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275647 Posts in 27717 Topics by 4285 Members Latest Member: - Jason DAngelo Most online today: 151 - most online ever: 429 (November 03, 2007, 04:35:43 AM)
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Author Topic: Do Indies have Competetive Advantage?  (Read 2456 times)
Valamir
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« Reply #15 on: February 03, 2003, 10:39:42 AM »

Ron, economically a subsidy is a a payment by an entity to a party without any expectation of that party producing anything with it.  Typically it is most often used with regards to a transfer payment by a government for the purpose of achieving some "greater good".

In a broader sense a subsidy can be thought of as any payment from one group to anotherfor which there is no expectation of a Return on Investment.

The sense it is being used here suggests that when a person provides labor there is an expectation of financial payment for that labor (the return on investment).  When an indie publisher works for free, then he is making a payment (labor) without any expectation of a return (for free), hense the effect is very similiar to that of a subsidy.  From the perspective of a company the effect is no different than if the government were subsidizing the company by paying its labor costs (either way the cost of labor to the company is free).

So technically it isn't a subsidy, but the economic impact for the company in isolation is very much like one.

But this is no different than any other industry which attracts "moonlighters" who are willing to work cheaper than the full timers.
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Ron Edwards
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« Reply #16 on: February 03, 2003, 10:49:31 AM »

Hi Ralph,

Seems to me that the subsidy definition requires there to be an "entity" and a "party" as separate things. Saying that the single-party phenomenon of not paying oneself a paycheck is "like that," or "feels like that," or "could be seen like that" isn't flying for me at all.

Best,
Ron
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Valamir
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« Reply #17 on: February 03, 2003, 11:13:01 AM »

Technically they are.  You Ron Edwards are a seperate entity from Adept Press, which is why I referred to effect on the company taken in isolation.  Since Adept is (I presume) structured as a sole proprietership it makes the issue more blurry because in this form of ownership structure assets and liabilities blur between the two entities.  But you Ron Edwards are the entity which is subsidizing the labor of Adept Press.  

Essentially this is the same as the subsidizing-entity-Ron-Edwards giving to Adept Press a sum of money for which Ron Edwards never expects to see a return.  Then Adept Press pays the salary of employee-Ron-edwards using that money.  You are basically (as is standard in a sole proprietership) both the owner and employee...two seperate hats - one person.  The effect on Adept Press analysed seperately is identical whether that money comes from you or me or the government...hense the comparison to a subsidy.  

The issue would be much more clearly deliminated if Adept were set up as a corporation (even if you were the only shareholder).  The two entities would be more clearly seperated.  But the difference in ownership structure doesn't invalidate the comparison, just makes it more fuzzy.

But as I said, while one can see donated labor as a form of subsidy (having the same overall effect on the company financial reports as a subsidy would) it certainly doesn't constitute anything unusual, or unfair.
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Ron Edwards
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« Reply #18 on: February 03, 2003, 01:42:09 PM »

Hello,

Adept Press is indeed a corporation. I shifted it from sole-proprietorship when I went to book format.

Still don't buy it, though. However, there's no real need to debate about the issue. as we're still in the realm of "seems like it" or "could be construed that way" and so forth, and I don't see any way for it to be debated without conflict-of-interest playing a large role.

Best,
Ron
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Valamir
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« Reply #19 on: February 03, 2003, 02:42:37 PM »

I agree there is no real point to debating it, although it is, for me an interesting intellectual exercise.  Referring to it as a subsidy is really just a short hand way of referring to the end effect.

The end effect being that if I analysed your financial statements the bottom line as a result of your donating your labor to Adept would look the same (as far as ratios etc are concerned) as it would if you took a salary but the cost of that salary was subsidized by an outside entity.  The numbers would come out the same regardless of the source of the cheap labor.  So from a raw analytical standpoint its a fair way of looking at it (and makes for a simple reference point).

But calling it a subsidy with the idea of putting an "anti-transfer payment" spin on it would be a dubious use at best.  There are currently several top CEOs of major corporations who take as a salary 1$ annually.
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