[sirlone]

So the mom-and-pop donut shop on the corner always optimizes for profits? The local donut shop?

Most companies do not actually optimize for profit. If they did they'd stop whatever it is they are currently doing and switch to whatever industry makes the most profit. They don't though, they keep making/doing whatever it is they start with generally. That means they aren't actually optimizing for profit.

[sophacles]

No, that's absurd for so many different reasons:

* if everyone who sold donuts suddenly went into AI there'd be a huge profit opportunity in donuts - optimizing for profits would be to wait for the other donut sellers to switch into AI and rake in the cash.

* the cost of retooling constantly based on the latest profit fad would just make the toolmakers the main profit center, and the toolmakers would just use their own gear to take all the profits in abandoned markets.

* the constant shift of areas of business would be sub-optimal because most people entering it would know nothing of how to succeed in that field, it's not optimal for your company to be incompetent in an area with much competition.

* labor costs in the "only profitable field" would be through the roof as everyone scrambled to hire competent people - not an optimal way to maximize profit in a crowded industry (also, this compounds with the above point).

In fact this idea is so bad (and yet weirdly beleived by many) that every boom there's memes and jokes about how absurd it is that random companies from completely different industries are getting involved... as if they have a chance to compete against the established players. And even more jokes about how they predictably go out of business.

[eddd-ddde]

Not all work is equal. Value is derived from having an edge over the competition. If you are a good baker then baking may be optimizing for profit. Also if everyone just switched to X it wouldn't be the best option anymore.

[neilwilson]

That is optimising for profit. One of the problems with any comparative advantage argument is that capital is destroyed during any pivot.

That cost has to be factored into the return from pivoting.

[kevin_thibedeau]

Profitability is important to any size business. Profit growth is what many large business C-levels obsess over because they get to eat a slice of the expanding pie.

[Obscurity4340]

Its almost like if they want a piece of the expanding pie hell be damned, they should recieve actual liabillity criminal and civil for the trouble and take away any profit incentive that drove them in the first place

[baq]

Any business will optimize for profit > 0, otherwise it’s a loss making business and will shut down sooner or later. Not all businesses optimize for maximum possible profit.

[HPsquared]

There are time and probability elements which can only be reduced down to NPV (net present value) my making assumptions and analysis.

[jbs789]

Umm… continuing the donut example, the owners are likely maximising their return given their skill sets, knowledge, time, etc. But return is pretty nuanced too bc it probably is not just be profits, but family time etc. in any event, I think you’re right that businesses don’t just focus on profits. But the example doesn’t prove the point.