i've noticed some folks are strongly opposed regulations they perceive as excessive when the companies cry that it's going to hurt their profit margins so i wanted to share a little story ~

i'm currently dealing with a meltdown at my work place because of short sighted decisions aimed to "maximize profits" while ignoring an ongoing infrastructure problem which finally broke under under excessive load ~ the situation is quickly turning into massive losses by the hour

as for why it was ignored, it's because the issue with our infrastructure was a well known one but since it isn't directly tied to revenue generation it never got much attention until now when things finally break and now we're scrambling to fix it

will we learn anything from this? no, because these things have happened several times throughout the past couple of decades, oversight of infrastructure issues leading to a chaotic meltdown, leading to a mad scramble to find a bandaid solution to the issue so we can resume business as usual only to repeat the same cycle a few years down the road

now you might think that as bad as this sounds, in the long run these corporations are doing great even if they run into frequent internal issues ~ after all a business model built on prioritizing decisions which maximize profits is great right?

the sad truth is that "maximizing profits" is nothing more than an internal sales pitch

while we pass up on funding robust infrastructure so that we can pursue projects to generate additional revenue, the truth is that we don't know for a fact that these projects are generating any meaningful profits for the company at all. this is because while we hype up the numbers on the returns that we will get when we make our sales pitch for a project to obtain funding, we don't actually measure the returns we get on most of our projects once the solution is in place ~ this is due to internal politics where it's not in the best interest of those who funded a project to verify and be held to scrutiny for their claims of roi on the corporate projects they funded. I personally believe that the 80/20 rule runs strong in big business where the vast majority of our profits comes from a fraction of things we throw money at

9 times out of 10 these are internal matters and you will not hear about them on the outside, but knowing how vulnerable large corporations are as a result of their own business model it is extremely important that we have regulations in place to maintain bare minimum service levels which have heavy infrastructure implications - this is the only way to get big business to do something about weak infrastructure outside of things going horribly wrong and scrambling for a fix - while they might complain that this will hurt their profits, the reality is that they're too greedy for their own good and forcing them to spend a little money on building robust infrastructure to avoid future losses is in the best interest of these large corporations as well as the people that use their services

/endrant

This post was edited by duffman316 on Jun 12 2013 09:34am

I think you need to differentiate between long term profit maximization and short term profit maximization.

Under long term profit maximization, firms will minimize any disruption in production even if it is more costly over the short run because they know it will reduce costs over the long run.

Short term profit maximization is where you run into problems as you described above.

An argument could also be made for the divorce of capital and ownership, where growth of the firm becomes the main priority of large modern firms, rather than maximized profits.

Well it's human nature to grow less motivated and want more money/power when in good position. It's like with many doctors -- they go into their profession with the desire to help people, but overtime they lose that honest passion and just grow dollar signs in their eyes. CEO's at some point can decide that they just want to suck their company dry and retire with more money. If they weren't like this, they would tread more lightly in how the money is managed, even if that means operating in the red for a while to keep things alive.

I know my company puts a lot of attention into the basic components that make up the company. Your intangible assets can be just as valuable as your tangible ones.

This post was edited by Asno on Jun 12 2013 09:45am

@

what you are describing has nothing to do with outside/government regulations but rather corporate governance

but i do understand your rant having experience myself the following approach
- have a fancy idea
- get consultants in to create a business model which justified your idea
- those consultants will create a model with few costs associated (minimal infrastructure if that is considered at all)
- project gets approved
- cost overruns and breakdowns will be blamed on the consultancy (that why they are worth their money)
- someone else will sort out all problems (*)
- the one who had the fancy idea gets a promotion/bonus
- the cycle starts again

(*) really p...d me off when i was managing operational/technical support as an employee - now as self-employed contractor i don't mind at all

This post was edited by brmv on Jun 12 2013 10:19am