I don’t doubt it. I’m simply using those as examples of things that might sound bad on the surface, but in actuality are likely something that any company their size in their industry would be dealing with. The fact is that company’s are nothing but a collection of employees. There aren’t very many companies where I would state that poor ethics are pervasive and encouraged as a company philosophy.
I simply don’t understand the idea here, and likely commonly held by Democrats (my opinion), is that companies can just be purely evil. I mean do you people not understand how professional jobs in the U.S. (and other first world countries) work? Kids either major in degrees that on the surface sound interesting to them or their parents did them. If a kid’s dad happened to be an engineer, he might major in engineering. When he graduates as a poor college kid he might have a couple of job offers and he takes the best one for his circumstances (pay, location, etc). He may take a job at Exxon and then within 10 years he is in middle management in a decision maker role. Is he now all of a sudden evil? If he is smart and successful and moves into upper management is that when he becomes evil? When did this person supposedly turn evil? Was it just because he took a job there in the first place?
Seriously, just about any random company is just a collection of people trying to earn a good paycheck and generally do the right thing. Most every large company has interchangeable human resources and legal departments (in house counsel might be able to change jobs from Exxon directly to Starbucks directly to Apple to GE). That guy is trying to minimize risks of lawsuits and so forth at every company he works at. It’s not like one particular industry or company attracts immoral people more than another.
“Minimizing lawsuits” =/= “doing the right thing”. Now, I get that most companies do the former, and hope it lines up with the latter, but it’s certainly not the case that it always or even usually does.
Their product is a commodity (oil or natural gas) and they have no control over the price of it. They are competing based on how much they can find and at what cost it takes to find it. They sell based on the market determined price, nothing more and nothing less. When you get down to selling gasoline to retail customers I guess you could say they have control over that sales price, but most oil companies aren’t really in the gasoline sales business. The fact is that most do not own these gas stations (even if their name is on the sign out front).
The basic idea behind owning a gas station for the companies or individuals that own a lot of them is very different than what you might think. First, again, the majority of the owners of gas stations are not oil companies. Second, they really don’t make their income from the sale of gasoline. They make money based on convenience store sales on an ongoing basis. For most of the larger gas station owners it is more of a real estate play. They buy the land, put a gas station out front to pay the bills, and then hopefully sell the store when the land value has gone up. If you are a banker and lending money to these guys, you obviously want them to be able to service the debt with their operating cash flow, but your primary collateral is the land that they own.
Finally, you are simply wrong that the price of gasoline has no effect on demand. I have read that the price utility of demand for gasoline is somewhere between 0.5 and 0.7. This means that for every 10% rise in gasoline there is a 5% to 7% decline in demand. There isn’t a whole lot of data for Iphone, but I have read wildly differing opinions on their elasticity. Most seem to state that it is somewhere around 0.5. This would indicate that gasoline is a more price sensitive product than an Iphone. Obviously it is an incredibly difficult thing to estimate the elasticity of a product especially one that is new like an Iphone. Further, I don’t know if I even agree with those numbers from just a gut-level feeling. Nevertheless, it is clear by history that gasoline is not as inelastic as some of you seem to think. For evidence, let’s take a look at recent history.
Gasoline usage in the U.S. declined 19% from 2008 to 2010. It declined 33% from 2003 to 2010. (I used August usage levels for each percentage and the EIA is my source.)
Clearly if you don’t want to use as much gasoline you can buy a more fuel efficient vehicle, move closer to where you work, car pool, use public transportation. You could lobby your local government to switch their municipal fleet to CNG. You could push for truck drivers to use CNG. We could as a nation massively reduce our gasoline usage without really lowering our standard of living in any major way. We just simply don’t want to. Americans talk a big game about environmentalism but don’t actually do anything useful. Your typical environmentalist right now is probably protesting hydraulic fracturing and against nuclear power and pissed off that Republicans stood in the way of the Cap and Trade bill. Of course all that bill would have done was make investment banks money through the creation of a new product to trade and made the environment worse because it was in effect a massive boon to the coal industry (the dirtiest fuel of all).
“Doing the right thing” is obviously not a well defined thing. There is probably a pretty high positive correlation between doing something that would get you sued and doing something that most people think is bad though. Also, I meant to be more broad then simply lawsuits; I was intending that to be a generic comment that included avoiding fines, avoiding criminal activity, avoiding sanctions from regulators, etc.
I don’t really disagree with what you said in those specific terms, but I would say that most people are generally trying to do what most people think is the right thing. That extends to people that work for large companies.
Why can’t “Granny Perkins” get medicaid if she’s now so poor? She think she’s too good to soil her dainty self by using it? Why can’t she get food stamps instead of starving? Why can’t she get section 8 housing? She’s not drawing Social Security, why?
In short your hypothetical lacks any grounding in reality, you’re pulling shit out your goddamn ass, and you know it. Where as the Exxon Valdez really did happen.
A greedy company, ran by sociopaths really did trash the Alaskan coast.
At what point does ethic of profit stop over ridding the ethical considerations the people in the company owe their fellow man?
Let’s say a company determines that the cost of fixing a defect in it’s product outweighs the cost of lawsuits from death and injuries resulting from that product, but only if it keeps it hush hush.
Which action should the humans running the company pursue?
How about another hypothetical. Let’s say a company has access to slave labor which could cut costs. Should it use slaves?
You’ve totally and utterly missed the point. I don’t agree with capitalism as a system. I think it is fundamentally flawed. But turning round and pointing at a company and saying “Evil, Evil” when it does what it is meant to is a little bit silly. Corporations exist for one reason - to make profit.
How do we deal with the negative consequences of that? There are a multitude of ways. One is to have a socialist revolution, but that has downsides too as history has shown - I’d rather we got there through a more evolutionary approach.
So what do we do? Expect corporations to act differently? No - that’s like expecting a scorpion not to sting. We can alter things through our buying decisions, for one. We can use the legal system - things like banning the use of slave labor, for example.
But overall, corporations aren’t evil. People are often evil, and people who run corporations are often evil. Expecting a corporation not to seek profits just is phenomenally naive. It’s the sort of bullshit we see about people complaining about Walmart and the death of small businesses, then lining up to by toilet paper at low, low rollback prices while driving past the going out of business corner store.
Thanks for this - it’s a lot to digest and I wasn’t aware of most of it. Well, to be more accurate, I was aware of most of it just hadn’t really connected it.
You answered the question yourself. Because 96% of the people do not give a shit how much price gouging Apple may be doing. They won’t buy an iPhone regardless. The numbers for Apples other industries will be different, but it’s the same idea.
As a side note, put aside profits for a second and look at the markets Apple is in. They have 4% of the cell phone market and ~7% of the computer market. Nine out of ten people will not buy their product. That’s not a hallmark of the second largest company in the country, that’s a hallmark of a niche player. A trendy niche player. A profitable niche player. An innovative niche player. But still, a niche player.
I’ll make this plain for you. Corporations are composed of people. You prattle on about scorpions, as if corporations are arachnid carnivores driven by instinct. However corporations are composed of people. Morally culpable people. A corporation can make no action without a person deciding and executing that action. People bear the moral weight of their actions.
Exxon is apparently full of jackasses, this makes Exxon a jackass company. Do you deny the people in Exxon behaved like evil jackasses?
I restate my question, and please answer it.
Let’s say a corporation determines that the cost of fixing a defect in it’s product outweighs the cost of lawsuits from death and injuries resulting from that product, but only if it keeps it hush hush.
Which action should the humans running the corporation pursue?
I’m perfectly willing to say humans running corporations can be evil. If a person runs over children for fun in a car, it doesn’t make the car evil, though.
As to the hypothetical, I’d really need more information. Keeping things “hush hush” involves what? Is it illegal? People work within a structure of law and responsibility, and officers of a corporation have a fiduciary duty to the shareholders.
One of the key things we need to do, short of a fundamental change in economic structure, which honestly isn’t on the cards. is acting as consumers to ensure there are significant financial consequences for companies which fall short ethically. If we don’t like Nike using low paid labor, we don’t buy Nike shoes. We alter the profit calculation for the firm. What is a singularly meaningless thing to do is sit and shout “evil, evil” while not doing anything to alter the calculations that corporations make.
I was simplifying things to a certain extent - the profits that made people made came from the commodity business, and I explicitly said that if Exxon made a bundle on an innovative technology no one would object. Chevron is flooding the Bay Area, at least, with ads about how they agree we need the types of innovation you mention.
However, none of this is a bet your company move, which is the kind of thing computer companies have to do over and over again. So, Apple made its fortune from innovation directly, Exxon made its fortune from a commodity.
[QUOTE=John Mace;1338001
And yet a common complaint about Exxon is: OMG!!! Exxon just made 100 gazillion dollars in profit. Look how evil they are.
That’s nonsense, and demonstrates a completely misunderstanding of how business works, what profits are, and what gouging is.[/QUOTE]
It is nonsense, however a common defense of their large profits is that their profit margins are very small which is also nonsense.
However the anger at Exxon did not come from its high profits in a vacuum, but from its great increase in profits as a direct result of the run up in oil prices which caused great difficulty for many Americans. Agree or disagree with this, the profits themselves were not the issue, since many other companies who also have large profits are not hated. Like Apple.
I trust you are not claiming the decline in demand from 2008 to 2010 is price related.
Gas station owners actually got screwed by the price increase, since they have a fixed markup on a gallon of gas, not a percentage markup. Credit cards charge a percentage, so the owners were losing money on big purchase by credit card, which is why a lot of them added a higher credit card price. It is unfortunate that so many people blamed gas station owners for the high prices.
Both of you are wrong. First, obviously most companies would not see an increase in profit margin as their costs increased.
Second, the price of oil is not the cost of raw materials for Exxon; it is the cost of their finished product. They have no raw materials since they are not a manufacturing company. Their cost is the capital and operating expenditures required to drill for and produce oil. Now you are likely thinking of their output being gasoline and the cost being oil, but that is not a correct way to think about the process. Exxon is an integrated company by definition. They happen to make the majority of their money in the upstream or Exploration and Production industry. What activity they have in the retail gasoline sales industry is insignificant to their bottom line.
Exxon produces 2.4 million barrels of oil per day. Total oil production is 86.1 million barrels per day. Therefore, Exxon has 2.8% of the oil market. Is Exxon also just a profitable niche player?
I think I just gave an example of a bet your company type move. Exxon just paid $41 billion for XTO. It represented their first real entry into the unconventional gas market. Gas prices are sub $5 and the future strip going out a decade remains below $7 / mmbtu. The Exxon - XTO transaction valued XTO at over $7 / mmbtu.
For a company with a similar size, when has Apple ever made a bet that big?
Also, what do you even mean that Apple made its fortune through innovation and Exxon from a commodity? Let’s say I came up with a way to tap the world’s methane hydrate reserves and thus secured power for the world for the next 1,000 years making me the richest person in history. Would that have been through innovation or through a commodity? Perhaps you have created a false dichotomy.
I think it is a combination of high prices and the economy. Certainly when gasoline / oil prices began their meteoric rise in 2007 through mid 2008, the consumer was altering some of their habits. Now prices then began to crater as the economy basically fell apart in mid 2008. They’ve since risen to fairly high prices starting around March 2009. There really is too much noise to say how much was price driven and how much was simply the economy. I’m sure a huge portion of it was just the economy; however, it can’t be doubted that the huge price rise made long-lasting changes to people’s gasoline usage habits.
You’ll get no argument from me that the retail gasoline business sucks.
I’ve heard Exxon is ~15% market share rather than 2.8%. The different probably depends on if the market is defined as one specific country or worldwide. Regardless,
If Exxon made a major attempt to differentiate it’s product from competitors as Apple does
If it’s primary selling point was that differentiation as Apples is
and if there was a company which dominated the market, like HP holds 30% vs Apples 7% in computers or RIM holds 25% compared to Apple’s 4% in the cell phone market
then yes, 2.8% would be a niche player. On the other hand, if the product is pretty undifferentiated in consumers mind, what differentiation there is doesn’t affect sales that much, and there are no companies with more than a few % of market, then 2.8% would not be a niche.
Now which of those two situations does Exxon fit into?
None of which affects Exxon’s cash generating machine, which is not at immediate risk.
For a company with a similar size, when has Apple ever made a bet that big?
[/quote]
Imagine if the iPod and iPhone had failed, and Apple was effectively locked out of the consumer market, and was limited to computers. They’d be back to shrinking market share and a buzz of only a small number of Mac fanatics. They’d also look like idiots, and people would say it was the Lisa all over again and write them off.
For your example, the innovation is the new process. New processes can lead to new commodity items (smartphones will be commodities soon, PCs are already there) - that doesn’t affect the innovation that began the product.