Why do some businesses, despite appearing reasonable, consistently fail to be profitable in the long run?

To put it bluntly, this boils down to the most fundamental logic of business: Revenue > Costs.

No matter how 'reasonable' a business appears, how 'innovative' its model, or how 'numerous' its users, if it consistently fails to achieve this, it's fundamentally not a self-sustaining business but a money pit.

We can imagine this by thinking about opening a noodle shop:

1. Your noodles are delicious, but you can't make money from them.

• Value does not equal price: Your noodles (product/service) might indeed solve the big problem of 'hunger,' and your neighbors might praise you (good user reputation). But the problem is, people are only willing to pay 10 yuan for your noodles, while the cost of that bowl, including rent, utilities, and labor, is 12 yuan. You lose 2 yuan for every bowl sold. You've created value (feeding people), but you haven't been able to convert enough of that value into profit.
• The allure of free: To take it to an extreme, imagine you offer 'free noodles forever, just come watch me pull them' to attract customers. Your shop is packed (huge user base), appearing incredibly prosperous. But the problem is, your seemingly logical assumption is, 'once I'm popular, I'll make money from advertising or selling merchandise.' What if the advertising revenue can't cover the cost of hundreds of bowls of noodles you give away daily? This 'seemingly reasonable' profit expectation might never materialize. Many internet companies have failed this way, gaining massive users through free offerings but never finding a revenue stream that could cover their enormous operating costs.

2. You haven't accurately calculated the true cost of making a bowl of noodles.

• Visible and invisible costs: For a noodle shop, flour, meat, and vegetables are visible costs. But rent, employee salaries, social security, depreciation of renovations, utilities, taxes, marketing, and even a bowl broken by a customer... these are all costs. Many businesses, in their early stages, focus only on core product costs and severely underestimate the 'invisible costs' of operations, marketing, and management. The result is that, on paper, selling a product seems profitable, but once all expenses are factored in, the company as a whole is losing money.
• Diseconomies of scale: Another scenario is when people always assume that costs will decrease with larger scale. For example, if one noodle shop is profitable, you might think opening 100 chain stores will definitely make a fortune. But you quickly discover that managing 100 stores requires professional managers, complex supply chains, standardized training systems, huge marketing expenses... Your management costs skyrocket, causing the average profit per store to decrease, or even turn into a loss. This 'diseconomies of scale' trap is common; a business model proven successful on a small scale doesn't mean it can be infinitely expanded.

To summarize:

A business that consistently fails to make a profit often stems from these two issues, or both:

• Revenue side issues: Either your customers aren't willing to pay enough for your 'value,' or you've mistaken 'users' for 'customers,' having popularity but no profitability.
• Cost side issues: Either your total cost estimation was overly optimistic, missing many hidden costs; or your model is flawed, and the larger the scale, the more you lose.

The so-called 'first principles' here means returning to the essence of business: a business is an organization whose purpose is to make a profit. All seemingly reasonable stories, sentiments, or user numbers, if they ultimately don't lead to the outcome of 'Revenue > Costs,' are just stories, not good businesses.