Do We Really Need Profit?

Do we really need profit?

People don’t like that profit has become the driver of business

Most organizations need some kind of seed money to get off the ground.  Lending it to them, then collecting interest or taking a cut of revenue is one way profit is generated.  But many businesses these days continue to deliver profits to people outside of the organization (shareholders) as standard operating procedure long past the start-up phase.

This may be where the problems stem from.  It’s one thing to enter a short-term arrangement with a wealthy entity so that you can get an idea off the ground.  It’s another to base the entire wellbeing of your organization on its ability to generate profit over and above what it needs to cover its costs.  This so-called “profit motive” seems to be at the root of a lot of the unrest we’re seeing around the world right now.

It seems like many people no longer earn much money for the value they provide in their day-to-day activities.  In fact, the protesters argue that it’s almost impossible to do well from an honest day’s work anymore, because the system is set up to reward those who are already wealthy.  You have to be rich to get rich.

So we have people who are making something for nothing, entire industries devoted to moving money and stocks around without really producing anything of tangible value, and people in those very industries being among the highest-paid in our economy.  A lot of people have a problem with this, and isn’t it all based on the existence of profit?

Can things get done without profit?

On the other hand, let’s look at non-profit organizations.  They can be financially self-sustaining and are legally allowed to spend their money on anything they like, as long as they don’t pay dividends to anyone.  This means that they can pay their staff fairly and invest in infrastructure.  They can spend whatever they need to make their organization work well.

What would be the problem with businesses running as this kind of non-profit – organizations with revenue streams who, in the fortunate event that they’re in the black, re-invest that money into growing or strengthening the business?  And if the business has everything else it needed to operate well, maybe that means investing in human capital: more training, higher salaries, better benefits.

Is there any real reason that kind of nonprofit couldn’t be the business norm?  Of course, it would require a complete re-thinking of tax regulations and other rules, but if we assume for a moment that those logistics could be overcome, can the argument be made that we’d be better off without profit?

This is not to say that no one could become wealthy.  If you work at a job where you produce a lot of value, you could be paid a lot of money for it.  The laws of supply and demand would still apply.  People could still do well, would still have incentives to achieve; they just couldn’t make money without producing value.