ShmoopTube

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principles of Finance a la shmoop the elusive nature and notion of profits

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successes Google Amazon Facebook Netflix Tesla Coke Starbucks Disney cheers Envy [multiple brand shooting onto screen]

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mumblings about why they were successful in your little coffee bar wasn't yeah [unhappy coffee barista]

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America got to its lofty perch by celebrating winners commercial success [hand places trophy on shelf]

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and you know being a weapon supplier to Europe during its conflicts and taking [world map showing exchange of weapons for money]

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advantage of market swings as they came and went under the tent pole of a very

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fair and trusted investment and capital market system oh and we stole a ton of [teepees on fire]

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land from the Indians and pretty much killed nearly all of them too anyway by [men waking through forest with rifles]

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hook and by crook we got here we're wealthy successful envied by most [woman holding money in font of the Statue of Liberty]

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of the rest of the world that's why they want to bomb us all the time but ok not [rocket flying through air]

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envied by you New Zealand and nobody wants to bomb you guys but ok everyone [beautiful New Zealand landscape]

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else pretty much but there's a pattern that comes to the successful usually in

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the form of a very I'm Randian set of mumblings by the less successful who you

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know envy and we want to tear down the successful sometimes for good reason [hand pushes trophy off shelf]

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sometimes for bad so when a given business begins to be enormous ly

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profitable it comes under the white-hot spotlight of scorn derision envy and

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rancor from wealth everyone who didn't think of the idea themselves the quote [Google logo put under a desk lamp]

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Little People unquote the governed alright well you know what we're talking

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about the people who simply would never take the risk of starting and running a

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business where failure was indeed an option a very very bad one and usually a

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very likely one or anyone who makes a relatively small fixed salary you know

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working for the government for those outside of the bubble of business well [hand holds magnifying glass up to cash check]

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the whole notion of profit can be seen as something evil as if profits are bad [thief steals profit from infant's hands]

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and somehow taking away candy from babies well by now you've watched our

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video hopefully on the Communist Manifesto [Shmoop website]

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not everyone who scoffs at profits is a strict communist per se that text had

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the same attitude ie the profits really are the creation of the evil doing

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thieves and profits should be held intentionally at zero meaning that there

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should be no profits why well profits belong

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to the people or something like that instead of selling that toothbrush for [thief launches profits into crowd]

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four bucks you ought to sell it for two twelve and just break even so as we [tooth brushes stocked on store shelf]

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begin to digest what profits really are and the structural and ethical drivers [man eating candy]

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behind them if you feel nauseous well maybe check

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out scenic Cuba for a moment it's the only true communist country left on [wasteland pictures of Cuba]

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earth check out their lovely beaches the great well fed population the buildings

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there and the cars yeah well okay at least they have their cigars all right

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now let's paint a picture of Mali's green nice and clean washing machine [woman near white laundry]

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company Molly created a beautiful way to clean clothes using solar power

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limestone and almost no soap the machines have been selling for 1,500

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bucks at retail for a while now years they cost her 850 all in and she makes [writing on white board]

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six hundred and fifty dollars a machine but every now and then someone realizes

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that they live in a cloudy area or really wanted to do their wash at night

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so a few washing machines get sent back and there's a restocking fee or a cost [man rolls washing machine back]

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actually she didn't collect the fee there's other delivery charges against

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her money-back guarantee that she eats so the real cost of her in practice it's

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more like 900 bucks and he really makes 600 bucks a machine I didn't think about [writing on white board]

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that well but all good so far she has 500 employees and runs the company in a

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rural area of the country she can pay her employees a decent wage but nothing [hand places large stack of cash on table]

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city like in this rural area you know they lead a nice life things are cheap [pictures of countryside with cows]

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in the country sells the fresh air one year she sells 10,000 machines at 600

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and profit each and make six million dollars one of the employees blabs about

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this number to the local paper and she's both vilified and honored as the paper [newspaper article]

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notes that her highest paid employee makes a hundred thousand dollars a year

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while she has raked in six million dollars this year but the country's mood

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changes one day people have given up on climate change and the next year she

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only sells 5,000 machines at the next year 3,000 machines and then things

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stabilized at 2,000 machines well at these lower rates she's actually losing

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money because she has a high fixed cost to operate that is she still has to [money on fire]

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employ the 500 people online there pay the rent of the building and buy the [workers in factory]

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steel and the solar panels and the infrastructure to keep everything in

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place so it's three years later and she's losing him

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million dollars a year hoping that the tide turns shows until he's tied in her

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washing machines and people care about green washing machines again

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well she's desperately trying to not have to fire some of the 500 employees

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she has dutifully been paying what happened to the snarky newspaper

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articles griping about her greedy and userís profits of a few years ago well [newspaper article]

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guess what much of that 600 million bucks that she'd stored away is used up

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now it's gone so what should she do continue losing money operating the

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company hmm well the business ethics here are complex and they revolve in

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large part around the definition and the notion of profits and what they really

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reflect that is business doesn't exist like the Olympics there isn't one day in

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Tokyo when everyone lines up and determines who's the best in the world [competing companies swim in a race]

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in the 400 medley relay and well that's it businesses are long-term greedy yet

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they get evaluated generally quarterly or at least annually so think about poor

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Molly desperately trying to hang on while thinking broadly that a climate [woman swimming laps]

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change is still happening be people who have bought her product love it and see

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people will always get dirty and need to do the wash well logically her product

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works it has a voice and a place in the market and there will be a demand for it

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so it's not like she believes the man will never come back it will she just

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has to hang on long enough for it to do so well should the world have maybe

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thought about her 6 million dollar profit windfall differently had she been [hand swipes newspaper]

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successful for a long time and had stockpiled say 40 million dollars in the

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bank well then she could have easily weathered a bad decade and then

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dominated the green washing machine industry after that right her cash stash

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would have been depleted down to say only 20 million dollars or maybe less

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but she'd still have a business those 500 people would go on gainfully

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employed but she didn't she listened to the naysayers read the local newspaper

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didn't fight back when local townspeople levied taxes on her and charged filing

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fees for this and for that and cut into her profits and balance sheet [saw cutting money pile in half]

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relentlessly and Molly never had the gumption to just

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move production to another city or China or Mexico or Africa where she could have [world map]

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saved a fortune and would have been loved by everyone there so here's

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Molly's corporate Diggs now yeah it looks a little bit

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like Cuba any major industries you can think of that have had to weather a

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similar storm yep Texas tea back in 2005 oil was trading at a hundred bucks a [oil rig]

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barrel it subsequently dropped to under $40 a barrel and stayed there a very

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long time the once vaunted wealthy oil companies lost all the profits they'd

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saved and then some essentially had to borrow money just to pay their stock

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dividends and remember that for a long time dividends were what old people

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retired on so they counted on that dividend to be there well then that old

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station wagon was gonna need a portable sink and you know a nicer mattress for [old man sitting outside car]

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Grandma to sleep in with oil having plunged in price there was also no

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appetite for exploratory drilling for new oil nor was there much pressure to [drill going into ocean bed]

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look for alternative fuel sources wind power solar all that bottom line the key

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mission of a business is to continue running as a business like it's to live

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and rainy days come all the time and profits are you know kind of water and

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food and shelter and that whole story dance there yeah so the next time

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someone mumbles some complain about someone getting too rich or making too

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much dough or having excess profits ask them to define excess and then please

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send us at some of the answer we'd love to know

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