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11-07-2012, 09:23 AM
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Originally Posted by DAChampion View Post

That's actually not correct for industries where the talent difference between employees is huge. A lawyer previously posted in this thread that at his firm compensation runs at ~75% of firm revenue. On Wall Street, compensation is well documented to be above 50% of banking revenue. You can also look up various articles about the troubles companies like facebook and google have to attract "talent".

When employees are not just talented, but differentially talented, and measurably so, then employee compensation can shoot far north of 50%.

This is also the case with the NHL. Now that owners have limited freedom to spend on payroll, teams are spending more on scouting and drafting. I bet you that the salaries of people like Timmins and Dudley are going up, and up, and up.

I predict that the salary increases for scouts, coaches, sports psychologists, trainers, etc will eventually consume 100% of the gains owners make from lower player salaries. My prediction is a direct consequence of classical economic theory, see the tendency of the rate of economic profit to decline.
Correct on 50 50 not applicable to industries that employ talent not labour. I've wasted my breath here trying to explain that difference.

Correct on profits dropping because of additional non player spending required to remain competitive.

I'm not sure, but I would guess that there is a direct relation between profitability, and the level of competition within any given industry. Economics 101 probably, but I'm too lazy to look it up.

To counter this disadvantage of high competition, I think you might need to redefine what the industry standards are by providing products or services that are far superior to, or desirably different from, the standards in that industry.

Apple computers is a good example perhaps. Pretty obvious.

Which suggests that the IT and computer industry is still highly elastic in the level of service and product that can be provided.

I'd guess that the NHL is not elastic at all in the level of service/product provided by competing teams, in terms of team and player performance, and therefore competition cannot be overcome through elasticity of product quality or difference, and profits will therefore always be limited.

IE: Don't buy an NHL team and expect to profit. Could be good thesis in there. Too tired to bother.

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