Profit is important for both practical and ideological reasons

Practically, profit increases organizational longevity and robustness because it means the organization is getting paid directly for what it does.^1 In other words, Profit makes organizations auto-catalyzing. Profit is the most straightforward way for an organization to both keep doing what it’s doing and possibly do more of it. If the organization is doing good work, profit is the most straightforward way for them to continue!

Profit also lowers the opportunity cost of working on a project. As of 2020, most people who have the skills and inclination to do important work have much better opportunities both in terms of pay and status. They could either start a startup, or go work at a big tech company, in finance or consulting where paychecks have the possibility of being huge and there really isn’t any hit to prestige. <The things that make “great talent” in high variance industries boils down to the ability to successfully make things happen under a lot of uncertainty>. Nonprofits and government organizations usually have significantly diminished pay scales because of tight budgets (and convention). Anecdotally, forgone salaries is one of the biggest deterrents for people to become DARPA program managers. While many people do forgo higher salaries do important work, many of them can only sustain the discomfort for so long and there are many excellent people for whom the opportunity cost is too high. Profit enables an organization to pay higher salaries, which in turn reduces opportunity cost. If more actives could be profitable, it could lower opportunity costs for excellent people to work on a more diverse set things.

Ideologically, it fits with a sense of justice when organizations and people who make the world better are rewarded. “Doing good is its own reward” holds to some extent, but it would be lovely if profitability matched up more closely with value creation. It seems a little “off” that companies like Peloton (just to name an example and not to call them out specifically) are valued at billions of dollars in large part because of technologies like screens, GUIs, and internet connectivity while the people who originally created those technologies aren’t particularly wealthy. Anecdotally, I believe Robert Metcalfe is the only former PARC employee who became a centimillionaire and to my knowledge, no Bell Labs employees became fabulously wealthy. The majority of Claude Shannon’s wealth came from being incredibly good at picking stocks.

Enabling (or at least not maligning) profit from world-improving activities is a key to both the practical and ideological reasons for profit. However, there’s a (perhaps productive) tension between whether better value capture should be an instrumental or intrinsic goal. Profit as an instrumental goal is the stance that “ultimately we want more amazing things and profit is an important tool to encourage people to make those things.” Profit as an intrinsic goal is the stance that “profit is the just reward for creating amazing things.” The latter can problematically bleed into the stance that “any created value can and should be captured.”

Those of us who primarily care about enabling more amazing things in the world should be wary of this last point because it comes along with the corollary “and therefore, if you can’t capture value, you must be missing something or it wasn’t worthwhile in the first place.” While many of you probably don’t believe the extreme corollary explicitly, it does tend to implicitly pervade the discourse so I’m going to spend a good chunk of time arguing against it with aggressive positions like Value capture is a utilitarian fantasy and There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators.


^1: Basically the entire world is a monetized economy as of the early 21st century. There is a whole other rabbit hole about the goodness or badness of that fact but I’m going to avoid that discussion and just treat a monetized economy as a given.

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