The profit motive

tumblr_mdlqgywoVm1qdhtq7o1_400A common cliché in movies, news media, politics, books, social media and conversations is the “greedy businessperson”. This is typically a business owner or high level executive who is portrayed as being driven principally (or solely) by greed (i.e., the desire for more money).

Business characters in movies, as well as real-life figures in news media, are often portrayed as “just wanting to make a profit”, and indeed, the term “profit motive” (which is the desire to constantly try to improve one’s income to expense ratio) has become synonymous for evil, despicable, greedy selfishness.

Surely there are many business owners and managers to whom making a profit is their top priority. But now that we’ve established the focus on this one-dimensional facet of this stereotype, let’s pick it up and rotate it around to expose some new, rarely-examined angles.

Facet #2:

The first question is this: Aren’t most employees “guilty” of the same thing? Don’t employees work at jobs primarily to earn a paycheck?

Thought experiment: Tomorrow, tell all employees of a company that there will no longer be any pay for their services. How many will continue to show up for their jobs? Probably very few in most cases.

So when it comes down to it, employees only work for the money, eh? Is this greedy?

Isn’t it a bit hypocritical to criticize business owners for putting making money first if their employees are doing the same thing? Isn’t it a double standard if an employee is praised for being responsible for making more money than they spend, thereby saving money for their future, yet an employer is vilified for doing precisely the same thing?

Why should the ethics of employers be judged with a separate set of standards than the ethics of employees? Aren’t we all just people? Shouldn’t everyone be judged equally?

Facet #3:

Now, you are thinking, “Of course if a company stopped paying employees they wouldn’t show up, because people couldn’t afford to live if they’re not making money. They need the money to pay their bills.”

You are right. This is surely a noble purpose, to wake up early every day and go to work to earn money to survive and pay your bills. And a raise or promotion is cause for celebration.

But what about  business owners? Is it any less noble to get up every day and strive to make your business successful in order to survive and pay your bills– and pay your employees?

Since a business owner’s expenses actually include employee salaries, wouldn’t it be logical to consider the business owner’s mission an even nobler one?

Facet #4:

Another, very interesting incongruence is that employees have guaranteed income. But employers don’t.

Given that an employee is generating a profit for their employer, their income is 90% risk-free. (Why would a company fire an employee they are making a profit from?)

Yet a employer’s income is not risk free at all. (If it were, everyone would start a business tomorrow, since every rich person would finance every startup they could find.) The facts are, 50% of new businesses fail in the first year, and 94% fail in the first ten years. We all know of countless businesses, large and small, that have gone out of business, where owners and shareholders have lost huge sums of money, sometimes their life savings. But no employee has ever lost their life savings when a company fails. They simply get another job. It happens every day.

Employers take a great risk in starting a business, and hiring employees that may or may not ever return a profit to the employer. (Obviously, if every employee returned a profit to the employer there would always be zero unemployment, as companies fought fiercely with each other to hire every last person on Earth.)

Is this fair, that employers should shoulder almost all the risk? Shouldn’t employees have more “skin in the game?”

And given this unfairness, shouldn’t there be more laws protecting companies from greedy employees than the other way around?

Facet #5:

Let’s say that an employee gets a job offer from another company for $20K more per year. This is cause for celebration and congratulations, right? Yay! The employee quits and takes the higher paying job. Over time, as their job skills and experience improves, they get raises and better job offers and make more and more money. This is the natural way of the world, and the reason 50 year olds make double the income of 25 year olds on average.

But what if an employer lays off an employee because they found someone who can do the job just as well for less money? Same thing, right?

No? Why not? The motivations are identical, to make a higher income, in the first case, by making a higher salary, and in the second, by lowering labor costs.

Is this another hypocritical double standard? If so, why?

The bottom line:

The bottom line is that our society judges employers, and employees, by two distinctly different, and often, opposite, sets of ethical standards.

It is admirable and honorable when one wants to work at a job to make money. Yet it is greedy to want to provide a product or service to the market to make money (and inevitably, create opportunities and jobs for others). Is this an intelligent and constructive viewpoint?

It is respectable for an employee to make more money than they spend, and saving money is responsible. Yet if you own a business, making more than you spend (a profit) is perceived as greedy and even irresponsible.

Since, in a free market, making money is a litmus test for genuinely providing people with something they want or need, doesn’t it seem that it would be much more fair, and much more healthy, to regard the quest for profit by both employer and employee to be equally honorable?

See “What is Money” for more insights.

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2 thoughts on “The profit motive

  1. Josh – IMHO, you are incorrect – it’s NOT that “It is greedy to want to provide a product or service to the market to make money” – it’s GREEDY when the CEO and Executives force minimum wages on their employees (i.e Walmart) , but pay themselves exorbitant salaries, and bonuses, and live high on the hog from the profits they exploit from “enhanced productivity” (meaning, paying workers LESS to do MORE). If you want to see what’s GREEDY, look at Executive Compensation at WalMart, ExxonMobil, and EVERY major healthcare provider. When the “quest for profit” becomes the ALL-CONSUMING corporate goal and workers are EXPLOITED in that quest instead of being compensated fairly, THAT is what’s wrong – and in America, that is what has been going wrong for over thirty years. Take off your blinders.

  2. Put more simply, “greedy IS as greedy DOES” – not EVERY Corporate Exec lines their pockets by exploiting their workers , but it has become more the norm than it should ever be…

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