(12-29-2016, 05:40 PM)SomeGuy Wrote: No, Mike, he does not. YOU are and have been making a different one, and a silly one if I might add. A "burden"? Do you think you or I have a job because our employers are interested in carrying out social policy?
Not at all. The term burden wasn't about social policy. It reflects a way of analysis that no longer makes business sense. Sixty years ago much of what a consumer goods company did were the so-called functional operations that produced the product and put it into the hands of the end consumer. There were always support functions, management, finance, human resources, which were a small part of the total that were "carried" along by the main (functional) business activity of the firm, hence the term "burden". It's a British term, not sure how much it was used here. It had nothing to do with social policy.
The world has changed. Today the total value of all the bulk pharmaceuticals produced at Pfizer amounts to 1.5% of sales. Formulation and packaging adds more but total cost of goods sold is still quite small. Today what used to be the burden is now the vast majority of what we do. From a strict profit pov this analysis should be reversed: the old-time functional employees are now the burden and the others are functional. After all, it is the latter which generates the bulk of the profits. This is what the platform model is about.
There is a potential problem with the platform model, however, which can be illustrated with a simple example. Nike outsources shoe production to manufacturing companies outside the US. These companies produce the authentic Nike shoes with the swoosh logo and packaged in authentic Nike boxes, which are shipped to America and sold in America stores for many time the price these companies receive for them. What stops such a manufacturer from selling these shoes as Nike brand shoes in its home market at a fraction the price Nike sells them for but still much more that they get from Nike? These wouldn't be knockoffs, they are the real deal--the same exact shoe, with the same brand cachet as what people have been buying. This, of course, is brand infringement, which is against US law and so they cannot do this here. But the only thing that would stop them from doing so in foreign markets would be if their government stopped them, that is, enforced Nike's IP rights.
A platform company is reliant on a government standing up for them. Its the same for us. A big chunk of our profits come from the fact that we can sell the exact same product to American consumers for much more than we do the Japanese. We give a low price to the Japanese because they demand low prices. They are huge customers and if we don't accommodate their desire for lower prices, we will lose their business, which is still very profitable (just not extremely profitable like the American business). The big American buyer is forbidden by law from bargaining with us, so we get our preferred price. The smaller American buyers has little market clout and have to take our price. The basis for both of our profits is crony capitalism, yet is presented as pure market capitalism in the case of platform companies.
The platform model is fundamentally dependent on political acceptance of globalism (free movement of capital between countries) and the concept of free trade (that Ricardo explicitly stated depended on NO movement of capital between countries). Since these are in contradiction with each other the framework on which this brave new world stands is shaky and it is likely to collapse like it did the last time we were here.