The 2 Capitalistic ways to maximize profits

The only two “rational” ways to play Capitalism

In this article, we use the word Capitalism to represent the economic activities taking place under the different forms of capitalism and neoliberalism.

And by rationality we mean an intellectual approach aimed at minimizing the efforts made to maximize gains. In this definition we also voluntarily exclude any moral component and any notion of consequences and long-term impacts of the actors’ behaviour on society and themselves.

Thus, within the framework of these two definitions, this notion of rationality leads to only two types of behaviour relevant for the actors.

To obtain in the long term the Monopoly of its market in order to be able to maximize both the revenues received and the profits, and to minimize the costs spent by pressing suppliers.
To agree with other Competitors on the prices charged to customers to maintain a high level of remuneration.
Because the deep truth of Capitalism is that competition is tiring. And risky. And expensive!
In time, in energy, and in income not received because of price wars.
Who has not experienced in his own flesh the difficulty of running his own business, with or without employees, does not really understand to what extent competition is “painful” in every sense of the word. You have to fight all the time. Make estimates, be the most attractive, but not too low otherwise you can’t pay your employees and operating costs. It’s complicated. Difficult. Using.
So by what human miracle would the Capitalist be free from the Forces that inhabit each of us, from our instincts, from our reflections that are to maximize gains while minimizing efforts?
Capitalism without competition is economic paradise. And to rationally achieve this Nirvana, there are only two types of actions possible, the creation of Monopoly or the agreement, tacit or not, on prices.

It should be noted that the two strategies are opposed in terms of effort/gain coupling.
The first strategy, the Monopoly, is the one that will ultimately allow you to make the most of your company’s profits. And, which is rarely written, on both sides. First of all, on sales made to captive consumers. And on the question of minimizing expenses (both on Suppliers and on its own employees or very intermittent collaborators). On the other hand, obtaining this state of Monopoly is sometimes very difficult. It depends on the conditions of its market. How many competing companies there are, what are their competitive advantages, their assets, their positioning, changes in consumer tastes, technology, disruptive innovation, etc…. Not to mention the legislative and judicial obstacles to going in circles, which, well aware of the tragic consequences of the Monopolies on society, aim to prevent their coming or their extension[We can never say enough about the hard job of being a Monopolistic Billionaire!] In short, the optimum of this choice is never sure to be achieved.

On the other hand, the price agreement does not allow us to collect the maximum possible price because we have to deal with the other companies with whom we will reach an agreement. But it is much easier to have an agreement of this kind than to sweat hard to reach the Nirvana of the Monopoly. It is therefore the strategy that is most commonly implemented, at different scales, in different forms. It is so tempting that it is most often done in tacit form, without the will to rig the market, almost without the knowledge of one’s own free will. Each company looks at the prices posted by the competitor and sets itself, more or less consciously, on the price charged by the others. It is one of the natural defects of Capitalism that this unconscious tendency towards alignment. This is a problem in itself, but it is not the main subject of the article dealing with voluntary, organised and deliberate price fixing. We are talking here about behavior that greatly affects society and the citizens who are exposed to it. It is in this sense that the impact of the voluntary agreement is similar to that of the Monopoly, both guided by this underlying force of short-term rationality and limited to a single actor. The organized agreement between economic actors makes it possible to save everyone’s most precious asset, their time. No need to work on these new offers or products. No more fighting with others. We free ourselves from this time taken and wasted to do other more rewarding tasks. The second advantage of the agreement is the preservation of an equally precious asset, the energy of the actors.

It is for these reasons, more so on the optimization (and not the maximization) of profit, that the Voluntary and Deliberate Agreement is a form that has been practiced in (too) many markets, that is still practiced and that should no longer be practiced in a New Civilization.

And if you think that the agreement, not only tacit, but meticulously organized and regulated by precise operating modes (prices, volumes, delivery times, quality of service, after-sales service, etc…) has not existed or does not exist, I would like to inform you of a program that is entirely adapted to your beliefs. Otherwise this one is good too!

For the others, you will find here an English example.
Just an example among those that have been discovered. Agreements between actors are probably like icebergs, we only see the 1/10 that is visible. The rest goes under the radar.
For the time being.

Roll of Dollars in Front

The Moyennitude Index! The Median remuneration of employees in the same Company.

First of all, dear English People reader, don’t try to understand the word “Moyennitude”, it’s an internal French Joke which is not translatable.

This index is used to establish, on a clear company-by-company basis, what is the median (and not the average) of remunerations in the same company. Let us recall here in a few words the technical, and profound difference, between an average and a median.

The average is an arithmetic calculation. It is the sum of the individual values of each element divided by the number of elements. [For those who like external references, the Wikipedia article on the subject is here.]

The Median is a geometric distribution! [I use the word geometric to indicate a spatial notion, of space, of distribution plane. And not the notion of geometric median.] With this value, we have half of the elements below this value. And half of it above. So it’s a split line. We have two equal sides on each side of the value. 50% have less than the value. And 50% have more than that value. It is an extremely important benchmark in social analysis. This should be the criterion chosen instead of the average, which has many perverse effects on display and comprehension.
Let’s take the following example:
– That is 9 people with incomes of 10 and one of 1,000. If you calculate the average income you get the misleading result of an average of 109! And you say that it is good to work in a company that will eventually provide you with an income of around 109. Except that unless you are the person who receives 1,000, you will never exceed 10! For those who think the example is caricatural, you just have to look at the pay gap between the salaries of basic employees and CEOs. And the underlying trend that shows a continuous increase in the importance of this multiplier. So, in the example given above, the median, calculated in and by Excel, gives a value of 10.

Once the difference between the Mean and Median has been established, we can establish the formula which is therefore the Median of the net salaries paid in the same Company. This Median is based on the collection of each employee’s salary to establish a list of all compensation values. And on this list, we determine the value where 50% of the employees have less than this value and 50% more than this value.

Be careful to understand that with a calculation basis with few values and, above all, an odd quantity, the result of the median proposed in the formulas of the types of those present in spreadsheets does not represent, because of the small number of values and the odd value side, the definition of the 50% of our Moyennitude Index. Let us take the formulas proposed by the English Wikipedia such as 1, 3, 3, 3, 6, 6, 7, 8, 9 where 6 is defined as the median value. It is not the value of sharing in two equal parts in percentage. This does not correspond to the definition of 50% below the value and 50% above. Because group 1, 3, 3, 3, 6 represents 4 values: 4/7 and not 4/8. Ditto for group 6, 7, 8, 9 which also represents 4/7th. And if we say that 6 is the value that separates the two groups in equal quantity (Group 1, 3, 3 of 3 elements and group 7, 8, 9 also of 3 elements), each group makes 3/7th of the elements which is not 1/2.

For these reasons, Moyennitudes are easier to establish, even on samples of few elements, with an even number of elements such as 1, 2, 3, 4, 5, 6, 8, 9 where 4.5 represents the Median. Indeed we have 4 elements (1, 2, 3, 4) which are below the median value of 4/8. And 4 other elements ( 5, 6, 8, 9) that are above.

What is the value of your Median in your Company? Is it calculated? Communicated?
How does it evolve over time? Does it follow the evolution of Inflation? It’s up to you to act!


P.S 1 As a reminder, these Formulas, which do not directly concern the COMMONS, are given to you so that you have tools to compare what the COMMONS approach and spirit can bring to a better distribution of resources and the current so-called Neo-Liberal modus operandi.

Alchemist of COMMONS

A person carrying a lot of cash

The increase in the number of Billionaires in the World: Informations or Fake News? Truth or illusion? In other words, Ultracapitalism, what effectiveness?

One of the indicators of wealth creation, and of greater sharing, and of the effectiveness of ultracapitalisme (we use here the French Word for the link on the Web Site) could be the increase in the number of Billionaires on Earth. If we look at the evolution (The equivalent statistics do not exist in English. At least on this site) of this number of billionaires between 2000 and the end of 2018, we see a rise from 470 to 2,208 since the 2000’s. This represents a multiplier of 4.70. How effective ultracapitalisme is! What better proof of its power, if not its undeniable superiority, of this ideology, which in less than 20 years, despite the crisis of 11 September 2001 and the financial crisis of 2007-2008, has multiplied by a factor of more than 4 this number of billionaires on Earth! It is a tremendous result that this 4.7 increase factor.

1) Of course, it is also necessary to take into account the evolution of the World Population during this time. It is true that, mechanically, if the population changes, so does the number of billionaires. So by taking into account the evolution of the population and relating it to the Billionaire multiplication factor, we will obtain the right weighting of this factor. And we will demonstrate the effectiveness, certainly a little less obvious, of ultracapitalisme. But you have to be fair and take this into account. Based on Wikipedia (World Population) data for 2000 and other sources for 2018, we obtain a decrease from 6 126 622 000 inhabitants to 7 637 000 000. That is a multiplier of 1.25 This weighs somewhat against the increase in the number of billionaires, but the overall effectiveness of ultracapitalisme is still there.
For those [not about to rock but] who want UN data, it’s here. And a global graph of the increase since 1950 is below.

Change in World Pop.png
By PacomartinTravail personnel, Public Domain, Link

2) It is also true that the average world inflation rate for the period in question must also be taken into account. If you are a multi-millionaire one year with 999 million € or $, an inflation, even 1%, automatically makes you fall into the category of Billionaires with 1 009 000 000 000 [We do not count the hundreds of thousands of Euros or Dollars when we are Billionaires. It’s very vulgar!]. This mechanism of natural wealth increase must therefore be taken into account. It won’t be fair play not to integrate it.

We have here some figures available over the last 7 years (And even in advance for the next 3 years: These Dudes are Magicians). But a World Bank graph is more appropriate.

Thanks to the World Bank for maintaining the spirit of Internet Sharing of the beginning.

The cumulative inflation, calculated with the above World Bank data, is a factor of 1.8 between 2000 and 2018. Oh, yeah, still… So it takes away a little of the prestigious 4.7 yield once again. But there is always a positive creative factor.

Another graph, based on the IMF source, is available here.

3) It is also true that on the monetary side, in addition to inflation, there is the increase in the Money Supply. Let’s take M3, all the cash. If it increases, mechanically by runoff and swelling, there will automatically be more Billionaires without the benefits of neo-liberalism being at all responsible [anything we will see this later…) . To be Fair Play, you must also take this factor into account. Strangely, there are no aggregated figures on the World Bank website for the increase in World M3 over the last 20 years. Here below, the World map, in French, for 2017.

Thanks to the World Bank for maintaining the spirit of Internet Sharing of the beginning.

Let’s assume that this is not relevant at the global level (although…) and take the increase for the USA. Apart from 2010, the consequences of the financial crisis have been compelling, which has seen a -2.741% decline in M3, there are often significant increases of 4% and more per year [Quantitative Easing Policy obliges us to translate it as “Let’s create monkey money based on nothing tangible and on a misunderstanding that can happen. And anyway we have no other choice, so let’s try!]”. Increases that when cumulated make a factor of 2.88! Oh yeah, that’s starting to sound like a lot, no?…. It takes a little bit of the 4.7 factor of increase. Because if we distribute money, with low repayment interest rates, lower than inflation, (which is not a financial choice without consequences), we necessarily have Billionaires who “grow”. Imagine that we give each person on Earth a million euros or $ in bank loans with very, very low repayment rates, we will mechanically have a larger number of millionaires. Some will earn money, some will lose money, some will just be able to repay the million, but inevitably we will have statistically more than Millionaires. Well, this same kind of phenomenon happened for the Billionaires! And by a factor of 2.7!
(Let the reader realize here that if the same policy, according to his political point of view, of quantitative easing, or money for nothing, had been practiced directly on the inhabitants of the Earth instead of a few Banks and Institutions, his/her salary for the same type of work would have been multiplied by 2.88 ! This compares with the change in the French minimum wage (SMIC) reported in euros, which rose from €6.21 (40.73 francs) on 1 January 2000 to 10.03 on 1 January 2019. This is a factor of only 1.61. Margaret Thatcher would have said “Where is my money!”).

Let’s now summarize the weighting elements we used to determine the true performance of the 4.7 Billionaire creation factor:
– 1) World Population: Factor of 1.25.
– 2) World inflation: 1.8
– 3) Increase in the money supply in the USA: 2.88.

But by summarizing and aligning these elements, we immediately have the understanding that they exist at the same time. From 2000 to the end of 2018. And that these simultaneous existences lead us to realize that their weighting effects are to be CUMULATED BETWEEN THEM! At the same time [Copyright Mr MACRON], there is an increase in the World Population, Inflation and the increase in the Monetary Mass. These 3 effects combine and multiply each other.
Which gives us: 1.25 x 1.8 x 2.88 = 6.3!

Oh well, what a surprise! Taking into account all the factors that artificially inflate the number of Billionaires on Earth, we realize that the multiplication of their number, 4.7 is, much, much lower than what we have mechanically with the 3 elements mentioned above…
The more it goes, the more we have decreasing yields of Billionaire Production! [But Karl Marx warned us that this is a fundamental trend of Capitalism!] The underperformance is a factor of 1.6 (6.3 – 4.7). The creation of Billionaires on Earth is 60% less effective than it should be with the elements that mechanically create this increase.

So, finally, would this ultracapitalism be less effective and relevant than what some people are telling us or claiming? Because if there is no longer even the excuse for a so-called efficiency of creating Billionaires and creating “fair” rewards for the efforts made, what is the point of this ideology? We have wastage, looting of resources taken from future generations, pollution, workers’ stress, inefficiency, injustices, hijacking of some people’s efforts, excessive financialisation, obsolete products which disappear in a few months, and so on and so forth, and I am not telling you the best, and so on ..

It is thus high time to move on to a New Civilization and New COMMONS, Public Goods, Public Property will fully participate in it.

It’s up to us!