written doesn’t mean it's right

We have a disastrous tendency to think that written laws have some magical air of authority, of wisdom, of special insight that elevates them above the mere opinions of their authors. Some subset of a subset of pollyannas have a cathartic collective experience on a committee, reel off a series of mindless misanthropic motions, and suddenly we have a law we must obey? Include me out.


Why do people  I did not vote for, whom I do not like or respect, who happen to have received an arbitrary number of votes in an election I did not engage in, now get to tell me what to do, with all the force of law?  Well, that’s democracy, you say. It's the best we've got, you say. It's how  we’ve always done it. Some must suffer so that all may prosper.  What bollocks!


What regulations does your local supermarket enforce upon you? Only one, really, and it's unwritten. You must pay us for stuff you take at the price we advertise. As Walmart demonstrates, you can pretty much wear what you like. You can take as long as you like during opening hours. You don’t have to complete any forms, submit any documentation, speak to any manager, in order to complete your shopping experience. And they go to extraordinary lengths to minimise the time you stand in queues


This regime of regulations, this riot of rules reached its peak during the recent Covid insanity. Petty health officials spewed forth a cascade of life threatening rules, unscientific, impractical, and deeply contemptuous of citizens' rights.  But because they were written down, somewhere, because they were “officially” approved, because they came with draconian “legal” threats, we rolled over in our millions with barely a “baaah”. 


“But a society without rules would be anarchy,” I hear  you bleat. “We must have road rules to prevent chaos. People would die!” The fact that people do die, in their millions, despite the many road rules, should give a smart person pause for thought. Perhaps there are better ways to manage the roads than by adding endless layers of rules? One recommendation (not even a rule), practised in enlightened countries all over the world, reduces road accidents dramatically - AVOID COLLISIONS. 


Rules, even when written in very big letters on very expensive paper, do not guarantee compliance. Compliance is a cousin of consent. If I think your rules are stupid, if you force them on me, I will not comply with them, even when they are occasionally sensible. I will not consent. If you want my cooperation, convert your rules to suggestions. I might consider them, if they make sense. As opposed to a knee jerk rejection of your compulsion, I might even recommend them to others.


Ninety percent of the rules you need for life you learnt in kindergarten. Don’t hit others. Don’t take their stuff. Be nice. Be wary of strangers. Have fun. 


If you wish to see the 4 rules that I recommend, have a look at the Individualist Manifesto at www.individualist.one.






Wednesday, 23 March 2022

Parallel structures

“The State is a condition, a certain relationship between human beings, a mode of human behavior; we destroy it by contracting other relationships, by behaving differently.”

Gustav Landauer

Ignoring is bliss


In the course of the last two years many countries have imposed their will upon their citizens. Using the  vast funds at their disposal and their relative efficiency,  it has been hard  for their citizens to escape the quarantines and mandatory vaccines and forced lockdowns. The state has been hard to ignore.


But this is not the case in South Africa.  The government does not have vast funds,  They are not even remotely efficient,  and most of the time have almost no clue.   This opens up a workable form of resistance to the endlessly encroaching state. In South Africa you don't have to defeat the government,  you don't have to overpower them,  you can simply ignore them in relative safety.  Most of the population does. 


Here is a list of government interventions that you can simply ignore, or avoid:


  1. E tolls

  2. TV licences

  3. Tax - most citizens

  4. Speed fines

  5. Electricity payments - Soweto

  6. Rates - most townships

  7. Bitcoin enquiries

  8. Vaccines

  9. Street and town renaming

  10. POPI act

  11. Internet publishing restrictions

  12. Mask mandates 

  13. Calling the police


Instead of endlessly worrying “what is to  be done”, simply do nothing.


For further ideas, visit The Parallel Society vs Totalitarianism | How to Create a Free World


Wednesday, 9 March 2022

Past tense, Future imperfect

 

by Trevor Watkins


In science the quality of your research and your thinking is measured by the number of hypotheses you suggest that turn out to have some basis in truth,  as revealed by the passage of time.


 As a student of the human condition I make predictions from time to time which are then measured against the revealed reality,  in the endless hope of being able to say “I told you so”,  but also to give me and my loved ones some tools for navigating a treacherous future.


In 2018 I penned an article called The future in which I laid out three possible scenarios for the next couple of years.  Having three scenarios is a good strategy since it  significantly improves your chances of being right.


Most of my predictions were about 12 to 18 months early. Remember the article was written in 2018 and 2020 seemed a long way in the future.  I have cherry-picked some of the better predictions below, while ignoring the worse ones.


Time frame

Prediction

Reality

Time frame

Late 2018

The “Incident” occurs. This might be an Eskom or SAA loan default, a natural disaster, an assassination, a major riot, an epidemic

The Covid pandemic starts in China..


The KZN riots occur .

late 2019



July 2020

Early 2019

State of emergency declared by Ramaphosa.

 

2019 elections delayed indefinitely.

 

 

 

 

 

Growth rate is negative 1%. 

 

Unemployment reaches 50%.

 

May 2019 election results

ANC 55%

DA 20%

EFF 15%

State of disaster declared by Ramaphosa.

 

2019 elections proceed

 

IEC attempts to delay 2021 LG elections. Overruled by Concourt.

 

Growth rate 1.2% in Q4/21

 

Unemployment 46,6% in Q3/2021 

 

ANC 57.5%

DA 20.77%

EFF 10.8%

March 2020


May 2019


November 2021



December 2021



May 2019

Mid 2019

Service delivery rioting increases around country. 


Riots move from dusty townships into leafy suburbs. 


Army deployed to curb riots, but ineffective. 


Death toll in riots exceeds 1,000.

Riots in KZN



Many urban areas hit



Army deployed, but ineffective



Death toll exceeds 350

July 2020


DA becomes a liberal party.

Mmusi Maimane resigns, more liberal policies implemented by Steenhuizen.

Oct 2019

Late 2019

Ramaphosa remains president of a deeply divided country.


South Africa stumbles along with no major policy shifts and poor future prospects.

Ramaphosa remains president of a deeply divided country.


South Africa stumbles along with no major policy shifts and poor future prospects.

March 2022


So, I predicted the pandemic, the KZN riots, the state of disaster, the election results, and the re-alignment of the DA. Now for my next trick…


In the Old Testament's Book of Ezekiel, the 4 horsemen of the Apocalypse are  sword, famine, wild beasts and pestilence or plague. We’ve already had sword and pestilence. Famine is coming. And the wild beast is a Black swan, or perhaps an alien.


Herewith my predictions for 2022 and beyond..


Subject

Description

Before

Consequences

Covid

Covid declines to endemic flu status

Q3

All Covid mandates worldwide lifted.


Vaccine injuries 

Q4

Vaccine injury deaths exceed Covid deaths


Many vaccine injury court cases begin


Recriminations for Covid policies escalate

Q3

CDC/NIH  re-organised in US


WHO / SAGE / Imperial College humiliated


Many Public Health Agencies collapse/close


Fauci resigns


Ivermectin approved for worldwide use.


Moderna and Pfizer declare bankruptcy





Ukraine

Russia/Ukraine Ceasefire


Russian troops begin withdrawal

Q2

Without preconditions.


Remain in Donbas and Crimea


International peace conference scheduled

Q3

NATO states, Ukraine, Russia, China, UN observers


Putin deposed

Q3

Forced to retire by FSB


Russian economy craters

Q4

Starvation, destitution in Russia


Big win for US and EU construction conglomerates as Ukraine rebuilding begins.

Q3

Massive governmental aid goes to construction companies.





Economy

US inflation exceeds 10%

Q2

Debt, logistics, oil. Widespread rioting in US.


Stock exchanges drop 50% worldwide

Q3

World recession begins


Food shortages widespread in Western countries

Q3

Bill Gates stands to profit from US land purchases


Oil $200/barrel

Q3

May reduce as Russian supply returns





US politics

Biden declared medically unfit

Q4

Kamala Harris takes over as president. 


Republican have majority in House and Senate after midterms

Q5

Massive legislative programs begin to reverse Democrats policy


Republicans mount bid to impeach Biden/Harris after midterms

Q5

Could even replace president, given majority





China

Taiwan invasion delayed to 2024

Q3

Worldwide response to Putin aggression sends Chinese home to think again


Chinese growth rate collapses

Q3

Drops to below 3%


Widespread unrest

Q4

Internal unrest increases despite violent suppression.

External protests increase.









World

Canada, Australia and New Zealand governments replaced with conservatives.

Q4

Trudeau sued, exits politics. Australian and NZ state governors sued for lockdown offences.





South Africa

Cape secession referendum approved

Q3

New SA polling mechanism through Xtra card shows widespread support in WC.


World recession wreaks havoc on SA economy. Massive inflation, unemployment. 

Q3

Eskom, SOEs close to collapse. 


Sassa grants not paid

Q3

Widespread rioting


IMF loan approved

Q4

Sassa grant payments resume





Aliens

Detected and confirmed

Q4

Aliens insist on speaking with Elon Musk





Culture

Woke movement collapses.

Q3

Made irrelevant by new conservative regimes


Global warming movement declines

Q3

Global recession pushes AGW to backburner.


Profit versus prosperity

The  goal of corporations is to maximise profits for investors. This concept has directed and justified the behaviour of corporations for ce...