Yep. Any community that is run as a single business will eventually enshittify. Cut the gordian knot by avoiding all commercial or even incorporated entities for community communication. The incentives of incorporated entities, like the assumption that making a profit is required in all contexts just because they apply in business contexts, just don't align with human persons or communities.
Good summary. Clear, concise, real. I wish we had advocacy groups sitting on corners with signs saying this. Seriously. People need to wake up, and they need a concise understanding to latch onto. I say it like this, "Perhaps social media where you upvote, downvote and like is just a shitty idea, for businesses and people. I think people WILL realize this, and I am hoping it will not crash software engineering, but I think it will, but most people building shitty software will leave the industry, while the useful software will continue. So it's important to be with an employer in an industry that is legitimate.
Nonprofits try really, really hard to make money well beyond their near-term expenses. Wikimedia Foundation is (in)famous for this.
First, they want a rainy-day fund to cover fixed expenses when income fluctuates. Second, and more importantly, they might want to create a massive endowment that provides them with stable income so that they're not beholden (or accountable) to donors or their usual business partners.
The only difference, at the end of the day, is whether they ever want to IPO.
The other reason a non-profit tries to more than cover its expenses is to accomplish its mission.
The point of non-profits is that their goal is to accomplish something other than profiting. Sometimes the goal can cost a lot of money to accomplish, often much more than just the cost of paying its employees.
For example a non-profit that raises money for cancer research might have very low costs and raise tons of money without raising eyebrows. Because they put the majority toward their goal, and everybody understands the goal, and "profit" is not that goal.
They're actually a great example, they have a defined amount of financial runway they maintain, and they don't exceed it. You might notice they don't leave the fundraising banners up all year.
That's an oxymoron if I ever heard one. A business is literally an activity that is undertaken for the purpose of profit. There are activities that are entered for reasons other than profit, but they're not businesses.
I work for a business owned in whole by its employees. Its goal is to pay its employees a good salary and generally act in the interest of the employees in addition to providing its core services to its customers. There is no pay out of any profits (by design), but it's a commercial enterprise (i.e., a business) nonetheless.
Perhaps for legal purposes that is not considered profit, but it is obviously exactly profit - the business paying money to its owners (who happen to be exclusively its employees).
The business doesn't pay its owners a cent. It pays its employees (who happen to be the owners) a salary.
In a business where profit is used to pay shareholders/owners you don't count the regular salaries as 'profit paid out' either. This is no different; any profit we have is reinvested (while financially stable, there has been no occasion where the profits exceeded the amount prudent to reinvest in growth or other factors).
What happens if the company makes more money than it pays salaries for some reason? I assume in this case and your description, the salaries are adjusted accordingly.
If so, then the word salary here is just another word for owner dividends, at least to some extent.
Those are referred to as "retained earnings" (occasionally: accumulated earnings, retained capital, or earned surplus), and accrue to the not-for-profit organisation's balance sheet.
Note that this may occur on a short-term basis given normal market variability, or over the long term The latter case is more interesting.
In the short term, such business profits simply accrue to accounts, and are typically held as cash or cash-equivalents.
Over the medium term, funds may be moved to various forms of generally-liquid assets (government bonds, equities, etc.), as part of the organisation's money-management strategy.
In the long term ... the organisation gets to decide how to invest those resources. There are several options:
- Increase wages, as you suggest. This is of course only one option.
- Expand business. This might entail expanding or improving a location, opening additional location, going into multiple lines of business, or aquiring other organisations.
- Expand endowment. This is particularly the case for many educational institutions, and those endowments may range into the billions of dollars.
Generally you'll find these options discussed in a long term capital plan or similar strategy document.
For specific forms of business organisation, such as a co-operative business (which may or may not be a not-for-profit organisation), there may also be dividend payouts to members. My understanding is that these are not equivalent to stock dividends, though I'm hazy on details.
What you don't see for non-profits, however, is a mandated and frequently automatic form of return to shareholders, through either stock dividends or inflating the value of a joint stock issue. That cuts two ways: not-for-profits don't have the financial drag of spilling out money to investors, but they also typically have less access to financial capital markets.
Software as a service for healthcare. We do vary salaries based on experience and function, but there is not much of a difference between senior devs and management. We're only a small business of 10 to 20 employees though. It works reasonably well (and we're 15 years old by now); the biggest threat is external market conditions and compliance requirements (because healthcare just is a demanding field).
No, the employees are compensated for the time they spend working. My salary is not a profit, it’s an exchange of services for goods. My stock dividends ARE profits, excess revenue disbursed by the company to its shareholders.
Not more than in any other company, with the exception that the company puts its employees needs first (but this is not exclusive to companies like mine).
Peanut gallery comments really don't add anything to the conversation. Unless this isn't sarcasm and your point is that being technically correct is practically worthless.
My point was that when commenting correctness by technicalities people often leave themselves open to dismissal in favour of more emotive arguments.
A "How dare you be technically correct!" variation is both an expression of mob-correctness trumping technical correctness _and_ an acknowledgement of being technically correct.
A sort of, you're right, I support you, but the crowd might not.
Depends on the definition. If an organization is arranged as, say, a limited-liability company, then it is a business no matter what its goals are. And "profit to shareholders "is neither definitional nor mandatory; the value produced can be whatever the shareholders want it to be. Of course, most of the time it’s profit.
If it is an LLC, then each employee would have to be a member to exercise control and have the legal standing to request profits from the company. An LLC does NOT have a requirement to maximize shareholder profit because there are no shareholders, just members. An LLC has a max number of members and members are required to maintain their portion of tax liability (this means they will owe a % of tax due or receive a % of tax refunds). This overwhelmingly means employees are NOT part of the LLC, as all it would take is one employee not paying their taxes for the entire LLC to be at risk (also this is why investors will run like the wind from an LLC raising money). An LLC CAN have an employment contract where they offer paper shares, which can translate to profit sharing but they are called paper shares because they are unsecured debts and are literally worth nothing in the event of bankruptcy.
They could be a C corp (could also be an S corp but that comes with a 100 share holder limit), but then they have a duty to maximize profit to the shareholders. In a private corporation, the shareholders may be less inclined to sue, but the option is still there and as such the CEO must work to ensure the company is profitable. If they decide to share all profits with the employees, and the employees are majority shareholders, then this likely falls within the sphere of maximize profits.
There are things like a publicly-traded LLP which allows employees to own a portion of the company while offloading tax liabilities to the shareholder, but that is usually limited to companies which depend on depleting natural resources (think oil, gas, coal, lithium, etc)
Any multi-party LLC I've been part of, and it's been more than a few, has provisions about tax liabilities and allowed the LLC to forcefully pay them. Additionally, LLCs rules would control equity holde payouts, and provisions around equity liquidation.
LLC rules do not apply during bankruptcy. Equity holders are unsecured in bankruptcy, employee salaries and secured debts have a higher priority.
You can have provisions about tax liabilities, but that is a specific risk that must be mitigated in an LLC that a corporation does not have to deal with, thus it’s an added risk
If we're talking about the United States, it's not an oxymoron at all. I've got some extremely profitable 501(c)(3) non-profit organizations I could show you. Autism Speaks comes to mind. They may not be making money for public shareholders, but they're making a lot of money for the people who run them, all the same.
Also plenty of organizations look like businesses in every way except their tax status. Thrift stores, for example. Goodwill isn't a nonprofit anymore, but even when it was it also employed all the same abusive labor practices and suchlike that you'd expect from a for-profit business.
Living in an unregulated capitalist society doesn't mean we should reward people or companies that are racing to the bottom putting values and customers aside, once their market has been "cornered" (these companies bet on the unlikelihood of users being incensed enough to dethrone their monopoly).
Silicon valley is based in a country that balks at universal healthcare FFS.
And I have no faith in the techno priest class that is just as corrupt as the Jesuits of old. They'd sell out their principles for a Lambo as we have seen time and time again.
But stay positive if that's what keeps you sane.
There is a big difference between making a profit and optimizing for profit.
Plenty of businesses make a profit - even a healthy profit - while respecting their employees and contributing to their community. Ones which optimize for profit inevitably become evil.
With that you mean that in tech the value extraction has been in the hands of only a few players (which is exactly what you'd expect in a global market with near-perfect competition. To some extent you could say the entire cause of this is that governments allow multinational companies to exist at all).
Value production for the internet was mostly done for free. Both where it comes to end users and the hosting they needed. And yes, sometimes by "wasting investor dollars" (of course investigating new things, wasting dollars, is exactly what investment is supposed to do, that it does that is why investment is allowed).
And ironically this goes multiple steps up the value chain. Users and mods are complaining to reddit that they don't "pay" them enough. Reddit is complaining that Google/FB/even OpenAI at the moment don't "pay" them enough by trying to take in ads directly, and presumably training their own AIs soon on "their" data. Elon Musk is complaining that he's providing data for free (it's even costing him some money, even though not anywhere close to the amount he implies) and not getting the dollars AI companies are attracting with "his (users)" data.
The real value in OpenAI is that Google's position is that they are the arbiter of where users go. Users decide where to put their attention 99% ... and Google 1% (and FB 0.1%, and reddit 0.01%). But OpenAI is a serious threat to Google's 1%, because it can give better answers and therefore will have the perfect, most expensive, place to put ads if things keep going the way they're going.
For Google this is a lose-lose proposition. Either they win, get to keep their position because they get the best Chatbot. However, running this chatbot is much more expensive than Google search (and they will need to restart their revenue optimization with angry shareholders screaming at them. There is no adwordsLLM yet). So they'll need to run a much more expensive internet scrape on a regular basis, and figure out how to run ads on this new platform, just to maintain the position they currently still have. Shareholders don't care, they just want to see Google's dollar amounts go up 20% per year as they did for a decade. And if Google doesn't do this massive investment? Well, they may lose everything.
Funny how apt the old Futurama joke has become "the internet has always been about the free and open exchange of somebody else's ideas".
Futurama meant Napster. But Reddit has exactly this business model. Google has exactly this business model. Twitter ... etc. I bet the tech sector has actually made more money on this than even the most absurd claims of the RIAA say Napster has cost them.
> OpenAI is a serious threat to Google's 1%, because it can give better answers
It does seem to give better answers.
But I don't think that's necessarily indicative of which kind of technology is capable of giving better search results. Google isn't what it was 20 years ago, so I don't think that what Google is now is terribly indicative of what their core technology is capable of being. They've largely allowed their search service to sink into a quagmire of content farms. They occasionally make a vague swipe at dealing with the absolute worst of it, but for the longest time they've had little incentive to put too much effort into it because these same content farms produce a sizable chunk of their ad revenue.
And they won't go down without a fight. I can't imagine it will be that easy for their crown to be wrested away by a chatbot with stratospheric operating costs that's been jerry-rigged into an ersatz search engine that nobody can afford to "reindex" more often than once every couple years. I wouldn't be surprised if a few rounds of proximal policy optimization costs more than it would cost Google to apply some proper attention to their search result quality.
Their service also got destroyed by SEO. Google has been at war with the public for decades. They simply lost. The public literally destroyed their product. Then they needed to increase ads. They are on a runaway train to zero.
> Shareholders don't care, they just want to see Google's dollar amounts go up 20% per year as they did for a decade. And if Google doesn't do this massive investment? Well, they may lose everything.
to “they may stagnate”. Alphabet shareholders are not going to be left with worthless shares because Alphabet still has the ability to earn tens of billions of dollars of profit per year, just shares worth less than they hoped they would be worth. I.e. they might have to be content playing in the market cap of hundreds of billions rather than trillions.
