Profitability with Purpose
July 25th
I won't close down a business of subnormal profitability merely to add a fraction of a point to our corporate returns. I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second; the middle ground is the only position that leaves me comfortable.
In a business world that seems to valorize unending growth and staggering profits, the idea of keeping a less profitable business afloat might seem counterintuitive. However, the alternative, closing solely to boost corporate returns, can often be shortsighted, risking employee morale and long-term sustainability.
Buffett suggests it's also inappropriate for a company, no matter how profitable, to continue funding a venture that only promises unrelenting losses. This view, contrary to the socialist perspective, underscores the responsibility to shareholders and the need for business adaptability.
Striking a balance between these seemingly opposing views, between unfettered capitalism and unyielding socialism, is where Buffett finds his comfort zone. This middle ground approach allows for the coexistence of profitability and social responsibility. It's a call for a more compassionate form of capitalism, one that values both the bottom line and the human element within a business.
In this delicate balance, the savvy investor finds a sustainable path, a way to navigate the complex business landscape without compromising on either profitability or the wellbeing of those who make the business possible. Such equilibrium ensures not just economic success, but also the longevity and respect of the business.
Copyright © 2023 by Scott Sansovich