Work: Money or Meaning? Why has this become a choice we have to make…
It’s my belief that what you’re paid, as compared to what value you’re adding to wider society has totally broken down. This is a terrifying situation, but like many global issues you can take an active role to combat it. We address these same issues in so many walks of our lives. In the absence of ambitious regulation we must choose to change our diet, to buy from ethical companies and invest ethically of our own volition. The question is whether many people realize that’s a choice they now need to make in their career too.
Whilst cliche, I habitually ask interviewees what they would like to achieve within their career. It’s reaffirming that the response I receive, from recent graduates particularly, typically includes phrases such as ‘making a difference’, ‘having an impact’ or ‘adding value’. It seems we have a natural and innate drive to feel that we are positively contributing to our social groups and society more widely. Makes sense to me really, seems intuitive, it’s evolutionarily advantageous that as social creatures we feel driven to scratch this itch.
There’s a problem though. Before, in a post-war haze of the mid 20th century, graduates from the world’s greatest institutions left education with a burning desire to address some of the world’s biggest issues: global health, making space travel a reality, doing genuine good within our governments. Now, we take graduate schemes that ship us to companies we hold unamicable feelings towards so we can help decide how to ship a new product designed to leach our attention or maybe we advise other businesses on how many staff to fire. We rearrange PowerPoints at large banks or advise the already rich on how to rearrange their portfolio on a secondary market. All this, just so that we may hope to build up a deposit for the unliveable circumstances of pretty much any major metropolitan area in the 21st century. I appreciate that reality can often get in the way of our dreams, but it still frustrates me to see the number of my peers who succumb to this set of aspirations, versus aiming to change the world for the better — as if financial success simply cannot be done in tandem.
I don’t believe people are becoming less aspirational, I believe our economies are no longer serving adequate infrastructure to properly incentivize productive activity, and that the bar for living a dignified life is simply rising too quickly . In layman’s terms, there’s too much opportunity and pressure to take on high paying but socially unproductive work. Particularly, my overarching sense is that we used to aspire to create value with the reassurance that doing well in any field will lead to a comfortable life. Now, necessity seems to have forced the modern graduate to focus first and foremost on cash, so that we may one-day claw together enough for a deposit on a mortgage. This effective economic serfdom is the frustrating part; many millennials in such circumstances ‘are only going to do it until they’ve saved up enough’, a statement that acknowledges their position as economic captives. But, so it goes, as long as the returns to capital are greater than the returns to labour, our youth is best spent amassing as much capital as possible. Our greatest dreams, watered down to the hope that we might save up enough to spend at least a bit of our working life doing something we actually care about.
Am I not naturally doing good whilst trying to make money? Isn’t money the reward for adding value?
One of the core tenets of capitalism is that you should do societal good whilst making profit, without even trying; in fact, this is the guiding principle which makes capitalism such an efficient method of allocating resources (‘invisible hand’ and all that). As Adam Smith, put it:
‘Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.’
‘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 necessities but of their advantages.’
So the butcher doesn’t provide meat because he feels a civic duty, he does it to make money. Even if that’s his motive, it provides a good to all those in his town as they can now purchase his products. Incentives naturally align, and so trying to make a profit provides good for all — in fact, profit is the markets way of rewarding that good, the markets way of saying that the time he spent working on a carcass has turned it into a more valuable resource at a rate that’s greater than it has cost him. This pillar of western economics is arguably the reason we have seen unprecedented periods of prosperity in our recent history — particularly versus other economic systems — and as a result why capitalist principles are so thoroughly embedded in most modern societies and the collective psyche.
This reasoning is part of why I’m proud to say that I’m an entrepreneur who’s building a genuinely useful product. At Stasher.com, we store people’s luggage with local shops and hotels with the aim of making money by taking a cut. Though not as emotionally gratifying as saving lives, it provides value to our customers, our hosts and our partners, and creates jobs within our local economy. I am confident we can say that we net add value to society. Importantly, because our business can scale hugely, to do several million little things can add up to much more than doing just one ‘big’ thing.
On top of our potential to contribute directly as a business, it’s the multiplication of many people and businesses making such small additions over time that leads to the rapid march of human progress — ultimately making the 21st century so much more prosperous, for all members of society, than the the world of just a couple hundred years ago.
This is also a conclusion drawn by Adam Smith as a consequence of his earlier statements:
‘It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people.’
This is a multiplicative effect because value creation ripples outwards. We save our customers time and money, which they likely recycle into aggregate demand by using/spending it on other goods and services. We provide extra cash to our host businesses, allowing them to reinvest, pay staff more or in some cases avoid shutting down altogether. We create jobs at our HQ which means there’s more active participants in our local economy and all of these at scale help create more demand and jobs for other value creating services. Furthermore, our technology and logistics platform may ultimately become a basis for further developments; consider that so many modern businesses couldn’t function without the pre-requisite of wide scale smartphone adoption, a consumer product created many years ago with limited foresight that it’d be the hub from which we order our taxis, track our runs and watch our food delivery driver make their way over. For these reasons, economies are best understood as ecosystems, feeding back and forth between participants, and value creation is part of a virtuous cycle of further value creation.
As I said in the first argument, profit intuitively sounds like it should then be a very good indicator of whether a business is adding value to society and efficiently improving use of resources. If you don’t achieve this, your business dies and stops inefficiently using resources. As such, profit may even be a good way to measure the net contribution to society. So profit = a company that’s adding value, right?
So why doesn’t this seem to be the case anymore?
The conclusion we drew above really doesn’t seem to fit the modern zeitgeist, there is in fact often a cultural dichotomy between doing good and making money. ‘Doing good’ is working at a charity, ‘making money’ is working at an investment bank. How does this follow from the above segment?
We praised at the alter of free-market capitalism in the mid/late 20th century but more recently we’ve started to dissent: The financial crisis of 2008 shook our faith and stoked immense anger towards big finance, spawning Occupy Wallstreet and similar movements. Populist political movements have become a typical sight (Trump, Brexit, etc) and these often blame struggling local economies on profit-seeking activities of large businesses — like car manufacturers moving jobs abroad — and explicitly blame the amorphous ‘large corporations’ and billionaires (despite then simultaneously cosying up to these groups for their support). As a result, far right and left political actors who were, or would have been, fringe players just a few decades ago have become central voices across the developed world. It seems evident that we want something different.
Part of the cause of this shift away from the deification of raw capitalism is that we have slowly discovered some deep seated issues in our economy which allowed the anti-regulation fervour at the end of the capitalist golden age of the late mid 20th century (thatcher/reagan era) to ultimately lead to the longest period of stagnant real wage growth and rising inequality we’ve seen in modern history. These issues have led to a common belief that profit is too often ill gotten and leached from other people, hence the opposite of a reward for adding value to society.
To give a few anecdotal examples, fossil fuel producers, betting companies, modern influencers and many members of the financial industry all make huge profits, but it doesn’t seem clear that they are adding societal value — certainly, if you measured public sentiment, people don’t seem very thankful for their contributions! I’m sure raising the price of insulin was very profitable for pharmaceutical firms, but I don’t think it added value to society as a whole.
Even companies that do seem to net contribute by making their money providing clearly useful services (Walmart, Amazon, Microsoft) still sit atop some uncomfortable truths that boost or sustain their profit margins — such as paying sub-living wages, outsourcing to countries with little or no workers rights and engaging in anti-competitive behaviour — and are often accused of poorly redistributing this value creation, simply concentrating it in the hands of their most senior employees and largest shareholders.
In the case of the latter group of companies (Walmart, Amazon and Microsoft) it’s a fact of business that no company can solely contribute positive societal value and that it’s a constant struggle to ensure good corporate governance is followed. We should endeavour to regulate out of existence practices which purely serve the business’s profit line or senior directors and have disproportionate negative external impacts, but even after this consideration there will always be some detractors.
Using my own company as an example (stasher), our success will also put the jobs of employees working for incumbents (privately run station facilities) at risk. The negatives may be palatable so long as there is sufficient positive value added to offset this loss (we’re providing a much better service to customers, saving a lot of people money) and so long as the distribution of the positive and negative impacts within society are acceptably fair.
However, the former group of companies (fossil fuels, big finance and gambling, amongst other examples) are the core focus of this essay and I believe epitomise the reason why we have fallen out of love with the profit motive of capitalism. That’s because these companies are what we call ‘rent-seekers’.
What are Rent Seekers?
To further expand on Adam Smith’s model, he postulates that the price of a good equals its economic value in a certain use plus a rent. In economic terms, a ‘rent’ is essentially a surcharge that is not derived by economic value. Instead, it’s typically the result of market imbalances, imposing externalities on others or illicit activities. Obviously, we want to minimize these rents.
In a healthy form of capitalism, you make money by adding value and keeping a percentage of the extra value as your profit. These businesses have found it’s easier to make money by driving up their rent instead of generating more value, effectively draining value from other members of the economy. This is why I believe we’ve fallen out of love with unfettered, dogmatic capitalism; there are so many rent seekers at the top, we almost assume that all profit is the result of rents. When we think of the people gracing Monaco or the Mar-a-lago golf club, do we imagine those who have contributed the most to society, or oligarchs, kleptocrats, crooks and the children of dynastic wealth?
Rents result from the prices of goods sold being too high, or unfairly purchasing goods at too low a rate. For example, the difference between the price of a good in a competitive market and a monopolistic market is a ‘rent’ to the monopolist. Taking advantage of informational asymmetry to sell a (potentially worthless) product for more than it’s worth, is a rent — one which some businesses couldn’t exist without. Paying a politician a bribe in order to win a contract with the government at an artificially low rate is extracting a rent (the money saved vs fair market value) from the government’s coffers (i.e. the people’s money) in exchange for the bribe. A company that spends money lobbying government is often times not just trying to make sure their case is fairly defended (which is legitimate) but is often also pursuing rents in the form of favourable policies. I.e. it’s cheaper to lobby and hold up policy makers than to accept the costs of policies. Burning coal to create energy, but not internalizing the costs of the knock-on impacts of the pollution this creates is also a rent imposed on the wider society around you.
Why did Adam Smith’s model fail?
As with most economic models, the specific issues leading to the failure of Adam Smith’s value-driven perception of capitalism revolves around its simplicity versus the highly dynamic and chaotic nature of market economies in reality.
Firstly, Adam Smith’s examples only seem to work in near ‘perfect’, competitive markets and it’s becoming abundantly clear that markets that naturally equilibrate at such a point are the exception, not the rule. There are often structural informational asymmetries, power imbalances or weak regulatory environments allowing externalities to be forced onto society rather than internalised by companies, or which allow non-competitive behaviour.
One of the most pertinent in today’s age is the power imbalance problem as it both disrupts a competitive market and can lead to cementing a non-competitive outcome by swaying regulation. In a healthy, competitive market, no individual company should be too powerful; market outcomes should practically be independent of any individual business’s actions. This is evidently not the case in modern times. Instead, entire industries are toppled by the entry of super-monopolists (think Amazon moving into groceries via Wholefoods and into delivery, nearly halving Fedex’s value).
To make matters worse, and the reason I singled out the problem of power imbalances, there is a vicious cycle whereby powerful companies use that power to further entrench favourable imbalances within our cultural, legal and even legislative systems. This can be subtle, through spreading ideals via owned media outlets, but also much more explicit. This is evident in the influence of the NRA and other lobby groups on US policy-makers and the colloquially labelled ‘revolving door’ phenomenon between powerful firms and government, influencing policy. That isn’t to say that the influence is direct (i.e. the ex-employees are literally instructed to do things by the company) but it’s clear that their experience can bias their perception of ‘fair’ policy — particularly when roles await them back at these firms after their tenure in government. Goldman Sachs has developed a notorious reputation in this regard, with employees on a practical sabbatical in the Obama administration devising the post 08 bailout packages which effectively decided to bail out the banks rather than individual mortgage holders. This, before returning to GS after their stint in government ended. Goldman aside, there are many other examples, like ex Verizon Legal Counsel Ajit Pai who was the main proponent of the immensely unpopular repeal of the Net Neutrality bill, earning him a double episode segment on John Oliver’s show.
The second failing of Adam Smith’s model is around his assumptions about human behaviour embedded in this model. We’re susceptible to biases, we make mistakes and have limited time available to scour all information available on the market — we can’t go to every butcher and check their prices. As a result, a company can make a profit by ‘tricking’ people into exchanging their money for a good or service which is of less economic value than the price offered and mostly inflated by rents. As such, even if there’s no structural imbalance in a market, a defacto one can still exist due to human error.
Also, note that Adam Smith, though often seen as a capitalist deity, was considered very liberal and left-wing for this time as his view more widely was one based on compassion. In one of our previous quotes, he said value improves the lives of all people when ‘in a well-governed society’. Further reading of Adam Smith shows he had an assumption that (to quickly paraphrase) the decency of humanity and mid-term self-interest in maintaining a functioning society would stop rent-seekers from capturing our economic systems. This doesn’t seem to have borne out, but we have a chance to change this. I suggest checking out Noam Chomsky on Adam Smith to find out more about this point.
Why don’t we just regulate rent seekers out of existence?
As above, we should and it was Adam Smith’s understanding that an empathetic populace wouldn’t do this in the first place and a functioning government would regulate it if needed. It’s a failure of modern politics that we do not, and a failure of modern empathy that so many of our best and brightest choose to help large firms like Goldman Sachs and Facebook drain the life from our economies and democracy in exchange for a relatively large salary packet (though still a pittance compared to what their senior execs and shareholders earn and, sometimes given the working conditions, not even a great hourly rate nor worth the hardship of working there).
Aside from those who understand the issue of rent-seeking and ignore it, we have significant portions of the political spectrum who have formed an ideological fixation with the notion that capitalism is so perfect that all markets must naturally fit Adam Smith’s intended examples without need for any other methods of correction, and to disagree with this is an assault on capitalism itself , tantamount to suggesting we should become the USSR or a South American socialist outfit — note, the major issues in Latin American countries are much larger than just ‘socialism’, it’s weak institutions, corruption, resource dependency and many other woes of an underdeveloped nation. Market regulation is socialist and ‘socialism’ has been a dirty word for decades. A capitalist disdain for regulation is deeply ironic as a true capitalist would identify that healthy capitalism and free markets require regulation to keep them competitive, not freedom from regulation.
That said, the above is a generous interpretation. The alternative is that those who are benefitting from rent-seeking would rather maintain the status quo and use their entrenched power to push this narrative to veil their activities, duping the majority of economic players into acting against their own interests. ‘Do not tax the rich. Do not trust public services vs private markets. Do not vote for candidates who promote redistribution of wealth.’ These players can exert considerable direct influence on policy via lobbying or surrogates acting within government. On top of this though is the even more insidious tactic of shaping narrative through modern (privately owned) media groups to encourage ideological stances conducive to regulation that benefits the rent-seekers.
What can we, and more specifically you, do about this?
This long ranty essay is, in earnest, all to make one simple suggestion which I basically state in the first paragraph. Start to take some responsibility for your career choices and consciously choose to contribute positively to your community and to the world at large. I’m not saying everyone should work at charities (they’re actually often rather inefficient), I’m not saying capitalism should be torn down in favour of some communist utopia, and I’m not even saying all finance jobs are bad, but for the love of god if you are graced with privileged background and are capable and seeking meaning in your life, do something that leaves the world a little better than when you arrived, irrespective of where that leaves your bank account.
I come back to reflecting on my own life to highlight how this doesn’t mean you have to work at a charity, and what making the world a bit better can look like. Does luggage storage deeply, intrinsically matter in its own right? No. Providing a net benefit to 1000’s of people every single day does though. Building an amazing place to work for 10’s of people does. Both of these feeding into a wider economic machine of prosperity does. Just use the framework of value creation and value capture, does this machine I am supporting create value? Is someone’s life better for it? Does the amount captured leave enough left over that society is net benefitting? Yes to both means you’re doing the right thing. When you make compromises, if you must, do so consciously and temporarily.
If it’s not too grandiose to say, to die having failed to achieve to leave that positive little indent in the history of human happiness (even if it’s so small it’s unknown to many and forgotten in time) but with a fat bank account, is the saddest indictment of a lack of reflection on one’s life and purpose that I could imagine. So few honestly have that opportunity to leave that mark outside of their most immediate connections and surroundings (still, a noble endeavor), to squander the opportunity to have truly made the world a better place at a meaningful scale is a sad thing.
Too often we allow top-down decision making, top-down morality to dictate our actions; however we now enter an era where the internet allows the spread of information and the formation of communities and networks of beliefs that are not constrained by geographic proximity, or shared perceptions of nationality, or languages. I can’t tell if it’s the finest time for democracy, where we can truly debate our ideas outside of the halls of parliamentary chambers and indeed guide that discussion with our weight of opinion, or perhaps the worst where our increasingly blinkered view of increasingly vast world leaves our consent too often manufactured against our own best interests…but I have to hope for the former. It’s time for us to consciously opt to do good, as we opt to reduce our meat intake because we care about the suffering of animals and environment, as we choose to buy sustainably for our planet and future generations, so we must choose to pursue careers that add value, for the betterment of our fellow man.
We’ve strayed for a while, but I’m confident a future can exist where the best amongst us choose to help others, discover the universe and help structure our societies, rather than structure balance sheets for companies who are destroying our planet. Never tell yourself you have no choice; making the lives of others just a little bit better shouldn’t be incidental to work, it is the work.