A Valid Mathematical Relationship?

[For the following mathematical nomenclature/symbology, read italicized characters/character strings as subscripts. - Ed.]

Given:

Rn = Revenue in period n

Cn = Costs in period n

P = Maximum profit in period n

Ptheoretical = Rn (Cn = 0)

Is the following expression of a proposed mathematical relationship between types of profit valid?

               ?

Ptheoretical > Pfeasible > Psustainable

 

Ptheoretical is the theoretical maximum profit that could be obtained if there were no costs associated with the development, or collection of revenue. Thus revenue, R, would equal profit.

 

Pfeasible represents profit that can be obtained by cutting costs during period n to the absolute minimum in order to maintain operations. Pfeasible acknowledges that a minimum level of cost is unavoidable. Pfeasible is one means of matching analysts's expections (an intellectual fraud of which I shall have more to say at another time) for the current period, but may impose longer-term (beyond period n) impediments to continued profitability.

 

The question mark over the greater-than sign between Pfeasible and Psustainable represents the possibility that a cost structure that allows attainment of a feasible maximum profit may, in fact, be sustainable in the long run. That is to say, Pfeasible may, or may not, be greater than Psustainable. The Skeptical Entrepreneur is, frankly, skeptical that cutting direct costs sufficiently to achieve a short-term profitability metric would allow for continued top-line growth. iPhones, contrary to popular belief, do not actually sell themselves.

 

Your thoughts, as always, will help to inform The Skeptical Entrepreneur's understanding, and decision-making. Thank you!

 



Jack Welch Quits Doing Punditry . . .

. . . about one tweet too late. Sorry, not a Stupid Manager Trick, just a disappointing end to an admirable executive's second career as a public intellectual.

From HuffPo comes late word that former GE CEO Jack Welch has quit his commenting gigs with Fortune and Reuters, following a breathtakingly ill-advised tweet last Friday essentially accusing the Obama Administration of fudging the rosy September jobs report.

It's sad that the famously direct-speaking Welch should have allowed himself to be compromised by corporate groupthink that holds Obama responsible for all things bad about the economy. Props to him for being honest enough to own the tweet once it turned into a storm, rather than throwing one of his flunkeys under the bus. Balls does not equal smarts - and Welch, who has never lacked either balls or smarts, displayed only the balls (and ballsiness) last Friday. The unfortunate result is that Welch has lost access to the public square, beyond what his name alone can continue to command. Fortune, and the whole CNN platform, are closed to him; likewise Reuters. If the goal of entrepreneurship is to play with other people's money, the goal of punditry should be to play with other people's (social) communication tools. Welch failed to remember that fundamental principle, and to self-edit accordingly.

The Skeptical Entrepreneur is amused, but no less dismayed, by another old-school, starched-white-shirt corporate executive trying to draw a facile and fatuous connection between the Obama Administration and Socialism. If only the President of the United States - any POTUS, regardless of party affiliation! - could conjure the economy to do his bidding just by saying, "Fiat!"

So long, Jack. Happy retirement. At any rate, you can serve as a useful object lesson. Memento mori.

Cynicism; or, What's in a Name?

The Skeptical Entrepreneur is constrained to wonder whether or not he should be The Cynical Entrepreneur. Earlier this afternoon, TSE was being domestic, cleaning out a couple of mustard bottles that had emptied at about the same. They were both brown mustard; one was a nationwide, name brand; the other the lower-market store brand at the supermarket just down the street from the corporate office of Excellence in Entrepreneurship, Inc. Both had been reduced to blowing air when further squeezed, even after having had the dregs of the contents shaken down toward the spout.

Upon unscrewing the caps to rinse the bottles out, The Skeptical Entrepreneur found a significant quantity of product in each bottle. Apparently these products are so viscous that, since force follows the path of least resistance,  discrete masses of product retained their cohesiveness, rather than being shaken down to the nozzle and dispensed, despite TSE's best efforts to dislodge the product for which he had paid. It seems to TSE that this is, on a number of levels, in consonance with the manufacturer's, and the retailer's, design goals.

In the first place, such a degree of viscosity produces a product with balanced characteristics of spreadability, cohesiveness, and concentration of flavor, that are in line with the manufacturer's design specifications. That is, such a degree of viscosity is characteristic of "good," or at least "acceptable," product quality.

On another level, the level where the marketing mavens operate, such viscosity serves a commercial purpose that is, perhaps, better left unsaid. By reducing the amount of consumable (that is, accessible) product available to the consumer, a relatively highly-viscous product forces the consumer back that much sooner to the retail merchant who (profitably) sold the consumer the original container of product, to buy a replacement product. This increases the retailer's demand for product from the wholesaler, if any, and increases demand from the manufacturer, who manufactures more efficiently. Everyone wins, except for the consumer, who pays for, say, 8 ounces of product, but is only able to use 7.75 ounces, a waste of approximately 3%. If the consumer uses 6 containers of product per year, in 6 years, he will have bought a whole container of unusable product. Caveat emptor, indeed!

Of course, it is no surprise that manufacturers, and the retail chain would sell packages of product, at least part of whose content is inaccessible, and hence unusable. Perhaps cynicism is more appropriate for the consumer, rather than the entrepreneur.

Help Wanted - Apply Within

[This is not part of the Stupid Manager Tricks series. This is an actual call for contributions. Thank you! - Ed.]

The Skeptical Entrepreneur seeks input from interested readers. If this blog is going to fulfill its mission of skewering 21st century American business for the inane schoolyard/cesspool that it is, The Skeptical Entrepreneur is going to need help. Otherwise, the blog will simply become an ongoing screed by one underemployed crackpot - and, really, who needs that?

We're not looking to compete with, much less challenge, the fun folks over at That's My Boss, who are doing a fine-fine job on their own. TMB is more first-hand accounts of the sort of inanity that would be filed under "Stupid Manager Tricks." What The Skeptical Entrepreneur seeks is commentary, preferably from folks who have some idea, or experience in business to know what "good business practices" are, and what are not good business practices, and can exhibit, and criticize bad business practices.

If you have ideas for bad business practices that deserve to be dragged kicking and screaming into the sanitizing light of day, feel free to drop a line to Excellence in Entrepreneurship, Inc. with subject line "Skeptical Entrepreneur Submission." The Skeptical Entrepreneur himself would be open to considering experienced posters, who demonstrate a record of useful submissions, for enrollment as guest editors of this blog. Thank you!

Stupid Manager Tricks #1 - "Why Do You Want to Work for Consolidated Widgets?"

"Because I need work, half-wit!" <smack>

This is arguably The Skeptical Entrepreneur's favorite meaningless, biz-buzz bit o' jargon. It's a useless question that wastes both interviewer's and candidate's time and energy, adds  nothing to the conversation, and fails even to invite, much less welcome, a substantive reply. "Why do you want to work for [company]?," is the lazy hiring officer's go-to option for blowing off an interview.

Anybody who could be that contemptuous of an applicant would automatically disqualify his, or her employer from serious consideration as an acceptable forum in which to display my talents.