The Profit Paradox

Algae responding to nutrient influx initially appear successful, rapidly multiplying and dominating their environment. Measured in isolation, the bloom represents explosive growth and resource capture.

Organisms and organizations claim profitability by drawing narrow boundaries around their activities. Expanding the boundary reveals whether value creation occurred or energy simply relocated within existing flows.

Organisms face natural limits on energy accumulation through competitive pressure. The more energy concentrated, the larger the target for competitors, predators, and parasites seeking that stored resource.

All organisms face mortality that prevents indefinite accumulation across generations. A squirrel’s cached nuts don’t transfer to offspring—accumulated resources redistribute back into the ecosystem upon death.

Humans uniquely developed institutional structures enabling accumulation across generations. Legal systems enforce claims that persist beyond individual lifespans, fundamentally altering accumulation dynamics from biological norms.

Humans evolved disproportionately large brains relative to body size—energy-hungry tissue consuming 20% of daily calories even at rest. This metabolic expense produces unique capability: converting experiences into transmissible knowledge.

Unlike physical resources that divide among users, knowledge multiplies through distribution. Teaching someone fire-making doesn’t diminish the teacher’s capability—both parties gain while total knowledge increases.

Drug companies demonstrate the distinction clearly. One develops new antibiotics, saving lives and enabling productive capacity. Another trivially modifies existing drugs to extend patent protection and raise prices without improvement.

Drug companies facing patent expiration make trivial modifications—new coating, slightly altered time-release—sufficient to file fresh 20-year patents blocking generic competition. Same drug, no medical improvement, dramatically higher prices.

Humans removed natural death-reset and competition-diffusion limits through property rights and money. Financial systems enable indefinite claim accumulation and compounding across unlimited time horizons.

Energy extraction progresses from highest quality, most accessible sources toward lower quality, harder-to-reach deposits. Early oil gushed from shallow wells; now we drill miles deep underwater or fracture shale rock.

When financial claims diverge from physical capacity to support them, history shows recurring adjustment patterns: debt defaults, currency collapse, conflict. Markets and institutions eventually force reconciliation between paper claims and real resources.

William Stanley Jevons observed in 1865 that improved coal efficiency increased rather than decreased total coal consumption. The pattern repeats across all efficiency improvements—more efficient engines mean more engines, LED lights everywhere instead of energy savings.