Cries of corporate greed and disdain for wealthy business executives are swirling in the media and frothing through the political echo chambers.
College campuses, in particular, are ground zero for advancing the startling sentiment that “profit” is a dirty word because it is generated by exploiting human capital and destroying natural resources.
Business schools should take a front-line role to dispel the myths that underlie this narrative. We should reinforce the morality of the profit concept because without it, society at large would suffer, resources would be misallocated, and people would not have access to goods and services. With it, the lives of billions have been drastically improved, and it continues to lift people out of poverty on a global scale.
While the reasons for the “goodness” of profit are many, here are five key points that every business school should reinforce:
1. Profit is earned when a person or a business is producing something that the public wants. It is not an exploitative, zero-sum game whereby there is a “winner” and a “loser.” Rather, profit is created through voluntary and mutually beneficial transactions.
2. Profit is the reward for innovation that comes from putting capital at risk. This reward incentivizes people or companies to expand operations (which often includes hiring more employees) that bring innovative, convenient, or accessible products to the masses.
3. Profit produces the spirit of entrepreneurship. It incentivizes creators and innovators to bring their ideas that create mutual benefit to fruition. Time, talent, and capital will flow into products and services that people want.
4. Profit is a key solution to society’s most pressing issues. Globally, we are faced with vexing challenges: pollution, human rights violations, resource depletion, and an expanding global middle class. Profit allows companies to invest in environmental and social initiatives. It has created the incentive for an unprecedented increase in industry collaborations that provide expertise and economies of scale to address fundamental problems that threaten our future.
5. The quest for profit can lead to abuses and unethical behavior. Bad actors should be punished. Society must strike the proper balance between governmental oversight that inhibits bad behavior and too much regulation that chokes the ability for people and firms to pursue profit.
It is time for business schools to take a stand. It is time to reach out to our friends across campus and advocate that society’s greatest challenges can be addressed with profitable and collaborative business solutions. Students need to hear this on their first day of college; the future of our society is depending on them.
Gayle Parks Forehand Associate Professor
Supply Chain Management