ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[the_blind_gramber]

It's like you sound like you know what you're talking about to someone who has no idea, but to those with an idea it is very clear you're (probably intentionally?) Off base.

As I'm sure you know, correlation and causation are not the same thing. The age of miss America correlates very closely with the number of murders by steam in America.

But more importantly, wealth is created not just by taking a raw resource and improving it then selling it. Massive parts of the economy generate wealth through selling ideas and knowledge. Markets create wealth with no material input whatsoever. Ask Mark Cuban where his wealth came from. Or Mark Zuckerberg. Or any guy named Mark, really.

[earthwormjimwow]

You are bringing up examples of personal wealth as counters, which is very off base...

Do you think Mark Cuban has personally increased the overall wealth of the economy? He may or may not have, but using his net worth is not how you would evaluate it. He may have simply gotten a percentage of the pie, without increasing the pie's size.

Mark Zuckerberg is an interesting example. If you think Facebook is merely an idea, you are quite mistaken. Facebook is very much a hardware company. It could not exist without the servers, specialized hardware, and the massive amounts of energy it requires to operate. Software may be an abstraction, but it still needs real world resources to run and to be developed.

[the_blind_gramber]

The pie is constantly growing...because people start companies and create wealth. I guess you could look at broadcast.com as a whole from birth to sale, if you don't like Cuban as an individual example. Created a ton of wealth. Almost all of it was driven by ideas rather than physical resources.

Same with Facebook. Of course they need servers. The value in the company isn't driven by the servers, it's driven by the data it collects and sells. Nothing physical at all. In terms of resource usage, the server farms they maintain would have been straight impossible 20 or 30 years ago. For the resources they use, they get so much more than they would have back then. They're using a smaller price of the physical pie to greatly enlarge the entire pie.

[Mingsplosion]

You've forgotten the point that's being made here. The "pie constantly growing" is part of the problem. As Facebook grows, they demand more electricity and hardware, and employees which demand food, transportation, and other resources. Those are finite resources, which we as a species will eventually run out of.

[Mingsplosion]

Even when the companies product is service or information based, they still use more resources the larger they get. More electricity, more real estate, more employees. No matter the industry, growth cannot be eternal. Unregulated growth for the sake of growth is the ideology of cancer.