I overheard a friend of my brother's say the other day that he thought it was bad that companies try to maximise their profits and that they really should only charge enough for their products just so that they stay in business.  I think people too often vilify profits without thinking about the positive side effects for a company to profit.  Upon thinking about this, I've also come to certain views about charities and some problems that can arise from them.

Let's say that someone like Brad decided to be "charitable" and set the price of his software at a level where he would make no profit from them.  Should we all be giving praise to this decision and talk about what a great thing for the community that this would be?  After all, this would mean cheaper games, and more money to spend on other things, etc.  How could this do anything but be good for us little consumers with limited cash in our wallets?  Well, the problem comes, not in the short term but rather, more in the long term.  Now that no profit has been made from this latest piece of software, where is the funding going to come from to make something new?  He might be feeling overly charitable, but the rest of the world isn't going to be so generous.  Consumer might be all too happy at first to be getting something at a cheaper price, but they pay the price by having less available to them in the future, if anything at all.  

On the flip side, perhaps the most charitable thing that can be done is to reinvest as much of the profit back into the company, as this well help insure that even more software can be made in the future to satisfy the demand of consumers.  But does that mean that we should give as much money as we can now to ensure the maximum amount of future products available to us later on?  Not necessarily, because we demand these things only so much, and we may not be willing to give up so much in the short run for that possible added benefit later on.

But this whole thing got me thinking about charities in general.  If you wanted to help society as much as possible, is giving your money to a charity the best thing you can do?  First off, here are a few things to think about.  First off, if you spend money on one thing, you can't spend that moeny on something else.  Another thing to note, is that when a company makes money, that's generally because it's satisfying a particular demand of society, where a product is traded to certain individuals in return for money (and that money that was traded was acquired through similar trades).  The more something is in demand, the more money is paid for that particular thing.  

Let's take a scenario, where I have $1,000,000.  Let's also say that I wanted to be as altruistic as I can, but that I'm a pretty good investor (either I can run a business well, or I am very good at trading the market, etc).  Should I donate that money to a charity, or should invest it so that I have even more money to donate to charity?  If I can make 10% a year on that money, if I wait a year, I'll have another 100,000 dollars to give to charity.  

It also seems to me, that if a charity performed a service that would not be profitable, then perhaps it's not a good place to put money.  I'm not saying that this organization needs to make a profit, I"m saying that if they decided to make a for profit model, could they profit?

Example, let's say you have a charity that gives out free food to those that are poor and unemployed, but that no effort was made to get these people employed.  Could you possibly make a profit from this?  Let's say that you offer this service, but made it so that these individuals would have to pay you back plus a small amount of interest, but even doing that, the costs outweight the revenue even in the long run.  Is it worth it to use those resources to that end?  What if another organization provided food, but also provided education and truly made it a mission to get people employed and productive to an extent where they were able to pay back the organization enough so that in aggregate it was profitable to provide this service.  This seems like a charity that is actually doing something.

Now, I'm not saying that these organizations should charge money necessarily.  The charity may receive donations from those it helped, enough so that it paid for the costs of providing this service in the first place.  However, by having an organization such as this be profitable, it can be self sustainable, and aslo important, it would be able to expand more easily.  

Now, regarding very small scale charitable acts (doing someone a favor), in these cases the cost of figuring out what the service is worth would often be greater than the cost of the service as well, and generally these types of acts don't require a lot of initial investment in the first place.  And besides, these would occur at a small enough scale and wouldn't make much sense to expand it.  I mean, it would be kind of weird if you charged a friend for grabbing him a drink simply so that you can expand your future efforts of grabbing your friend a drink.  But for larger scale problems (involving lots and lots of people), a more for profit model might actually be beneficial, as long as you focus on the long run.

In any case, it's just something I"ve been thinking about, and I haven't made up my mind one way or another yet.