Meaningful Profits: An Oxymoron?

I’m no socialist, or communist, and I have never held views that could be interpreted as anti-capitalist. In fact, growing up in a family business made me understand the value of making (enough) money from early childhood on. In my teenage years I developed strong interests in business and philosophy alike, represented most pointedly in my past work experience as business banker with a Masters degree in Philosophy. However, I have always found it hard to unite the principles of economics [=making profits] and philosophy [=finding meaning] because in the real world, they somehow seemed to be in opposition to each other. On one hand, I consider financial success in business invigorating, refreshing, and admirable; on the other hand I detect an aversion to the focused pursuit of such success and the over-emphasis on profitability. Until now I didn’t know how to explain this ambivalence within myself.

The Pursuit of Profitability

Most businesses stress the importance of the bottom line, and this emphasis trickles down to almost every employee in a company. More turnover, higher sales numbers, customer acquisition, networking – everything is tuned towards getting more in for your business, because it will hopefully result in more profit. Most of us are geared towards that goal. Hence, a recent time-travel back to Peter Drucker, one of the top management theorists of the last century felt very refreshing to me. In one of his books*, Drucker wrote:

“The concept of profit maximization is, in fact, meaningless.”

So, with that one sentence, Drucker annihilates the everyday striving of mankind, our seeming purpose in life, the reason for our daily work struggles? I just have to like this guy.

Of course, Drucker wouldn’t have earned his reputation and influence with this statement alone, so this is what he meant by it: he did acknowledge the importance of profits and profitability for individual businesses but he reasoned that making profits is not the purpose of business activities but a limiting factor:

“Profit is not the explanation, cause, or rationale of business behavior and business decisions, but the test of their validity.”

To think about profitability as an indicator of something else (= activities that make just sufficient profit to cover risk and avoid loss) helps me look at making profits in a slightly less obsessive way. It enables me to shift my perspective from caring mainly about the bottom line to the actual work businesses are doing. So, now that the erroneousness of pure profit pursuit has been established, the question of meaning still remains.

Purpose, Business and Society

You might ask: Why the fuss about these definitions, or What’s so bad about viewing profits as sole purpose (apart from the fact that some of us don’t want to live with that)? Because every extreme breeds its opposite. In the case of the profit motive of businesses, Drucker suggested that it breeds hostility to profit itself in others, which in turn is “among the most dangerous diseases of an industrial society.”

(I experienced this hatred first hand as student at the University of Brighton (UK) in a class about the philosophy of Karl Marx and it worried me deeply: young people talking about ‘capitalist pigs’, growing up with a near-communist intellectualism and trying to represent the opposite to everything the modern capitalist society stands for. How is that going to work out once they wake up to the realities of the working class? Not at all, or very destructively.)

The solution á la Drucker relates to the shift of perspective, away from viewing profitability as the ends of all means, to looking for its real purpose:

“Its purpose must lie outside of the business itself. In fact, it must lie in society since business enterprise is an organ of society.”

So, we could have our cake and eat it. It is theoretically possible to combine the pursuit of profitability with a meaningful contribution to the community. This perspective certainly resolves my own dilemmas regarding the fascination with business and the quest for meaning.

What can it do for you?

Let me know by commenting on this blog, or by emailing me at andrea.derler@gmail.com

Reference:
*Drucker, P. F. (1973). Management: Tasks, Responsibilities, Practices. Harper Paperbacks.