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"the ultimate purpose of a business is to make money"

No.

The proximate purpose of a business is to make money. It's a means to the end: the ultimate purpose of businesses are to improve human well being.




It may be useful to distinguish between:

* The purpose of a business, i.e. what organisations like Google want to do; and

* The purpose of businesses, i.e. why organisations like Google are permitted/encouraged to exist.


The purpose of a business is to do whatever the hell you want to do.

The purpose of a publicly traded business is to make money and thus profit for it's shareholders. Everything else becomes secondary.

There is a huge difference in responsibility between the two.


No, actually, the purpose of a business is to make money. That's why it's created, after all. Now, businesses do bring benefits to society, on the whole, but that's not why they exist.


Business owner here. The purpose of a business is to do whatever the business owners want it to do.


Well, sort of. If you don't actually make money for a few years the IRS can declare it a hobby and disallow deductions.


That's your opinion of it. I can have a contrary opinion that's just as valid, and so opinions of the "ultimate" purpose of business are moot.

Legally, the ultimate purpose of a business is to make money as well as legally possible; specifically, maximize shareholders' stake NPVs.


First of all, if I am the sole owner of a business, and I want to run it into the ground, that is my prerogative, and it is completely legal. Secondly, the 'maximize shareholder value' idea is a management principle, and it is not, and never has been, a legally binding requirement for corporations, public or not. Public corporations can be sued for purposefully or negligently destroying shareholder value, but not for failing to 'maximize shareholder value', which would be an absurd and difficult thing to argue in court anyways.


The context was a publicly-traded for-profit company, like most large members of the banking system. And for those companies, you are indeed given a fiduciary duty to maximize profits (See eBay v Newmark, http://www.delawarelitigation.com/uploads/file/int51%281%29....). So they can indeed be theoretically sued for failing to maximize shareholder value to the best of their ability as a fiduciary: negligence includes knowingly failing to take action that would increase shareholder value, not just destroying it. After all, the two actions are the same thing.


It might be just as valid to you, but that does not mean it is necessarily just as valid in a wider sense of the word. In this case we are asking about the ultimate purpose of business, and about whether it is to make money. One easy way to look at this logically is to ask if people would try and do business if money did not exist, is money a defining characteristic of business, or is it just an environmental aspect of the fact the business exists in a monetary society.


You're operating from a premise that misunderstands the nature of money in a market. Money is just a measure of value, a metric of human endeavor, and so it's traded on that basis. Publicly traded for-profit corporations have a fiduciary duty to maximize shareholder value. It only happens that we measure value in, say, Dollars or Yen. We could measure it in ounces of gold or bushels of oranges. For-profit companies transcend currency, and could exist in a barter economy.

So it's not that money (as used to mean currency) is a defining characteristic of for-profit business, it's that value is. If a for-profit business existed to "maximize shareholder value in terms of cows", they would try to maximize shareholder NPV as measured in cows. The reason that for-profit companies exist is because the economics-theoretic ideal point for production in an economy (the point that benefits all consumers the most) is at supply-demand equilibrium, which is where profits are maximized for an individual company. The fact that there are non-profit companies is simply indicative of market inefficiency--in a "perfect" market, all companies would be for-profit. That doesn't mean that nonprofits shouldn't exist right now; in fact, it means that they have to.

So let's change "money" to "value" to be more specific. And then yes, value is indeed a defining characteristic of business, no matter how you measure it: currency accumulated via industry, children vaccinated, or political points spread. That's because humans tend to take action to maximize what they value most, humanitarian or self-serving, and business is the systematic application of human action.




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