‘Profit is everything’.
This is the current mantra but is it true?
At first glance yes – what company can survive producing nothing but loses?!? – but then another concept starts jumping before our eyes, the ‘non-profit organizations’.
So let’s take a step back and have a second look.
“Pecunia non olet” – Money has no smell – was how Vespasian, an Roman emperor, replied to his critics who were ‘bewildered’ about how low could an emperor get – to levy taxes on urinals. So if this kind of attitude is OK coming from an emperor who are we, mere mortals, to have a different opinion? The only difference is that today we are a little more prudish and we put it differently: “Money is fungible“!
Really? Try using your grocery money for gambling and see what happens….
“The ends justify the means”. This quote is attributed to Nicollo Machiavelli but it seems that what he really meant, that ‘people will accept a certain course of action when coming from a ‘prince’ ‘ is quite different from what we understand of it today: ‘if you want it badly enough grab it and deal with the consequences latter’.
Same with money, specially now that they don’t smell anymore after Vespasian taught us how to launder them…
‘Survival of the fittest’. Now what on Earth Darwin has to do with being profitable?!? Just bear with me for a little longer.
You see, we are rational human beings. As such we are consummate optimizers: we cannot settle for anything less than the ‘best’. Well…more exactly for anything less than what WE, with our limited knowledge of which we are so proud, consider to be the best …
There is a guy, Ernst Mayr, who opened my eyes about this. As an expression ‘Survival of the fittest’ was not even used by Darwin in any of his works and besides that it doesn’t make any sense from the evolutionary point of view. Being ‘fit’ to one particular environment (not to mention ‘fittest’) means being practically unable to survive in any other environment so your capacity to evolve is severely limited if not altogether absent. In reality evolution, as Mayr aptly puts it, ‘is not about the survival of the fittest but about the demise of the unfit’.
Now lets get back to what profit is about and see if any of this makes any sense in an economic environment. By the way, ‘economy’ comes from ‘oekonomia’, a Greek word meaning making the ends meet in a household.
So what is the ultimate scope of any economic venture? For the entrepreneur to become rich, no matter what, or is it about the whole team involved making the ends meet?
OK, both options are at the very extreme so I’ll propose a less ambitious one. How about the real scope of a company being long term survival? This way the shareholders would have a (steady) income and the employees a job.
Yes, for that to happen the company would have to have a certain profit but if the long term goal is ‘survival’ the management and the board will have to take care not to sacrifice the long term prospects of the company for a short term profit boost – just for the sake of the handouts that management currently gets at the end of an ‘exceptional’ year. (Do you still wonder how come every year is exceptional nowadays and the bonuses keep flowing, regardless?)
In this circumstances ‘profit’ would no longer be THE exclusive goal of every economic venture. It would still be a very good thing indeed but just an efficiency indicator, one of the indicators that show if a company might be able to survive for the long run.
And what if the ‘intensity’ with which a certain company exerts itself in the quest for ‘profit’ drives the customers away? And invites others, who until then didn’t even considered it, to enter the field? And steal some more of the already disgruntled customers?
“The EpiPen is one of the most important life-saving medical innovations for people with severe food allergies—which affect as many as 15 million Americans and 1 in 13 children in the United States. But its price has exploded over the last decade despite few upgrades to the product itself. And that’s led to criticism from a consortium of critics which includes consumer advocacy groups and notorious drug price-hiker Martin Shkreli himself.” (Sy Mukherjee, How Mylan Got Away With Its Enormous Price Hike for the EpiPen, Fortune.com)