Labor Theory of Value Meme #1

This is a common meme, based on a story from United Auto Workers in 1937. It is, of course, silly. The man in the suit paid for the factory, the utilities omn it, the taxes, and the maintenance costs. He bought the raw materials, had to have them shipped to the factory, then got the finished goods to market. Then there is the advertisement, the negotiation with the retail space (or the online work to be listed), the r&d to keep the product new and interesting as competitors come to nip at his heels. Then, of course, there is the regulations, the regulators, the insurance, the quickbooks, the payroll, the compliance. It’s likely the factor owner only makes a net 5–10% margin on his product. That $2.50 a day isn’t going to do anything for him, so he has to build a factory to make dozens, hundreds of devices. That means loans.

My friends will laugh and talk about how an LLC is “limited liability” and a poor founder/CEO can just walk away. In practice, as a guy who has an established credit line and a corporate vehicle, banks want a personal guarentee. When my company, Excelon Development, had it’s best growth year, I had to take out a mortgage on my house to raise the capital to meet payroll while we waited to get reimbursed by the customer — it took about 6 months to get the loan paid off and get back to profitability. Getting in a position where Excelon could accept a contract of that size…