Product innovation ideas, career independence, necessity to advance, and many other reasons drive the start of businesses. Unsurprisingly, most business owners understand more the motivations for startup than the actual mindset necessary for an owner. An abundance of business misconceptions trickle down from owners into operations and strategies, impacting success. As abundant as the misconceptions, books professing truth about the mindset, traits, and habits of successful entrepreneurs and CEOs litter bookshelves. While these books have some merit, they overlook the most vital facet of the owner's attitude for the reason of not sounding distasteful. In the way people practice impression management, companies mythologize success in public relations campaigns, making success appear more about social concerns than the desire and fiduciary responsibility to make money. Worse yet, gurus and other individuals take these yarns and spin them for their own use, adding to the misconceptions. Whether green washing or feigning concern for quiet quitters, these messages, however well-intentioned, bombard budding entrepreneurs with misinformation that defies the reality of successful business development.
There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game, which is to say, engages in open and free competition without deception and fraud. ~Milton Friedman
Famous economist Milton Friedman’s assertion remains as unchallenged today as in 1958, showing the primary concern of business as profit which America enshrines with law and policy. It is interesting how the federal government dedicates entire departments to overseeing the fairness of business, such as with SEC and FTC, yet has few federal safeguards to protect employees except the meekest of laws to enforce anti discrimination, whistleblowers, and minimum wage laws. Profit as the only true social responsibility pushes all concerns to the side, easily evidenced by legal bias and by strategy.
Layoffs, cutbacks, and downsizing are sound business strategies that satisfy investors regardless of the cost employees must pay.
Yet, many entrepreneurs fail to see this necessity of profit as the vital driver to success and concern themselves with other things, often nonsense that runs counter to profit. Though always a problem, in recent decades companies began branding themselves with corporate responsibility, schools began teaching the triple bottom lines of social, environmental, and economic in response mainly to large corruption cases including WorldCom and ENRON, as well as the growing concern for the environment. While these shifts move us in the right direction, they also cloud the profit motive in a social justice mythology that hampers entrepreneurship.
The Myth of Ethical Enterprise
Business doesn’t care about ethics or morality. Successful business leaders view ethics as a barrier needing sidestepping or vaulting to avoid litigation or other negative outcomes. Time and time again business leaders prove this thinking in the ingenuity needed to better hide corruption to grow company profit. Despite increased transparency and the awareness of corruption’s damage to economies, the problem continues on a global scale. Researchers, Stephen Ferris, Jan Hanousek, and Jiri Tresl, could not state any better corruption’s inspiration and proliferation than,
Our Corporate Advantage Hypothesis contends that corporate corruption persists because of the financial benefits it provides to firms.
The authors go on to state:
We also find that corruption still relates positively to profitability after the financial crisis of 2007. The additional disclosure requirements and increased monitoring of the global financial system enacted after the 2007 financial crisis appears to have had no effect on the proclivity of firms to engage in corrupt practices.
Even with the damage caused by unethical and unsound lending practices, the profit drive remains undeterred, which informs the aspiring entrepreneur of the mindset and drive needed to grow an enterprise. The entrepreneur can voice the concerns about the environment and child labor exploitation, even going as far as to develop the mission and vision around such ethics, which is likely good for PR, but beneath these ideas – profit remains the drive.
In 2020, Alexion Pharmaceuticals was charged by the SEC for bribery and expected to pay $21.4 million for bribing Turkish and Russian officials since 2015.
In the same year, Airbus, agreed to a $4 billion settlement of bribery and corruption that spanned more than a decade.
In the same year, Larry Householder, Ohio’s Speaker of the House and other political actors were charged with bribery and racketeering suspected to have fraudulently taken $60 million in exchange for $1 billion in taxpayer bailout for an energy company.
Such stories go on and on, making corruption an expected business practice since profit forms the primary function, but illegal activities do not comprise the wealth of profit driven activities. To safeguard profit, companies use workers with the same utility as the machines they rent or buy to perform their work, even in cases of ethically driven organizations.
Starbucks prides itself on its commitment to an ethical supply chain and many social justice issues but when workers protest for fair work practices and a voice in the decision making, the company began closing stores that unionized claiming safety and other issues as the closure reasons. This same company that touts ethical supply chains was also accused of blocking countries from trademarking their coffee goods to maintain price control.
Nearly all large multinational corporations have been accused of various forms of unethical behavior, which should alarm all citizens with their involvement in politics such as in the case of Larry Householder, but for the entrepreneur, these examples dictate what is essential for success.
Regardless of what companies, CEOs, billionaires, and gurus claim, if you lack the willingness to place profit above even the welfare of employees, you are unlikely to succeed.
Profit Motivation’s Importance for Small Business
Believing as a small business owner one is less apt to act solely on profit motivation is bad thinking. In fact, entrepreneurs starting small companies often must have less ethics than their large corporate siblings. Small companies have limited resources and when faced with ethical dilemmas they are not always capable of “just biting the bullet” or suffering a cost as the “cost of doing business.”
Employees form a large area of ethical concern for small companies, despite the fact that most small companies do not fall under federal guidelines such as affirmative action and other legislation these companies must pay FICA, workers compensation, and abide by labor laws dependent on state guidelines. Employees are expensive; there can be no doubt, often too expensive to even perform the job in some highly competitive industries. Labor based companies such as construction, moving and storage, landscaping, etc., to remain competitive often must pay laborers as subcontractors, which eliminates much of the cost associated with employees, most notably overtime and workers compensation. Many companies that follow this practice do not consider subcontractors as separate companies or entities which they are considered under the law. So questionable is the ethics of this practice that the IRS provides checklists to determine whether a worker operates as a contractor or employee.
Readers who work or have worked as contractors might be laughing at my point, having experienced work as a “contractor” and a means for a company to avoid cost, typically at their expense. The use of contractors instead of employees is just one of many dilemmas faced by small business owners who generally lack the ability to offer any benefits or find themselves lying to not just employees to avoid cost but also to customers.
As online business grew so too did fake reviews. As much as 40% of Amazon reviews are thought to be phony and in most cases inspired by companies offering refunds or payment for the review. Large companies like Wal-Mart don’t have a need to buy reviews but new, small companies with no history do. This practice has been around for sometime despite measures taken by companies like Amazon to protect the credibility of their reviews.
Just like large companies driven by profit, small companies needing reviews are willing to lie and pay for the fraud.
The level of corruption necessitated for profit in small business is an area lacking research. However, given that small companies lack the resources of large companies, they have far greater incentive to operate unethically since the cost of mistakes, and more importantly the loss of profit, are more impactful.
Small companies that don’t place profit first are prone to failure.
Think Like a Psychopath
Business is built on failure, primarily because people found startups based on misguided thought. Prevailing “wisdom” tells people they can achieve their dreams by effort, by commitment, by operationalizing ethics and social concerns, and by forming a grand vision. The business educators emphasize planning and hammer the point of management as the means to fix or maintain a successful firm. Gurus and billionaires talk about timing and mythologize the means to ingenuity and originality (paradoxically as if these concepts have a formula.) Armed with nonsense, entrepreneurs start companies believing success is all but guaranteed due to their beliefs that deny the reality of commerce.
The only thing that matters is profit.
Whatever the reasons one opens a business doesn’t matter as long as the primary reason is to make money. All the other reasons are secondary, and this reality oftentimes heralds failure when ignored. Giving too much credence to motivations and intentions results from learning such being told things like,
“You have to really enjoy what you do, otherwise you will not be successful at your job.”
“Do what you love and the money will follow.”
“Believe in your dream, and never stop striving.”
“The triple bottom line is essential to a sustainable business.”
“To avoid corruption, ethics must be operationalized.”
“Community and workers are essential stakeholders to be considered in decision making.”
Unknowingly, these entrepreneurs launch their new enterprise on an Achilles heel of misconceptions and poor thinking that makes them believe they are doing the “right” thing for the “right” reasons.
Many people do what they do for no other reason than the money. Go ask a trashman.
You can do what you love and never make a dime doing it. Go ask any teacher.
You can envision your dream until your eyes pop out and work your fingers to the bone only to fail. Sixty-five percent of new businesses will fail within ten years.
Maintaining a triple bottom line might be sustainable for nations or communities but for large businesses they are typically costly to start, maintain, and make work. For small businesses they are impossible.
Operationalizing ethics might actually cost you a business if you need to be honest about every mistake.
Community and workers might be stakeholders, but they are far from essential, evidenced by the propagation of corruption that ultimately hurts them.
If you want to be successful with a business, you need to toss out the adage thinking and guru wisdom and hypocritically show the facade of the triple bottom line while using employees as tools. If you do not believe that idea, you are deluded.
One of the reasons Elon Musk claims to have bought Twitter was to protect free speech (all 280 characters) and began firing people who criticized him after completing the sale.
Steve Jobs was a tyrant whose only interest in collaboration was employees collaborating to achieve his vision.
Mark Zuckerberg stole the idea of Facebook from his classmates and since that time made the company one of the most invasive-to-privacy advertising platforms.
Big tobacco, despite having agreed to one of the largest settlements to avoid litigation for false advertising of a dangerous product, continues to target young adults and teens, knowing the younger someone becomes addicted, the less likely they are to quit.
A former executive of Google claimed the company abandoned its “Don’t be evil,” so the company could grow financially.
Examples from the most successful people and companies in the world abound, showing their claims as PR or lip service to maintain a positive view. If you think these examples are cherry picking, you, again, are deluded. Scholars, Perry and Herrera, present a plethora of research to back their claim, that “While it is not necessary for one to be a sociopath to be a businessperson, business is particularly attractive to those who happen to be sociopaths.”
Keep in mind, the statistics these researchers use are somewhat confined to clinical perspectives, making the possibility of business people acting sociopathic difficult to assess. What is clear is the connection between high rates of sociopathy and business leadership, likely due to the fact that success in business centers on profit which is best acquired by means that do not increase cost, like not caring about employees, playing by the rules, or enforcing ethics when lip service will do.
To achieve small business success you need to prioritize profit – above all else.
Original photo by Shane Devlin on Unsplash