It says that capital management is non-trivial and full of risk that needs to be proportionally rewarded with profit to justify the outlay.
Even non-profits have to grow revenue, because organizations require resources. But non-profits are hampered by the fact that they can't reward people for taking risks on them. A for profit organization can seek outside capital and reward risk. A non-profit can only seek donations or charge for services.
Ultimately, society benefits a great deal from it.
One can still receive many financial rewards in not-for-profit organizations: a high wage, payments, etc. without those rewards being ‘unlimited’ in scope.
As an experiment, imagine if the FAANGS and the BATs of this world were not for profit organizations; appreciating the role that venture capital played for all of them so maybe the experiment is that they wouldn’t exist!
What I struggle to understand is the relationship between the financial interests of humans (extending between the two extremes of billionaires on one hand and absolute poverty on the other) and organizational design in the west.
In other words, revenue is not profit and wages are still income, so why does the current system benefit capital (owners, investors) to such an extent.
Could we live in an alternate economic reality - maybe one that is ‘fairer’ if more of our for-profit organizations were not for profits. Or is that a fallacy?
What I am trying to better understand is why there is a preference (morally, legally, societally) for for-profit organizations.
Is it because (most) people are inherently profit-focused, or, that it is just the way things are? Amongst many other possible options.
sustainable ones do not move all of it to expenses or purpose
the answer of why is that the buffer allows them to continue existing. if there is any disruption in money coming in, then they cease to exist.
I understand you are wanting a different discussion that I didn't offer, based on wanting a reason that has nothing to do with moral legal or societal. There are more for profit organizations because it is easier to set one up, it is "permissionless" whereas a non-profit requires approval.
for profit and non profit are bound to the same fundamental constraints and I think that is misunderstood by many. both types of organizations have the capability of having none left over. both types of organizations have the risk of having a disruption in their ability to exist. both types can keep more for themselves. this is not a moral issue.
If you're considering the Fed, it too is a lender, and has a zero net asset sheet.
https://www.federalreserve.gov/monetarypolicy/files/balance_...
The opposite, not for profit, usually means, for loss, which is not sustainable.
An organization designed to be zero net will also die during hiccups and downtimes.
So if you want something to be sustainable, provide stable jobs, provide continues benefits to whatever it serves, "for profit" means it runs on less than it makes, allowing it to survive.
Basically, all the "not for profit" things die, and you don't see them around very long.
Not-for-profit means that 100% of the revenue is reinvested in the business (“mission”), rather than have a portion returned to owners/shareholders as profit.
Successful not-for-profit companies can have a problem of having more money than they can effectively deploy. This can lead to all sorts of problems: Overpaid staff; Inefficient operations; etc.
In the context of organizations, not-for-profit doesn’t mean they are designed to be not profitable; rather, it means their primary goal is focused on other goals than making the most amount of profit possible.
It’s also a misnomer that not-for-profits can’t make profits, it’s just that those profits are not distributed to the capital (owners, investors) of the organization.
https://nccs.urban.org/publication/registered-501c3-private-...
What does that say about our societies that we have embedded the profit motive in (most) organisations?
Worth noting that obviously there are many not for profit organizations, just that they are largely clustered in the fields of health, education, social welfare, etc.
And also note the difference between (unlimited or at least not capped) profit and earning or being paid a living or even high wage. People often confuse the ability to earn a ‘good’ wage and a very high wage.