How much profit is too much? Tech companies and the surprising truth about their returns.

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[Commentary] Do tech companies, like Google, Apple and Facebook, make too much money? The answer depends on whether you want there to be another Apple, Google, etc. The entrepreneurial development and investment processes that created today’s successful enterprises are littered with failures. Some estimate a failure rate of 90 percent for tech startups.

It is hard to estimate how much capital is lost by these failures, but CB Insights reports that the average dead tech firm has raised about $11.3 million. Because these losses are large and pervasive, profits from the companies that hit the home runs are needed to keep capital flowing into startups. Saying that high profits are important does not mean that successful people shouldn’t be benevolent -- all major religions and most secular philosophies emphasize the importance of giving to others, even for people of modest means. It is clear, though, that if we have systematic biases against high profits, we will kill off some future tech startups, and their potential customers will bear the cost.

[Mark Jamison is the Gunter Professor of Public Utility Research Center at the University of Florida]


How much profit is too much? Tech companies and the surprising truth about their returns.