Virtuous Profit
Virtuous Profit
“Be Fruitful and Multiply”
Water4 has always been a water-business starter. We started with technology for water construction micro businesses , then professionalized drilling companies, then sales and ongoing service businesses through pump-insurance and NUMA. It took us 12 years to figure out the right product, and nearly 10 years to figure out that the “market” of African consumers has to come before our “good ideas.”
When we started NUMA we announced we were building something that would generate enough revenue to pay back the capital cost in under seven years, meaning there would be enough money made to cover the costs to run the business and profit to pay back the expenses for the pumps, pipes, solar panels, etc. This was the vision because we knew it we needed this to scale. I announced this goal in my 2017 Gala video from the launch, where we put it all on the line, in my first year of leadership, in front of all our major Donors. They say insanity loves company…
But internally, somewhere in launching and scaling NUMA a seductive little idea of “break-even” is “good enough” snuck in.
Let’s not be profitable, let’s just cover the costs to operate. Let them make just enough, maybe, to pay back some of that capital cost, or spread it out over 30 years.
That probably came because it is stinking terrifying to try to do something that has never been done.
It probably came because we rolled out our focus on ten independent core competencies to make businesses internally stellar and technically sound. We should’ve had a core competency called “sales and marketing.” No sales, no profits.
Also, we were so ludicrously confident that we said what the world considers a 4 star solution wasn’t enough (that a pump lumbers on for ten years) and added another star..
To make a 5 star water organization, a solution that keeps getting better AND bigger..for the solution to have its own incentive to repair and replicate itself through profit generation.
Beyond it being just hard to do in a practical sense, I think there is a philosophical temptation that snuck in as well.
In writing this, I'm groping in the dark to say what I feel to be true from all I read, have experienced and observed. This blog is the best audience to try this with in such a long format because if you’re reading this you likely know my heart and intentions—to empower. If something gets misconstrued and misunderstood I know you all will provide the feedback so as I share this content I make the message virtuous, true to my values and clear.
So here we go, the click click click climb of this rollercoaster begins from here:
I observe that we often think it’s unvirtuous to derive a profit–especially if you mix in people who have been labeled as poor.
The problem with thinking profit is unvirtuous: charity actually comes from deriving profits.
Why do we see it as the epitome of virtue for our donors to make profit and then use it to help people in need; while not having that same aspiration for people still trapped in poverty?
Why is it virtuous for companies in wealthy nations to earn profits and use those to help people but it is wrong to build companies in Africa to earn profits and use those to help people?
Say we see a new grocery store constructed in a “food desert”, regions where families cannot get access to fresh produce to make the healthy meals their families need to thrive. When these stores arrive, we don’t bemoan the fact that people will have to pay for the groceries there. We applaud the risk a business took to bring a needed product to that market. Intuitively we know that business has to make a profit to stay there. Is it not still virtuous that they would charge money while providing access, otherwise not had, to a product of value that people value?
The success illustrated by this analogy is that by seeing the “poor” as clients, you are forced to provide what people are asking for, the type of foods for the right price and quality. If not, people will just go somewhere else.
Doing good for someone while charging for services creates this equilibrium of relationship. It removes the fulcrum from the excuse of “good intentions” and puts you on the level ground that comes from standing across the marketplace table, which also allows for relationships to be built.
“I’m helping you” can become a great way to waste a ton of money on half-cooked ideas, justify half-cooked organizations, and force good intentions on people who have an unfortunate history of being hurt by people justifying their actions with good intentions…economic development, manifest destinies, and the like.
I believe this is the most massive thing we’re fighting in the massive industry of charity, water. Seeing people as objects of our help and not people with potential makes our charity uncharitable.
The problem is we’re obsessed with sending out shoe boxes full of highlighters and pens for christmas more than we’re obsessed with people being able to go out and get what they want to get on their own.
Back to the roller coaster: The source of charity is profit. And when people receive charity they either use it to make profit or buy something from someone who’s going to make a profit. Profit is everywhere.
Profit is everywhere that things are happening. Another word for profit is “an upside.” No one sane sets out to do anything without an upside. Nothing is maintained, much less bettered, without an upside.
Profit or resources are used to educate, shelter, and care for your family. You are making those choice as to what is needed by you and your family, not what someone else determines you need or don’t need.
At Water4, we want to build companies full of employees just like the companies and employees who’s goodwill is funding the building of those companies. Peoples upsides making a world with upsides.
At some point we lost touch with the reality that profit is the foundation for good in the world–not the evil of the world.
We were jaded by news cycles that capture only the ugly and focused on the risk of someone taking advantage of the system instead of the reward of people making the world better.
Monopolies, mega corporations, hedge funds, and other byproducts of a virtual and global era have clouded the virtue of profit and made us confuse it with vice.
Wealth creation, as Adam Smith observed and described it, results in job creation and is based on meeting people's needs with products and services they desire, for a price that matches the value they assign to it.
It isn’t a new, Western idea.
Wealth creation has existed wherever people have existed. It lives off the law of supply and demand, market laws people have relied on for the foundations of all societies. Ancient Israel, Babylon, Persia, Greece, Timbuktu, Ethiopia. Everywhere that has ever had a market to sell goods has had profit.
Profit is the most basic and core function of life. Philosophically, profit is the surplus leftover after expenses of labor and money is a symbol of the value of that labor. You plow a field, you plant a seed, you weed, you water, you put in the inputs and risk the outputs. You’re not charging for a tomato, you’re charging for the inputs, the soil, and your labor. What you profit is what you gain beyond your costs, it’s what you have to survive.
In nature, this results in fruit on trees and vegetables in gardens. Fruit is literally the profit of a plant from the inputs of sunlight, water, and soil. Plants exist to make more of themselves in this way. We exist to do the same. We work because we reap more than we sow and the minute that reverses, we stop working, plants stop growing.
When you’re a breakeven farmer, you're one dry month away from poverty, poverty you can’t rebound from because you have no profit, no inertia and surplus to push you onward. The same goes for a water business.
You remove profit, you remove progress.
Biblical Standards
To start off, I want to be clear that where I’m about to head is a conversation about economics. Economics is a huge factor in social and racial inequity here in our nation and other “melting pot” contexts around the globe. I’m a generalist, and the danger of that is missing the specifics, and I apologize for any accidental ignorance in what I’m about to say.
Seat Belt check!
The most primal command to humans is to profit, to be fruitful, to multiply. See Genesis 2.
Never in a biblical society was profit limited, frowned upon, or resources viewed from a scarcity viewpoint.
The Bible does not portray a belief that by some getting ahead that it would mean that others would not.
On the social injustice front, I believe we miss the mark by imagining that some have to lose in order for others to gain, and that very foundation adds unnecessary headwinds in the efforts to get others ahead.
Increasing profits is biblical stewardship, it is taking something and making more of it as in the parable of the talents, where the best took 1 and made it 10. It’s shrewdness like the parable of the shrewd manager in Luke who uses wealth wisely, the type who Jesus says is therefore entrusted with spiritual abundance. It’s the wisdom of Solomon in expanding the reach, wealth and power of Israel. It’s the empowered marketplace woman of Proverbs 31.
SO the question is, can people live as faithful followers of Christ and still be wealthy?
Although Scripture has some very harsh things to say about the wealthy, this does not mean that all of the wealthy or that wealth creation is evil or under divine judgment. Abraham, Isaac, Jacob, and Job created wealth and were rich and yet were also approved by God.
Just as poverty doesn’t guarantee virtue, wealth and wealth creation does not guarantee vice.
Acts 2-5, lists several examples from the New Testament of wealthy believers who gave generously to those in need. Among these Christians are:
Joseph, called Barnabas (Acts 4:36-37), Dorcas (Acts 9:36), Cornelius (Acts 10:1), Sergius Paulus (Acts 13:6-12), Lydia (Acts 16:14-15), Jason (Acts 17:5-9), Aquila and Priscilla (Acts 18:2-3), Mnason of Cyprus (Acts 21:16), Philemon (Philemon 1)
These believers lived faithful Christian lives in addition to participating in wealth creation and enjoying wealth. It’s important to take note of the example they set. These people were“ wealthy and gave generously.” Their actions illustrate the responsibilities placed upon the wealthy because of how they have been blessed.
Scripture is very clear that the wealthy have obligations to the poor that God takes very seriously.
Treating the poor with fairness.
Not using the courts to defraud the poor.
Not taking advantage of another’s misfortune.
Preserving the dignity of the poor by providing opportunities for work, for the creation of wealth.
What scripture warns us of is an attachment to wealth, not the creation of wealth.
The creation of wealth is what enables charity.
Without the individual creation of wealth and individual possession of wealth, there is no free choice to share that wealth.
You can’t be a cheerful giver is you don’t have profit, surplus wealth to give.
Shalom teaches universal flourishing, but flourishing looks like the diversity of a fruitful garden, not a mowed lawn where everyone has the same.
A Cultural Reaction
I believe part of our problem is that we’re trying to head Mr. Scrooge off at the pass instead of believing in God, the universe, and the market’s ability to right the wrongs of gross injustice.
Before the digital age people couldn’t accumulate such massive amounts of wealth. This is true, but is that really the problem?
Before the digital age we were unaware of the discrepancies in individual wealth-we maybe caught it on a print magazine, now we have social media and the web pandering to our emotions, our fears of being left behind, at every moment.
The facts are that in no less than twenty-five nations, capitalism has liberated entire societies from all but the smallest traces of poverty.
At breathtaking speed, modern high-tech capitalism has been the greatest liberating force in human history: Over one billion people now live in conditions of enduring relative affluence never dreamed of a generation ago.
The rate of extreme wealth IS increasing but so is the rate of overall wealth.
So what happens if you try to remove or overly regulate personal incentives with profit?
Removing free market capitalism risks the garden becomes a mowed lawn, not a fruitful garden
Economies are like ecologies. Big plants must grow high, they must fall to make space for others, but it’s the interaction of the small, medium, and tall that play together to enable a thriving world.
I think we are culturally obsessed over fairness because for the first time we know everything about everyone and feel like we’re missing out.
If you take away the incentives of the innovators who are delivering products/services that are making them rich, you don’t get any more innovation.
So Elon Musk has a private jet…take away the jet and you take away the incentive to take the immense personal risk, the stress, the 80 hour work weeks that result in an electric car that is actually fun to drive, beautiful, and desirable. Limit profit, you get a Prius, allow for it, you get the Model X.
I believe if you play out everyone all having the same, you end up with everyone having very little.
Big trees have to fall to let in light so others can grow.
This is the breakdown in modern capitalism
The big companies and big players are infinitely growing at rates that place the ecosystem at risk.
They are creating TONS of jobs but our economic system isn’t keeping up with their ability to monopolize due to a stock market based on future anticipated value, rather than profit linked to production, as we discussed earlier.
I would argue that this is not because of a problem with capitalism but rather GOVERNMENT, which enables monopolies or becomes one itself.
Don’t think for one minute that monopolies can happen without governments. THey have to pretend like they’re not, but we have two options: Government will take the power and act like a monopoly, controlling prices, products, and quality with NO consumer leverage (you can’t not pay the government) or we tolerate the effects of private sector monopolies, pressuring government to loosely but effectively regulate, and retain the freedom to instantly boycott businesses through our purchase decisions.
“Just be careful you’re gathering up the guns of the e-com gangsters to give to the lobby-fueled Mafia”– anonymous
A Water4 business in Sub-Saharan Africa is not a monopoly.
There are always other water sources: surface water, hand pumps, rain water, etc.
We advocate with the government to be regulated as businesses, but loosely regulated.
We can’t charge more than people are willing to pay; we ensure we don’t charge more than the vast majority can pay.
We’re working in rural communities, not urban slums.
We’re building small to medium sized businesses, the local ones with the local owners we all know and love.
Capitalism Enables Altruism
In life and in charity, profit and prosperity are not the enemy. Capitalism is altruistic when profits from production are used for greater production— because greater production equals more jobs, more income and a bigger pie to slice from. Eradicating the water crisis in Africa must be approached through the lens of creating opportunity, jobs, and profit in the water sector. We know that this will lead to sustainable prosperity and a shift in the paradigm from giving to creating.
Africa has struggled economically for decades because of the generational consequences of colonialism, foreign resource extraction, weak institutions, reliance on foreign aid, sustained civil conflict, and corruption. Governments were then often set up with ideals based on developed economies (with clear land ownership and taxation) but without the private sector backbone that enables those social services through taxes and the influence of the will of the people leveraged through taxes. You can’t have political systems built on wealth redistribution unless you’ve first allowed wealth creation.
But we know that the status quo doesn’t have to be a life sentence. Classic, wealth creating economic models, such as the ones Adam Smith spoke of, show us that countries without businesses don’t have sufficient tax revenue to provide social services such as basic water utilities. By encouraging, creating, and supporting local businesses that generate revenue to become financially sustainable in the long-term, charities can turn from giving to creating to ensure that the targets of their goodwill aren’t perpetually dependent on foreign aid.
Our responsibility is to create businesses that enable a thriving world. When profit is linked to providing a valuable service/product to people, there’s a direct linkage between the value to the consumer, the profit gained, and the virtue accomplished.
Revenue is a representation of value created for individuals. Profit equals the surplus after costs of jobs created to deliver that value and the value-laiden-product delivered.
Profit is the Foundation of a Flourishing Society
If there is no profit, there are no incentives, if there are no incentives, there is no excellence
Art, music, drama, festivals, poetry, sports, etc. exist because there was surplus income to spend on non-essential things. The beauty of culture is supported by the excess it creates.
All Governments depend on profit from the private sector. Over regulate the private sector, you disincentivize the private sector, and you lose your profits to tax to support the public sector.
All charities depend on profit generation from the private sector. You share from abundance, remove abundance, you remove charity.
Lao Tzu, the Chinese philosopher and author of the Art of War, said “give a man a fish, feed him for a day; teach a man to fish, feed him for a lifetime.” Once that man is a successful fisherman, don’t we realize the first thing he’s going to do is start selling fish? Take that fish and make profit. Buy a boat. Hire a few youth to help. Hire a driver to take them to market. Employ some women to sell them there. Enable access to better food for families for a price the market sets by supply and demand, cost and reward.
Entrepreneurship is happening everywhere in the world. I think we’ve lost a vision for how to earn money in having gotten so dang good at spending it. We fixate on the use of wealth in just about every moment of our lives. People in developing nations, not having that luxury, fixate on creating wealth to get ahead.
We need to get off the train of "Africans are poor and need our help" and get on the train of "Africans are solving their own problems, and we get to play along."
If helping someone help themselves doesn’t feel as good as helping people who can’t help themselves, I think we need to face the fact that we’re helping more for ourselves than for others.
https://www.acton.org/pub/religion-liberty/volume-12-number-2/good-affluence
https://www.youtube.com/watch?v=BqSvivHz86M
https://ellerman.org/Davids-Stuff/Dev-Theory/HPHT-precis.pdf
https://en.wikipedia.org/wiki/Africapitalism