In big corps, there are endless projects that claim to deliver more than the “weighted average cost of capital” which is basically what we can do with our parked cash in the market (why invest in a low return project if you can make more money in the market?).
Even then we have lots of projects that claim to deliver incremental net profit. Why not just do them all?
The obvious answer is limited resources and risk. Those numbers are never real, and there are lots of costs you don’t think of.
Less obviously is gross margin %. If you begin to dilute your high margins just to make extra cash, your % dilutes and this is a bad thing. Your money should be working toward the most profitable thing per dollar invested.
Also, focus. If OpenAI has to focus on two rabbits, they won’t catch either (or 100 rabbits in this case). They have 1 thing they should be focused on, and all bets should lead to that road.
One exception is that you also need to invest in projects that aren’t profitable, like safety and regulation, etc. But I could still build a business case of how much profit we’d lose if a bunch of consumers got sick or hurt off x if I want to complete the exercise.
Even then we have lots of projects that claim to deliver incremental net profit. Why not just do them all?
The obvious answer is limited resources and risk. Those numbers are never real, and there are lots of costs you don’t think of.
Less obviously is gross margin %. If you begin to dilute your high margins just to make extra cash, your % dilutes and this is a bad thing. Your money should be working toward the most profitable thing per dollar invested.
Also, focus. If OpenAI has to focus on two rabbits, they won’t catch either (or 100 rabbits in this case). They have 1 thing they should be focused on, and all bets should lead to that road.
One exception is that you also need to invest in projects that aren’t profitable, like safety and regulation, etc. But I could still build a business case of how much profit we’d lose if a bunch of consumers got sick or hurt off x if I want to complete the exercise.