Profits ≠ success

As the adage goes: if you love what you do, you’ll never work a day in your life. They say you are in your element when you find a way to get paid doing something that makes you happy. The trouble is, most of us never find such a career. In reality, we need money, and we must respond to what the market wants of us. So, in the pursuit of money, we give up our happiness and work in jobs that we don’t like with the vain hope that some day it will all be worth it.

Typically we determine whether we are in such a situation by asking ourselves if we would continue to work in our current job for free. Most of us say no. We require money to continue to work. Otherwise, why bother?

What about the company you work for? If there was no such thing as money, would that company still exist? Was the company founded for a reason more than simply creating profit? Many companies are founded to address some purpose, yet almost nobody invests in a company for the same reasons. Angels invest with the expectation that they will make money.

From the first round of funding on, the company has mixed incentives. The founders may wish to address some purpose: provide shoes for the homeless, or facilitate better communication, for example. Once shareholders become involved, values begin to deteriorate, and founders slowly lose control over the direction of the company. Profit projections and share prices begin to take precedent. Not only must the founders impress these new stakeholders, they become accountable to them; after all, they have the ability to remove founders from the company: a la Steve Jobs. It is somewhere between start-up and Initial Product Offering (IPO) that many companies lose their way.

At some point, the company becomes more interested in growth and hitting profit projections than the mission that it originally set out to accomplish. This is where ethical standards begin to diminish. The law becomes the only moral standing. Instead of holding itself to a higher standards, the company has the green light to try anything, so long as it is within the confines of the law (and often if it isn’t). The result is blatant disregard for moral standards that we, as humans, typically adhere to, yet companies seem to be exempt from them.

And we are okay with that.

We have relaxed moral standards for businesses, so they can more effectively hit profit projections and the leaders can look good in front of shareholders. Maybe the CEO will be offered a better paying position at a larger firm.

In his book Saving Capitalism, Robert Reich describes how corporations continue to gain control over our economic system. As a result, the scales of pay tip more towards the CEOs, and further away from the average worker. Because CEOs are paid mostly in stocks and options, “[t]his form of pay gives CEOs a significant incentive to pump up the value of their firms’ shares in the short run, even if the pumping takes a toll over the longer term.”

Shortsightedness such as this manifests itself in the form of buybacks, layoffs, and questionable accounting practices. These practices may put the company in such a dismal state that it collapses shortly after the incumbent conveniently exits.

We live and work in a system whereby the purpose of a corporation is to create wealth for the shareholders. Corporations and CEOs continue to make more and more while leaving a trail of destruction in their wake. Our economic system gives companies perverse incentives to make short-term decisions that inflate share price, while causing harm to everyone and everything around them.

We need to change the way we think about our marketplace. We need to change the way we think about business.

We have, in our grasp, the greatest tool to create a positive change in our world. That tool is business. No where else have we seen any type of organization that has been able to have such a profound impact on every level of our society and the environment.Yet we continually misuse and abuse these wonderful tools in favour of chasing greater profits.

Business should not be about making profits; rather, profits should be a side-product of good business. Many, if not most companies in our world would not exist if money didn’t exist. Indeed, most companies measure their success by how much money they make, not by how much of an impact they have. It would seem that our priorities as a society are misaligned. We are trapped on the hamster wheel, chasing profits, and getting nothing done. We are losing our way.

Profits should not be the only parameter of success. Our lives are so much more valuable than money; by basing our economical system on it, we are setting ourselves up for catastrophe. We must re-define business. It’s not all about the money, it’s about making a difference. Some companies have started, but it’s up to us to change the culture.

 

Thanks for reading!

-TC

Advertisements

Welcome

Welcome to the Master of Wealth blog. After spending some time working with families in the financial industry, I’ve seen that there is a severe lack of education out there, particularly among the middle class. People don’t understand money. Moreover, we are afraid to talk about it. I’ve heard that we fear talking about money more than sex and religion. Whether or not that is actually true, I’m not sure. The point is clear though. We don’t like talking about money. The traditional financial industry has created the illusion that finances are complicated, and that information is reserved for the rich. The deception ends here. Personal finances are not that complicated. Most other financial blogs focus on budgeting, or saving cents at a time. This blog is meant to inspire you to get your own finances in order. Here, you’ll find tools and strategies that you can use to enhance your own life, financially and otherwise. Its meant to educate you, which is why it will be written in layman’s terms, and hopefully, this blog will show you that you don’t need to be rich to live richly.

I want to shake your conceptions about money. Money does not equal happiness, nor does it make you evil. One does not need a lot of money to start investing. Wealth is not constrained to monetary value. We will focus on finances, but we will also discuss ways to enhance your life in other areas: your career, your relationships, or your health, for example. This is a Canadian focused site, but many of the themes and ideas extend across borders.

Lastly, before completing your personal financial plan, I always recommend sitting down with a licensed professional. Although some of the strategies we will discuss may seem amazing, a financial plan must be tailored to meet an individuals needs. This site is for education purposes only, and it is not affiliated with any financial institution in any way whatsoever.

Thanks for reading!

-TC