Profit and Value

One thing I've found over and over in business is the lack of correlation between value and a company making a profit.  I see many profitable companies that are producing nothing of value, and I also seen many genuine companies struggling.

A lot of companies talk about a "value proposition", though I don't know if that really means anything.  You can find a shirt that costs $20 that's better-constructed than one that costs $100.  But the company that's managed to persuade more customers to buy the $100 shirt will be more profitable.

There's some concept here that I'm just not getting.  I know all about the textbook version of capitalism (and I've taught it), but it is so far from business reality that the model may even need to be scrapped.

I think about a book like, "The Paleo Diet" that actually has value.  But it has been far outsold by many other diets books that are just complete nonsense.  It's frustrating to me, because you would hope that making money and producing value would go hand-in-hand.  They do in some cases but more often than not, they don't.

Comments

[chainey]

I think you're overlooking simple consumer irrationality. The $100 shirt will have the "right" label - i.e. the one that everyone else is wearing.

I'd like to know who the marketing genius was who first got people to pay extra for gear with BIG logos or brand names/acronyms - walking ad billboards. Even on the buttocks of womens' sweats now!

Anyway, if the Paleo Diet had been called 'The Paleo Beverly Hills Revolution - Five minutes a day to a firmer, sexier YOU!', it might have fared better.

People are dumb. Present company excepted.