What is profit?

Incorruptible: Why Good Companies Go Bad…

and How Great Companies Stay Great

Available to order at incorruptible.co

The conventional definition of profit has fatal blind spots. If it can’t see externalities, if it ignores human costs, if it’s at odds with the intuitions of most builders—­ what good is it? 

So the first step in building an incorruptible organization is to reject this narrow thinking. Each organization must reclaim its power to define its own purpose. This begins with declaring clearly what it means to be a for-­profit company.

Yet for so many builders, their intuitive insight is buried beneath an internalized and outdated formal definition. Rather than continuing  to suppress this wisdom, builders should embrace a different approach:

Profit is the maximization of human flourishing.

To be precise, profit itself is the surplus of human flourishing that an organization creates. By surplus, I mean what remains after accounting for all the organization’s impacts on human lives. This accounting spans immediate and distant, measurable and not, today and decades from now. A “for-­profit” company, properly understood, is one that seeks to maximize this surplus.

This definition is not a rejection of financial success. In fact, organizing around human flourishing allows companies to achieve tremendous financial results. But I do want to be clear that adopting it won’t guarantee financial riches. Extractive companies often accumulate vast wealth; tobacco executives collect bonuses while their customers die. My claim is simply that we should stop calling that behavior profitable. It is closer to theft than value creation. Changing how we think about profit changes how we build, measure, and govern organizations.

I have been chiseling away at this definition for years, trying to find the most concise, memorable, and effective phrase that works in the real world. Every element is deliberately chosen.

Maximization is important because it preserves what was valuable in the conventional understanding of profit. The strongest organizations are those that are good stewards of the resources under their control. Efficiency still matters. Accountability is essential. For all its flaws, capitalism has lifted billions out of poverty and unlocked the abundance that gives us the luxury to contemplate these higher aspirations.  Our goal should be nothing less than harnessing the awesome power of the engine of capitalism redirected toward a worthier goal.

Why human flourishing? It’s the only phrase honest enough to capture the true scale of what we’re after. Happiness is subjective and easily confused with dopamine hits. Sustainability might connote a miserable, bare existence. Well-being is too easily misinterpreted as mere physical health. Human dignity isn’t really something that can be maximized, only protected.

Flourishing—­ real human flourishing—­ means people growing into their potential, physically, emotionally, spiritually.

This is the moral foundation of capitalism, the fuel that drives the engine.

This is why our definition of profit matters so much.