[pdonis]

But profit is what tells you that what you are doing is valuable, i.e., that it is not a waste (no scare-quotes) of money, or more importantly, of the time and effort of the people involved. So the fact that Ovishinsky's company made a profit while he was running it is not an accident: it is a consequence of the fact that his inventions were valuable, so that spending his time and effort, and that of his employees, on them was worth doing.

Your definition of "waste" appears to be something that you think is worth doing, but which does not make a profit. But if it is worth doing, why is it not making a profit? And if it is not worth doing, why put "waste" in quotes? People's time and effort would be better spent on something else.

Finally, if you want to spend your own time and effort (and money) on something that others might consider to be not worth doing, that's your choice. But when you talk about convincing others to "waste" money, you are no longer just committing your own time and effort (and money); you are committing theirs. The track record of this method of organizing human activity when not constrained by the need to make a profit (in order for the activity to stay in business) is not good.

[TheZenPsycho]

>But profit is what tells you that what you are doing is valuable

wow. are you a fan of "Atlas Shrugged" by any chance? I will give you just one obvious counter example (though I could rattle off a huge list), which, if you are not sociopathic, should immediately make you see your mistake:

The Red Cross

Profit is a very poor metric for value to humanity. In fact it is a horrifyingly inhumane metric, and I would hope you feel shame for writing such rubbish publically.

But if that doesn't do it for you, I could also point out that you have just insulted everyone here who happens to work on open source software, by telling them their work has no value, and is a waste without scare quotes.

That's not to mention the day traders and bankers who make huge amounts of profits and contribute nothing of value to society.

[pdonis]

are you a fan of "Atlas Shrugged" by any chance

Not really.

The Red Cross

Perhaps we are using a different definition of "profit". AFAIK the Red Cross is funded by voluntary contributions; in other words, people pay the Red Cross to do what it does, indicating that people find what it does worth doing. That meets my definition of "profit", but apparently not yours. So we may be talking somewhat at cross purposes.

Btw, the fact that the Red Cross and other similar organizations call themselves "nonprofits" is a subterfuge, so they can collect money, pay salaries to people, make purchases, have administrative expenses, and generally do all the same things that ordinary "for profit" businesses do, without ringing alarm bells with people who don't understand that the resources they use to do what they do have to come from somewhere; they don't just magically appear. In other words, they are forced to call themselves a "nonprofit" because most people have a faulty definition of what "profit" means.

In a sane world the Red Cross would be a normal corporation that was selling the service of helping people. If they made a profit, so much the better: more money to reinvest in helping people better. As it is, they have to hide what would normally be "profit" in various expenses that amount to the same thing, reinvesting profits in helping people better--but it's less efficient because of the subterfuge.

Profit is a very poor metric for value to humanity. In fact it is a horrifyingly inhumane metric, and I would hope you feel shame for writing such rubbish publically.

No, what is inhumane is to pretend that people can be helped and human welfare improved for free, magically, without any cost and without any expenditure of people's time and effort, as well as other resources--for example, to force organizations like the Red Cross to pretend to be "nonprofits" and waste resources on subterfuge that could otherwise be used to directly help people. I would hope you feel shame for writing such rubbish in public.

Profit forces us to face the reality that creating value takes time and effort, and forces us to make hard choices about which things will get done, out of all the things that could be done with the time and effort and resources at hand. There are other ways of making those choices, but on a large scale they all have worse track records than profit does.

you have just insulted everyone here who happens to work on open source software, by telling them their work has no value, and is a waste without scare quotes.

I have said no such thing. I write open source software myself; some of it is visible on the web (see the links at http://blog.peterdonis.com). But I write it because it is valuable to me; I don't need to be paid by anyone else because I already see the value. But the flip side of that is, I have no idea how valuable it is to anyone else.

For example, suppose there were some feature that could be added to one of my Python libraries that would be very valuable to someone else. So that someone else sends me an email saying, basically, can you add this feature? But they don't offer me any money; they just say the feature would be really valuable. How do I know how much of my time and effort that feature is worth? If I have no other information, the feature will get done when I have the spare time and interest (which may be never). But if the feature really is that valuable to them, they have one obvious way of getting my attention: offer me money. Now I have an easy way of judging whether the feature is worth my time and effort: I judge the money offered against the opportunity cost, i.e., what else I could do with that time and effort, and how much would it be worth to me? (Note that "how much would it be worth" doesn't necessarily mean in money; it might mean giving up time with my family and friends, and I might not be willing to do that for the money offered.)

For another example, look at a large open source project like OpenOffice. I filed a bug years ago asking if a "normal view" option could be added to the OpenOffice word processor, similar to the feature in MS Word (basically, you see the fonts and paragraphing as they will be in the finished document, but you don't see all the extra "page view" cruft that is in the default view in OO). Lots of people voiced support for adding the feature, and the OO project team agrees it's a good feature, yet it's never been added. Why not? Because they have no way of knowing whether that feature is worth more than all the other things the OO team has to do with their time and effort--which basically means they assume it isn't worth more, and the feature never gets done.

Most open source software falls into this category: what there is may be very good (I use OO quite a bit, and do not use MS Word except when forced to at work), but it tends to lack features that for-profit software has. The exceptions are mostly cases where there are for-profit entities backing the project up--the Linux kernel, for example--or where the open source project is an enabler for profits made through other means, like Android for Google. Again, that is by no means an insult to open source developers; as I said, I'm one of them. It's a recognition of reality: we all put our time and effort where we can see value. We can all see when things are valuable to us (btw, this includes things like the Red Cross--many people see value in helping other people, and the Red Cross is an expression of that); but we are not good at seeing how valuable things are to others, particularly when the others are widely distributed and diffuse. Profit helps to fill that gap.

[dragonwriter]

> AFAIK the Red Cross is funded by voluntary contributions; in other words, people pay the Red Cross to do what it does, indicating that people find what it does worth doing. That meets my definition of "profit", but apparently not yours.

First, donations are revenue, not profit; profit is revenue minus expenses. It is somewhat amusing that a post which makes this error complains about others having a "faulty definition of what 'profit' means."

Second, the term "nonprofit" is the less-formal term for a certain class of tax-exempt entity because part of the requirement for that tax-exempt status is that "part of the net earnings [...] inures to the benefit of any private shareholder or individual", that is, that the organization does not return profits to anyone. [1]

> In a sane world the Red Cross would be a normal corporation that was selling the service of helping people. If they made a profit, so much the better: more money to reinvest in helping people better. As it is, they have to hide what would normally be "profit" in various expenses that amount to the same thing, reinvesting profits in helping people better--but it's less efficient because of the subterfuge.

Except that this is not the case, because there is no requirement for the Red Cross not to have excess revenue above its expenses, it just can't have shareholders or other individuals to whom that excess is distributed.

[1] 26 USC § 501(c)(3); similar language appears in other paragraphs of § 501(c) defining other categories of tax-exempt non-profits, though § 501(c)(3) is the most important, and the one relevant to the Red Cross; http://www.law.cornell.edu/uscode/text/26/501

[pdonis]

donations are revenue, not profit; profit is revenue minus expenses

Yes, I know that. See my response to ZenPsycho.

there is no requirement for the Red Cross not to have excess revenue above its expenses

This is a valid point (and thank you for linking to the actual law governing this). However, I don't think it makes much difference to the point I was making. For one thing, it amounts to admitting that the Red Cross can make a profit, and that therefore profit and helping people can go together, which was my original point in this subthread. Also see below.

it just can't have shareholders or other individuals to whom that excess is distributed

First of all, that's not the only limitation. They also have to limit their activities to those that qualify for tax-exempt status. The law seems to have quite a bit of language intended to make it difficult to evade that requirement. So there is still an assumption that certain kinds of activities are "more worthwhile", independently of the question whether they make a profit.

Second, if there is an excess, what happens to the excess? Some of it probably gets put aside as a buffer for times when receipts are down. But other than that, what else does the Red Cross do with it?

Based on their recent financials, this is purely a hypothetical question, since they are operating at a loss, from what I can see:

http://www.redcross.org/images/MEDIA_CustomProductCatalog/m1...

But let's suppose they had a surplus. Where does it go? They are limited in the uses they can put it to and still keep their nonprofit status. A regular for-profit corporation is not. So the Red Cross still has to cope with an added burden that it should not have to cope with (and would not have to in a sane world), and that added burden detracts from their ability to help people.

[dragonwriter]

> First of all, that's not the only limitation.

That's the limitation that's relevant to the name "non-profits"; there are several classes of tax-exempt non-profits, and that's the shared feature that makes them "non-profits" -- not that they don't have excess revenue over current expenses, but that they don't return profits to shareholders.

> So there is still an assumption that certain kinds of activities are "more worthwhile"

Well, yes, there are public resources being expended by way of a tax subsidy -- 501(c)(3)'s are not merely exempt from income taxes, but donations to them are tax deductible.

> Second, if there is an excess, what happens to the excess? Some of it probably gets put aside as a buffer for times when receipts are down. But other than that, what else does the Red Cross do with it?

All of it is put aside for future use.

> So the Red Cross still has to cope with an added burden that it should not have to cope with (and would not have to in a sane world), and that added burden detracts from their ability to help people.

Nothing stops you from forming a regular corporation and trying to do better than the Red Cross at what the Red Cross is intended to do. I suspect you'll find that the "burden" that you are talking about is far less than the benefit you would get from 501(c)(3) status. If that wasn't the case, no one would be starting 501(c)(3)'s.

[pdonis]

That's the limitation that's relevant to the name "non-profits"; there are several classes of tax-exempt non-profits, and that's the shared feature that makes them "non-profits" -- not that they don't have excess revenue over current expenses, but that they don't return profits to shareholders.

But all of those different categories of tax-exempt entities have restrictions on the activities they can engage in and still retain their status, correct? So the limitation on activities is a relevant limitation for this discussion.

All of it is put aside for future use.

Doesn't that seem inefficient? Surely there are more profitable ways of using at least some of that excess than just putting it aside for a rainy day.

Nothing stops you from forming a regular corporation and trying to do better than the Red Cross at what the Red Cross is intended to do. I suspect you'll find that the "burden" that you are talking about is far less than the benefit you would get from 501(c)(3) status. If that wasn't the case, no one would be starting 501(c)(3)'s.

Of course; that's obvious. If we as a society choose to play favorites, obviously that skews the playing field. But skewing the playing field doesn't make the existing Red Cross more efficient; it just transfers the tax burden to the hypothetical corporate competitor. That's not an argument for making the Red Cross a nonprofit: it's an argument for doing away with the skewed playing field.

In other words, the relevant comparison is not between the existing Red Cross and a hypothetical corporate competitor in today's world; it's between the existing Red Cross and a hypothetical corporate competitor in a sane world where society does not play favorites by giving special benefits to certain types of activities. In that world, a corporate Red Cross that didn't have to restrict its activities to meet some arbitrary social requirement might do better at helping people than the existing Red Cross does.

[TheZenPsycho]

Sorry I just saw this:

>"That meets my definition of "profit", but apparently not yours. So we may be talking somewhat at cross purposes."

is that the same definition you used here?

>"It looks like Ovishinsky's corporation did make a profit, at least while he was running it. "

Profit is defined as total income minus expenditure. When talking about corporations, that is, by convention, the one unambiguous meaning in that context. But you now say that simply having income at all, is good enough to be considered "profitable". Huh!

You know it is very dishonest to just go around changing the meaning of words mid conversation, sir.

> In a sane world the Red Cross would be a normal corporation that was selling the service of helping people.

HELP ME! HELP ME I AM DYING.

RC: Sure thing. That will be $1200. Don't worry we'll send the bill to your family.

you know, like this sort of sane world?

House Burns Down While Firefighters Watch [1]

[1]: http://news.yahoo.com/blogs/sideshow/tennessee-family-home-b...

[pdonis]

you now say that simply having income at all, is good enough to be considered "profitable"

No, that's not what I said. I said people pay the Red Cross to do what it does: but the amount paid in must be at least as large as the amount spent by the Red Cross or they won't be able to continue doing what they're doing. The likelihood that, averaged over time, the amount they take in is exactly the amount they spend is miniscule. So practically speaking, they must be making a profit, in the sense of taking in more money than they spend, in order to continue functioning. (As I said, the fact that they are called a "nonprofit" is a subterfuge; they have to be making a profit in the sense of total income minus expenditure.)

You know it is very dishonest to just go around changing the meaning of words mid conversation, sir.

I did no such thing. I didn't spell out all of the above because I assumed you would be able to figure it out for yourself. Apparently I assumed wrong.

RC: Sure thing. That will be $1200. Don't worry we'll send the bill to your family.

So you missed the part where I explicitly said that people pay the Red Cross to help other people. The Red Cross does not charge the people they are actually helping. That would also be true in the hypothetical sane world I was describing: people would pay the Red Cross to help others. They just wouldn't have to lie about the Red Cross being a "nonprofit": the Red Cross could openly admit that it was taking in more money than it spent, and investing the difference in finding ways to help people better.

You know that it is very dishonest to put words in other people's mouths and accuse them of taking positions they have not taken, sir.

like this sort of sane world?

Was the local fire department a for-profit corporation? Or even a "nonprofit" like the Red Cross? Or was it, as I strongly suspect, a governmental entity? (The reason I strongly suspect that is that the city's mayor defended the fire department's action.) If it's the latter, then you are misrepresenting what happened to make it seem like it supports your position, when it actually does not. You know that it is very dishonest to do that, sir.

[TheZenPsycho]

> No, that's not what I said. I said people pay the Red Cross to do what it does: but the amount paid in must be at least as large as the amount spent by the Red Cross or they won't be able to continue doing what they're doing.

that's still not profit. That's breaking even.

> Was the local fire department a for-profit corporation?

A for-profit corporation. a privatised fire service. Because socialism is evil, supposedly, in this rural town, paying the fire fee is a voluntary choice, not an involuntary tax, and thus the fire service made sure nobody was going to die and then stood by and watched the house burn down. Because the family had opted not to pay the monthly subscription fee.

> So you missed the part where I explicitly said that people pay the Red Cross to help other people.

when what you wrote is right there and you haven't even bothered to edit it to fit this lie, saying something like this is a bit on the absurd side.

I'll put what you actually wrote, here again, for your own benefit.

> In a sane world the Red Cross would be a normal corporation that was selling the service of helping people.

and so

> You know that it is very dishonest to put words in other people's mouths and accuse them of taking positions they have not taken, sir.

It's dishonest to switch your positions at your convenience and make an accusation like that. It's stupid to do this when there's a visible record of you having done so.

OF COURSE you can say explicitly that you've changed your position, and that you've realised you were mistake in your view of the word "profit" but somehow I don't think this is going to happen.

[pdonis]

that's still not profit. That's breaking even.

You failed to quote the next two sentences: "The likelihood that, averaged over time, the amount they take in is exactly the amount they spend is miniscule. So practically speaking, they must be making a profit, in the sense of taking in more money than they spend, in order to continue functioning."

A for-profit corporation. a privatised fire service.

Reference, please? The article you linked to doesn't say this, and as I noted, it implies the opposite, since the city mayor defended the fire service. Also see below.

supposedly, in this rural town, paying the fire fee is a voluntary choice

"Supposedly"? Did you actually read the article you linked to? It says: "Residents in the city of South Fulton receive the service automatically, but it is not extended to those living in the greater county-wide area." In other words, the city (not town) only charges the fee to people living outside the city limits, who don't have the same expectation of receiving city services anyway.

I'll put what you actually wrote, here again, for your own benefit.

Sure, I'll even quote it again: "In a sane world the Red Cross would be a normal corporation that was selling the service of helping people."

Does that say "selling helping services to people"? No, it doesn't. It says "selling the service of helping people". By which I meant, as I clarified in subsequent posts, that people can pay the Red Cross to help other people, instead of helping those other people directly.

Was what I originally said ambiguous? Yes. But that means you ask for clarification; it does not mean you assume that I meant whatever is most convenient for you.

[TheZenPsycho]

welp, there's no profit in reading this.

[pdonis]

That's not to mention the day traders and bankers who make huge amounts of profits and contribute nothing of value to society.

I just noticed this last sentence, and it's a valid point. I agree that profit does not always correlate with providing real value, and in fact day traders and investment banks provide a good example of how to spot when it doesn't. The key thing about the profits made by day traders and investment banks is that it comes from zero-sum trades: whatever they gain, someone else must lose.

That's not true of a profit-making activity like Ovishinsky's company; it made products that were of real value to people, and it got back some of that value as profits. In other words, the transaction was positive sum--both parties (the company and the customer) were better off as a result. (And of course the same is true of the Red Cross: the overall process of people donating to the Red Cross and the Red Cross using that money to help people is positive sum.)

[TheZenPsycho]

If profit correlated to value even most of the time, that would imply that Miley Cyrus and Justin Beiber are better musicians than Bach and Mozart, and that "Scary Movie 4" is a better film than Citizen Kane or Rashoman.

[pdonis]

It's evident that in your opinion, Bach and Mozart are better musicians, and Citizen Kane and Rashoman are better films. I happen to share that opinion. But you and I are just two people, and judgments about aesthetic merit are not the same as measures of value. The fact that lots of people pay money to hear Miley Cyrus and Justin Bieber means that their music has value to all those people, whether or not it meets your or my aesthetic criteria.