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I do not think so. See retail and insurance businesses, with their consistent 2% to 6% profit margins.

Bigger potential profits merit bigger risk taking. But not all investments have the same risk profile and time horizons.



It's not a matter of thinking so or otherwise. It's a mathematical question of what value each worker added to the product. Other expenses aside, profit is the difference between the value they added and the wage they were paid. You don't get profit without underpaying relative to the value provided by a worker.


Your assumption is that each worker is solely additive or multiplicative to the process, and thus the marginal worker's input is uncorrelated to the team and the environment. Certain teams can be exponentially performant while mostly full of mediocre individuals, and certain processes can stunt the fruit of the vine.

Rather, what you're calling for is average value produced, which is substantially different. I'm not sure I accept the assertion that they are close.


I'm not talking about individuals. In aggregate, you don't profit unless you pay your workforce less than the value they produce. It's not complicated.


Value is an ill defined word to use in economics. I rarely, if ever, have seen a good reason to use it.

Obviously, employers are not going to operate a business at zero profit margin, so I am not sure what the significance of pointing out that employees do not get paid the sum total of their economic contribution to a business’s profits (which I imagine is rarely ever calculable).

The whole point of having buyers and sellers engage in numerous, transparent transactions is to figure out what portion of the business’s operations should be allocated to the purchasing of labor, since there is no objective way to measure it and have a definitive answer. It is always moving, and needs to be continuously updated. The same reason employees always need to be shopping around and seeing who will offer them the appropriate price for their labor.


The macroeconomics are built from microeconomic foundations.


That’s simply not true.

If I create value by hitting in a nail with your hammer I deserve compensation for my labor, but certainly you deserve compensation for the part your hammer played as well.

Wages are simply returns to labor, profits are returns to capital.


The hammer is an expense, as I mentioned. The hammer doesn't deserve interest payments for existing IMO.


It’s not an expense, it’s capital. The nail is expense.


Insurance is so far from perfect information though. Maybe perfect information in for an average year is possible, but it is the black swan years that knock you out.

Even then, there is no perfect information on clients.




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