Why has Communism failed everywhere ? A chance for commies to explain

[Flubber]

Oh and kid

just curious but have you ever done a risk weighted assessment for a project? The ones I have reviewed can be quite detailed and really focus you on the key elements of a project.

Its actually amazing the number of variables that are considered and the level of detail that is necessary. It also gives a sense of the level of risk that faces a capitalist on a major project.

For example a relatively minor fluctuation in the price of gas and reservoir performance can take a project from very profitable to unprofitable. When the capitalist is deciding whether or not to invest the billion bucks required, the "risk " they care about is the chance of profit and loss.

[Kidlicious]

Flubber,

I'm not interested in how you do your analysis. I'm interested in how normal people do it.

Are you saying that companies buy insurance but don't consider how they will pay for it? Of course they consider their OH costs when they price their products. Don't be so ridiculous.

[Flubber]

Originally posted by Kidicious


The fact is that companies buy insurance. They do so because they have a cost that they want to avoid. If you have 10 years of experience and don't understand that then there are no websites for you to look at. You are too silly to bother with.

I'm too silly

yes companies buy insurance. Actually some don't for some risks but so ?

I never denied that companies buy insurance. That decision is actually something that is subject to its own risk weighted analysis. I actually participated in a decision to maintain various coverages. The reality for most large companies is that although they have to pay more in premiums than they are LIKELY to recoup in benefits (the p mean is that you lose money buying insurance), the worst case ( and I think they used a 1 in 10000 likelihood here) was such a catastrophic loss that the purchase was a no-brainer. Note in the insurance case, the maximum upside would be saving the premium while the downside was losses of something like a thousand fold the premium.

So the decision to buy insurance is one just like any other-- subject to a risk assessment.

[Kidlicious]

Originally posted by Flubber
So the decision to buy insurance is one just like any other-- subject to a risk assessment.

D'uh. Even more simply put companies analyze risk and make a decision whether or not to buy insurance. This must be to simple for you. It seems that the more simple things are the more trouble you have.

[Flubber]

Originally posted by Kidicious
Flubber,

I'm not interested in how you do your analysis. I'm interested in how normal people do it.

Are you saying that companies buy insurance but don't consider how they will pay for it? Of course they consider their OH costs when they price their products. Don't be so ridiculous.

Not ridiculous at all. I thought we were talking about profit and the necessity for the likely projected profit to be sufficient to warrant the risk of the investment.


Pricing decisions gets into marketing where I am not expert. (I am very experienced in project analysis but not in marketing-- producers of commodities like oil and gas generally have no pricing decision to make).

But marketing 101 tells me that yes cost will be a factor although I know of many instances where products are priced below cost as part of a long term strategy to attain market share or simply because the market has changed and the product is now obsolete. I would suspect that often costs will play NO part in the pricing decision. If you want to maximize revenue now you simply project sales at various price points for the available inventory -- whatever you paid for them in the past is gone and costs are irrelevant.

You have taken enough business to hear tell of a "sunk cost" right??


Now if you want to get back to investment decisions, the decision to produce more of the product will definitely consider all incremental costs required.


This is all basic stuff.

[Flubber]

Originally posted by Kidicious


D'uh. Even more simply put companies analyze risk and make a decision whether or not to buy insurance. T

Double duh-- thats what I just said

Originally posted by Kidicious


This must be to simple for you. It seems that the more simple things are the more trouble you have.

I'm not sure where I had difficulty since you parroted me

[Flubber]

ok kid I am enjoying my day off work here but will soon have to run.

What exactly are you trying to say about insurance premiums-- err excuse me risk cost?

My assertion is that many projects have no additional insurance premium cost and if they do its a cost like all others.

I also say that when people talk about "risk' that needs to be compensated in projected profits they are talking about the probabilities of various outcomes (which cannot be or are not insured against). That any incremental cost of insurance would be part of the cost of the project is so simple that its at a 7th grade economics level.

So tell me again what the heck you were trying to prove?

[Kidlicious]

Originally posted by Flubber


Not ridiculous at all. I thought we were talking about profit and the necessity for the likely projected profit to be sufficient to warrant the risk of the investment.


Pricing decisions gets into marketing where I am not expert. (I am very experienced in project analysis but not in marketing-- producers of commodities like oil and gas generally have no pricing decision to make).

But marketing 101 tells me that yes cost will be a factor although I know of many instances where products are priced below cost as part of a long term strategy to attain market share or simply because the market has changed and the product is now obsolete. I would suspect that often costs will play NO part in the pricing decision. If you want to maximize revenue now you simply project sales at various price points for the available inventory -- whatever you paid for them in the past is gone and costs are irrelevant.

You have taken enough business to hear tell of a "sunk cost" right??


Now if you want to get back to investment decisions, the decision to produce more of the product will definitely consider all incremental costs required.


This is all basic stuff.

Of course I know what sunken costs are. Sunken costs are still costs, are they not?

Look I'm going to give you thins formula. I don't want to debate about it. I'm done. If you don't understand it I will explain it to you.

a - b - c - d = e

a = Revenue
b = Non risk related costs
c = risk avoidance costs
d = Real costs of risks not avoided
e = profit

edit: fixed the error in the dim hope that Flubber will understand it.

[Kidlicious]

Originally posted by Flubber
My assertion is that many projects have no additional insurance premium cost and if they do its a cost like all others.

If there are risks involved they need to be avoided or considered. If the risk is already paid for then of course you will not pay for it to be double avoided. The risk is still a cost, and paid for out of revenue, and the owner anticipates a profit that is greater than all of his costs (including risk).

[Flubber]

Originally posted by Kidicious


Of course I know what sunken costs are. Sunken costs are still costs, are they not?

Look I'm going to give you thins formula. I don't want to debate about it. I'm done. If you don't understand it I will explain it to you.

a - b - c = d

a = Non risk related costs
b = risk avoidance costs
c = Real costs of not risks not avoided
d = profit

err not to debate you but its tough to see where you get a profit from a formula which has no revenue and where it appears that you are SUBTRACTING costs from each other .

If we are going to treat each other as idiots, I'll give an easier formula

Profit= Revenue minus ALL costs

The problem is at the decision point, you don't know revenue and you don't know costs. So you do a probability assessment of each.

[Kidlicious]

Originally posted by Flubber


err not to debate you but its tough to see where you get a profit from a formula which has no revenue and where it appears that you are SUBTRACTING costs from each other .

If we are going to treat each other as idiots, I'll give an easier formula

Profit= Revenue minus ALL costs

The problem is at the decision point, you don't know revenue and you don't know costs. So you do a probability assessment of each.

Holy Cow! So I forgot to add revenue to the left, and so you don't agree with the formula. There's no hope for you Flubber. As for what is wrong with you I can only say that you look at the world through an exremely warped lense.

[Flubber]

Originally posted by Kidicious


If there are risks involved they need to be avoided or considered. If the risk is already paid for then of course you will not pay for it to be double avoided. The risk is still a cost, and paid for out of revenue, and the owner anticipates a profit that is greater than all of his costs (including risk).

Why do you make a self evident statement and act like I might have disagreed with at some time.

Do I need to repeat my formula??

We got into this on the topic of level of profitability a capitalist needs based on risk.

You googled an article on insurance premiums and have ever since been trying to backtrack ever since. I have said 10 times that an insurance premium may be a cost-- I never ever disputed that.

What exactly are you trying to say about its impacts on profits? . . and yes revenue must exceed all attributed costs for a project to be profitable.


Again its wording-- You know that when people talk about risk they mean the chance of making a loss. Thats the risk people care about and its the risk that requires higher profits to entice them to invest.

[Kidlicious]

Originally posted by Flubber
What exactly are you trying to say about its impacts on profits?

How does it impact profit?! Obviously I can not assume that anything is self-evident for you. It reduces profit just like all costs do.

[Flubber]

Originally posted by Kidicious


Holy Cow! So I forgot to add revenue to the left, and so you don't agree with the formula. There's no hope for you Flubber.

If you add revenue to begin then our formulas are the same-- profit equals revenue minus costs-- Now that we got the greade school formula out of the way, what's next

Oh I still ask you what you mean by "real costs of not risks not avoided"-- Is the first "not " there in error

Also your categories seem artificial to me but thats largely irrelevant. Not all risk alters costs however. For example many risks will not impact costs but will materially impact revenue-- reservoir amd pricing are two.

Originally posted by Kidicious


As for what is wrong with you I can only say that you look at the world through an exremely warped lense.

Interesting from a guy that proposes the deconstruction of existing society by a presumably violent revolution.

[Kidlicious]

Originally posted by Flubber
If you add revenue to begin then our formulas are the same-- profit equals revenue minus costs-- Now that we got the greade school formula out of the way, what's next

There is nothing else. That's it. Profit is not compensation for risk anymore than it is compensation for other costs. The costs are paid for out of revenue and profit is what's left.