Profit — "the Root of All Evil" — Is the Top Performance Metric in the Long Run

 

The profit theme has always had a bit of a negative connotation. But we have to be careful about the nuances. For a company to survive, it has to be able to pay the bills, at the very least. And if we look over a horizon of decades or even hundreds of years, as it is being simulated in the game OFMOS, the money side of business stands out even more.

And not in a bad way. In fact, it is arguably the only way — the only way to monitor and measure the survival (success?) of a company. As I wrote in the detailed instructions document (draft September 29, 2018):

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"With the game generally taking 45 to 90 minutes to play, it is important to note that the corporate activity being simulated would span several decades in real life. The game’s focus is on the big picture and, in line with the theoretical model used as foundation, most of the characteristics of a successful business are likely to be embedded into the game mechanics. The simple fact that the two companies, as simulations of the real world, last very long periods of time suggests that they are healthy companies, being customer oriented and adept of various best practices.

Nevertheless, the longer the time frame, the more visible the money side of business becomes. While generations of offerings come and go, to stay in business, companies must continuously generate revenues that exceed the expenditures or costs of doing business. Essential in keeping an organization operational or running over long periods of time, the difference between revenue and cost is simply described as profit (sometimes also referred to as return). 

Profits in the game are expressed exclusively in cash (the most ready-to-use form of money), even though in real life the financial side of business tends to be more complex. And it is the same for all other monetary transactions: investments, bonuses, and fees. The currency chips are available in denominations of $1, $10, and $100. They are simplified expressions of $1 million, $10 million, and $100 million, which more accurately would represent the amounts of money that long-lasting companies tend to deal with."

 
Cristian Mitreanu