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Is Profit Evil?

Weve told you before that non-profits are seen as warm and
for-profits are seen as competent. But do people think that for-
profits are downright evil?
That is the finding of three recent studiesconducted by Amit
Bhattacharjee, Jason Dana, and Jonathan Baron of the
University of Pennsylvania. In the first two studies, participants
were asked to rate particular U.S. firms and types of firms
(such as Investment Banks) based on familiarity, perceived
profit (How much profit do you think this business made on
the average in the last year?), whether they thought this profit
was deserved or not, perceived value of the firm to society,
and beliefs about the sources of firm profits (Do profits for [this
business] come at the expense of others?).
In the third study, participants were given identical descriptions of five separate hypothetical organizations
with a single difference: in one description the organization was described as for-profit, in the the other it
was described as a non-profit. Subjects were given both descriptions in a randomized order. After reading
each company description, participants were asked to rate the organization on perceived social harm or
good and perceived value to society.

The result? For the first two studies, mean profit and social value were highly negatively correlated. In
other words, the more money a company makes (or is perceived to make), the more people feel that the
company does not benefit society. Along the same lines, in the third study, participants viewed the same
organization as less socially good (i.e., more socially harmful) when it was described as a for-profit
corporation versus a non-profit organization. In short: Even in one of the most market-oriented cultures
in the world, people doubt the ability of profit-seeking business to benefit society.
Bhattacharjee, Dana, and Baronof argue that this conclusion has serious implications for the economy
because a market society relies on the willing participation of its members, but individuals may be reluctant
to participate in a system they view as morally bankrupt.

The papers analysis says that economic education could help the public better understand markets and
consequently turn around the common perception that profit is evil. But do people really respond to textbook
evidence and logical arguments? Of course not. Humans are emotional beings and we react accordingly.
So how can for-profit companies, the lifeblood of our economy, make sure they are not seen aswell, evil?

In The Dragonfly Effect, we tell the stories of many for-profit companies that have harnessed social good,
from to TOMs shoes. We talk about how these companies use the Dragonfly Effect
model to create ripple effects by pursuing a mission based on deep meaning in addition to profit. No, were
not saying that making money is evil. But we are saying that if you want to run a for-profit company thats
also seen as a force for social good, its probably better to learn from the example of companies
like Zappos than to wait around for the public to brush up on their macroeconomic theory.
Ruthless Criticism

Profit good or bad?Profit, also known as earnings or returns, is the surplus that owners of
money, means of production or land make from a business with their respective commercial
means. In our free-market economy, in which the freedom of property is legally protected, profit is
the recognized measure of everything: it is the lifeblood of the society, on which not only the
enrichment of the financial magnates depends but virtually everything.

Therefore, an endless list can be made of what is preconditioned on profits and their realization, as their
necessary and determinant condition:
There must be profits because otherwise employees wouldn't be employed and wages paid;
Profits are the Alpha and Omega of the national economys export success on the globalized
world market;
There must be profits in the housing construction sector, otherwise who would build homes?
and the unpredictable consequences for the housing market would lead to a housing shortage;
There must be profits, otherwise there would be no growth and thus no money for hospitals (if
they are not yet privatized and must throw off profit), no money for education programs, for
regional development projects, highways; without profits, no tax incomes for the state to pay its
officials, to maintain its police and courts, for the international mission of the military, etc.

This boring list of everything that depends on profit makes perfectly good sense. The longer the list goes
on, the more striking it should be. Each example should already prove the following: the number of things
dependent on profits shows the indisputable necessity and therefore the goodness and benefit of profit.
However, this is only a bald assertion because:

Where is the benefit for everybody if wages and salaries can never be low enough because of profit? If,
because of profit, the pace of work must constantly be increased, and working hours have to constantly
be expanded and made flexible? Who does profit help if, because of it, the number of environmental
catastrophes never lets up? Is it a good thing if, for the sake of profit, rents are high and constantly
continue to rise? The truth is that profits are beneficial for those who are keen on making them and for the
state, while the majority of people must allow themselves to be used as a cheap means for profit.

Only profit!

There are plenty of critics of profit who are uninterested in how the application of the legitimate profit
principle brings all the well-known negative consequences with it, that profit is based in practice on
poverty and exploitation. These critics see it completely differently. They stick to the ideal of the
usefulness of profit when they are confronted with its negative consequences. If profit making does not
have the charitable effects they attribute to it, then they claim it is not at all because of profit, but an
exaggerated pursuit of it. Profit in itself is not the reason for the various evils, but an excessively egoistic
interest in it, that one thinks only of profit and nothing else. This criticism goes like this:

Profits rise stupendously, but at the same time 15% of the staff are laid off why? Once again the
entrepreneurs are disregarding any sense of social responsibility because of profit;
Women in the same job and with same qualifications as men are paid less why? Because Mr.
Businessman never stuffs his wallet enough and lacks any spirit of equality in his behavior,
merely for the sake of his profit;
Why do apartments in the centers of dense urban areas always become pricey? Because the real
estate industry ruthlessly exploits the demand for their profit.

This is how critics of profit argue; with loud complaints that are good for nothing. Either profit, and
concomitantly profit-making, is an indispensable and beneficial invention for humankind, in which case it
can never be high enough, and the politicians who worry about it are on the right track when they orient
towards nothing other than profit; or capitalistic money-making is not at all intended to be a means of
livelihood for humankind, and the legitimate principle of the free-market economy from the get-go
necessarily brings with it all the unpleasant consequences that everyone is all too familar with. So it is
damn stupid to divide profit into good and bad: a sense for capitalistic business wreaks something done
beyond good and evil

Ed McLaughlin is the author of the upcoming book, The Purpose Is Profit: The Truth about Starting and
Building Your Own Business, along with co-authors Wyn Lydecker and Paul McLaughlin.
Our Belief

After consideration, weve come back to our belief that the core purpose of every business is to make a
profit. If you are starting out to launch and build a business, you want to achieve success. Otherwise,
what is the point? Success is measured not just by revenue, a fast-growing customer base, and social
good but also profit.

Profit is the fuel for growth, sustainability, and social impact. Profit enables a business to achieve all of
the following 5 goals:

1. Pay bills and save some money for a rainy day

2. Underwrite the cost of sustainable job creation
3. Fund business growth and expansion
4. Enable social responsibility and giving back
5. Fuel the fulfillment of the entrepreneurs vision