The Beauty of Profit

A common refrain heard when listening to the song about high gas prices it the amount of profit "those greedy oil companies" are making. Just this week, Neal Cavuto argued with Sen. Dick Durban about oil prices and the only thing Durban could focus on is the profit made by gas companies. Oh, how Neal tried to make the point that the government's take on a gallon of gas is 5 times that of the oil companies - and the government doesn't risk a thing - it just sits there with its hand out - and proposes a "windfall profits tax" to take even more. But to no avail - Durban's approach is single sided - hurt the gas companies.

What a terrible idea! Government officials have got to get it through their heads - if you remove the profit incentive, you'll remove innovation.

How the heck did we get to the place in our society that we are angered when someone makes a profit!? I'm sure its part of the politics of Hatred, Envy, Laziness, Blame that I discussed in an earlier article. It is a complete reversal of the American mindset that produces innovation, growth, and prosperity.

Profit is good! It is the fuel that drives innovation. Remove the incentive created by profit and you'll remove all the creative human endeavors that come from people trying to make a living by finding profit opportunities.

Think about profit this way - it is a financial expression of human need. A bunch of people need something in their lives - such as fuel. Another group of people realize that they could make a profit by using their abilities to meet that need. They form a company, pool their resources, take huge risks, put it all on the line in the hopes of "harvesting" the profit that was made available by the human need to power one's automobile. They didn't have to take those risks, but they saw an opportunity to profit and were willing to give it a shot - good ol' American innovation.

Other groups then see the profits that are being made and say, "hey, maybe we could sell better fuel cheaper than they do and take some of their profits." So the search for profit creates competition as well. This forces all parties to strive to increase efficiency and quality in the hopes taking profit from their competitors.

The beauty of the profit based free-market system is that it produces excellence. Those with a product they would like to sell, in the hopes of making a profit, offer it to the marketplace. Individuals in need of that product compare the various offerings, noting the distinctions in quality, benefits, features, and price. The products that get chosen are those that offer the most value to the consumer - excellence. So the makers of excellent products get the profit and the makers of mediocre products eventually go out of business. Excellence is the bridge between human need and human ability.

Two things make the process work. 1) Freedom and 2) the pursuit of profit. These are the two sides of the economic system. Companies bring their products to the market in order to make a profit. People come to the market to get their needs met and freely choose the products that have the most value (excellence). Freedom allows competition - competition creates excellence. The result, people have their needs met in increasingly excellent ways and others make the profit necessary to live their own lives and meet their own needs. It is a beautiful system and we're all engaged in it every day. Every one of us is working day in and day out to make a profit.

Unfortunately, the politician nurtures and exploits the darker side of human character - in this case, envy - to claim that those who meet our need (to drive cars) with their ability (producing fuel) in an excellent way (fuel on every street corner at a reasonable price) are making too much profit. If Dick Durban gets his way, in order bring more of your money into government coffers and ensure his reelection, he will stoke the fires of envy in the human heart and destroy the fuel of human innovation - profit.

As a nation we need to celebrate those that make a profit - for those that make a profit are the ones who have met our needs most effectively. They are the ones who have brought the most excellence to the market. Let's praise them and celebrate them rather than destroy them in the public square.


Anonymous said...

Hey Mike,
I found your blog on Google. Great views...I totally agree with you. Let's be happy for each other when we succeed.
Good job...Astil C.

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