Beyond Garden Variety Profit

Dear Mr. Turak,

I so enjoyed your interview on NPR’s The State of Things with Frank Stasio. I wonder if it is possible for corporations to “do the right thing” when the law tells the MBA students (by the way, why did we elevate business to such a pedestal in our universities??) that a corporation’s (and its managers’) duty is to make profits for shareholders. I will soon retire from my profession as an attorney utterly discouraged from beginning to end at the “ethic” at work in the world of business and law – it is, first and foremost, what is in it for me?; how can I extract the most for myself from this situation?; and then, how can I keep anyone else from benefiting? Oy vey!

Diana

Dear Diana,

Oy vey indeed! Thanks so much for your comment. First of all I must say that I actually do think it is the duty of a corporation to make a profit for shareholders. As a businessman who built a company from scratch, I am not anti-profit per se. And as an investor and shareholder who wants to eat when I can no longer work, I am hoping for a return on my investment from the corporations I invest in.

I think a bit of the confusion here surrounds the word “profit”. When I plant my vegetable garden each year I plan to “profit” in three ways:

1. I will get more “output” in vegetables than “input” -the cost of the seed, etc.

2. I save money on veggies.

3. Even if I lose on the first two (and if I factored in labor I would be out a bundle!) the increased satisfaction, value, or “profit” from growing my own food and enjoying fresh vegetables will more than offset my “loss.”

Louis R. Mobley, my mentor and founder of the IBM Executive School, said that in any “free exchange” – economic or not – both parties should walk away with an increase in value and/or satisfaction. If one man offers ten dollars for another man’s tie and the man accepts, then the “seller” wanted the ten dollars more than he wanted the tie and the “buyer” wanted the tie more than his ten dollars.

Both walk away with an increase in satisfaction. The world in a tiny way is better off. “Profit” does not imply a zero sum game and SHOULD be win/win. As the founder of a non-profit corporation I also know that any sustainable non-profit must take in more in a given year than it spends and stick this “profit” in the bank for a rainy day when donations dry up.

However, since I bet you have your own nest egg “invested” rather than in a sock, I’m also betting you are railing against something deeper than “profit”. You are disgusted with the selfishness, greed, materialism, and cut throat competition without any regard for an ethical “higher purpose” that you see in Corporate America. I share your feelings, but to give the devil his due, many a church-going helicopter parent working for a non-profit would shame the meanest corporation when it comes to “MY” kids.

Lou Mobley also said that profit is not the PURPOSE of a corporation. Profit is just the yardstick that measures whether a company is making progress toward fulfilling its mission. Mission was everything to Mobley, but since he started preaching back in 1956, and most people inside and outside corporate America still think profit is the mission of a corporation, we have a long way to go.

But to keep the record straight, I am NOT anti-capitalist or against competition. As Churchill said of democracy, right now capitalism is the worst economic model we have except all the others we’ve tried. The prime minister of India recently said that free markets have lifted 500 million people out of poverty in India in the last ten years – more by a factor of 100 than fifty years of well intentioned “charity.”

My work based not on theory but on experience is that there is a better way to do business. It is time to move past the old models that see economics as a tradeoff between cooperation and competition, altruism and selfishness, the “soft” people advocates and the “hard” bottom line types, and Socialism vs. Capitalism.

My Forbes.com article, Business Secrets of the Trappists and my upcoming book argue that the monks of Mepkin Abbey and people like Warren Buffet are super successful in business not DESPITE their high ideals and ruthless commitment to ethical concerns but BECAUSE of them.

The conflict between “profit” and “ethics” is the result of the assumptions we make about human nature and the nature of business, not something essential to people, business, or economics. And I am just audacious or foolhardy enough to offer my own business success as a proof of concept.

I am arguing for a new model that transcends the old divides between a profit driven organization and a not for profit. This, of course, is a tough sell made even tougher because it will require – though I hate the term – a revolution in consciousness to ever be adapted on a large scale.

However, despite my realism I am an idealist. As I mentioned on NPR’s The State of Things, several hundred years ago Adam Smith must’ve despaired at ever toppling the prevailing model of his time – Mercantilism. In effect, I’m arguing that the more we forget ourselves the more our organizations “profit” whether that is a business, a non-profit, or even a family. Indeed, our whole lives will run better both individually and collectively.

August

Posted in Transcending Capitalism | Tagged Adam Smith, Altruism, Business Secrets of the Trappists, Capitalism, Commitment, Ethics, Gardening, Greed, IBM Executive School, Louis Mobley, Materialism, Mepkin Abbey, Mercantilism, Monks, Profit, Selfishness, Selflessness, Socialism, Transcending Capitalism, Transformation, Warren Buffet, Winston Churchill