In the News: Profit & Profitability
May 5, 2009, 10:03 pm
There has been some feedback regarding the distinction I’ve been trying to make-apparently not successfully-between “profit” and “profitability.”
In a nutshell, I am trying to imbue “profit” with the idea of the benefit that results from making an effort. “Profitability” tracks how well one succeeds in generating that benefit.
Perhaps “purpose” is a better word for “profit” since it includes both “WHAT” and “WHY” aspects. Proverbs 34 says: “In all labor there is profit.” This is true, even if the only result from your labor is that you learned something. Let’s say you march into the backyard to trim the overgrown hedge but before you even begin, you’re stymied by a skunk you didn’t see. While you soak in a kiddie tub your wife has set up in the basement, you reflect on what you’ve learned: check the underbrush.
Not all “profit” is easily distilled down to a single net number. Nor should it always be: there are other types of benefit. Like the kind when you spend Sunday afternoons delivering hot meals to shut-ins.
<PAUSE>
Having re-read what I’ve just written, I realize the distinction may still not be clear. In the long run it may not matter. The point is that only those who are generating sufficient benefit will have the profitability to remain in business. Again, in a nutshell:
Profit: what the benefit is (qualitative, uses words)
Profitability: how well the benefit is being generated (quantitative, uses numbers)
(Footnote: in financial reports, profitability is summed up in a single number called by standard convention “Net Income” or, sometimes, “Net Profit.” As mentioned in “Introducing: Profitability” (Blog 4), that number doesn’t have to be positive).
In the News
Over the past week, I’ve picked out newspaper articles from the “Contra Costa Times” that touch upon “profit” or “profitability” in some way. Since the “Business” section is expected to cover such stories, I excluded it from this less-than-scientific review.
I also excluded the “Sports” section but not because there are no “profit” or “profitability” issues in sports. Far from it. It’s just that sports tend to elicit intense emotions and I wanted to avoid what might become an impassioned distraction. An example: any comments on the Sharks? I mean, in regard to their “Profit” (winning games? Giving entertainment joy to fans?) and their “Profitability” (how much they succeeded in fulfilling their benefits?).
From last Sunday (April 26, 2009) through Saturday (May 2, 2009), I circled headlines that suggested “profit” or “profitability” for the organizations or people who were the subject of the articles. I did not follow a specific set of rules. I didn’t have a check list to ensure articles objectively met rigid qualifications. Rather, I chose articles that seemed to be about people or organizations (which are run by people after all) who were making efforts to provide a benefit.
Also, I did not make moral or other judgments and so included an article dealing with piracy off the coast of Somalia.* Whether or not that activity is ethical, the perpetrators (now there’s a judgmental word) are presumably engaging in the acts for some intended benefit. Since the pirates are based in a country that hasn’t had a functioning government for a long time, it probably isn’t hard to guess what sort of benefit they might be producing. As alluded to in “Defining Profit” under “The Morality of Profit,” the actions of the pirates are not universally beneficial. Many people suffer from their activities: the sailors and their families, the shipping companies, the rule of law and commercial interests everywhere.
As for the “profitability” of the piracy, the article states: “…over the past year, reaping an estimated $1 million in ransom for each successful hijacking,…” One might conclude there’s positive profitability in the activity. And that is one of the challenges facing the rest of the world: how to eliminate the “positive” part of the results.
Bill
William A. Stong
Email: william.a.stong@gmail.com
SBF&P # 9
© 2009 Integrated Profitability TM
* Link to the Contra Costa Times article:
Subscribe to our blogs using either our 
