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John Larrick

Director of Finance and Operations, SBJ Capital Partners

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Is profit bad?

I'm 18 and I will start a company that will help people. The issue is as I read it seems profit seeking corporations are the evil seed in the world. What I'm trying to tackle is where this idea comes from, and is it correct? If my corporation makes money by adding value to people's lives, and then invests that money into medicines, technologies, or other small businesses who seek to create jobs and a channel for people to pursue their passions I don't see why it is so bad.

I'm not trying to be offending with this question, but it is a serious issue I have when I claim I'm starting a for profit rather than nonprofit because I believe it can do more good in the world. Why is this such a radical belief?

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    Mar 11 2013: please visit

    http://www.ted.com/talks/cameron_herold_let_s_raise_kids_to_be_entrepreneurs.html
    http://www.ted.com/talks/matt_ridley_when_ideas_have_sex.html

    also i recommend to catch up on the theory just a little bit. it might not be the best articles, but passable.
    http://wiki.mises.org/wiki/Profit

    but if you skip all of these, you actually got it right with " If my corporation makes money by adding value to people's lives". you don't even need to go any further. to think that it is bad requires a century long marxist brainwashing.
    • Mar 11 2013: Those videos were absolutely spot on, Krisztian, and have expanded my views on entrepreneurship and the power of ideas being put to action. Also, what Wikipedia states about profit hits the hammer right on the nail:

      "Profit is an indication that both producers and consumers have improved their well-being."
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        Mar 11 2013: beware. it is not wikipedia, it is another page using the wiki engine too. it is maintained by the mises institute, an institute that studies how the free market works.
        • Mar 12 2013: Thanks for calling me out on that glaring mistake, and thanks for showing me the site too. It's a very interesting place.
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    Mar 12 2013: Hi John,
    I do not perceice profit as a bad thing, and it depends on how one gains and uses the profit, don't you think? If one is making a profit at the expense of others....corruption, misuse of funds...greed...etc., then profit is not a good thing. If one makes a profit with integrity, while providing a worthwhile service or product at reasonable prices, it can be good for everyone.

    There are non-profits which have had corruption within the organization, so profit or non-profit does not seem to be the important factor. You ask where the seed idea that "profit seeking corporations are the evil in the world" comes from? Perhaps we have seen so much of that, we (humans) start seeing ALL profit making organizations as an "evil seed"? Public sentiment and conventional wisdom seems to swing one way, then the other. It is important to have good intent and integrity to manage and operate for- profit AND non-profits. That seems like the seed we need to plant:>)
  • Mar 12 2013: OMG,John Larrick,who told you the idea:profit is bad?just like what u said:if your corparation makes money by adding value to people's lives,it is a very meaningful values in our lives to pursue.don't pay attention to profit or nonprofit words but just focus on helping people needed indeed.
  • Mar 11 2013: Profit is good and necessary. Just pursue it with common sense and ethics.
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    Mar 12 2013: The fundamentals of your question are not radical. Unfortunately, they are mainstream.

    Look at the reverse side of your question:

    If you start a company that will help people, and you refuse to help people without financial compensation, what does that make you? And if you keep doing that, what are you doing to yourself in the process? If you have the courage to answer that question honestly, you will understand what is wrong with our world.

    Don't let the word non-profit trip you up. There is no fundamental difference, because in our current fiscal paradigm, you cannot have a dollar unless someone else goes without that dollar - and too many who need dollars are forced to do without them, so non-profits are set up to transfer wealth, but in that transference, most charities (like most nation states) create a system of "learned helplessness', which actually does more harm than good.

    You asked.
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    Mar 12 2013: Profit is not bad. It is an essential element of a business enterprise without which economy cannot roll at all. Whatever bad you have heard is possibly about profiteering, which is a strategy of making profit without adding real value to products or exploiting consumers' ignorance, social conditions or just manipulating regulations.
    Looking at a for-profit business with contempt and skepticism and thinking non-profits are philanthropists is wrong. It is a popular mistake on account of terrible records of business strategies of some MNCs and ultra large corporates. There are still good, honest and value-centered businesses in the world and many of them are faring well too.
    If you feel an ethical dilemma about making profit for your own business model, remember the following cardinal rules:
    1. If you yourself will buy your product or service as a free choice.
    2. If your business model has guaranteed return of money for your product or service returned by buyer within fair use terms.
    3. If your profit is calculated after setting aside reinvestment for R&D, CSR and Environmental Impact Compensation.
    Your proposal sounds value centric so best of luck.
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    Mar 11 2013: Profit, despite of what you may have heard, is not bad.

    Profit is what a capitalist might call a return on his investment. Most people invest their capital with the idea of getting a return. If you create a business and do not make a profit, then that may be considered as a charitable contribution. If you have excess capital make to contributions that is a noble thing. But the limit of your excess capital is the limit of you nobility.
    So, if you can make a profit from providing services to people and use your profits to support other ventures helping others to succeed, that is a great business plan and I wish you great success. It is radical because not many attempt to create such a business
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    Mar 11 2013: The fundamental part of Capitalism is that people have to make less money so other people can make more. This can be seen in today's current economy as the 99% vs. the 1% in America. What most Americans don't realize is that the 99% of Americas are also in the top 1% of the world.

    Because I am able to run my business in a free market, my plan is to limit my employee’s salary, as well as my own, to an amount no greater than $100,000 per year for life. I already have 3 business ventures that I am currently working to get off the ground. These businesses are as follows; One in Marketing, one in 3D printing, and one that can be best described somewhat as a Jiffy Lube for nail salons. As I’ve previously stated, my employee’s and I will never make more than $100,000 a year in income. Furthermore, I plan to automate the jobs completed by my employees and create machines that will complete the work for them. However, I will still pay them their annual salary. I will be able to accomplish this with the capital received from the automated services my businesses will provide. As an employer, I don’t really care who or what does the work as long as it gets done. With the future IT companies I plan to establish, I will be able to spread Wi-Fi coverage to everyone in the country, cheaper than it’s already being done. In addition, I will also have the ability to offer more coverage in more places. I will show those employees how they can outsource their job to 3rd world workers, where they can basically double that person’s income by only paying them a tenth of what I plan to pay my employees. This will allow my employees to semi-retire and still complete all the necessary job requirements. Essentially, this method will enable me to rescue my employees as well as the 3rd world workers from a life of poverty. This can be seen as a trickledown effect, which current businesses like to pretend they already accomplish.
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    Mar 11 2013: The best part about this plan is that my “semi-retired” employees will have the buying power. Therefore, they will buy from my company instead of from my competitors. Much like a lobbyist, I will be “bribing” my employees for their loyalty in the form of the semi-retired salary, which they will make for the rest of their lives. My employees will know the more they buy from me, the more people we can rescue from poverty.

    Once I educate my employees on how money actually works, they will realize it is a juggling act and my enterprise will be the ultimate juggler. This will also allow the removal of government welfare programs, thus lowering everyone’s tax rates. This will be effective simply because I will be paying people for doing nothing. From then on they can volunteer or spend their time completing more hospitable and fulfilling activities while having job security.

    If 25% of the world companies and charities used this model instead of our current model how fast do you think we can end poverty?
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    Mar 11 2013: Would you rather invest 100% of your resources into your interests and get equal exchange OR invest 100% and receive back less and have someone invest the profit they made into a different interest?
    • Mar 11 2013: You'll have to excuse me if I have this wrong, but are you stating that I invest $100 (as an example) into something and as a result I get something I value at $100. Something like an experience, a widget, or a property that belongs to me. Or, I can invest $100 into something, only get back $60 of value of something and give the other $40 to another individual to invest with it? Again, you'll have to excuse me as I never have the issue of being the smartest individual in the room, but neither of these models makes sense in real world application. Again, I'm sure I have this wrong.
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        Mar 12 2013: John, thank you for presenting an interesting dilemma. Could you please summarize this a bit more?
        • Mar 12 2013: Are you asking if I would rather invest 100% of my resources and keep all the proceeds, or if I would prefer to give some of the proceeds away?
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        Mar 12 2013: Hey John, How are you defining your words? Could you explain your use, context, and your interpretation? This fascinates me you are engaging my mind ;-)
        • Mar 12 2013: Yeah sure...So, what I'm reading from your original question is, as an example, I have $100. And I invest 100% of my resources into something (that $100). As a result I get "equal exchange" and receive back $100 worth of land. Or, I have the option of still investing 100% of my resources (that $100), and getting $100 worth of land for my efforts. However, rather than keeping all the land I decide to only keep $60 worth, and decide to give $40 to a local individual for their own personal use to invest in.

          Where I made the comment earlier about neither of these models are applicable in real life is that the value fluctuates constantly, and so my $100 worth of resources would either grow or shrink. I hope this clears everything up, as I was confused as well.
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        Mar 12 2013: If this is clear to you now, what is your answer?
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    Mar 11 2013: However money is evil
    • Mar 11 2013: Can you please elaborate on that? Is money truly evil, or is it the means greed causes people to use to acquire money that you are talking about?
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        Mar 11 2013: Well the paper it's self is fake and only exist because of the fall of men
        • Mar 11 2013: There is an amazing book I believe you should read called Money, Greed, and God by Jay W. Richards. It does an absolutely remarkable job of laying out why capitalism is the answer and not the problem. It's the love of money that's a sin.
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        Mar 11 2013: I agree that capitalism will end poverty, I can even tell you how
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    Mar 11 2013: No profit is good we can use it to end poverty
    • Mar 11 2013: The best way to end someone's poverty is to give them a job, and the best way to create jobs is to invest in entrepreneurs who start job creating companies.
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        Mar 11 2013: Well the best way to create profit is to lay people off
        • Mar 11 2013: No it's not. The best way to create profit is to hire people who add value to the company by creating a better product, service, experience, etc. Using that mentality there would be no employees because companies could maximize their profit by running themselves and not using any human capital.
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        Mar 11 2013: That sounds like slavery and prostitution.

        Why do company's automate jobs, if layoffs are not the best way to create profit
        • Mar 11 2013: That is not slavery and that is not prostitution, sir. Slaves do work they do not want to do, are not paid for doing it, and are trapped with no escape. Hired employees agree to the job they sign up for and have the ability to leave when they want.

          The point you brought up about automating jobs is exactly what happens in an evolving economy. That is the process of an economy evolving to it's next step. As the economy evolves different kinds of jobs become available to workers that were previously unavailable and even impossible to have because they didn't exist. Now that worker who was laid off can get a job fixing the machine that took his job. On top of that he can see what's wrong with the machine, decide he can build a better one and then proceed to start a company that builds machines. As that company grows it requires accountants, salesmen/women, managers, etc. to keep it running.
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        Mar 11 2013: I am looking for investors, I need $100,000 to create jobs and end poverty. Interested in investing
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        Mar 11 2013: Your young kid ... I don't know any person that would willing choose to go to work as a free man
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    Mar 11 2013: You are fighting Marx and the unions. They believe that the value of the product is in the skill of the labors and that even though you invested your money to start the company and they are only there because of it ... that your profit belongs to the workers.

    Profit is the direct result of supply and demand. You make a better product than Bill Gates then you will step up as the big dog on the block.

    You took the chance ..... you put up the money ...... you deserve the percent of profit that is left after all the share holders, bills, government, etc .... take the lions share.

    Good luck. Bob.
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      Mar 11 2013: Do you believe in god? Are you a christian?
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        Mar 11 2013: Casey, Not that I would mind answering the question ... however it is miles off topic.

        For what reason are we going to a different discussion? Please explain.
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          Mar 11 2013: Oh if you believe in god then you are here to do gods work. And profits should go to god to do more of his work.

          In God we Trust

          Seem like we are talking about the same thing. Why is the profit your and not gods whom provided it for you
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        Mar 11 2013: Casey, In that case ... you previously shared that you have lost everything except the dog ... would you equally blame God for that loss. It would seem that you could not have had all of the material things you stated had you gave your profits to God as you suggest.

        Interesting excursion off topic though.

        Bob.
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          Mar 11 2013: I had to loose everything material to realize that you Robert Winner is more important the money or profit...

          When I was making money and profit the only think that matter was the money
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          Mar 11 2013: And I lost it by my choices, by the path I chose to take
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    Mar 11 2013: You have opened the pandora's box, I tell you.