Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Published on December 23, 2008 By Draginol In Politics

Obama joke

 

So my tax bill for April is starting to come together and it's looking pretty bad. I've been paying estimated taxes all year but we had a particularly good year this year and since many of our projects run under S-corporations, their profits get tied to my personal return (like most small business owners).

Our company has around 70 people in it. We'd have more but we literally can't fit anyone else in the building.  We're in the process of building out other parts of the building we own but of course, that requires a lot of money.

Some of these projects will have to be put off until mid next year or later depending on how well Demigod, Sins of a Solar Empire: Entrenchment, Object Desktop 2009, and ironically, how well our partner Dell does (buy Dell computers! ).

The reason they have to be put off is not that we don't have the capital to build out more of the building and hire more people, we do. It's that that money is going to go to the government instead in the form of income taxes -- almost $2 million of it in fact.

Now obviously, the government needs money to pay for vital services. I don't begrudge paying taxes on principle.  But too often, people forget where government money ultimately comes from. Worse, they are totally unaware of the consequences of taxation.

Taxes should always be kept as low as humanly possible because when you tax, you are literally taking from the people who are the most productive with capital and often giving it to the least.

Stardock, for instance, is based in the Detroit area of Michigan. So there is a certain sense of irony that the $2 million the government is taking from us is going to be given to the Auto companies and other companies have have absolutely demonstrated that they are terrible with capital.  Heck, our $2 million probably was used up in the hearings leading up to the vote on the bail out for the auto industry which Bush ultimately and unwisely decided to ignore.

So instead of using that $2 million to hire workers to build out another 8000 square feet so that we can hire an additional 24 more people this next year (to open more development teams to work on more projects for OEMs, gamers, and general consumers) we'll have to wait until we make enough money from the sales of our projects next year.  Way to go government...


Comments (Page 10)
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on Jan 13, 2009

"or in front of congress asking for a bailout." - so wait, you spend money you don't have based on money that you EXPECT to get in the future, and when you don't get that money in the future you go crying to congress and THEY give you the money? than what is the incentive to spend within your means?

on Jan 14, 2009

than what is the incentive to spend within your means?

Are you asking the feds?  The ones that is made up of failures?

on Jan 15, 2009

you are wrong.  All you have is a revenue stream - and it is unpredictable

I guess I should have started at the basics. Profit = revenue - costs. A firm receives revenue throughout the year, and incurs costs throughout the year => The firm is making profit throughout the year (if revenue>costs of course, otherwise it's making a loss). To ignore costs is absurd.

Also revenue streams are predictable - an ice cream seller can expect sales to increase in summer, especially if it's a hot summer, but to drop in the winter. Similarly retail shops can expect an increase in sales up to Christmas, and then a drop in them after christmas (if they don't change their prices etc. to try and affect that). You can't get the exact number of sales every single time, but you can get a decent idea of what they're likely to be.

on Jan 15, 2009

To ignore costs is absurd.

I don't think anybody suggested that one should ignore costs.

May I ask how big your company is?

I still tend to believe Draginol here. I don't know anything about running a business myself, but I know that he does.

 

on Jan 15, 2009

Also revenue streams are predictable

Really?  Tell that to Exxon, WalMart, Circuit City, GM, ReMax, etc. 

And another "unpredictable" factor is cost.  Let's look at the oil market once again, but from a different perspective.  Trucking company Abbot contracts with the Army to move trucks.  They charge $1.50 per mile.  Price of Diesel, about $2.  Wham!  Arabs go wild, and the price goes to $5/gal!  Shazzaam!

Their revenue stream is very predictable.  They are getting the same amount of money they did 6 months ago.  But the costs are kind of different.  And wowzer!  They made some money in the first 6 months and spent it all!  In the second 6 months they lost a ton, and guess what?  have no money at the end of the year.  They are now in chapter 13 (or in front of Al Franken and his clowns).

So you spend your revenue like a drunken sailor.  Go right ahead.  There is no law against it.  But you will not be in business long.  And most Entrepreneurs (these are the people that start and build businesses, not necessarily the ones that run the big boys) are not going to be that stupid.  If they were, they would never have been able to build it in the first place.

on Jan 15, 2009

It sounds like you're contradicting yourself now. Anyway, lets summarise this into a few quick statements, and you can say if you disagree with any of them:

1) Profit = revenue - costs

2) A business gains revenue through the year

3) A business incurs costs through the year


(The result of all 3 of these is that a business gains profits (/incurs losses) through the year).


Now on to the other part:

You keep talking about spending "profits" each month, and I keep trying to tell you - they do not exist.  They ESTIMATE profits

From 1) above, profits = revenue - costs, hence to estimate profits they're estimating revenue-costs, hence these are predictable to some extent (or you couldn't really estimate). However:

"revenue streams are predictable" Really?  Tell that to Exxon, WalMart, Circuit City, GM, ReMax, etc.

Suggests that you now disagree with this. The alternative is that you think a company can only estimate it's profit (/revenue and costs) as they suffer/gain them, and can't estimate them into the future. I guess I should number these points as well:

4) Companies can estimate profits

5) Revenue streams can't be predicted

6) Companies can't estimate future profits but can estimate current/past profits

on Jan 15, 2009

From 1) above, profits = revenue - costs, hence to estimate profits they're estimating revenue-costs, hence these are predictable to some extent (or you couldn't really estimate). However:

YOu keep ignoring the estimated part.  As in some costs are annual.

Suggests that you now disagree with this. The alternative is that you think a company can only estimate it's profit (/revenue and costs) as they suffer/gain them, and can't estimate them into the future. I guess I should number these points as well:

4) Companies can estimate profits

5) Revenue streams can't be predicted

6) Companies can't estimate future profits but can estimate current/past profits

No, now you see the word estimate.  But an estimate (or guesstimate in this case) is not a realization.  The guesstimate future revenue and costs, they realize past revenue and costs and thus know their profits.  That is what I said.

I am not taking anything away, I just gave you another scenario.  Like how paragraphs are a normal break between thoughts?  And you totally ignored the reality of the business world.  Here's an even better one, and right out of the pages of today.

Company X hires 10 people based upon first half earnings and their guesstimate of sales for the second half.  But what happened to sales during the PRIME profit/selling season for virtually all sellers this year?  They tanked!  Badly!  so those 10 people would be laid off, and instead of a small profit the company would realize a loss.  Great way to stay in business, right?  That is not a hypothetical, it happened to all retailers this year.  Even WalMart, while "Guesstimating" an increase of 2.8% in sales in December, only realized a 1.2% gain (and I dont think any one else even had a gain).  SO they hire based on 2.8% and what happens?  Their sales go up 1.2%, but they lose since their costs far exceed the additional revenue.  If they had hired based upon profits, then they still have a profit, albeit small, not a loss.  Keep doing it and you dont stay in business long.  And if you are not WalMart, even a shorter period of time.

on Jan 16, 2009

some costs are annual

Apportionment (accruals+prepayments) easily solves that.

 

Company X hires 10 people based upon first half earnings and their guesstimate of sales for the second half.  But what happened to sales during the PRIME profit/selling season for virtually all sellers this year?  They tanked!  Badly!  so those 10 people would be laid off, and instead of a small profit the company would realize a loss.  Great way to stay in business, right?  That is not a hypothetical, it happened to all retailers this year.  Even WalMart, while "Guesstimating" an increase of 2.8% in sales in December, only realized a 1.2% gain (and I dont think any one else even had a gain).  SO they hire based on 2.8% and what happens?  Their sales go up 1.2%, but they lose since their costs far exceed the additional revenue

in other words their sales were predictable - they were out by only a small amount proportionately, since instead of being 102.8 they were 101.2 (100=sales previous year). Also to extend your argument it means firms shouldn't hire anyone - since if their profit is unpredictable they may end up with too many people and have to fire them. Just because something is predictable it doesn't make it certain, and as I said before it doesn't make it risk free. The key to business is taking on those risks that will on average yield you a healthy return. Sometimes you lose, but more often than not you win.

on Jan 16, 2009

wheeeee..... and the love keeps coming.... so are they now thinking of another bail out ranging of 800+ Billion.... GM is talking about not lasting long again! HAPPY JOYS! They are gonna be back for even more money! Book it!

 

 

on Jan 16, 2009

so are they now thinking of another bail out ranging

And when it fails, the Republicans will be pointing blame fingers at the Democrats and vice versa!

It won't end until each side gets the log of economic idiocy (that it's possible for everyone to have maximum individual ecomonic profit) out of their own eye.

Also and just as paramount, is that We the people actually have the power and we must get our congressman back to understanding that they can't legislate in the concept of wealth, that no matter what or who gets helped or hurt, the ends justify the means.  

on Jan 16, 2009

in other words their sales were predictable - they were out by only a small amount proportionately, since instead of being 102.8 they were 101.2 (100=sales previous year). Also to extend your argument it means firms shouldn't hire anyone -

YOu are being obtuse.  YOu INVEST profits.  But you cannot invest what you do not have.  SO you invest after you have them (and after they are taxed).

And your example is funny.  I guess you think that companies earn a gazillion percent on their revenue!  Must be, because a small shortfall is nothing, right?  But if you are planning (guestimating) a $100 increase, and you spend it, and you only get a $50 increase, what do you have?  a $50 loss. And like I said, you dont stay in business long.

As for annual costs - you can estimate them monthly, but you cannot declare dividends on them until they are realized (again).  So yes, they are estimating monthly (as I said), but not realizing.  You keep thinking that a guesstimate is gospel, and you have yet to show a shred of evidence where a successful company has ever done that.  But dont worry, I dont expect you to.  Since it cant be done.

on Jan 16, 2009

you cannot invest what you do not have.  SO you invest after you have them (and after they are taxed)

See before:

1) Profit = revenue - costs

2) A business gains revenue through the year

3) A business incurs costs through the year

If a company doesn't make profits through the year, then it doesn't gain revenue/incur costs through the year. It doesn't matter if you don't know exactly what those are for them to exist. Here's a simple analogy to help: I decide to raise some money for charity. I take a box around to people, and ask them to put sealed envelopes (containing an undisclosed amount of money) into the box. I have little to no idea of how much money is in there. I leave the box lying around for a month, and then open it and count out the money. When was that money raised?

a. the day I went out and raised the money

b. the day I counted the money

Similarly, when do I have that money?

a. the end of the day I went out and raised the money

b. the day I counted the money

Apply the same thing to revenue and costs. Then apply the profit = revenue - costs rule. Hopefully if that's not too hard for you, you'll realise that actually you can earn profits during a year. If you can understand that far, it's a small step to then go to realise that if you're earning those profits, similarly you can spend(/invest) them.

on Jan 16, 2009

lulapilgrim

so are they now thinking of another bail out ranging
And when it fails, the Republicans will be pointing blame fingers at the Democrats and vice versa!

It won't end until each side gets the log of economic idiocy (that it's possible for everyone to have maximum individual ecomonic profit) out of their own eye.

Also and just as paramount, is that We the people actually have the power and we must get our congressman back to understanding that they can't legislate in the concept of wealth, that no matter what or who gets helped or hurt, the ends justify the means.  

 

The problem with that is most people see a little "free money" handout to them and they are more than happy to bend over and take it

on Jan 17, 2009

An absolutely hysterical (and DEAD ON) article seems appropo here:

Mark Steyn

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