Jun

18

Profit or Non-Profit, from Dan Grossman

June 18, 2008 |

15 Comments so far

1. Greg Rehmke on June 19, 2008 2:32 am

   After twenty plus years working for nonprofits, my experience is that mismanagement is the rule rather than the exception. Nonprofits have plenty of programs and goals, but how is success measured? It is rarely clear. Ironically, my nonprofit work has been with educational organizations whose goal has been to improve understanding of the key role of profits in modern societies.

   One experience in support of Dan’s claim, I have invested much time recently with workshops and conventions promoting market-oriented books to homeschoolers. And interestingly, I find the most widely read economics books in the homeschool world have been published by a for-profit company (Bluestocking Press, which published “Penny Candy” and other resource books). Few homeschool or high school students or parents have even heard of the many nonprofits spending millions on free-enterprise education.

   I would argue though that some nonprofits, like Underwriters Laboratories, perform valuable services that support for-profit firms. If the FDA were spun-off as a nonprofit similar to or part of Underwriters Laboratories, it could develop to provide a far more useful and less restrictive role in food and drug safety. That is, for-profit firms could in the future come to voluntarily look for “FDA Approved” labels–if it were a voluntary organization.

   I don’t know which social and economic services would be provided by nonprofits, if state and federal governments were to be pushed back into their limited Constitutional roles.

2. John White on June 19, 2008 10:09 am

   When I was a teenager, I told my mom that I was going to be rich when I grew up. She said, "Don't you want to help people?" I responded, "Mom, the accumulation and distribution of wealth is a good thing, so long as I do it honestly. If I have money, then the people at the car dealership, the restaurant, the grocery store, and the stage actors, and everyone who makes any part of what they sell me has money and can take care of their families. Don't you want them to be able to send their kids to college?" Economics was never my mom's strong suit (although she more than makes up for it in countless other ways), but I think she got it.

3. George Parkanyi on June 19, 2008 12:53 pm

   Dan, Your niece is in business school and she's against profit? That's like taking physics and being against gravity. "I'd love to be an investment banker at your firm as long as we're clear that I won't be required to make a profit…" I predict — call me crazy — that she's going to be in for some tough interviews. (Although she may have point in the end. Gravity does suck.) Cheers, George

4. Frank Sizemore on June 19, 2008 1:27 pm

   @John…..this is not meant to inflame nor target your position. In reference to your quote, when one accumulates wealth it's at the expense of someone else (assuming finite resources, which is the current fave media topic). In other words, if one garners some resource (money), presumably someone else must have relinquish said resource (money). It seems to me that industrialized nations are garnering more resources from the third world countries and redistributing it within our own country (really to the top 1% of folks since they own most of everyting really). Not sure this has anything to do with profit/non-profit or whether I even know what I'm talking about.

5. John White on June 19, 2008 2:28 pm

   Wealth and physical resources are not the same thing. Wealth can be created almost out of thin air. How much wealth did the invention of the internal combustion engine create? Sure the wealth of people who bred horses probably dropped, but on the whole, more wealth was created than destroyed. Mercantilism proved to be a flawed economic paradigm.

6. David Tyree on June 19, 2008 2:36 pm

   Frank, when we acquire ore from some jungle in S.America we use it to process into steel and eventually use it to build roads, bridges, tunnels and skyscrapers. Those things allow us to move our goods more efficiently and thus get more out of our existing resources. If we didn’t know how to add value from iron ore it would be just another rock in the ground that nobody would have any use for. Trade is not a zero-sum game- both parties win or else neither would partake in the trade.

7. Mark Candon on June 19, 2008 2:42 pm

   For years I was on the finance committee of a local non-profit. Every year we’d do the budget and I’d ask what the fund-raising department had raised the year before. “Eighty thousand,” was the answer. And what did the fund-raising department cost last year? “Eighty thousand.”
   So every year I tried to get rid of the fund-raising department, because half of what they raised came in the door whether they were there or not (like when someone died and they were listed as the local charity to support).
   Believe me, there is a huge disconnect with the “non-profit” mentality. They really think money is dirty and dirtying.

8. reid wientge on June 19, 2008 3:05 pm

   The knife is sharp that has divided the worlds wealth for thousands of years so finely that 6.5 billion people exist as of 2006.

9. Rob Steele on June 19, 2008 3:33 pm

   It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Adam Smith (http://en.wikipedia.org/wiki/Adam_Smith)

10. Frank on June 20, 2008 9:03 am

    Quite the contrary, I think trade is a zero-sum game. It’s just that we don’t always recognize the costs (indirect). Sure, if I extract ore from S America and pay them some nominal wage, we both theoretically profit. But…when I build my bridges, buildings, etc. I have deteriorated some other part of the “environment”. These costs have not traditionally been captured by traditional accounting practices…..I hope this is beginning to change as I feel there are companies out there who do a better job of “profiting” while at the same time not destroying the planet.

11. steve leslie on June 20, 2008 12:11 pm

    I don't know if this addresses the question or not. First you might be pushing a rope here. It can be entirely futile, terribly frustating and perhaps impossible to explain "the real world" to a college student. In many ways, they hold the idealism of youth. On the other hand, your niece may see "non profit" as her opportunity to give something to society without the bottom line in mind knowing full well that this will come in time. Second, there are other ventures that our youth can partake in that old horses such as you and I can not now pursue. Vista and Peace Corps come to mind. Doctors without Borders another. In fact Dr. Bill Frist esteemed physician and graduate of Princeton and Harvard Medical School and former senator from Tennessee continues to make mission trips to Africa and has done so since the mid 90's. Third before we assail non-profits remember that Franklin Graham's Samaritan's Purse, Feed the Children and plenty of non-profits were there for Hurricane Katrina victims long before FEMA and state agencies and any corporations that I can think of. Where would we be were it not for The Salvation Army and The American Red Cross. How many children would not receive medical care and die if it were not for the Shriners. How many times do we get the opportunity to do noble things in life without the pressure of "The Bottom Line." G-d I wish I could go back 30 years in time and do some of the things I wanted to do rather than the things that I had to do. sl.

12. reid wientge on June 20, 2008 3:24 pm

    Man has created a world in which altruists do not starve and yet our education system is so profoundly inadequate that many do not understand the nobility of working for personal gain.

    Ayn Rand provides, in her novels, dramatic arguments in favor of self interest.

    Easy access to understanding how wealth is created and how wealth creation benefits all can be learned by reading “I, Pencil” by Leonard Read. The complete essay is available at http://www.fee.org/Publications/the-Freeman/article.asp?aid=3308.

13. Dary Craiger on June 21, 2008 12:23 pm

    Some non-profits exist where some people believe there are moral reasons to preserve economic inefficiencies. In other cases, non-profits are used for tax avoidance purposes.

    Classic examples of non-profits would be traditional religions. A free-market approach would probably be more a therapist, or a new agey class. Feeding those, who don’t work, is considered moral by many, but it isn’t economically efficient for a single party. Many educational institutions existence depends upon the idea that morality does not equate with economic efficiency. Academics who have attempted to define how people should approach various arts are always enamored with free market choices. Preserving a monopoly in this regard may also be a goal.

    The other reason for non-profits is tax avoidance. The classic example is Ikea. They are owned by a non-profit, and then have some complex scheme of getting the money out. It helps to put together a fortune if your money can grow tax free, and you can get government grants.

14. vic on June 22, 2008 7:18 pm

    Mr. Craeger's point should the service should be extended to those who favor an increase in the estate redistribution so that others might not have the benefits of their past shelters and current non-profit activities. vic

15. Mallory Margueron on July 1, 2008 12:54 am

    I understand and sympathize with Mr Grossman, but I'd like to point out that some for-profit activities clearly are not socially useful. An example is selling tobacco. Another is selling Hummers when oil is $140 and climate change is a real problem… Both of these may have some social benefit, but on balance we'd be better off if no one did them at all.