Common Stocks and Uncommon Profits and Other Writings

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product development, the complexity of the task almost guarantees this. 
Important as it is, the degree of technical competence or ingenuity of 
one company’s research staff as compared to that of another is only one 
of the factors affecting the benefits that the company derives from its 
research efforts. Developing new products usually calls for the pooling
of the efforts of a number of researchers, each skilled in a different tech- 
nological specialty. How well these individuals work together (or can be 
induced by a leader to work together and stimulate each other) is often 
as important as the individual competence of the people involved. Fur- 
thermore, to maximize profits, it is vital not to develop just any prod- 
uct but one for which there will be significant customer demand, one 
that (nearly always) can be sold by the company’s existing marketing 
organization, and one that can be made at a price that will yield a
worthwhile profit. All of this requires efficient liaison between research 
and both marketing and production. The best corporate research team
in the world can become nothing but a liability if it develops only prod- 
ucts that cannot be readily sold. For true investment superiority a com-
pany must have above-average ability to control all these complex rela- 
tionships yet at the same time not so overcontrol them as to cause its 
researchers to lose the drive and the ingenuity that made them out- 
standing in the first place. 
FINANCIAL SKILL 
Again and again in this discussion of production, marketing and 
research, the terms profit and profit margin have been used. In a large
company with a diverse product line, it is not a simple matter to be sure 
of the cost of each product in relation to the rest, as most costs other 
than materials and direct labor are spread over a number of such prod-
ucts, maybe over all of them. Companies with above-average financial 
talent have several significant advantages. Knowing accurately how 
much they make on each product, they can make their greatest efforts 
where these will produce maximum gains. Intimate knowledge of the 
extent of each element of costs, not just in manufacturing but in selling 
and research as well, spotlights in even minor phases of company activ-
ity the places where it is logical to make special efforts to reduce costs, 
either through technological innovations or by improving people’s spe-
cific assignments. Most important of all, through skillful budgeting and 

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