MonoRealism Philosophy Site

The Philosophy of Business

Part B: Money and Freedom

Business Ethics

We saw in Part A that there is no special "business ethics" in any fundamental sense. Earning one's living is just a basic part of living, and business ethics are simply the same ethics that apply to living.

For example, consider the fundamental virtue, rationality. Rationality is the application of reason to correctly identify the facts of reality and act accordingly. Clearly this is of vital importance to any business, as in any life. To survive, let alone prosper, a business must correctly identify what it can produce at what prices, such that people will buy its products not only instead of its competitors', but instead of anything else they could do with their money, including saving it for the future. The alternatives to rationality – putting wishful thinking over facts or evading reality rather than seeking to understand it – are rocks on which many a business has foundered.

The other virtues are merely specific aspects of rationality, and are necessary for and in the best interests of businesses for the same reasons they are for individuals, if not more so. For example, as business is based on production, the virtue of productiveness is plainly one of its defining virtues. The more productive a business is, the more it can produce for less cost, increasing the value of its products to its customers and therefore increasing the amount of money it can make. Related to that, it is important that the owners and workers in a business act with pride, seeking only the best in what they can achieve and continual improvement in what their best is: both increasing productivity even more, and also appealing to the best within those they deal with. And independence – in terms of thinking for yourself – is at the base of all innovation, a major engine of productiveness.

Integrity, honesty and justice are also important business virtues: but as they are less obviously and directly applicable, we will revisit them later.

Business Values

What are the valid aims of a business – its values? That is easily answered by its reason for existence: to make money. Making money is the proper purpose of any business, just as making money is the proper motive of a worker offering their services for hire.

In a real sense, money is to a business what life is to a person: the fundamental and ultimate value, the only end in itself. The life of a business is as conditional as the life of a person: it can cease to be, and the business goes out of existence. And the life of a business is money, without which it cannot continue.

Periodically we see in the news complaints that some company or other is making "excessive" profits that should be curtailed. A common defence is that maximising profits is a duty owed to shareholders. This justification is correct – as far as it goes. People invest their money in companies in order to make more money, by assisting the companies they invest in to perform their primary task of making money. All of this is simply free trade according to individuals" judgment, and they have a right to the earnings that their investments enable. If other people do not approve of what the company does when there is no force or fraud involved, they have no right to impose their will on the company or its shareholders, other than by reasoned argument or refusing to trade with that company (by investment or buying their products). However, there is more to it than the rights of shareholders, real as they are. Making money and maximising profits are the right things for companies to do, regardless: and the directors of companies should proudly proclaim that moral right.

This does not mean "making money at any cost", any more than the fundamental value of life means one can or should seek to preserve one's physical existence at any cost. Again, this is because at the most basic level virtue is what makes life possible: to think you can prosper in the absence of virtue is to attempt a contradiction, and contradictions do not work in the long term even if you manage to get away with them in the short term.

Nor does it exclude other values or other goals. Unlike a human being, a business is not a self-guided entity that is an end in itself: it is the creation of human beings, created to achieve their purposes. So while a business must be able to make money, it can be the means to some other end sought by its owners. Similarly, how much money it seeks to make is up to them. Whether their aim is simply to support theselves or to build a billion dollar company is a decision that depends on their own values, ambition and ability.

Which brings us to the final aspect of money, business and life. Money is not an end in itself for people, and people are what create and run businesses. For people, money is merely a means of exchange, and its sole value lies in what they can achieve with it. Part or even most of what they wish to achieve may be the growth of the business itself, but ultimately a business exists to serve and achieve the values of its owners. That is, not only can a business be the means to some other end, it is always the means to someone's ends: always a means for achieving values. Those values can be any of the infinite array of human values, from the most basic such as feeding one's family, to the most ambitious such as creating a new industry or making spaceflight a reality.

Consequently, a fundamental business ethic is integrity. One cannot attempt to run a business or work in a job whose methods, aims or products undermine one's own values: consider how many of your waking hours are spent working, and what it would mean to be spending them directly or indirectly undermining your own values. The purpose of a business is to achieve your values, and if the business you are running or working for is contrary to them, you are attempting a contradiction: and contradictions cannot stand. The best you could hope for from that is a hollow victory – and you'd be "lucky" to achieve even that. As with all things, you owe it to yourself to ensure that your values are rational: but whatever they are, you should not act against them. In this the Biblical advice is true: "What shall it profit a man, if he should gain the whole world, and lose his own soul?" Money is always a means to an end and to upend that hierarchy of values is to oppose and thus risk the values you hold dearest.

Too Much Profit?

A closer examination of the charge of "too much profit" is in order, as it is a lamentably common complaint against some industries – pretty much any industry where companies are so large that their absolute profits can be huge.

The primary economic error one sees so often is a simple-minded "oh, look at all the money they made this year! Unfair! Take it from them!" That is bad enough when coming out of the mouths of people driven by simple envy: it is far worse when taken up by gleeful politicians looking to leverage that envy into more power for themselves. The obvious thing to look at first is how much money has the company invested over the years, and how much risk has it taken, in order to make that profit? Any complaint about "too much profits" that does not mention total investment in the same sentence can be dismissed for its outrageous economic ignorance, without further consideration.

Consider the recent case of ExxonMobil, actually vilified in some quarters for the remarkable achievement of making the highest corporate profit in history ($10B). While huge, it is huge because of the enormous investments oil companies have to make to stay in business. The service they perform for mankind, not only in the valuable products they sell, but in the new science and technologies they drive and the huge number of employees, contractors, suppliers etc they support – not to mention the huge taxes they pay – should make them heroes. Instead, for the sin of making a profit, they were lambasted by the usual suspects. Yet the profits of oil and natural gas industries over the last five years were less than six cents per dollar of sales – which is less than in many other industries.

Free Enterprise

But there is a more fundamental defence of high profits. There is no percentage profit which is "too high" – in a free society.

The virtue of making money and the right to earn as high a profit as one can presupposes a free society in which force and fraud (and only force and fraud) are banned and punished. Then, the only way a company can make money is by offering values to other people, values sufficiently prized to succeed in the marketplace.

In such circumstances, the only way you can make any profit at all is by offering sufficient value that people want your product more than whatever else they can buy with that money now, or its value to them as savings. How then could one possibly make "too much profit?" That has as much meaning as "offering too much value" or "making too many peoples" lives too much better" – which is how the money was made, and the only way the money could be made. No, the charge "too much profit" is code to hide the actual, unadmitted meaning: "They've made a lot more than I can and I want to get my hands on some of it, without having to earn it or offering any value in return at all."

One must distinguish between wishing someone else's price was lower, and claiming their price is too high in some absolute or moral sense. Too high compared to what? If you are willing to pay the price, then by definition it is not too high: if you are willing to pay it, then while you might prefer a lower price, in your judgment it is still worth it to you or you wouldn't do it. You may wish someone's prices were lower (indeed, it is proverbial that buyers always think the price is too high and sellers, too low). But to jump from "I'd prefer a lower price" to "I shall force you to charge a lower price using my mates in government" is to move from the moral behaviour of bargaining under free trade to the immorality of a thief, which is anyone who takes property via physical force, whether direct or delegated.

It must be stressed that these arguments apply only to free trade. They do not apply to money made by deception (where you are lying about the value of your product) or to profits maintained at a premium by government force (such as protections, subsidies or government-imposed monopolies). In neither case would you be earning your money by honest, free trade.

However it is not the responsibility of a business to protect people from their own errors of judgement, nor does anybody have a right to impose their opinions of what is correct judgement on either businesses or their customers. If a business wishes to offer goods that some think are immoral or too risky, but other people are happy to purchase them regardless, then that is solely the business of the people directly concerned. Nobody has the right to initiate physical force against another, no matter how strongly they may feel their beliefs should be imposed on everyone else. The only thing that justifies the use of force is prior force itself.