What gets maximized?

When an organization succeeds, the owners decide what to maximize. Some of the choices:

Salaries for the bosses
Distributions to the shareholders
Stock price
Salaries for everyone else
Positive impact on customers
Positive impact on the culture

So, if you’re the local cable company, you can decide to invest extra profits in customer service or lower rates, even if those choices don’t maximize long or short profitability. If you’re a public company, you might try to hype the stock price with a buyback. Or, if you’re a company with a mission, you might re-invest in that mission.

The myth is that the only purpose of a company is to maximize profits. That’s a fiction, and a dangerous one. Organizations exist to make things better for people, not the other way around.

One reason that social entrepreneurship is a useful concept is that it announces the priorities from the start. Be profitable enough to grow, but put most of that profit to work serving your customers and their neighbors.

You don’t have to have a fancy label to build an organization that you’re proud of. You simply need to decide what you’re trying to accomplish, and then go do that.

 

[Also! the new episode of Akimbo is out now, and a new podcast called Everything is Alive is the next thing you might want to listen to after that. I’ve listened to two episodes and they’re extraordinary acts of originality and genius.]