profiteering gluttons

A line from the Hacker Manifesto, written by The Mentor in 1983. The full line goes "..for what could be dirt-cheap if it wasn't run by profiteering gluttons..."

The basic premise behind this is a comparisson to war-profiteers during the two Great Wars -- they would steal supplies from milatry convoys and then sell what they stole *back* to the military units at an inflated price.

The coralary here is to telephone and long-distance companies. According to investigations of AT&T done by the FTC in 1996, the cost per minute of long-distance service including equipment and labour was about 2.2 cents. At the time, AT&T was charging over 5 times that -- 12 cents per minute. Granted, this doesn't meet the true definition of 'profiteer', but it sure comes close.

It costs AT&T 2.2 cents per minute to transmit long-distance. And they charge us about 12 cents per minute. Yes. But how much did that first minute cost? How many millions, even billions of dollars did they put into satellites and fiberoptics and ground crews?

A good corollary is drug companies. Sure, it only costs about fifty cents to make a pill, and they charge five bucks a pop when they sell it. But how much did that first pill cost? How many other pills did they invest in and never see pan out? We pay for that, too, as we should.

No matter what you hear, unless something extraordinary or illegal is going on, most businesses operate on a profit margin of about 2 to 3 percent. That means for every dollar you spend, about two to three pennies of that is profit for the company. Those few pennies are essentially return on the risk the investors took with their money, choosing to put their money in this company and not another.

If you hear a number that is too incredible to be true, it probably isn't.

True, perhaps, but it is important to remember that profit is revenue minus expenses. Expenses include wages, like those mega salaries paid to CEOs and the board of directors. Expenses include company paid business lunches and first class plane tickets and a private hotel suit for the CEO to attend business negotiations. In a progressive corporate tax system, running a loss is profitable. Every company runs at least two sets of books, one for the investors, and one for the tax department. The records going to the tax department will always show a loss where possible.

Sure infrastructure is expensive to implement, but over time the initial outlay on that infrastructure is paid off, and profits go up. Not to mention that infrastructure is an asset, as is cash. The purchase of infrastructure with cash does not appreciably affect total assets. Also, good infrastructure reduces the need for paid labour, allowing for massive layoffs and even higher profits.