High Taxes Send Companies Away

[The Terrible Sweal]

The difference being, as between the two, that the market for Rolexes may be, say 200,000 units, while the market for flags is 200,000,000 plus.

Not to mention the fact that an American might buy more than one flag, at $10, whereas he's unlikely to buy more than one Rolex.

No. In this example the market sizes are defined as noted.

I think you're also vastly overinflating the return on a Rolex.

It's just an example, Hugo. Quibbling over whether your speculations or mine are more correct about the cost structure of a company we know nothing about is not the point.

This, of course, will prove von Mises right,

Not only is Mises wrong, you look like a fool continuing to pretend that he's right.

...since it is an empirical fact that the Fords and Wal-Marts of the world are richer and make more profit than the Ferraris and Tiffanys.

Again, that is not the question. The question is: where is the better return found. LWhy are you incapable of grasping this concept, I wonder?

Anyway, I have noticed that you have entirely given up arguing the original point and are now just quibbling about von Mises. Why?

This point is more interesting to me, and it seemed to me that Eureka is covering the other points quite adequately.

Now, I've noticed that you somehow overlooked the problem you're having keeping your point straight. Do you even know that there is a difference between HAVING wealth and CREATING wealth? Incredibly, it seems that you do not.

[The Terrible Sweal]

Here are the current leading companies in the United States stock markets ranked by Return on Equity. You'll note it's not until you get down to numbers 15 and 16 that you find a couple a really giant companies.

1. NRT North European Oil Royalty 25.88 21257.8%

2. GBEL Grubb & Ellis Co. 4.75 5690.6%

3. MPTT MPTV, Inc. 0.00 3283.7%

4. ADVC Advanced Communications Techno 0.00 3009.4%

5. TELOZ Tel Offshore Trust 15.03 2499.3%

6. PBT Permian Basin Royalty Trust 13.85 2347.3%

7. RHD R.H. Donnelley Corp. 58.28 1715.3%

8. VLTR Volterra Semiconductor Corp. 12.98 1321.9%

9. GBCS Global Casinos Inc. 1.06 1319.7%

10. AOXY Advanced Oxygen Technologies, 0.01 1165.2%

11. NWEC NorthWestern Corporation 26.40 1019.9%

12. SBR Sabine Royalty Trust 38.09 853.3%

13. XIDE Exide Technologies 13.24 721.4%

14. BSY British Sky Broadcasting Group 42.80 711.0%

15. GT Goodyear Tire & Rubber 13.74 667.4%

16. ITY Imperial Tobacco Group PLC (AD 52.94 662.2%

17. LRT LL&E Royalty Trust 7.30 593.0%

[Hugo]

Not only is Mises wrong, you look like a fool continuing to pretend that he's right.

You see, here's the problem. Your theory only works on paper, and there are no real-world examples of what you are claiming is a common fact. A theory that is not borne out empirically is wrong, and this is what your theory is: wrong.

You have still yet to show me a real-world example of what you are talking about. Your number games may make sense if we allow their dubious assumptions, but the fact that they are divorced from reality means that they must be missing something so vital as to make them completely false. The noteworthy thing about number games is that I can prove my point with them as easily as you, but the real-world evidence overwhelmingly backs up the Misesian assertion.

I asked you to look at real-world evidence in my last post and the fact that you studiously ignored my request speaks volumes, as well as your decision to ignore the uncomfortable fact that the markup on a Rolex watch is not 900%. Your number games rest on highly spurious assumptions and you are continually unable to provide real-world data.

Here are the current leading companies in the United States stock markets ranked by Return on Equity.

This is irrelevant. It is perfectly possible for a company to be making rates of return in the thousands of percentiles and still make a net profit of less than a dollar. These data you have provided do not disprove that possibility.

Until you provide a list of the companies that generate the largest net profits (i.e. that create the most wealth) that corresponds almost exactly with this list, nothing is proven.

Your other option is to prove that rate of return is synonymous with wealth. Until $90 is greater than $1000 this cannot be. Otherwise, pennies are worth more than thousand-dollar bills as long as the rate of return on the pennies is higher!

Again, that is not the question. The question is: where is the better return found.

That is indeed the question! Von Mises point was that more wealth is created through selling to the masses. You are trying to pretend that he said that the most profit-per-unit is derived from selling to the masses, which, as I keep saying, is not the same thing at all.

This point is more interesting to me, and it seemed to me that Eureka is covering the other points quite adequately.

You think that a complete lack of evidence combined with an actual disdain for fact and a self-confessed penchant for flights of fancy and wild speculation is "adequate"?

Do you even know that there is a difference between HAVING wealth and CREATING wealth?

Yes. I also know the difference between net profit and rate of return. Again, I also know that a theory that is borne out in the real world is a fact, and one that is not, is a fiction.

[The Terrible Sweal]

Your theory only works on paper, ...

Please don't be stupid. It's not MY 'theory'. It's a basic fundamental and self-evident fact of economics.

The noteworthy thing about number games is that I can prove my point with them as easily as you,

So, yet agan, you've forgotten what is under discussion. You say Mises has offered a general rule. If numbers can prove either side equally, then the generality of the rule is punctured.

I asked you to look at real-world evidence in my last post

You provided none.

and the fact that you studiously ignored my request

Lie.

... your decision to ignore the uncomfortable fact that the markup on a Rolex watch is not 900%.

Another lie. I answered your Speculations about watchmakers margins.

Your number games rest on highly spurious assumptions

What spurius assumption?

Here are the current leading companies in the United States stock markets ranked by Return on Equity.

This is irrelevant. It is perfectly possible for a company to be making rates of return in the thousands of percentiles and still make a net profit of less than a dollar.

You really have no idea at all what you're taking about. How utterly ridiculous.

Until you provide a list of the companies that generate the largest net profiits ...

That piece of stupidity again. Look, one more time: if you are talking about wealth generation you have to talk about the return as a proportion of the amount invested.

Again, that is not the question. The question is: where is the better return found.

That is indeed the question! Von Mises point was that more wealth is created through selling to the masses.

And I've demonstrated how that is wrong.

You are trying to pretend that he said that the most profit-per-unit is derived from selling to the masses,

False.

I also know the difference between net profit and rate of return.

Yet you keep confusing the two.

[Guest eureka]

Hugo, I think that you should find youself a financial consultant with a proven track record.

When you can use your intelligence to grasp that numbers are only a beginning, you will be a formidable debater.

When you can use that inner eye of reason to assess and explain your numbers, you will have an epiphany that will transform you.

[Hugo]

Please don't be stupid. It's not MY 'theory'. It's a basic fundamental and self-evident fact of economics.

Which schools of economics embrace this theory? What are their names and who are their chief proponents?

You say Mises has offered a general rule. If numbers can prove either side equally, then the generality of the rule is punctured.

Numbers cannot. Number games can. What we have been doing is constructing artificial scenarios in which our theorems are proven true. However, the real world does not support your hypothesis. Add 'game theory' to the list of things you need to research.

You provided none.

Yes I did. I compared Ford to Ferrari, Wal-Mart to Tiffanys. You offered no rebuttal to that. You have not provided any real-world examples to demonstrate that which you claim is a universal truth.

I answered your Speculations about watchmakers margins.

Where? Provide a quote, because I don't see your answer anywhere.

and the fact that you studiously ignored my request [for evidence]

Lie.

Oh, it's a lie? Again, quote where you have cited real-world evidence that proves your claim.

What spurius assumption?

That, for example, the markup on a Rolex watch is 900%. The only people who'd ever see profits even approaching that might be Mafia loan sharks and Colombian drug lords, but then again, probably not. They're businessmen too and they know such a policy isn't a good idea.

You really have no idea at all what you're taking about. How utterly ridiculous.

So you think it is impossible to make a rate of return in the thousands of percentiles and yet make a net profit of pennies?

OK, clearly I need to demonstrate!

I make a product for $0.0001. I make 10 of them and sell them for $0.01 each. My rate of return per unit has been 9,900%. My net profit has been 9.9 cents. Stupendous rate of return. Infinitesimal net profit.

Understand?

That piece of stupidity again. Look, one more time: if you are talking about wealth generation you have to talk about the return as a proportion of the amount invested.

Why? Because you say so? Are you a world-renowned economist? Have you won a Nobel Prize? Is there anyone who is or was a world-renowned economist who agrees with you?

And I've demonstrated how that is wrong.

You've demonstrated that economics wasn't something you'd ever studied. Once again, you are reduced to flailing around trying to redefine basic terms in some bizarre way to avoid looking like a fool. It doesn't work.

Yet you keep confusing the two.

No, that's you. I know that rate of return and net profit are entirely separate as I have demonstrated several times. You, on the other hand, insist that profit only be measured in rate of return, and that net profit is irrelevant, and all the worlds economists and accountants are wrong when they disagree with you.

When you can use your intelligence to grasp that numbers are only a beginning, you will be a formidable debater.

When you can use that inner eye of reason to assess and explain your numbers, you will have an epiphany that will transform you.

You still have absolutely no proof for anything you've claimed, do you?

[The Terrible Sweal]

Please don't be stupid. It's not MY 'theory'. It's a basic fundamental and self-evident fact of economics.

Which schools of economics embrace this theory? What are their names and who are their chief proponents?

I just told you it's not some mere theory. It's a fundamental reality of what you are purporting to be discussing.

What we have been doing is constructing artificial scenarios in which our theorems are proven true.

Exactly. Since these scenarios are plausible they disprove Mises supposed general observation.

You provided none.

Yes I did. I compared Ford to Ferrari, Wal-Mart to Tiffanys.

Mentioning a list of names, and asserting without data that they prove something doesn't count. Furthermore, the point you thoguht you were proving with those 'examples' was not the point at issue.

You have not provided any real-world examples to demonstrate that which you claim is a universal truth.

What claim, exactly, do you think I have alleged is a universal truth?

I answered your Speculations about watchmakers margins.

Where? Provide a quote, because I don't see your answer anywhere.

Read it again.

and the fact that you studiously ignored my request [for evidence]

Lie.

Oh, it's a lie?

I have not ignored your request. I told you why 'real world' 'evidnece' is not necesssary to support my point. Then in the next post, I offered real world evidence anyway.

What spurius assumption?

That, for example, the markup on a Rolex watch is 900%.

But my point does not hinge on the real world markup on Rolexes. I could just have said Brand X.

You really have no idea at all what you're taking about. How utterly ridiculous.

So you think it is impossible to make a rate of return in the thousands of percentiles and yet make a net profit of pennies?

No, I think this discussion is pointless as long as you keep flipping back and forth between net profit and return on investment. IF you mean the former, then Mises point is meaningless. IF you mean the latter, he is wrong.

That piece of stupidity again. Look, one more time: if you are talking about wealth generation you have to talk about the return as a proportion of the amount invested.

Why? Because you say so?

Look a few posts back. I wrote then:

"1. Investment is driven by a desire for a return, and selected based on the rate of return offered (with the risk calculated in the return numbers.

2. Rate of return is a calculation: net return/amount invested.

3. Net return is a function of Margin and Scale.

Is there any of that so far that you disagree with?"

You agreed with these basics then, but now you forget them when the consequences of them is tht Mises was wrong.

You've demonstrated that economics wasn't something you'd ever studied.

Lie.

I know that rate of return and net profit are entirely separate as I have demonstrated several times.

You have demonstated the exact opposite several times now. You live in a fantasy world.

You, on the other hand, insist that profit only be measured in rate of return, ...

I don't know whether distortion of that kind is because you don't understand the subject we are dealing with here, or whether you are willing to say simply ANYTHING when your arguments fall apart. Anyway that's not what I was saying. You can measure "profit" in different ways depending on how you define it. Mises (supposed) point, by speaking to invesment incentive, implies that the relevant measure for the point is Return.

and that net profit is irrelevant, and all the worlds economists and accountants are wrong when they disagree with you.

All economists will tell you that investment choices are based on expected Return, and that Return is a function of BOTH scale and margin.

But we've been thorugh this at least once already and your just going in circles now. I'm not inclined to indulge such idiocy further.

If anyone OTHER THAN Hugo is unconvinced by my comments andis interested in this aymore, I'll be happy to discuss this further.

[Hugo]

I just told you it's not some mere theory. It's a fundamental reality of what you are purporting to be discussing.

Evasion. Answer the question: what schools of economics embrace this theory and who are their major proponents?

Since these scenarios are plausible they disprove Mises supposed general observation.

Clearly at least some of them are implausible since they are not borne out by empirical evidence. A scientific theory can be borne out in the laboratory but be inapplicable in the real world.

Mentioning a list of names, and asserting without data that they prove something doesn't count. Furthermore, the point you thoguht you were proving with those 'examples' was not the point at issue.

Evasion again. So where are your examples? This was the original question. Anyway, if you want figures:

Net profit for Ferrari/Maserati in 2003: 2 million euros. This converts to $2.6m US. (Source: Detroit News Auto Insider.)

Net profit for Ford in 2004: $3.47bn (Source: Hoovers, Detroit News Auto Insider). This is 133,461% of Ferrari profits. They had a very bad year in 2003, but still made 19,038% of Ferrari profits.

What claim, exactly, do you think I have alleged is a universal truth?

That rate-of-return is the primary measure of wealth, and also/therefore that niche marketing offers at least equal and usually greater opportunity for wealth than mass marketing.

Read it again.

Done. I still don't see it. Please provide a quote or link.

I told you why 'real world' 'evidnece' is not necesssary to support my point.

Taking a leaf from Eureka's book, eh? Real-world evidence is very necessary to support your point. Otherwise you have nothing.

Then in the next post, I offered real world evidence anyway.

That was not evidence, that was irrelevance. As I already said:

Until you provide a list of the companies that generate the largest net profits (i.e. that create the most wealth) that corresponds almost exactly with this list, nothing is proven.

But my point does not hinge on the real world markup on Rolexes. I could just have said Brand X.

Then what company has a markup of 900%? If you can't find one, then we are dealing with a pure fiction, and if that is the case, you could quite easily 'prove' your point by assuming Brand X makes a one thousand billion quadrillion gazillion percent markup.

No, I think this discussion is pointless as long as you keep flipping back and forth between net profit and return on investment. IF you mean the former, then Mises point is meaningless. IF you mean the latter, he is wrong.

I do mean the former. And if von Mises point is meaningless (by which I assume you mean obvious), why do so very many people - the majority of them, including most currently-writing economists - miss it completely?

You agreed with these basics then, but now you forget them when the consequences of them is tht Mises was wrong.

I don't disagree with those principles. The problem is that you have oversimplified greatly, and there are quite a few more crucial points in the process that we disagree on.

Note, for example, that in point #1 you use the word "offered". This is incorrect. You should have used the word "expected". It seems trivial, but look hard and you will see that it makes a huge difference.

Lie.

Oh, you've studied economics? Where? When?

Mises (supposed) point, by speaking to invesment incentive, implies that the relevant measure for the point is Return.

But you make gross assumptions about both the prospect and the time of return. You treat all investment as being equivalent to a savings account or mutual fund, but venture capital investment is a very different beast.

But we've been thorugh this at least once already and your just going in circles now. I'm not inclined to indulge such idiocy further.

Always comes down to this, doesn't it? To summarise:

You have a theory that works purely on paper with very carefully constructed fictitious scenarios, with outrageous assumptions and premises. All real-world data disproves it. You claim that there is real-world data that proves it, but won't provide it. You claim it is widely accepted fact, and yet cannot tell me of one single source (apart from you) who believes it.

I doubt anybody other than me would even be bothered with your babbling, quite honestly.

[The Terrible Sweal]

I just told you it's not some mere theory. It's a fundamental reality of what you are purporting to be discussing.

Evasion. Answer the question: what schools of economics embrace this theory and who are their major proponents?

You lie. It is not evasion it's a statement of fact.

Asking me to name proponents or a school of thought for the concept that Return is a function of Margin and Scale is like asking who are the proponents of the idea that 5 is 101 in binary.

Net profit for Ferrari/Maserati in 2003: 2 million euros. This converts to $2.6m US. (Source: Detroit News Auto Insider.)

Net profit for Ford in 2004: $3.47bn (Source: Hoovers, Detroit News Auto Insider). This is 133,461% of Ferrari profits. They had a very bad year in 2003, but still made 19,038% of Ferrari profits.

Of course, Ford is a bigger company. This tell us nothing about whether you should by a share of either company however, which is what Mises must have been trying to talk about, if he was trying to make any sense at all.

What claim, exactly, do you think I have alleged is a universal truth?

That rate-of-return is the primary measure of wealth, ...

Good thing I asked so I can correct this AMAZINGLY PERSISTENT misapprehension you have conceived.

I have said nothing of the sort. I have been refering consistently to GROWTH of wealth.

(On the other hand YOU have been wavering back and forth inconsistently between these two concepts.)

I don't disagree with those principles. The problem is that you have oversimplified greatly, and there are quite a few more crucial points in the process that we disagree on.

It would be useful for you to point these out, rather than reiterate your initial claims.

Note, for example, that in point #1 you use the word "offered". This is incorrect. You should have used the word "expected".  It seems trivial, but look hard and you will see that it makes a huge difference. 

An investment offers a return, and investor expects a return. It makes NO difference to the point.

Lie.

Oh, you've studied economics? Where? When?

In graduate studies.

Mises (supposed) point, by speaking to invesment incentive, implies that the relevant measure for the point is Return.

But you make gross assumptions about both the prospect and the time of return.

Only to illustrate cleary the flaw in Mises point.

It is true, I have only touched on the most obvious proofs of his mistake. If you examine a typical product-lifetime return curve you'd also see that the time of maximum return on any product is BEFORE competitors have driven prices down far enough to make it a 'mass market'.

You treat all investment as being equivalent to a savings account or mutual fund, but venture capital investment is a very different beast.

Not for our purposes here. Here it is perfectly adequate to consider an economy's aggregate investment.

If you want to consider venture capital, you will find that it demonstrates my point even more. Venture capital seeks HIGH returns in small enterprises, NOT stable but low returns in mass enterprises.

No, I think this discussion is pointless as long as you keep flipping back and forth between net profit and return on investment. IF you mean the former, then Mises point is meaningless. IF you mean the latter, he is wrong.

I do mean the former.

Funny, because you've said the opposite from time to time and seem to be terminally confused.

Mises point is that mass markets are more attractive to investors and thus the needs of the masses will be met by the market, right?

Then you say his basis for saying mass markets are more attractive is because businesses serving them represent, typically, larger pools of wealth, right?

Unfortunately, this is not a sensible reason to view these markets as attractive for investors. Investors care about how much value they will recieve back as a proportion of the amount invested. I.e. They don't care about the net profit, they care about the Return.

[Hugo]

Asking me to name proponents or a school of thought for the concept that Return is a function of Margin and Scale is like asking who are the proponents of the idea that 5 is 101 in binary.

That is what you are claiming? I thought you were claiming that niche marketing companies create more wealth than mass marketing ones because wealth can only be measured in terms of return on investment. And you didn't even establish that niche-marketing enterprises do make higher returns! Quite the climb-down. Or is it just deceptive evasion?

Of course, Ford is a bigger company. This tell us nothing about whether you should by a share of either company however, which is what Mises must have been trying to talk about

Take a look again. In 2003, Ferrari created $2.6m. In 2004, Ford created $3,470m. Who created the most wealth?

In other words, is this equation accurate: 3,740 > 2.6?

If we're comparing shares, according to Yahoo! Finance, Fiat SpA (Ferraris parent company) in 2003 paid -2.18 Euros per share. Ford paid 40 cents per share in 2003. Ford shares are $11.46, Fiat sells for $7.2. The last time Fiat made a profit was in 2000, and that gave a return of about 0.05 cents per dollar invested against approximately 10 cents the same dollar of Ford stock would have made in the same year (dividends). So again, Ford is and was really a much better buy.

I have said nothing of the sort. I have been refering consistently to GROWTH of wealth.

Whose wealth grew more, Henry Fords or Enzo Ferraris? Whose company just made 1,300 times as much profit as the others?

And what was the primary difference? I'll tell you: from the outset, Ford was a mass-market company, whereas Ferrari was a niche-market specialist.

An investment offers a return, and investor expects a return. It makes NO difference to the point.

That isn't what you originally said.

In graduate studies.

Sorry, but I don't believe you.

Only to illustrate cleary the flaw in Mises point.

If you have to make fraudulent and outrageous assumptions to illustrate a "flaw" in a theory, that just enhances the credibility of the theory.

It is true, I have only touched on the most obvious proofs of his mistake. If you examine a typical product-lifetime return curve you'd also see that the time of maximum return on any product is BEFORE competitors have driven prices down far enough to make it a 'mass market'.

Show me. Try a real-world example this time.

Funny, because you've said the opposite from time to time and seem to be terminally confused.

Where? Quote me so doing.

Unfortunately, this is not a sensible reason to view these markets as attractive for investors. Investors care about how much value they will recieve back as a proportion of the amount invested.

Yes. Ford vs. Ferrari being a prime example. At the founding of each company, Ford was a much smarter investment because it was designed as a mass-marketing enterprise. As each company has progressed, this has been borne out. Ford makes huge and generally increasing profits. Ferrari barely keeps itself afloat. Ford is larger in terms of market share and wealth than it was 50 years ago. Ferrari hasn't really progressed all that much.

So the mass-marketing enterprise is the better investment, and why? Because you can make more money selling to the masses. Von Mises was right. You are wrong. And that, furthermore, is why you can't find a credible source to concur with your half-baked ideas.

[The Terrible Sweal]

I thought you were claiming that niche marketing companies create more wealth than mass marketing ones because wealth can only be measured in terms of return on investment.

But as you now know, I was saying that niche marketing companies CAN create more wealth and that the CREATION of wealth is measured in return on investment.

Of course, Ford is a bigger company. This tell us nothing about whether you should by a share of either company however, which is what Mises must have been trying to talk about

Take a look again. In 2003, Ferrari created $2.6m. In 2004, Ford created $3,470m. Who created the most wealth?

Which investment created the most wealth?

In other words, is this equation accurate: 3,740 > 2.6?

It is insufficient to describe what we're talking about. It should be:

3,740/FordCapital :: 2.6/FerrariCapital

If we're comparing shares, according to Yahoo! Finance, Fiat SpA (Ferraris parent company) in 2003 paid -2.18 Euros per share. Ford paid 40 cents per share in 2003. Ford shares are $11.46, Fiat sells for $7.2. The last time Fiat made a profit was in 2000, and that gave a return of about 0.05 cents per dollar invested against approximately 10 cents the same dollar of Ford stock would have made in the same year (dividends). So again, Ford is and was really a much better buy.

Based on this sort of information, on a one-off basis you can discover many pairs of companies where a mass marketter beats a smaller, losing venture. Acknowledging this makes no dint whatsoever in the flaw of Mises position. What Mises needs to do is explain why on the list of companies I supplied based on similar criteria, so many of the companies and so much of the return generated is from companies which disprove his rule.

And what was the primary difference? I'll tell you: from the outset, Ford was a mass-market company, whereas Ferrari was a niche-market specialist.

Drivel.

In graduate studies.

Sorry, but I don't believe you.

That's your problem.

It is true, I have only touched on the most obvious proofs of his mistake. If you examine a typical product-lifetime return curve you'd also see that the time of maximum return on any product is BEFORE competitors have driven prices down far enough to make it a 'mass market'.

Show me. Try a real-world example this time.

Are you seriously attempting to deny that there are successful niche market investments and unsuccessful mass market investments?

Anyway, I already gave you a list of the companies with the best returns on equity.

Funny, because you've said the opposite from time to time and seem to be terminally confused.

Where? Quote me so doing.

It wouldn't matter, you would simply pretend it didn't exist.

Unfortunately, this is not a sensible reason to view these markets as attractive for investors. Investors care about how much value they will recieve back as a proportion of the amount invested.

So the mass-marketing enterprise is the better investment, ...

No, Ford was a better investment than Fiat (depending on what you paid for the shares).

... and why? Because you can make more money selling to the masses.

No. Because you make more money by having your margin times your scale produce a consistently above average return and Ford has done this better than Fiat.

Von Mises was right.

The outcome of the particular instance of two companies, Ford vs. Fiat just happens to align with Mises notion.

The right way to begin to measure this matter would be to take several years of the kind of list I provided and see which type of company is most weighted there.

[Hugo]

But as you now know, I was saying that niche marketing companies CAN create more wealth and that the CREATION of wealth is measured in return on investment.

But as a general rule, niche marketing companies do not create more wealth and yield a smaller return on investment. It's possible for a niche marketing company to generate more wealth. It's also possible for a person of age 20 and in good physical shape to have a heart attack and die. It just doesn't happen very often.

Which investment created the most wealth?

Um... Fords investment did. He and Enzo Ferrari started in similar circumstances, and Ford ended up as a much larger and more profitable company.

It is insufficient to describe what we're talking about. It should be:

3,740/FordCapital :: 2.6/FerrariCapital

Very little difference in the startup capital of either company. Certainly not enough to explain the massive disparity between the two today.

What Mises needs to do is explain why on the list of companies I supplied based on similar criteria, so many of the companies and so much of the return generated is from companies which disprove his rule.

As I said before, it is possible for a niche marketing company to be handsomely profitable up to a very fixed ceiling, after which greater investment yields fewer and fewer returns and eventually, losses. Your examples don't disprove that. There's no evidence that any of them could be any more profitable than they are now. There's plenty of evidence that a company of similar size but aimed at the mass market would become far more profitable, as Ford outstripped Ferrari by such a huge margin.

It wouldn't matter, you would simply pretend it didn't exist.

How could I pretend it didn't exist if you quoted me? Your failure to do so and your petty excuses merely confirm my initial suspicion: you are resorting to lies to defend the indefensible.

Drivel.

Prove it. Why else is Ford so much more profitable both in relative and absolute terms than Ferrari? Mindlessly saying "drivel" is all well and good, but since you can't prove it, all you do is reinforce the idea that it isn't!

Are you seriously attempting to deny that there are successful niche market investments and unsuccessful mass market investments?

No. I'm saying that as a general rule, mass-marketing enterprises will create more wealth than niche-marketing ones.

No. Because you make more money by having your margin times your scale produce a consistently above average return and Ford has done this better than Fiat.

I notice that you've conveniently dropped the idea of return on shares, since that which you were arguing before has now swung against you.

You also don't seem to understand that what you have said above can be perfectly true and also support the idea that mass-marketing enterprises create more wealth.

It's also worth noting that the division of Ford that makes the most profit is their financing and credit services. These services are much easier to sell to a mass market than to a niche, since the rich generally don't require credit services (I doubt that anybody buys a Ferrari on credit - if you have reached the affluence where you can buy a brand-new Ferrari, you are probably giving credit, not accepting it). This also reinforces the notion of the mass-marketing enterprise as the superior profit-generator.

The right way to begin to measure this matter would be to take several years of the kind of list I provided and see which type of company is most weighted there.

Go ahead. But I don't see any evidence from you. You have only provided one citation, which I already debunked. You offered no rebuttal to my objections, so until you do your evidence is worthless in this discussion. What I am seeing from you is more economics-as-religion in the vein of Keynes, Marx or Galbraith - when the facts don't fit the theory, the facts must be wrong.

As I said, the empirical evidence against you is overwhelming. The Fords, Waltons, Sears, Gates, Dells, Bransons, and so forth have amassed far greater wealth from their mass-market enterprises than the most successful of the niche-marketers have: the Ferraris, Tiffanys, the four guys who started Sun Microsystems, etc. In fact, when looking at the Forbes Richest People list, those who created the majority of their wealth (rather than inheriting it) are almost all mass-marketers, and the mass-marketers are overwhelmingly richer than the niche-marketers. The top ten richest people in the world only include one man who has not primarily derived his wealth from at least one mass-marketing company: Prince Alwaleed Bin Talal Alsaud.

Which just proves the Misesian point: if you're an entrepreneur, and you want to get rich, better be a mass-marketer.

[The Terrible Sweal]

But as you now know, I was saying that niche marketing companies CAN create more wealth and that the CREATION of wealth is measured in return on investment.

But as a general rule, niche marketing companies do not create more wealth and yield a smaller return on investment. It's possible for a niche marketing company to generate more wealth. It's also possible for a person of age 20 and in good physical shape to have a heart attack and die. It just doesn't happen very often.

Alright, at least we are now clear on the factual point in question between us: Do one or the other of mass market vs. smaller market type-businesses generate higher returns.

It is insufficient to describe what we're talking about. It should be:

3,740/FordCapital :: 2.6/FerrariCapital

Very little difference in the startup capital of either company. Certainly not enough to explain the massive disparity between the two today.

Leaving the somewhat uninstructive particulars of these two companies aside, for the moment, you accept the point about the need for the denominators now, right?

No. I'm saying that as a general rule, mass-marketing enterprises will create more wealth than niche-marketing ones.

Which is demonstrably and demonstratedly incorrect if you mean it one way (investment incentive), and irrelevant for Mises ultimate argument if you mean it the other way (accumulated wealth).

No. Because you make more money by having your margin times your scale produce a consistently above average return and Ford has done this better than Fiat.

I notice that you've conveniently dropped the idea of return on shares, since that which you were arguing before has now swung against you.

I have not dropped it and it has not swung against me. The return on equity list I gave you shows exactly what I expected it would. Massive mass-marketting companies do not heavily populate the top of the list.

The right way to begin to measure this matter would be to take several years of the kind of list I provided and see which type of company is most weighted there.

Go ahead. But I don't see any evidence from you.

I hardly think it is for me to produce this evidence. I've shown why logically Mises claim is not correct. If you want to prove the logic wrong using facts, I have now described the types of facts you would need to use.

Tally ho!

As I said, the empirical evidence against you is overwhelming. The Fords, Waltons, Sears, Gates, Dells, Bransons,

Well now that you bring it up, let me just add that there is a problem with your analysis involving your identification of mass marketers and the confusion you have with using accumulated wealth instead of ROI. General speaking, the margins on products decline over time due to cost control and price competition. In so doing the market converts from a niche market to a mass market, and returns on investment become less spectacular. Much of the wealth of today's mass marketers was generated during phases of their history when they were bringing high-margin products to the market. They only became mass-marketers when they had, through surviving competition, become the dominant player in an industry which, through price competition, become a mass market.

Mises seems to be saying that because mass-marketting companies have accumulated more wealth this means that they have given better Returns. This is not the case from an investment/incentive (i.e. the relevant) point of view.

[Hugo]

Leaving the somewhat uninstructive particulars of these two companies aside, for the moment, you accept the point about the need for the denominators now, right?

Sure - but I think you'll find that the only companies that don't have similar small beginnings are those that are spun off from a large parent company.

The return on equity list I gave you shows exactly what I expected it would. Massive mass-marketting companies do not heavily populate the top of the list.

The most profitable industry is pharmaceuticals, which is dominated by huge mass-marketing companies. The Association for Asian Research finds that the most profitable companies in China (for instance) are found in the fields of real estate, elementary education, book publishing, automobile sales, spectacles, telecommunications and mobile phones, medicine, overseas study intermediaries, and online video games.

None of those are really niche-market industries. You may be able to find isolated examples of companies who are making big profits from niches, but the industries that are generating the most profit for both large and small companies are mass-market industries.

Now, I don't know where your figures come from. But I looked at Standard and Poor figures as seen in Businessweek, who say that the ten best ROE companies are:

UST (consumer products)

Moody's (corporate banking and credit)

Autozone (consumer products)

IMS Health (IT for healthcare companies)

Colgate-Palmolive (consumer products)

Avon Products (consumer products)

Anheuser-Busch (consumer products)

Dow Jones (publishing)

SLM (education financing)

Gilette (consumer products)

This is a very different picture from the one your (unnamed) source paints!

I hardly think it is for me to produce this evidence. I've shown why logically Mises claim is not correct.

As I already said, your "logic" rests upon outrageous and downright fraudulent assumptions. Your demonstration rests upon the idea that a company - a typical company - would have a markup of 900%, and when pressed, you could not name one single real-world company that could do such a thing!

Mises seems to be saying that because mass-marketting companies have accumulated more wealth this means that they have given better Returns. This is not the case from an investment/incentive (i.e. the relevant) point of view.

It seems wherever I look I see the same picture. Mass-marketing gives better returns on initial investment, better ROE, greater dividends, stock growth, etc.

In so doing the market converts from a niche market to a mass market, and returns on investment become less spectacular. Much of the wealth of today's mass marketers was generated during phases of their history when they were bringing high-margin products to the market. They only became mass-marketers when they had, through surviving competition, become the dominant player in an industry which, through price competition, become a mass market.

Then by that logic, current niche-market companies should be more profitable than current mass-market ones, who have already exhausted their brief high-profit niche-market phase. However, this is absolutely wrong and completely backwards: the niche-market companies make less profit and less return, and mass-market companies begin to make their huge profits and returns once they begin to escape being a niche-market - like Ford, or Sears, or Microsoft. All are making staggeringly larger profits now that they are giants with sales in the tens of millions than when they were small businesses providing a product that most people didn't want or couldn't buy.

[The Terrible Sweal]

... you'll find that the only companies that don't have similar small beginnings are those that are spun off from a large parent company.

Most companies start small and grow bigger or they disappear. In the process of growing from a small scale to a large scale company, successful companies are the ones who produce the greatest return.

The most profitable industry is pharmaceuticals, which is dominated by huge mass-marketing companies.

In order to say whether this tells on the question or not, can you answer two (initial) questions:

1) Most profitable measured how, over what period?

2) What was the market size of the companies producing the highest returns in the industry during that period?

You may be able to find isolated examples of companies who are making big profits from niches, ...

I sense the need to probe a definition thing here. What did Mises mean by mass-market industry?

In so doing the market converts from a niche market to a mass market, and returns on investment become less spectacular. Much of the wealth of today's mass marketers was generated during phases of their history when they were bringing high-margin products to the market. They only became mass-marketers when they had, through surviving competition, become the dominant player in an industry which, through price competition, become a mass market.

Then by that logic, current niche-market companies should be more profitable than current mass-market ones, who have already exhausted their brief high-profit niche-market phase.

I'd make certain critical distinctions from that: High margin companies should have a higher investment return than low margin ones. High margins are found during a business phase in which the company has a substantial competitive advantage.

Now it's true that the big mass companies have been successful over time in generating wealth. Maybe even more wealth in absolute terms than all the smaller companies. But this doesn't tell you:

1- that the big mass companies made their returns from their mass products; nor

2-where your next $10 will produce the best return.

...Ford, or Sears, or Microsoft. All are making staggeringly larger profits now that they are giants with sales in the tens of millions than when they were small businesses

What size were they when they experienced their greatest ROE?

[Hugo]

Most companies start small and grow bigger or they disappear. In the process of growing from a small scale to a large scale company, successful companies are the ones who produce the greatest return.

All of which is true but has no bearing on the discussion. My point is that most companies start roughly equal and where they end up is largely due to their strategies from that point on.

In order to say whether this tells on the question or not, can you answer two (initial) questions:

1) Most profitable measured how, over what period?

2) What was the market size of the companies producing the highest returns in the industry during that period?

1) Return on equity, return on assets and return on revenues. In all of these criteria the pharmaceutical industry is first on Fortunes profitability list (Fortune does not measure profitability by any other metric). The period is from at least 1999 to the present day. It may well also be true further before that, I didn't bother to research it that far back.

2) Pfizer and Merck are the two most profitable pharmaceutical companies. In November 2001, Pfizer market capitalization stood at $271 billion and Merck at $165 billion.

I sense the need to probe a definition thing here. What did Mises mean by mass-market industry?

I sense a need to create a distraction thing here. You know the difference between mass-market and niche-market. I'm sure your graduate economics studies covered this.

this doesn't tell you... that the big mass companies made their returns from their mass products... What size were they when they experienced their greatest ROE?

A more interesting point than that: Fords greatest relative growth and profit were made when they were a mass-production company (i.e. mass-marketing) and no other American automobile manufacturer was (source: Wise Research Ltd.). Once other manufacturers embraced Fords techniques, the gap narrowed. It was mass-marketing which enabled Ford to pull ahead of the niche-marketing competition, and mass-marketing enabled that competition (or some of them) to close the gap again.

At that time, Ford was indeed more profitable in all metrics than his competitors. This is why his competitors followed suit. And this also answers your question about where the greatest profits came from.

this doesn't tell you... where your next $10 will produce the best return.

No. But why should it?

Now it's true that the big mass companies have been successful over time in generating wealth. Maybe even more wealth in absolute terms than all the smaller companies.

This sounds like a concession. All you need to do now is add that which I have just demonstrated - that mass-market enterprises tend to generate more wealth in relative terms than smaller companies - to this, and you are a Misesian. At least on this particular idea.

[The Terrible Sweal]

In order to say whether this tells on the question or not, can you answer two (initial) questions:

1) Most profitable measured how, over what period?

2) What was the market size of the companies producing the highest returns in the industry during that period?

...

2) Pfizer and Merck are the two most profitable pharmaceutical companies.

In terms of ROE since 1999?

I sense the need to probe a definition thing here. What did Mises mean by mass-market industry?

I sense a need to create a distraction thing here. You know the difference between mass-market and niche-market. I'm sure your graduate economics studies covered this.

You have no basis to impugn my motives. You don't know what Mises really means do you?

this doesn't tell you... that the big mass companies made their returns from their mass products... What size were they when they experienced their greatest ROE?

A more interesting point than that: Fords greatest relative growth and profit were made when they were a mass-production company (i.e. mass-marketing) and no other American automobile manufacturer was (source: Wise Research Ltd.).

EXACTLY my point. Fords most profitable period was when they were LEADING the change from niche to mass market. I.e. BEFORE the mass market drove prices (and margins) down.

Once other manufacturers embraced Fords techniques, the gap narrowed. It was mass-marketing which enabled Ford to pull ahead of the niche-marketing competition,

No, it was Ford's low-cost advantage which CREATED the mass-market automobile industry.

and mass-marketing enabled that competition (or some of them) to close the gap again.

No, mass-marketing came about when margins go so low that scale was the only way to generate a decent return.

At that time, Ford was indeed more profitable in all metrics than his competitors.

Exactly. BEFORE the mass market came about.

this doesn't tell you... where your next $10 will produce the best return.

No. But why should it?

Because we are talking about Mises' contention that the strongest investment incentive (i.e. where you should put your next $10) is in mass market industries.

[Hugo]

In terms of ROE since 1999?

At least since then. And you have told me that ROE is the best way of measuring profitability.

You have no basis to impugn my motives. You don't know what Mises really means do you?

Yes, I do. And it is not hard to find a definition of mass-marketing:

Of, relating to, or produced for consumption in large numbers, especially when sold in supermarkets, in drugstores, and at newstands: a mass-market paperback.

American Heritage Dictionary

I think it fair to say that niche-market products are of intentionally limited marketability, whereas mass-market products aren't. Niche markets have built-in exclusivity. In your examples already provided, you have already demonstrated that you know full well the difference between niche and mass markets. So your request for clarification now is strange.

EXACTLY my point. Fords most profitable period was when they were LEADING the change from niche to mass market. I.e. BEFORE the mass market drove prices (and margins) down.

It's not your point at all! It's the exact opposite of your point! You have been trying to tell me that niche market enterprises are more profitable, and you think the fact that a mass-market enterprise made far larger profits in a predominantly niche-market industry proves this? What in blazes are you going on about?

No, it was Ford's low-cost advantage which CREATED the mass-market automobile industry.

That's backwards too. Henry Ford developed a low-cost advantage because he wanted the mass market. You pretend that the two are causally connected in a different way. In effect, the mass-market automobile industry created the need for Fords mass production and other cost-cutting measures. Other companies didn't want a mass market and didn't bother with them, until Fords example showed them the greater profits they could make.

You're also misinterpreting the evidence, which is pretty sloppy on your part since I already stated the correct interpretation of it in my last post. It was not the case that Fords highest absolute profit was when they were the only mass-market car firm. It was the case that their profits were at their highest point relative to their competitors at that time.

No, mass-marketing came about when margins go so low that scale was the only way to generate a decent return.

Rubbish. I've already proven that it is the mass-marketing enterprises that produce the highest margins. You've offered no refutation.

Because we are talking about Mises' contention that the strongest investment incentive (i.e. where you should put your next $10) is in mass market industries.

I didn't realise the answer you required was so ridiculously vague. In that case, I can indeed answer it: you should put your next $10 in mass market industries.

[Hugo]

Bump

[The Terrible Sweal]

Yes, I do.

No, you don't.

[Hugo]

Do too.

Oh, and to pre-empt your learned, scholarly rebuttal: Do too times infinity, period, with brass knobs on and no returns forever until the end of time, my dad can beat up your dad, and roses are red, violets are blue, I'm laughing like heck 'cause I'm smarter than you. Oh, and BTW, I'm rubber and you are glue.

Anything else, Socrates? Or would you prefer to actually post a response appropriate for somebody with a mental age over 8?

[I miss Reagan]

Corporate leaders are warning about what I've been saying all along: The Left is Killing the 'Golden Goose'.

This vacuum threatens Canadians' standard of living in a changing global economy, they say.

''As leaders of Canadian enterprise, we are concerned about the future of our country,'' says the document, Canada First, prepared by the Canadian Council of Chief Executives, and obtained by the National Post. ''As a political entity, Canada is a nation adrift.''

The government has been under particular attack over the country's abysmal record on productivity growth, or economic output per hour of work. It is a key measure of a country's standard of living, and Canada's growth in recent years is near the bottom of industrialized nations.

But government critics say skyrocketing government spending -- up 20% on a per-capita basis over the past five years -- has tied the government's hand for the rest of the decade to take measures to boost productivity, such as tax cuts or spending on infrastructure.

[TheHonorableJordanDent]

How long will it take for the people in this country to realize that you can't continue to tax and spend without damaging our economy.  The motivated people will take their wealth elsewhere.  According to stats can.  offshore investment has increased 8X to 88 Billion since 1990.  That includes our PM's ( ) offshore holdings.  Still Canadians cry for a nanny state to provide wasteful government programs.  The government must cut taxes if Canadians want to maintain their way of life.  If not there will be no one left to tax.

Jack Mintz, president and chief executive of the C.D. Howe Institute, said the StatsCan study underscores the reality that "we're not as attractive enough as a country for foreign investment, and that's a concern."

Mr. Mintz said it is not suprising Canadian investment in tax havens has jumped in recent years, given that Canada has one of the highest corporate tax rates among industrialized countries.

Post

<{POST_SNAPBACK}>

Well the way I look at that is we have to have hard times now so that our children can have it better, personally I don't mind shelling out a bit of extra money now so that my daughter can have a brighter future. That's what I like about our current financial situation, we're paying down the debt. In my opinion this is paramount because it leads to so many other good things through reduction of interest payments. Past governments (Trudeau, Mulroney) destroyed our finances and now when we're just starting to chip away at that mountain of debt we want to lower our income? We've only had balanced budgets for the last 8 or so years, compared to the massive defecits of the 80s that's peanuts.

Let's not forget that there were supposed to be Corperate tax cuts in the last budget, which if I rmeember correctly were put in there to satisfy the Conservatives but then they painted the Liberals into a corner by threatening to defeat the government and the Liberals made a deal with the NDP to get rid of them, I think they made a huge miscalculation there, they jumped on the post Jean Brault (sp??) numbers too early, not allowing them to solidify before they made their move. So they not only lost their corperate tax cuts, but also they didn't win the confidence vote either.

[Guest eureka]

I sippose the Canadian Council of Chief Executives is collectively upset that it cannot boost its members remunaration to US levels.

Instead of lying about taxes, why don't they find ways to increase productivity in the companies they Chief.

What a croc. They are the drag on the Canadian economy and on productivity. They set the table with "Free Trade" and phony Globalization. Growth was higher before.

[Cartman]

Taxes do drive businesses away especially from socialist havens like the tax and spend Bush liberals in the United States. That is why large US corporations like Stanley Tools are moving to places like Bermuda with no taxes and no social welfare policies. Don't believe me? Click on the link.

http://www.csmonitor.com/2002/0522/p01s01-uspo.html

Why is this considered "un-American" when it is just plain economics?

"These expatriations aren't illegal, but they're sure immoral," declared Sen. Charles Grassley ® of Iowa recently. "During a war on terrorism, coming out of a recession, everyone ought to be pulling together. If companies don't have their hearts in America, they ought to get out."