Mike Kueber's Blog

February 22, 2013

Profit plus social responsibility

Filed under: Business,Economics — Mike Kueber @ 11:28 pm
Tags: , , ,

While re-watching the movie Atlas Shrugged, I was struck by a comment by one of the movie’s villains, James Taggart, who argued that social responsibility dictated that Taggart Transcontinental Railroad (TTR) retain a line into Mexico because the line was vital to the economy of that impoverished nation.  Ironically, Taggart’s largesse, which was sending TTR hurtling toward bankruptcy, prevented the line from being adequately maintained.  In Ayn Rand’s world, Taggart is the obvious villain because the prosperous world is built on capitalism, with winners and losers, not on socialism, with attempts to reward everyone until it runs out of other people’s money to spend. 

But Rand’s economic philosophy remains controversial.  A book that I just finished, Drive by Daniel Pink, which advocated a new framework for motivation based, not on rewards & punishments, but rather on autonomy, mastery, & purpose, contained several favorable references to businesses that pursue something more than profits:

  • Four states have created a business-type called “low-profit limited liability corporation” (L3C) for businesses that aim to have some profit, but whose primary aim is to offer significant social benefits.  
  • A Nobel Peace prize winner is creating “social businesses” that have replaced the profit-maximization principle with the social-benefit principle.
  • The Fourth Sector Network is promoting a hybrid of an organization that is both economically self-sustaining and animated by a public purpose.
  • TOMS Shoes is a self-declared “for-profit company with giving at its core…. [The company’s] business model transforms our customers into benefactors.”

Although the ability of a social business to compete against a profit-maximizing company might seem dubious, I suspect that it can if it transforms its customers into benefactors.

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