And at least it'll give you a sense of how revenues, gross profit, operating profit, pre tax income and net income really are different.

But you can see there's a problem here.

And when people talk about earnings of a company, this is what they're talking about.

This is what the owners of the company get before they pay the government.

(Laughter) But I know it's the bottom line, or one's perception of it, that motivates people in the end.

We know how much it takes to build our product.

And that's what these brands did.

We are assuming a very simple world, were the is no taxes, we have no debt, we have no intrest or things

The pie's getting bigger because these are real investments that are going to benefit my village.

Kill the goose that lays the golden eggs.

And then if you subtract your costs from your revenue, or if you just add these two numbers, because this one is negative, you have your gross profit.

And let's say, assume if I inherited this million dollars, I didn't finance it.

It's good for everybody.

But here you see it means very, very different things.

This is really important to pay attention to, because so many people say, oh, a company made this much.

So you've probably heard not only the term earnings, you've probably also heard the term earnings per share.

They buy more of your service and they tell more of their friends, which leads to more profit.

We had marginal profit I did.

And you'll hear these numbers, gross and operating profit and net profit and pretax profit, and it's very hard to understand that these are actually very, very different things, because they all have the word profit, and what does gross and operating and all that mean?

So, let's see, you have to do 1.85.

Minus 500,000.

The taxes will be 153,000.

With trade, there's mutual interdependency and mutual gain between parties.

I asked them all.

The reason this is happening boils down, in my mind, to one basic problem, which is our inability to perceive the difference between public benefits and private profits.

But again, fun is not enough.

These are the only people who really have, arguably the sophistication and the time and the monetary incentive to really look and scrutinize what management is doing.

Science comes first, but business comes a close fucking second.

What's in it for the institution?

Do we really believe that engineering and biology and all of these other things that have so benefited from computers and maths have somehow conceptually gotten reduced by using computers?

But when you lower the Price to Earnings you are increasing the Earnings to Price.

They're generating the operating profit, and that's a very important thing to realize in the future when we talk about return on assets.

I'll just abbreviate that as Nl.

The assets are generating this.

Then the companies or those factories or whatever you want to think of them,

They have no interest expense, because that's not the point of this video.

Go ahead, eat.

You sold it 50, you borrowed and sold 50, then when it went down 20 you bought is back, you bought it back for 20

I say 50 percent here it's more like 60, 60 percent of the cost of your laptop is sales, marketing, distribution and profit.

Our interests clash with theirs.

This is 350,000 of net income.

This was interest. This was non op income.

This guy makes what is this?

And then I was left with 1 million.

Why isn't it on every poster across the third world?