You can want to make as much profit as possible while ALSO doing the right thing ethically.
No. You've confused means with purpose.
A company with investors has to make enough profit to give the investors a fair return. And any company needs enough profit to reinvest in growth. But profit alone isn't a sustaining motivation. One entrepreneur I know sold his first company back in the 90s for >$100m. As he was working on his next venture, he said, "Profit isn't the point. Profit is permission to continue."
The purpose of a company is generally to create value for a given audience in particular ways, often ones that have a broader impact.
For example, the purpose of the New York Times is to inform readers about the things that matter to them and to the world. They do that because they see journalism as necessary to a healthy society, a healthy world.
If you approach the same audience and tools with a goal of pure profit, you end up with things like supermarket tabloids, viral clickbait, and Macedonian fake news farms. Those have a much higher ROI than real journalism; they're going to be much more profitable. By your theory, they're better companies. But they aren't.
Easy to say profit doesn't matter once you've cleared $100mm.
And since you missed it, let me be clear: he didn't say profit doesn't matter. He said profit wasn't the point. His previous business was quite profitable, but that's not why he did it.
To expand a bit, I see business success as balancing the needs of four groups, whose needs are naturally in tension:
(1) Employees, who want the best pay, work conditions, job satisfaction, etc. (2) Investors, who want the best financial return (3) Suppliers, who want to be paid on time and want repeat business (4) Customers, who want great products at the minimum price possible
I'm American. One thing I've noticed reading economic histories of the US, such as Reich's Supercapitalism, is how shareholder/profit-oriented US business became, around say, the late 1970s/early 1980s. This was the heyday of leveraged buyouts, and I can't help but think that, in terms of operating quality of US companies, there was indeed much trash to be taken out. Business was too cozy; customers and investors were getting a raw deal. You hear all these Mad Men-esque stories of sexual harassment, two-Martini lunches, expense accounts, and I can't help but think, man, the customers and investors must have gotten a pretty raw deal that employees could get away with that stuff (working so little, being distracted, wasting capital, making shoddy products).
I also think Japanese and German capitalism are more employee/manager-oriented than the US for various reasons.
In the end I think it depends on which group (of the four above) are culturally privileged. We hold investors in pretty high regard in the US vs. employees; it's very "capitalist". I have no idea whether it's right, but I think it's a useful insight. In the end I think it comes down to culture, and that US culture is pretty capitalist compared to say, France.
It didn't dawn on me that investors are only one constituency. For owner-operators, investors and managers are the same person, so of course, businesses would be operated (managed) for benefit of their investors; they're the same people.
But you're right, investors are only one group, you need to keep them happy, and that's done with profit. It's not a very important insight when investors = operators (most small businesses), but as the two groups diverge, such as when entrepreneurs use a lot of outside funding, I think "permission to continue" is a good way of looking at it.
If you give me two $10 bills in exchange for a single $20 bill, it's clear that the value of what you gave me was $20, but unless you are counterfeiting or laundering money, I presume your profit was $0.
Conversely, if you save the seeds from tomatoes, grow them in your yard, and sell me $20 of tomatoes, same $20 of value, and presumably close to $20 in profit.
Everything is monetized, and profit drives everything, we are a capitalist society. A business will not operate on charity very long...
A company with investors has to make enough profit to give the investors their expected return that they were promised, within the bounds of the forward looking statements, etc., that the company put forth to receive the investment.
There's no "fair" anywhere in there - nor should there be.
"But profit alone isn't a sustaining motivation."
That's true for me and it might be true for you but it isn't true for everyone, nor should it be. We should expect that there are many people and organizations for whom profit alone is a sustaining motivation - and we should take steps that we are not fragile to such actors.
This is basically a moral claim. I think it's a sad sort of morality. That's irrelevant to that point, which is a practical one. Businesses generally have to give investors a return they feel is fair, or they stop getting investors. Investors are primates, and so have a sense of fairness. [1] The notion of a fair rate of return is also related to the market rate, and companies that fail to provide market-rate returns don't do well, no matter how precisely correct their forward-looking statements.
As to profit being a sustaining motivation, feel free to give examples, but I find your raw assertions unpersuasive. I believe that it's necessarily true for organization in the long run, in that profit-seeking is a short-term motivation, one that essentially conflicts with the long-term work needed for sustainable companies.
> we should take steps that we are not fragile to such actors.
Sure, but that's true whether or not their exploitative behavior is in some sense sustainable. Indeed, we need to be most careful of the unsustainable ones; they're the most dangerous.
[1] See, e.g., https://www.ted.com/talks/frans_de_waal_do_animals_have_mora...
Why isn't the purpose of the New York Times to mis-inform and trick its readers into blindly accepting horrific policies such as the US Invasion of Iraq in 2003? [1]
A corporation's means and purpose are one in the same: profit.
I love reading vague, romanticized mischaracterisations of corporations that enables the writer to not need to reconcile their politics with their current living scenarios. But this is a totally inadequate explanation for the existence and purpose of corporations today.
Companies exist to derive profit for their investors, primarily by increasing the value of their common stock and by dividends. Whatever other impact is made by a company's operations in the marketplace is an externality.
Sometimes an externality is positive, sometimes it is negative. The New York Times exists to derive profit for its investors, and it does this by, yes, making a product that informs its readers. But they also do it by nuzzling up next to evil, moneyed interests - making deals with the devil and serving significant positions in helping to roll out horrible public and international policies.
Perhaps journalism is necessary for a healthy society, but could you honestly accuse NYT of being the purveyors of such an ideal? NYT is extraordinarily guilty of nefarious, trixy, and immoral activity compared with its competition, in fact. The goal of pure profit has certainly made the NYT a strong purveyor of tabloid-esque material, clickbaity headlines, and outrageous, unfounded articles.
To change this, the American public needs to elevate its own desire for quality journalism to the extent that it becomes more valuable to pursue that goal, than to pursue clicks, outrage, and lowest-common-denominator dreck like the NYT and all other corporate news entities do today. That would be quite a tall order for a society driven to mass mental illness by their weak, thoughtless acceptance of social media into their every waking moment.
[1]: http://www.ianwelsh.net/always-remember-the-nytimes-pushed-h...
Toyota, for example, is explicit about it. If you talk with employees at Apple, Intel, or Google, you can easily see that they're not just doing whatever random thing that is profitable; all three companies have a deep sense of purpose. They know their chosen audiences and are dedicated to creating value.
> Companies exist to derive profit for their investors, primarily by increasing the value of their common stock and by dividends.
There are several ways you could mean this, but I think all of them are wrong.
Companies exist societally because we have decided that we want to encourage certain sorts of positive-sum economic activity. If they didn't, we wouldn't allow them. What you write off as an externality is, systemically, the entire point.
Individual companies exist because one or more people have lined up around an idea and pursued it with great dedication. I have not met a single entrepreneur whose chosen purpose is "produce a good return for the LPs of some investment fund".
Those companies attract employees partly because they can make a living. But also because the company's audience and work are something they can get behind. Nobody lasts long doing a job where they hate the company's mission.
From the customer's perspective, the question of purpose is even clearer. It's to give them things they want in exchange for reasonable amounts of money.
In theory you might be right about the investor's sense of purpose: maybe they see companies as pure profit-making machines. But even there, the investors I've met don't act that way. They get really excited about who a company's audience is and how they are choosing to serve them.
And I'm hardly alone in disagreeing with the "maximize shareholder value" school of thought. If you care to search for "world's dumbest idea" you'll find plenty of discussion slamming it. Including from business luminaries like Jack Welch and Mark Benioff: http://www.forbes.com/sites/stevedenning/2015/02/05/salesfor...
Entertainingly, even the Whole Foods CEO disagrees with your theory. He wrote: "But we have not achieved our tremendous increase in shareholder value by making shareholder value the primary purpose of our business. [...] the most successful businesses put the customer first, ahead of the investors. In the profit-centered business, customer happiness is merely a means to an end: maximizing profits. In the customer-centered business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centered business is capable of."
There are plenty examples where companies will profit even though they are "going too far." Just think of all the profit made from war while the majority of people disagree with the war.
Your ethics of "doing the right thing" while making as much profit as possible are also subjective if you consider the definition of profit that I proposed above. I know I'm saying all this in a forum based around startups but I think it's worth pointing out.
That is a perspective, yes. It's also ridiculous zero-sum thinking contradicted by both theory and reality. The iPhone has resulted in hundreds of millions of happy customers, and tens of thousands of high paying jobs. But apparently all of those people are "exploited" because Apple makes a profit.
Sure, it probably would have been unlikely but this is because non-profits are usually less thrilled about hiring de-facto slave labour in China or elsewhere on the supply chain in order to produce an iPhone at a price where large profits can be made.
No one cares if Whole Foods makes piles of cash. Just don't pee on my leg and tell me its raining.
Hypocrisy isn't great, but practically everyone has been guilty of it in one way or another. So it's an easy charge to make that gets everyone worked up.
I don't know if we should tolerate hypocrisy, but I'd be in favor of talking about it less in favor of more direct and productive arguments.
Don't tolerate hypocrisy for hypocrisy's sake, but recognize when it's pragmatic to tolerate it to either move things in the correct direction or simply to limit how far they slide in the wrong direction.
My preferred concrete example, simply because of how staggeringly effective tolerating hypocrisy was at getting a resoundingly unpopular law to become the law of the land is American Prohibition. During the lead-up to prohibition in the United States one of the most successful lobbyists was a man named Wayne Wheeler of the Anti-Saloon League. He would work with or endorse any candidate that supported a dry agenda, and he'd work to replace those that didn't with those that did. This included candidates who were, themselves, barely-functional alcoholics. They would drink while meeting with him (he himself was truly a teetotaler as far as we know) while discussing the very legislation that would make acquiring alcohol illegal. He took it all in stride as long as they voted the right way. Despite the perceived success of the wets in attaching a 7-year limit on time-to-ratification for the 18th amendment, it passed the required number of state houses in less than two years.
For a more modern example I direct you to Republican's willingness to re-elect "family values" candidates who support and push through anti-LGBTQ legislation but who have themselves been caught in flagrante delicto. I find such laws reprehensible, but I cannot deny the effectiveness of the right in passing them, in part due to a willingness to tolerate effective but hypocritical legislators.
In terms of where I believe a failure to tolerate hypocrisy has resulted in net loses for progressive causes, I'd point to politicians with strongly progressive voting histories are pilloried and their political careers are summarily executed because they turn out to be corrupt, sexist, racist, homophobic, etc. If their voting history and the legacy they're leaving behind is a progressive one (and stays that way), who cares if they're only pursuing it because they know it will get them re-elected? Unless you can find a candidate who will produce a better net effect, stick with the flawed bigot.
Concretely, take Hillary Clinton after the primaries[0]. I saw it argued that she was a hypocrite for taking millions in speaking fees from big banks while talking about protecting the little guy. She may well be a hypocrite (and her banking voting history isn't great), but the platform she was running on and much of the rest of her voting history are solidly progressive. The number of votes lost due to perceived hypocrisy probably wouldn't have swayed that contest, but more broadly I see it in the same category of being idealistic to a fault.
But I do agree that there is a case to be made to work those people, if their views align with yours, even though they are personally hypocrites. On the other hand, maybe not the most trustworthy allies.
It's almost inconceivable to me that someone(s) can be both anti-abortion and pro-execution without some deeper, darker, cynical motivator.
Huh. Again, thank you.
I don't think there is a conflict with either position because they are vastly different scenarios, and neither side is basing their argument on an absolute position on the value of all life in all circumstances. A good example would be: Someone who opposes kidnapping, but supports imprisoning criminals. Those positions are not in conflict, even though prison is just legal kidnapping.
> You can want to make as much profit as possible while ALSO doing the right thing ethically.
OP even said that their ONLY goal was profit. Of course as a company in a society like ours you have to make profit. It's when that becomes a priority that obscures all others that people find it distasteful.
One of a companies goals may be profit, but it may not be it's only goal.
When companies engage intelligently, they an create 'win win' scenarios. When they don't they can create zero-sum - or worse - can profit by actually destroying net value.
There's a certain feel of hyperreality in those stores, their hiring guidelines must be a great read. I'm fascinated by how cashiers always appear to me as the same prototype of fabricated cool-and-polite-and-supernice robots. A few smiles, a little bit of small talk, sometimes a bit more chat on random things "oh I love that stuff! it's sooooo good!". I feel like WF is trying to tell me that those guys are not working here, they are just super cool and they are helping the distribution of organic food which is good for my health and important for the well being of the world. Oh and WF must be an NGO actually.
A few times a year, they do some fundraising at the cash register. It typically happens in the ultimate phase of the credit card translation (before the single/double inside/outside question). Cool cashier usually loudly asks "Whether I would like to donate some money to awesome charity helping orphaned children with cancer". The technique is pure genius both in terms of timing and leverage of peer pressure. The two options available are looking like a monster to the people in line behind, or directly financing the advertisement of whole foods as an ethical leader.
> The two options available are looking like a monster to the people in line behind
Sure or maybe you are paranoid.
You mean you don't preschedule your charity donations each year/month and refuse to acknowledge momentary charity appeals?
What a strange way to live, feeling pressured by the Whole Foods cashier!
I vote with my dollars, as much as possible. Fortunately, I have many local choices (farmers markets, local mini chains, coops).
When traveling, I've been pleasantly surprised by Sprouts. It's like Trader Joe's doing Whole Foods. (I haven't checked on their politics, labor practices.)
Speaking from experience, there's definitely slacktivism in cooperatives too.
I've seen several of them basically turn into UNFI/KeHE outlet stores selling the same big brands that are marketing themselves as "conscious" alternatives rather than smaller local vendors (because they can't make the same deals).
Not all coops are created equal and not all of them are looking out for their customers, local vendors, or employees. Yeah, there are good ones out there run by people who care about the products and customers, but don't think that just because it has "coop" in the title that it's one of them.
Maybe it was that the board and management had largely remain unchanged for years or that there was investment larger than normal ownership which may have incentivized board decisions towards returns and expansion.
Regardless, there are multiple types from farmer coops, consumer coops, to employee/worker coops out there. and even within those divisions they're all handled in very different ways with different goals. If you're with one of the good ones, that's awesome, help them all you can. But be careful assuming that they all operate similarly.
However during the winter I go to Natural Grocers, or Sprouts because the price is always cheaper (here at least it is much cheaper then Whole Foods).
I believe it is misleading though. The company's only goal is profit and this is very evident when you hear their libertarian CEO speak. He's a sociopath preying on the good will of middle class liberals. Combine that with the exploitation of cheap prison labour as a perfect example of the company's principles in execution and it just leaves a bad taste with those seasonal organic vegetables.
Edit: If you really want to get tasty, fresh, sustainable, local, and organic food then join or start a local food co-operative. This gets everyone a fair price for high quality products along with paying people fairly for their produce and work. It's also completely democratic so all practices are decided upon by the members and not just by some megalomanic CEO or greedy shareholders.