Is capitalism really evil? How is your startup measuring success and promoting the common good?


7

Went to see (and enjoyed) the movie Avatar. I've been thinking about how the conventional wisdom says capitalists are evil, greedy, self serving, and a danger to the common good. The very real cost of all this is inordinate regulation, taxation, and societal disincentives towards businesses.

I say the vast majority of entrepreneurs are not evil and most startups greatly benefit society at large.

How is your startup measuring success and promoting the common good?

Success Morality

asked Dec 28 '09 at 06:42
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Keith De Long
5,091 points
  • +1. Both my parents are very well educated (PhDs) and sadly, they lean towards the "capitalism is evil" philosophy. – Olivier Lalonde 9 years ago
  • The way I see it, the economics and politics of the matter are central to my question. Thanks for your comments Tim. – Keith De Long 9 years ago
  • THis question was closed for being clearly a discussion. – Tim J 7 years ago

11 Answers


4

What has been evil is not capitalism, but the fact that you have some people choosing to abuse the system for their own good. For example, if everyone has the same information as to the value of a product, then capitalism would show that that the cost will be driven down to the correct level, but, you often have where only a few have all the information, or, you have systems where monopolies are allowed to run unchecked, such as in the healthcare system.

That leads to problems, as they are free to charge what they want, and prices go up without bound, as more people fall out of the system.

But, the role of government should be to set the rules that govern the market. As long as government is willing to do that they can help guide the expected behaviors. Lately, greed and gambling has been rewarded, as, as in a company, what is measured is deemed what is important, so in business, what is seen as behaviors that are rewarded, or protected, will continue to grow.

So, for example, if the idea is to get more people employed and reduce waste, then you write policies that do things like get rid of the payroll tax, and instead tax anything that is considered pollution or waste. This will push companies to sell what they have as waste to someone else, so, the hot water from an electric generation company goes to a greenhouse, and then they use the filtered water and it can go to water livestock or fish farms.

So, startups can try to do that, by looking forward and seeing how they can make money by being more socially aware, perhaps by helping to work with local schools, as better educated students will be better employees later, and as you grow, since you have developed a relationship with a high school, then they may look at you for a job, and you may get better choices in candidates, as you had a chance to observe them, and the skills you need may be what you helped to stress. This is self-serving, but if more small companies did this then we would see improvements in vast areas of our society, and over time society would improve, without any reliance or guidance on government, though we may get a tax break for charitable works.

Economic systems are not going to be good or evil, but how people use or abuse them, work within the system, will decide if it is beneficial or detrimental to the members of society, which is my simple way to define good or evil, in this case.

UPDATE: Based on comment from OP here is the rest of my answer.

I have 2 projects I am working on that work toward the idea of helping society. The first is focused on the idea of helping educators to be able to sell textbooks back to their school districts, if the textbooks are better than the commercial ones, and have the vast majority of the money go back to the educators. This way more money stays local, but in keeping with that, I hope that the publishing can be done by independent, local printers (local to the school district) so that more money stays local, as that is something that helps that society.

The other project is focused on games to help students to develop a more intuitive understanding of math and science, so, ideally, if you ask the student if putting three molecules together into a super-molecule, they should have an idea whether it is stable or not, and, what types of bonds may be needed for it to be stable. Having an intuitive sense, before you learn the theory, is helpful, as, when you start to learn the theory you have a model to put it into, but, more importantly, these students are more equipped to start doing some research younger, which can help them learn more sooner, as they are also learning to think outside the box.

answered Dec 28 '09 at 11:16
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James Black
2,642 points
  • @Tim - Ideas, just as opinions, are not evil, nor good, as they are concepts, abstract. Once you act then evil and good can be judged. – James Black 9 years ago
  • @Tim - I will fix my answer to help out. – James Black 9 years ago
  • I appreciate your comments James. What I am most interested in are concrete personal examples from entrepreneurs that demonstrate your point. – Keith De Long 9 years ago
  • +1 For the examples. It's so easy to generalize on this topic that examples like yours are gold. Thanks James. – Keith De Long 9 years ago
  • @Keith DeLong - When I studied for my MSEE I concentrated on sustainable corporations (and how to make them sustainable) and on how to help companies to adapt to rapidly changing environments. :) Social awareness is something I feel deep in my bones. – James Black 9 years ago
  • + 1 - Great answer James. – Gabriel Magana 9 years ago

3

The concept of capitalism is not evil just like the concept of communism is not evil -- it's all in the application.

What corrupts and turns it evil is the unmediated pursuit of more and more wealth to the detriment of society. Society relies on capitalism to provide the framework in which to function and thrive.

My particular startup is providing systems to track and locate clinical laboratory samples which will improve patient safety. So, our impact to society (preventing medical errors) is positive and we will measure that by how much we reduce medical errors due to errors made in the clinical laboratory.

answered Dec 28 '09 at 09:41
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Jarie Bolander
11,421 points
  • I agree with your general premise. Most successful entrepreneurs are not primarily motivated by an endless pursuit of wealth. Thanks too for the practical example of your business Jarie. – Keith De Long 9 years ago

5

Capitalists are greedy, self-serving, and this serves the common good.

If any civilization is to survive, it is the morality of altruism that you have to reject (Ayn Rand).

ie: Greed is GOOD. Quoted from Wall Street :

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

Taken from a historical perspective, it is government and regulations that distort free markets that has the historical bad track record in this area, not businesses. Governments (with the possible exception of religions) through history have done the most damage to the most people and the most markets the fastest.
answered Dec 28 '09 at 12:24
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Tall Jeff
1,406 points
  • The idea of "greed is good" is very very interesting. Thanks for sharing. – Matt 9 years ago
  • -1 for Greed is good. The common definition for greed is reprehensible acquisitiveness or an insatiable desire for wealth. This is not good nor is it a worthy goal for an entrepreneur. Truly great entrepreneurs have multiple bottom lines, profit, quality of life, doing things of interest and that matter. Even Bill Gates reached a point where he realized wealth accumulation is not the main point. Giving away wealth adds meaning to his financial success. +1 for your final comment - I agree that government intervention in the free markets has easily done the most damage. – Keith De Long 9 years ago
  • Is there a better word than greed? I.e., most would live a wonderful life earning a $100K salary, but some yearn for acquiring $10M. It's completely and absolutely unecessary to have that much money so, provided you can earn it without being reprehensible, what is that attribute called, if not greed? – Alex Papadimoulis 9 years ago
  • @Keith, I think you misunderstand the meaning of "greed" here - it is "greed" as a hunger for any of those things you also mention. Most of the entrepreneurs we know of are not motivated by money. Sure, the money is nice, but if that were the main goal then we all probably would have chosen other things to do. I think there are many other reasons we do what we do - freedom, building things, etc. – Tim J 9 years ago
  • Tim, we have to choose words with care. Celebrating greed is not a useful way to demonstrate that capitalism is not evil ;-). – Keith De Long 9 years ago
  • @Tim - Thanks for the follow-up comment! – Tall Jeff 9 years ago
  • @Keith - The main issue I had with your question is that you start from an assumption that capitalism is evil or that there is a burden of proof that show that it is not. I don't think there is any facts in evidence showing capitalism is evil in any way that is specific to the nature of capitalism itself. Certainly, there have been bad and corrupt business people, but these people don't impugn the system nor are they unique to capitalism. In fact, generally speaking, it is the regulated impediments created against free markets that usually allow certain parties to gain undue leverage – Tall Jeff 9 years ago

2

Businesses promote the common good simply by making better, cheaper, or faster products and services.

Much like individuals however, they need the watchful eye of government and the media to monitor their behavior and prevent them from cutting corners. You also need a fair set of market rules that all companies follow and a just way of resolving disputes.

Any system can be abused and corrupted. There is no perfect market philosophy that can effectively run itself.

answered Dec 28 '09 at 07:53
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D Thrasher
894 points

2

Another thread I'm waaay too late to. Oh well, for the Archives, here goes:

You're all slightly wrong. :-) Capitalism is GOOD and it is good because of FREEDOM. FREEDOM is the critical ingredient, the catalyst, the little thing without which there is nothing. (There are other requirements as well, such as a transparent and consistent rule of law. I'm bringing up freedom as it's the most essential one.)

If you have ever as an entrepreneur sold a product for, say for example, 100 US Dollars, then the buyer at the time perceived to get a 'human benefit' of 101 USD or more. In other words, for every sale you have ever made to a free person, if the sales price was x then you created (x + a little more) benefit for the buyer in his head.

Why? Because of something we can call the uncertainty principle. (I believe it has a more precise name in economic literature; but I cannot recall the English name at the moment.) This principle essentially says that once you buy a certain product, you spend your money, and you're unable to spend that same money again tomorrow. But having the option to spend that money tomorrow has a certain value in itself -- after all, you don't know which challenges tomorrow brings. So you mentally add a small value to 'not buying'. Thus if a free buyer chooses to buy, then he has mentally calculated that his benefit of owning the good exceeds ((cost of good) + (value of not committing money)).

Back to the example. Let's say you have a good which you sell for 100 USD. Lets also say your fully burdened manufacturing cost is 90 USD, just as an example. The sellers 'benefit' of creating this good and bringing it to market is (100 - 90) = 10 USD. Let's just as an example say the buyer estimates his 'happiness' derived from buying the good to be worth around 102 USD. Then the total 'human benefit' of creating this product and bringing it to market could be quantified as "10 + 2 = 12 USD worth".

Obviously, this quantification is not perfect -- but in a human world, it is at good as it gets. After all, both the buyer and the seller are free persons, if either one of them feels the deal isn't to their benefit, they'll just walk away. Humanity is incredibly diverse, can you think of a better yardstick than "enlightened self-interest" by which to quantify human benefit?

Caveat 1: Of course the Seller could loose money on the deal. But that self-corrects fast. Seller goes bankrupt, and stops manufacturing the good. Thus it's a fair assumption that the clear majority of sellers benefit from their sales.

Caveat 2: Seller could be externalizing costs, i.e. keeping the profitable parts, and dumping large expenses on someone else. The classical example of unsound externalization of costs is a company which makes a product that generates toxic waste -- and dumps the untreated toxic waste into the river. Most forms of crime are also examples of externalization of costs. Preventing unhealthy externalization is one of the core roles of Nation States.

This rapidly gets more complicated, but the essential message is this: A free, rational, perfectly informed buyer will only buy if he perceives his benefit from the deal to be larger than the price. Thus the net surplus value in the deal is ((sellers profit + (buyers unspoken benefit) - (externalized costs)) , and in healthy capitalist societies this value is positive in the vast majority of deals. This also provides an answer to "what is entrepreneurship?" Entrepreneurship is putting together natural resources in a synergistic way and selling the resulting product for a fair profit, without unfairly externalizing costs in the process. At least, that is my summary for now.

answered Mar 13 '10 at 07:38
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Jesper Mortensen
15,292 points

2

How is your startup measuring success and promoting the common good?

Our stated goal is mass prosperity. As we help small businesses everywhere thrive -- both for business owners and for employees -- their families will be better off, their communities will be better off, and society will be better off. And as we do that on a large scale, we will help bring about prosperity for all.

Of course, as we do this, we'll make money too, but if that were the primary goal, surely there are easier ways to achieve that!

My main point for this post: Many of the entrepreneurs I know have similar sentiments.

answered Dec 29 '09 at 10:52
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Reid Wilson
156 points

2

Capitalism rewards hard work and creativity. That's a good thing; it encourages -- well, hard work and creativity. Anyone who works hard and does smart things has a reasonable shot at being able to compete hard enough to enjoy the reward. Said another way, in my world view, the core of capitalism is: "that which increases competition is a good thing." Diversity increases competition; diversity is good. Opportunity increases competition; equal opportunity is good.

The ethical key is in how you handle your externalities -- that is, the costs that can be swept under the rug, but should not be. The company which pollutes and hides behind regulatory slight of hand rather than cleaning it can charge less per unit than the company which is responsible and cleans it. Some celebrate this irresponsible behavior in the name of capitalism; I find them contemptible. The company which dislocates a native population and destroys the indigenous culture so they can pump out the oil under their home is ignoring the very real but unmeasurable cost in reduction of global cultural diversity.

In short: greed is NOT good. Greed allows you to ignore your effect on others. Gordon Gecko, in Wall Street, was written as a warning, not a hero. Capitalism does not have to be about greed, but rather about opportunity.

answered Dec 29 '09 at 12:44
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User1377
407 points
  • Look at Google. They started off with high ethical values, but now they seem to be willing to monetize much of what they have gathered. Facebook is another example of a company where greed seems to have taken root. – James Black 9 years ago
  • I don't see that either Google or Facebook are causing harm, and they're certainly doing a lot of good. They may be using the information and/or position they have earned in a way that makes others uncomfortable or jealous, but that's very different from pushing hidden costs onto others (or the future). – User1377 9 years ago

1

Ridiculous how many glibertarians have parroted Ayn Rand's tripe here. Capitalism is neither inherently good nor evil; it's a machine; and a very dangerous one at that.

Those who think greed is always good for society ought only need to think about how much spam, attempts to phish, etc they deal with every day from people motivated by said greed. How on earth did that make society better off anyways?

answered Dec 30 '09 at 10:09
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M1 Ek
201 points

0

That's like asking if kitchen knives are evil. I all depends on how it's used.

answered Dec 29 '09 at 06:01
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Jeff
649 points

0

Prefacing your question with what (the alleged) conventional wisdom is about anything, let alone capitalism, here, is a bit off the mark. If we accepted the conventional wisdom, we would not be building startups. (If capitalism is Evil, does that make socialism, fascism and poverty Good?? - If so, I stick with Evil.)

To your question: How can a startup promote the common good? I'd suggest three points:

  1. Startups and NGOs practicing Social Entrepreneurship are doing some very good things out there - start one.
  2. Startups succeed by disrupting the status quo, including the bad parts of the status quo. I think the next decade is going to see a lot of this for the simple reason the it will make a great deal of money. In short - fight evil with software.
  3. Make better people with your software.
answered Dec 29 '09 at 08:19
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Bob Walsh
2,620 points

0

I say the vast majority of
entrepreneurs are not evil and most
startups greatly benefit society at
large.

They are not evil until they are big, when they are big or whilst getting big they'll become evil. World is full of this kind of entrepreneurs.
answered Mar 14 '10 at 06:16
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The Dictator
2,305 points

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