“Who are businesses really responsible to?”
“Businesses are messy things.”
“How do you spell entrepreneurship anyway?”
The start of this 5-week experiment in teaching was defined by questions about what businesses fundamentally are. In particular, we noted how Jason Fried’s approach to business — ”Why we choose profit,” Signal v. Noise on Medium — seemed to be surprising. Fried, the founder and chief executive officer of project management software Basecamp, attempted to break the apparent dichotomy of corporate profits and social responsibility by arguing that earning profits is a socially responsible action. In addition to emotive points, “$1 in profit is the ultimate FU money,” Fried argues that being profitable affords flexibility and time to a business to “go in any direction you want and take as much time as you need.”
This is fascinating because the dominant discourse about business and entrepreneurship is that earning profit is a polar opposite of being responsible in a narrow sense to company stakeholders and, in a wider sense, to society; Fried’s argument shifts that and offers one idea that earning profit is socially responsible.
Some key takeaways from his Medium post were as follows:
- Reinvesting profits adds risk to the company, while taking out distributions reduces risk because it forces the business to focus;
- Having profits acts as a shield against bad times, allowing the business to stay afloat and keep going rather than going bankrupt and having society take the cost with the social safety net;
- Earning profits is not the same as creating shareholder value; the former proves that your business is working, while the latter forces you to squeeze the lemon for every last bitter drop.
