The formula M–C–M′ basically describes the way capitalists turn money into more money. A capitalist starts with M (money) and uses it to buy C (commodities), like tools, supplies, and especially labor power. Workers then use those commodities to create products, which are sold for M′ (a larger amount of money than what the capitalist started with). The profit comes from surplus value—the extra value workers add through their labor that is greater than the wages they receive.

This system explains why wealth tends to concentrate in the capitalist class. The cycle repeats constantly: money is invested, workers create products, products are sold, and profit goes back into the next round. For instance, a restaurant owner might invest in food, equipment, and staff. The meals sold to customers bring in more money than what was paid for wages and supplies. That extra profit becomes M′, and reinvesting it ensures the owner keeps making more. Over time, this is how capitalists maintain and grow wealth.