I’ve heard, like you have, about corporate greed. The profit motive, we are told, is evil and causes the little people to be trampled. Formal studies show that people perceive that profit is negatively associated with social value for specific companies and whole industries (example — that “evil” oil industry). This is probably no surprise, given the way business is portrayed in popular culture, from movies like “The LEGO Movie” to “The Wolf of Wall Street.”
My first experience with profit was when I started working fresh out of college. My company paid a bonus to the workers if we made a profit. Boy, we worked hard to make a profit and were excited about the bonus. All of a sudden, profit was great! I have since learned that profit plays an incredibly important role in the world and that corporate profit is not evil. Profit is simply a motive and incentive. We all need incentives to ensure top performance. A corporation that does not manage its costs, that does not produce efficiently, or that makes something no one wants to buy is punished for its “bad” behavior by not having a profit. Alternatively a corporation that is able to discover what people truly want, and to make it efficiently, is rewarded by earning a high profit. If a nonprofit organization is inefficient, wasteful and provides poor service, what happens? Often nothing, as the incentive and motivation for efficiency is missing. We see this constantly in complaints about wasteful and inefficient government programs.
Profits provide extremely important information to society. It tells us where we should invest our resources to provide more wealth for society. If oil companies make enormous profits, then it makes sense to invest in more wells and find alternative sources of energy. If oil companies are losing money, we know not to drill more wells. Without the profit motive, who would make these decisions for society? Should we trust some government-appointed economic czar to decide what we need, or would we rather vote with our dollars? If what an organization is doing contributes, it will make a profit and grow so it can do more of the same. If what an organization is doing is not providing a valuable product or service, then it will not make a profit and it will shrink.
The view that profit is immoral is based on the idea that when a company sells you something they dupe you into overpaying for the product. This is not true! If the exchange is conducted with freedom on both sides, then both sides are better off simultaneously. It is because we value things differently that we engage in trade They sell and you buy at the agreed price since you want the item more than the money paid and they value the money paid more than the item they sold you. Profits do not represent wealth taken from others, but added value that both buyer and seller enjoy.
Adam Smith pointed out way back in 1776 that it is advantageous that we can rely on the profit motive to promote the public interest because the alternative, benevolence, is often in short supply.
Life-saving drugs, the automobile, Disneyland and your iPhone have all been provided for you to enjoy as a result of companies being motivated to do so in order to earn a profit. Thank goodness for profit.