Is Profit Evil?

We’ve told you before that non-profits are seen as warm and for-profits are seen as competent. But do people think that for-profits are downright evil?

That is the finding of three recent studies conducted by Amit Bhattacharjee, Jason Dana, and Jonathan Baron of the University of Pennsylvania. In the first two studies, participants were asked to rate particular U.S. firms and types of firms (such as “Investment Banks”) based on familiarity, perceived profit (“How much profit do you think this business made on the average in the last year?”), whether they thought this profit was deserved or not, perceived value of the firm to society, and beliefs about the sources of firm profits (“Do profits for [this business] come at the expense of others?”).

In the third study, participants were given identical descriptions of five separate hypothetical organizations with a single difference: in one description the organization was described as for-profit, in the the other it was described as a non-profit. Subjects were given both descriptions in a randomized order. After reading each company description, participants were asked to rate the organization on perceived social harm or good and perceived value to society.

The result? For the first two studies, “mean profit and social value were highly negatively correlated.” In other words, the more money a company makes (or is perceived to make), the more people feel that the company does not benefit society. Along the same lines, in the third study, “participants viewed the same organization as less socially good (i.e., more socially harmful) when it was described as a for-profit corporation versus a non-profit organization.” In short: Even in one of the most market-oriented cultures in the world, people doubt the ability of profit-seeking business to benefit society.

Bhattacharjee, Dana, and Baronof argue that this conclusion has serious implications for the economy because “a market society relies on the willing participation of its members, but individuals may be reluctant to participate in a system they view as morally bankrupt.”

The paper’s analysis says that economic education could help the public better understand markets and consequently turn around the common perception that profit is evil. But do people really respond to textbook evidence and logical arguments? Of course not. Humans are emotional beings and we react accordingly. So how can for-profit companies, the lifeblood of our economy, make sure they are not seen as…well, evil?

In The Dragonfly Effect, we tell the stories of many for-profit companies that have harnessed social good, from Salesforce.com to TOMs shoes. We talk about how these companies use the Dragonfly Effect model to create ripple effects by pursuing a mission based on deep meaning in addition to profit. No, we’re not saying that making money is evil. But we are saying that if you want to run a for-profit company that’s also seen as a force for social good, it’s probably better to learn from the example of companies like Zappos than to wait around for the public to brush up on their macroeconomic theory.