Let's say you live out in the middle of nowhere, away from a power grid. You want electricity, so you do research and find that you have options: a diesel generator, or solar panels (plus a battery). Both options have a 5-year lifetime (i.e. they'll break after 5 years and you'll have to buy a new one), and for the sake of simplicity let's assume there's a 0% chance they break before then. The solar panels cost $900 to buy and don't cost anything to run, while the generator costs $425 to buy and will need $100 of fuel every year. For this entire post, let's assume no inflation (or equivalently, that all prices given are real prices).
So, the solar panels cost $900 for the 5 years, and the generator costs $425 up front + $100 per year times 5 years = $925. So the solar panel is the better purchase, and you get to go green! yay!
Now let's become bourgeois: you are now a small startup power company, selling electricity to people. Based on the current price of electricity, you're charging people $200 a year for you to supply them with power. Now, how will you actually make the electricity you're selling? From the calculations above, it seems like you'd want solar panels: you'd pay $900 for 5 years of panel electricity, and sell it for $1000, pocketing a nice $100 of profit per customer. With generators, you'd pay $925 for the 5 years, also sell it for $100, and only make $75 per customer.
However, looking at things per-customer is not the capitalist way. You have a huge number of potential customers (everyone needs electricity!), but only a finite amount of start-up capital, i.e. money on hand when you start your business. Whether you got your money from saving up, from taking out a bank loan, or from convincing your local failson to invest in exchange for half your profits, you only have so much money. So:
- With solar panels, you spend $900 of your upfront money in order to buy a $200/year profit for 5 years.
- With diesel generators, you spend $425 of your upfront money in order to buy a $100/year profit for 5 years (since each year you get paid $200 from the customer, but spend $100 on fuel)
Comparing the two, it's now obvious that you should never waste your finite supply of money on buying solar panels: one panel purchase converts $900 of upfront money to 5 years of $200/year profit, but two generator purchases convert only $850 of upfront money to the same $200/year profit. To put it concretely: if you have $8100 to start your business with, you could either buy 9 solar panels and be making $1800/year for the next 5 years, or buy 19 generators, and be making $1900/year.
Because you're trying to maximize profit as limited by your current amount of money and not profit as limited by number of customers, what makes sense for your business is different from what makes sense for an individual consumer, or indeed what makes sense from a society-wide rational perspective of minimizing resource use.
Thanks to @apas-95 for this great post which inspired me to think about this and actually come to understand it!