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What Liberals Don't Understand About Business and Profit

Posted By Mike Brownfield On January 6, 2012 @ 5:50 pm In Featured | Comments Disabled

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How’s this for a nicely polished gem of irony? Liberal blogger Matthew Yglesias today authored a piece [2] poking fun at Barnes & Noble for attempting to diversify its bookstore model by venturing into the world of digital with its “Nook” e-reader. (Stay tuned for the irony, below.) For Yglesias, the notion that a corporation wants to innovate and change in order to survive is a laughable one:

Barnes & Noble the organism doesn’t want to die, so it makes a desperate effort to launch a new book-related businesses (sic) —the design and manufucter (sic) of e-readers—that it has no particular expertise in. All very understandable, but weirdly out of step with the ostensible idea of the for-profit business corporation. At the end of the day, there’s absolutely nothing wrong with investors capitalizing a new business venture, the venture making money for a while, then its profits declining and eventually the business shuts down.

Nothing lasts forever, and a corporation doesn’t need to achieve immortality to have been a good business. But large firms essentially never behave like this. They never, that is, serenly (sic) accept the inevitable and just attempt to manage their existing operations as well as possible. Instead they want to live! They want to thrive! And this survival instinct is tied up in a weird way with the doctrine of shareholder value.

Where’s the irony? Yglesias writes for Slate.com, an online news magazine acquired by The Washington Post, presumably to diversify from its “paper-only” model and expand its presence in the digital world. In other words, Yglesias is getting a paycheck from a company doing exactly what he’s lampooning Barnes & Noble for trying to accomplish.

Guess what? It’s great that companies grow, change, and diversify in order to order to produce what consumers want! It’s called answering the call of supply and demand, and those that do it best are the ones that survive, thrive, and keep producing goods while also making a profit.

What happens when companies like Barnes & Noble don’t adapt? They go out of business. Borders, anyone? The book-selling behemoth was late to the digital game, and now its stores are shuttered. How about Blockbuster? They failed to compete with the Netflix threat, so they, too, went bankrupt.

Then there’s the newspaper model, which today is clearly threatened — if not on the road to extinction. Circulation is dropping, readers are getting news for free online, and Craigslist is sapping classified revenue. The Washington Post — parent company to Yglesias’ employer — sees the writing on the wall and is attempting to find out what works in the online space. If the Post were to follow Yglesias’ advice, it would keep printing and delivering newspapers to fewer and fewer readers, throw its hands in the air, and throw in the towel. “Hey, it was our time to go!” the paper would conclude. But it doesn’t have to be.

What liberals don’t understand is that profit is a phenomenal motivator for companies and their shareholders. Corporations don’t exist just for the heck of it, they exist to make money. And they do it by providing products and services that people want. If consumers’ demand changes, profitable companies will change, too. And shareholders, workers, and the economy are better for it.

Follow Mike Brownfield on Twitter @MikeBrownfield [3]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/01/06/what-liberals-dont-understand-about-business-and-profit/

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[1] Image: http://blog.heritage.org/wp-content/uploads/nook.jpg

[2] authored a piece: http://www.slate.com/blogs/moneybox/2012/01/06/barnes_nobel_rages_against_the_dying_of_the_light.html

[3] @MikeBrownfield: http://twitter.com/mikebrownfield

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