Author: Curt Doolittle

Employees vastly overestimate the profitability of any business. They have no idea how hard it is to defeat the rate of inflation. Its very hard to create an organization that produces sustainable profitability across cyclical booms and busts, as well as ordinary competition. They are intentionally made ignorant by the socialist ambitions of the members of the educational system and academy.

In some businesses, like professional services, it is relatively easy to attribute both revenue and expenses to the individuals in the organization. But what about the overhead staff who generate no revenue?

Just as in economics, the only measure of anything is the number of hours of effort individuals must work (in each economic class) to pay for the cost of a good. (Any statement of price differences is not only nonsense, but very likely misleading, unless expressed in this metric: hours of work needed to purchase the good or service.) Time is the human currency. By using the division of knowledge and labor, money and prices, credit and interest, we are able to concentrate our efforts and produce far more per moment than we could on our own. In this sense we are not wealthier than cave men. we have merely used the division of labor to make everything almost infinitely cheaper.

The way to do that is to distribute all costs and expenses to all employees by one algorithm or another – showing them their total loaded cost (at least EBITDA). The way to determine how much an employee contributes or costs, is to determine the amount of time it takes the people who produce revenue to pay for the salaries of those who perform indirect functions.

Most people who are raised in our left-wing education system simply have no idea how little money is actually present at any given time: our “cash flow”.

Or that when a company says it does X million dollars in revenue, that it’s lucky to hit triple the rate of inflation in profits.

My experience is that trust increases rapidly with education in the work place. For years I have given ‘the money talk’ that is the only material exposure to the operation of business in the world that most students have ever had.