A friend of mine sent this to me and I’m interested in hearing how you see this playing out in practice. I want to start by saying I think this is a great idea, but I don’t think it would work much better than current structures. I’m interested to know how you came to some of the statements you did, as my experience working for a for-profit company would suggest you’re incorrect in some of your assumptions.
Premise: While I agree that a business focused on providing its profit to non-profit work is admirable, good, and perhaps the best we can do in an otherwise bad situation, I don’t believe that this factor alone is a deciding business advantage over another business with similar products. It would be one factor of many at best.
I would argue that the idea of Guiding Producers is perhaps a good stepping stone to a post-profit world, but it is not on its own the solution to the problem of exploitation to the benefit of profit. To defend my premise, I want to point to a few statements you’ve made to the writings above, and I’d love to hear your thoughts in counter.
“Structurally, there is no reason that a Guiding Producer would produce goods and services at a higher cost.”
I’d be interested in hearing where you’re coming up with this statement and what justification you’ve got; in my experience, this is demonstrably false. Even if we don’t account for the “economy of scale” argument (which you dealt with by arguing that consumers would deal with higher cost for a short period of time), there are hundreds of reasons why two businesses producing the exact same product would have very different business expenses. Things like:
Vendor relationships (your ability to argue for discounts with people you are close with or have worked with before)
Payment history (many businesses give discounts to companies with good payment history/credit)
Location (depending on where your manufacturing centers are, you may see greater or fewer costs)
Distribution mechanisms (a business may be able to hire a fleet of trucks, but they might need to outsource their shipping to a third-party because of factors other than the raw cost)
These factors alone are enough to represent a major difference in the cost of producing one good, even if it is virtually identical to another. It is not safe to assume that because a business purchases, manufactures, and distributes the same or similar goods, their up-front cost is the same and therefore the cost to the consumer is virtually the same.
“In low-differentiation sectors, it may be easier to construct a ‘no-brainer’ where a consumer is genuinely ambivalent as to two products.”
I would challenge this statement by asking where you see pure ambivalence in virtually any product purchase. It’s true that commodity goods like ketchup, toilet paper, and paper towels are usually competing in a race-to-the-bottom on cost, but what you’re talking about specifically here is a unique kind of product differentiator that functions as part of a much larger structure of consumer purchase behavior. We can come up with lots of theoretical ways that people end up buying things, and the entire field of economics is determined to codify these systems of supply-and-demand to a science. But unless you are able to take the business model of one business and replicate it exactly, all you’ve done is create one additional factor that might motivate a consumer to purchase your product. It’s not a guarantee, because people don’t fundamentally function in predictable, codified, rule-based ways.
I don’t buy Newman’s Own because (1) it costs more and (2) it doesn’t taste as good as the other kinds of ranch dressing on the shelf. It is not, in and of itself, an equal product to its competitors, and so it loses to Hidden Valley or DIY ranch seasoning packets when I go to the grocery store.
“People all over the world choose the ‘lesser of two evils’ in the political contexts routinely.”
Herein lies the core of my disagreement, which is that this advantage alone is enough to level the playing field and produce the Guiding Producer as the winner. I fundamentally disagree that we are able to practically operate on an equal playing field between two businesses and see demonstrable business advantage from just one product differentiator.
In order to sell one’s products, one must be willing to create the absolutely perfect scenario to motivate a consumer to buy their product. The competitive edge relies on coercion, exploitation, subjugation, and dishonesty to accomplish its purpose, and the business can justify those actions by arguing that profit, above all else, is the sole measure of success. Governments exist to regulate this behavior by telling companies what they are and are not allowed to do to the end of profit.
They get to say that losing money is the same as failure. How does a business whose sole purpose is to do good in the world operate by the same standard? Can a business reasonably justify underpaying its staff in order to further the profits of the non-profit it supports? If it were true that simply having a good cause was the deciding factor, why do non-profit businesses not already succeed against for-profit enterprise?
Unless a Guiding Producer is willing to exploit its workforce to an identical degree as its for-profit counterparts, it can’t corner the market on virtue alone.
I am very grateful and delighted with your serious and thoughtful engagement with my thoughts.
Firstly, I would note that Guided Consumption is not a panacea. A world of Guiding Producers/Companies could still be one in which structural relations between labor and capital result in workers not getting their due. It is unlikely that all corporate behavior of Guiding Producers would be totally unimpeachable. However, although Guided Consumption does not solve every problem, it tends to direct the fruits of economies from the least needy (wealthy shareholders who have the capability to own components of the means of production) to the most needy (beneficiaries of charities such as the global poor or potentially the billions of animals that are tortured through the factory farming process). In my view, allowing the perfect to be the enemy of the good, thus choosing not to explore the possibilities that Guided Consumption may allow, is dreadfully mistaken. That being said, even in a world where Guiding Producers/Companies that serve excellent and effective charities, there are likely going to be other political and social projects to engage in to work for an even more just and happy world!
You appear to have two premises, one unbolded, another bolded. Your unbolded premise, that Guided Consumption does not solve every injustice in our economy, is one I agree with, as noted above. As for your bolded premise, I would disagree because your claim is too strong. You contend that “I don’t believe that this factor alone is a deciding business advantage over another business with similar products. It would be one factor of many at best.” A business advantage, like advantage in other competitive contexts, has the potential to be decisivedepending on the other factors involved. Certainly, there are contexts in which profit destination is less likely to effectuate a large market advantage; I used a restaurant as an example where profit destination will often be lost in a crowd of other factors. However, even in that context, charitable profit destination (“Designated Funding Destination”, or “DFD” as I define it in the longer paper) would provide some advantage. But the strength of that advantage would depend on that context, some of which would be imply greater advantages that would imply greater profit opportunity.
“Structurally, there is no reason that a Guiding Producer would produce goods and services at a higher cost.”
This statement is true, albeit more modest than you appear to be suggesting. You correctly note that actors in our economies have different competitive advantages based on the factors such as vendor relationships, payment history, location, distribution mechanisms, and many more. Consequently, the results of competition between the actors that compose firms, including investors, depends on a wide variety of factors. What I mean when I say there is no reason a Guiding Producer would produce goods and services at a higher cost, I simply mean that having a popular charity as recipient of producer surplus instead of wealthy shareholders confers an advantage. This advantage is not balanced by any other structural disadvantage. A firm with a popular profit destination is strictly superior, competitively speaking, to the same firm with a neutral or unpopular profit destination. Of course, a Guiding Producer does not get to compete with its pre-acquisition self, and it may not outcompete the other competitors with a less popular DFD. So, status as a Guiding Producer is not a magical aura that will automatically optimize for all the factors, and thus success is not guaranteed, but it does create an unalloyed competitive advantage along one dimension that is broadly applicable across market sectors.
I believe that a metaphor may be helpful in conveying the power of charitable profit destination. Consider the economy of metal goods in the fictional medieval world of Profitos, where, on the island of Popularis, the metal Charitium is discovered. Charitium is as strong, durable, and otherwise useful as the other available metal, iron, but is significantly lighter, making it more useful as a component in the vast majority of applications. Now perhaps, in some contexts, this advantage is hardly important, such as regarding horseshoes. So, incumbent talented blacksmiths can produce better iron horseshoes because their superior skill and/or other available resources can make for the best offerings, even though, theoretically a Charitium horseshoe would be better. However, in the context of a sword, the significant weight difference implies a battle advantage that allows the swordsmiths with access to Charitium to monopolize the sector such that iron swordsmiths can only produce swords that are useful for resistance-training.
Very high amounts of Charitable Equity in firms in our world will be like Charitium in Profitos. Although in many sectors the advantage conferred will not necessarily imply dominance given other firms’ short-term advantages which proceed from their incumbencies and economies of scale. However, in some contexts, Charitable Equity in firms would allow for decisive advantages. For instance, maybe you could fund the salary of realtors or life insurance salespeople in exchange for their commissions with resultant Guiding Producers that are no less competitive (I know there are a variety of adverse selection or other arguments here, which I could address at another time- my point simply is that in some contexts Charitable Equity could be more potent or lack issues that may affect other economic contexts). As the public becomes more aware of Guided Consumption, the advantage of Charitable Equity will become more potent, and I anticipate that Guiding Producers will proliferate even to sectors where its advantage is not as important. One of the functions of the Consumer Power Initiative will be researching and reasoning so that we can identify the contexts in which Guiding Producers can thrive in the early stages of Guided Consumption so that an even more fulsome presence in the economy can soon be achieved.
So, to summarize on that quote, I think you took my statement as being stronger than it actually was, and Charitable Equity does not magically eliminate all other competitive factors. It does, however, add a dimension on which a firm can be almost always“strictly superior”, which I believe will allow for general economic proliferation.
“In low-differentiation sectors, it may be easier to construct a ‘no-brainer’ where a consumer is genuinely ambivalent as to two products.”
This issue is one that I address more fully in my longer post, particularly in Section III. So, you are correct that it is unlikely that we can create the perfect no-brainer situation, however, this does not mean that we can’t get close enough to obtain large market-share capture or even monopolies in some contexts. This is even more evident when one considers the advantages from positive discrimination from other economic participants (see BOAS’s free consultants, lower advertising fees, higher commission from suppliers) and essentially tons of free advertising from a social movement for companies that serve charities. I believe what this critique fails to appreciate is that Guiding Companies will have the benefit of professionals managing and directing their affairs just as normal companies would. Why would not these structurally advantaged entities not tend to outcompete normal firms?
“People all over the world choose the ‘lesser of two evils’ in the political contexts routinely”
I think that your formulation of my thesis is a strawman consisting of a stronger thesis than I am making (no attribution of bad faith or any ill will here, I most appreciate your comment!). Like you say, Charitable Equity is only one factor in the competition among firms. Thus, it is not, by itself, a guarantee of success, but rather a broadly applicable structural advantage. However, this broadly applicable structural advantage, in conjunction with tactical and strategic participation in the economy by charitable investors working in conjunction with the Consumer Power Initiative, can still be transformative and revolutionary.
Is a given sector, such as the cost-competitive production of chicken products, fraught with moral obscenity? Then enter the vegan and cultivated meat space, using profits to promote systemic changes that can create a more just relationship between humans and animals. There is one question as to whether significant moral impurity would be ruinous for Guiding Producers’ competitive advantages (I am inclined to think that they are not), but this question is besides the point. Charitable investors can choose the sectors in which Guiding Producers/Companies operate!
The positive or negative competitive advantage of acting badly is also contextual. In some, such as factory farming, evil is profitable. But in other contexts, consumers pay premiums for companies that behave scrupulously. This phenomenon is known as conscious consumerism. More generally, the tendency of economic actors to do good or ill is largely a function of the features of the systems in which they operate. The utilization of charitable equity to create structural competitive advantages to do good is a way to construct sustainably virtuous systems.
As for why Newman’s Own and Bosch are the exceptions that prove the rule? I just think there’s something very counterintuitive about the notion that the best way to solve global poverty would be to buy out a ketchup company for rich countries. There have been long-running mores requiring modesty and forbidding flaunting etc. regarding charitable activity. The merging of the philanthropic and business, so flagrantly using charities for marketing merges clashing worlds in a way that is almost forbidden magic. There have been isolated cases of Guiding Producers, but not a concerted effort to weaponize identity in the manner I propose.
We agree that profit has contributed to many of the problems that we face. We also agree that profit for non-profits is one factor among many, but I disagree that this is always a small factor. I believe it’s a small factor in some businesses (e.g. the restaurant example, where you’re going to go with the best marketed, top-reviewed and most tasty option) and a bigger factor in other business (e.g. buying from an insurance broker, where two dozen brokers are all selling an identical product and one donated all profits to charities).
But let’s assume it is a really small factor and suppose two identical companies (an online marketplace), where one is purely for-profit, and the other donates profit to charities, start. These companies need one billion in funding to generate 10 billion in future profits. The for-profit company gets the billion from VC because the expected value is 10 times the investment. In the current state of the world, the company directing profits to charities doesn’t get the one billion because there is no VC like EA infrastructure to fund it. But if such a structure existed (e.g. SBF donating/investing the billion), the company directing profits to charities would be able to take off and donate 10 billion to charities over its lifetime. Again, both of these companies are identical, and let’s assume they have a 1000 differentiating factors, only one of them being the profit destination. With all things being equal, the company who has 1001 differentiating factors would win. You’re right that the reality is much more complex, and you’re right in saying: “It is not safe to assume that because a business purchases, manufactures, and distributes the same or similar goods, their up-front cost is the same and therefore the cost to the consumer is virtually the same.” But these are factors that are relevant to both for-profit companies and guiding companies. Statistically, if you start the above company a 1000 times you would have 1000 different outcomes, but even with an additional differentiating factor (assuming it’s positive), the odds of the guiding company to win are higher, even if that’s just a very small percentage. And that should warrant investment in them.
In reality I think companies have less differentiating factors and a company that donates all profits to charities has more than 1 extra. A couple are named in the article and a recent blog on this forum also hinted to another advantage which is going to be really important for success, employee recruitment/retention. I have found this to be true for my own EA startup, which directs all profits to charities.
So the crucial part that seems to be missing at this moment, is an infrastructure to fund guiding companies. If I start a for-profit, I can go to investors, and if they like the team, the numbers and the idea they will invest in it. This doesn’t exist for guiding companies, but if it did, I don’t see why guiding companies couldn’t do at least as well as for-profit companies (if people don’t at all care about the profits going to charities) or better (if people do care).
You raise a very interesting point about for-profit companies being dependent on coercion, exploitation, etc. I think that’s true for many of the biggest companies, but not true for smaller companies and I don’t agree that it’s always necessary to be successful, but it is in most cases. I genuinely think that some of the biggest companies in the world can be ones that are mostly good (e.g. Patagonia or FTX). I say mostly, because any billion dollar company will make mistakes. I don’t think businesses whose sole purpose it is to do good always have to use coercion or exploitation, but I agree that they sometimes have to. Personally, I don’t start businesses who rely on these methods, but I do think creating companies that have to use coercion to compete and that donate their money to charities are still a (much) better option than we have now. Government has to work together with guiding companies to create a playing field where these methods can’t be used anymore, but we can’t wait for that to happen.
Hi Brad!
A friend of mine sent this to me and I’m interested in hearing how you see this playing out in practice. I want to start by saying I think this is a great idea, but I don’t think it would work much better than current structures. I’m interested to know how you came to some of the statements you did, as my experience working for a for-profit company would suggest you’re incorrect in some of your assumptions.
Premise: While I agree that a business focused on providing its profit to non-profit work is admirable, good, and perhaps the best we can do in an otherwise bad situation, I don’t believe that this factor alone is a deciding business advantage over another business with similar products. It would be one factor of many at best.
I would argue that the idea of Guiding Producers is perhaps a good stepping stone to a post-profit world, but it is not on its own the solution to the problem of exploitation to the benefit of profit. To defend my premise, I want to point to a few statements you’ve made to the writings above, and I’d love to hear your thoughts in counter.
“Structurally, there is no reason that a Guiding Producer would produce goods and services at a higher cost.”
I’d be interested in hearing where you’re coming up with this statement and what justification you’ve got; in my experience, this is demonstrably false. Even if we don’t account for the “economy of scale” argument (which you dealt with by arguing that consumers would deal with higher cost for a short period of time), there are hundreds of reasons why two businesses producing the exact same product would have very different business expenses. Things like:
Vendor relationships (your ability to argue for discounts with people you are close with or have worked with before)
Payment history (many businesses give discounts to companies with good payment history/credit)
Location (depending on where your manufacturing centers are, you may see greater or fewer costs)
Distribution mechanisms (a business may be able to hire a fleet of trucks, but they might need to outsource their shipping to a third-party because of factors other than the raw cost)
These factors alone are enough to represent a major difference in the cost of producing one good, even if it is virtually identical to another. It is not safe to assume that because a business purchases, manufactures, and distributes the same or similar goods, their up-front cost is the same and therefore the cost to the consumer is virtually the same.
“In low-differentiation sectors, it may be easier to construct a ‘no-brainer’ where a consumer is genuinely ambivalent as to two products.”
I would challenge this statement by asking where you see pure ambivalence in virtually any product purchase. It’s true that commodity goods like ketchup, toilet paper, and paper towels are usually competing in a race-to-the-bottom on cost, but what you’re talking about specifically here is a unique kind of product differentiator that functions as part of a much larger structure of consumer purchase behavior. We can come up with lots of theoretical ways that people end up buying things, and the entire field of economics is determined to codify these systems of supply-and-demand to a science. But unless you are able to take the business model of one business and replicate it exactly, all you’ve done is create one additional factor that might motivate a consumer to purchase your product. It’s not a guarantee, because people don’t fundamentally function in predictable, codified, rule-based ways.
I don’t buy Newman’s Own because (1) it costs more and (2) it doesn’t taste as good as the other kinds of ranch dressing on the shelf. It is not, in and of itself, an equal product to its competitors, and so it loses to Hidden Valley or DIY ranch seasoning packets when I go to the grocery store.
“People all over the world choose the ‘lesser of two evils’ in the political contexts routinely.”
Herein lies the core of my disagreement, which is that this advantage alone is enough to level the playing field and produce the Guiding Producer as the winner. I fundamentally disagree that we are able to practically operate on an equal playing field between two businesses and see demonstrable business advantage from just one product differentiator.
In order to sell one’s products, one must be willing to create the absolutely perfect scenario to motivate a consumer to buy their product. The competitive edge relies on coercion, exploitation, subjugation, and dishonesty to accomplish its purpose, and the business can justify those actions by arguing that profit, above all else, is the sole measure of success. Governments exist to regulate this behavior by telling companies what they are and are not allowed to do to the end of profit.
They get to say that losing money is the same as failure. How does a business whose sole purpose is to do good in the world operate by the same standard? Can a business reasonably justify underpaying its staff in order to further the profits of the non-profit it supports? If it were true that simply having a good cause was the deciding factor, why do non-profit businesses not already succeed against for-profit enterprise?
Unless a Guiding Producer is willing to exploit its workforce to an identical degree as its for-profit counterparts, it can’t corner the market on virtue alone.
Thank you for your time.
Jo
Hi Jo!
I am very grateful and delighted with your serious and thoughtful engagement with my thoughts.
Firstly, I would note that Guided Consumption is not a panacea. A world of Guiding Producers/Companies could still be one in which structural relations between labor and capital result in workers not getting their due. It is unlikely that all corporate behavior of Guiding Producers would be totally unimpeachable. However, although Guided Consumption does not solve every problem, it tends to direct the fruits of economies from the least needy (wealthy shareholders who have the capability to own components of the means of production) to the most needy (beneficiaries of charities such as the global poor or potentially the billions of animals that are tortured through the factory farming process). In my view, allowing the perfect to be the enemy of the good, thus choosing not to explore the possibilities that Guided Consumption may allow, is dreadfully mistaken. That being said, even in a world where Guiding Producers/Companies that serve excellent and effective charities, there are likely going to be other political and social projects to engage in to work for an even more just and happy world!
You appear to have two premises, one unbolded, another bolded. Your unbolded premise, that Guided Consumption does not solve every injustice in our economy, is one I agree with, as noted above. As for your bolded premise, I would disagree because your claim is too strong. You contend that “I don’t believe that this factor alone is a deciding business advantage over another business with similar products. It would be one factor of many at best.” A business advantage, like advantage in other competitive contexts, has the potential to be decisive depending on the other factors involved. Certainly, there are contexts in which profit destination is less likely to effectuate a large market advantage; I used a restaurant as an example where profit destination will often be lost in a crowd of other factors. However, even in that context, charitable profit destination (“Designated Funding Destination”, or “DFD” as I define it in the longer paper) would provide some advantage. But the strength of that advantage would depend on that context, some of which would be imply greater advantages that would imply greater profit opportunity.
“Structurally, there is no reason that a Guiding Producer would produce goods and services at a higher cost.”
This statement is true, albeit more modest than you appear to be suggesting. You correctly note that actors in our economies have different competitive advantages based on the factors such as vendor relationships, payment history, location, distribution mechanisms, and many more. Consequently, the results of competition between the actors that compose firms, including investors, depends on a wide variety of factors. What I mean when I say there is no reason a Guiding Producer would produce goods and services at a higher cost, I simply mean that having a popular charity as recipient of producer surplus instead of wealthy shareholders confers an advantage. This advantage is not balanced by any other structural disadvantage. A firm with a popular profit destination is strictly superior, competitively speaking, to the same firm with a neutral or unpopular profit destination. Of course, a Guiding Producer does not get to compete with its pre-acquisition self, and it may not outcompete the other competitors with a less popular DFD. So, status as a Guiding Producer is not a magical aura that will automatically optimize for all the factors, and thus success is not guaranteed, but it does create an unalloyed competitive advantage along one dimension that is broadly applicable across market sectors.
I believe that a metaphor may be helpful in conveying the power of charitable profit destination. Consider the economy of metal goods in the fictional medieval world of Profitos, where, on the island of Popularis, the metal Charitium is discovered. Charitium is as strong, durable, and otherwise useful as the other available metal, iron, but is significantly lighter, making it more useful as a component in the vast majority of applications. Now perhaps, in some contexts, this advantage is hardly important, such as regarding horseshoes. So, incumbent talented blacksmiths can produce better iron horseshoes because their superior skill and/or other available resources can make for the best offerings, even though, theoretically a Charitium horseshoe would be better. However, in the context of a sword, the significant weight difference implies a battle advantage that allows the swordsmiths with access to Charitium to monopolize the sector such that iron swordsmiths can only produce swords that are useful for resistance-training.
Very high amounts of Charitable Equity in firms in our world will be like Charitium in Profitos. Although in many sectors the advantage conferred will not necessarily imply dominance given other firms’ short-term advantages which proceed from their incumbencies and economies of scale. However, in some contexts, Charitable Equity in firms would allow for decisive advantages. For instance, maybe you could fund the salary of realtors or life insurance salespeople in exchange for their commissions with resultant Guiding Producers that are no less competitive (I know there are a variety of adverse selection or other arguments here, which I could address at another time- my point simply is that in some contexts Charitable Equity could be more potent or lack issues that may affect other economic contexts). As the public becomes more aware of Guided Consumption, the advantage of Charitable Equity will become more potent, and I anticipate that Guiding Producers will proliferate even to sectors where its advantage is not as important. One of the functions of the Consumer Power Initiative will be researching and reasoning so that we can identify the contexts in which Guiding Producers can thrive in the early stages of Guided Consumption so that an even more fulsome presence in the economy can soon be achieved.
So, to summarize on that quote, I think you took my statement as being stronger than it actually was, and Charitable Equity does not magically eliminate all other competitive factors. It does, however, add a dimension on which a firm can be almost always“strictly superior”, which I believe will allow for general economic proliferation.
“In low-differentiation sectors, it may be easier to construct a ‘no-brainer’ where a consumer is genuinely ambivalent as to two products.”
This issue is one that I address more fully in my longer post, particularly in Section III. So, you are correct that it is unlikely that we can create the perfect no-brainer situation, however, this does not mean that we can’t get close enough to obtain large market-share capture or even monopolies in some contexts. This is even more evident when one considers the advantages from positive discrimination from other economic participants (see BOAS’s free consultants, lower advertising fees, higher commission from suppliers) and essentially tons of free advertising from a social movement for companies that serve charities. I believe what this critique fails to appreciate is that Guiding Companies will have the benefit of professionals managing and directing their affairs just as normal companies would. Why would not these structurally advantaged entities not tend to outcompete normal firms?
“People all over the world choose the ‘lesser of two evils’ in the political contexts routinely”
I think that your formulation of my thesis is a strawman consisting of a stronger thesis than I am making (no attribution of bad faith or any ill will here, I most appreciate your comment!). Like you say, Charitable Equity is only one factor in the competition among firms. Thus, it is not, by itself, a guarantee of success, but rather a broadly applicable structural advantage. However, this broadly applicable structural advantage, in conjunction with tactical and strategic participation in the economy by charitable investors working in conjunction with the Consumer Power Initiative, can still be transformative and revolutionary.
Is a given sector, such as the cost-competitive production of chicken products, fraught with moral obscenity? Then enter the vegan and cultivated meat space, using profits to promote systemic changes that can create a more just relationship between humans and animals. There is one question as to whether significant moral impurity would be ruinous for Guiding Producers’ competitive advantages (I am inclined to think that they are not), but this question is besides the point. Charitable investors can choose the sectors in which Guiding Producers/Companies operate!
The positive or negative competitive advantage of acting badly is also contextual. In some, such as factory farming, evil is profitable. But in other contexts, consumers pay premiums for companies that behave scrupulously. This phenomenon is known as conscious consumerism. More generally, the tendency of economic actors to do good or ill is largely a function of the features of the systems in which they operate. The utilization of charitable equity to create structural competitive advantages to do good is a way to construct sustainably virtuous systems.
As for why Newman’s Own and Bosch are the exceptions that prove the rule? I just think there’s something very counterintuitive about the notion that the best way to solve global poverty would be to buy out a ketchup company for rich countries. There have been long-running mores requiring modesty and forbidding flaunting etc. regarding charitable activity. The merging of the philanthropic and business, so flagrantly using charities for marketing merges clashing worlds in a way that is almost forbidden magic. There have been isolated cases of Guiding Producers, but not a concerted effort to weaponize identity in the manner I propose.
Thank you for your time as well.
-Brad
Hi Jo,
We agree that profit has contributed to many of the problems that we face. We also agree that profit for non-profits is one factor among many, but I disagree that this is always a small factor. I believe it’s a small factor in some businesses (e.g. the restaurant example, where you’re going to go with the best marketed, top-reviewed and most tasty option) and a bigger factor in other business (e.g. buying from an insurance broker, where two dozen brokers are all selling an identical product and one donated all profits to charities).
But let’s assume it is a really small factor and suppose two identical companies (an online marketplace), where one is purely for-profit, and the other donates profit to charities, start. These companies need one billion in funding to generate 10 billion in future profits. The for-profit company gets the billion from VC because the expected value is 10 times the investment. In the current state of the world, the company directing profits to charities doesn’t get the one billion because there is no VC like EA infrastructure to fund it. But if such a structure existed (e.g. SBF donating/investing the billion), the company directing profits to charities would be able to take off and donate 10 billion to charities over its lifetime. Again, both of these companies are identical, and let’s assume they have a 1000 differentiating factors, only one of them being the profit destination. With all things being equal, the company who has 1001 differentiating factors would win. You’re right that the reality is much more complex, and you’re right in saying: “It is not safe to assume that because a business purchases, manufactures, and distributes the same or similar goods, their up-front cost is the same and therefore the cost to the consumer is virtually the same.” But these are factors that are relevant to both for-profit companies and guiding companies. Statistically, if you start the above company a 1000 times you would have 1000 different outcomes, but even with an additional differentiating factor (assuming it’s positive), the odds of the guiding company to win are higher, even if that’s just a very small percentage. And that should warrant investment in them.
In reality I think companies have less differentiating factors and a company that donates all profits to charities has more than 1 extra. A couple are named in the article and a recent blog on this forum also hinted to another advantage which is going to be really important for success, employee recruitment/retention. I have found this to be true for my own EA startup, which directs all profits to charities.
So the crucial part that seems to be missing at this moment, is an infrastructure to fund guiding companies. If I start a for-profit, I can go to investors, and if they like the team, the numbers and the idea they will invest in it. This doesn’t exist for guiding companies, but if it did, I don’t see why guiding companies couldn’t do at least as well as for-profit companies (if people don’t at all care about the profits going to charities) or better (if people do care).
You raise a very interesting point about for-profit companies being dependent on coercion, exploitation, etc. I think that’s true for many of the biggest companies, but not true for smaller companies and I don’t agree that it’s always necessary to be successful, but it is in most cases. I genuinely think that some of the biggest companies in the world can be ones that are mostly good (e.g. Patagonia or FTX). I say mostly, because any billion dollar company will make mistakes. I don’t think businesses whose sole purpose it is to do good always have to use coercion or exploitation, but I agree that they sometimes have to. Personally, I don’t start businesses who rely on these methods, but I do think creating companies that have to use coercion to compete and that donate their money to charities are still a (much) better option than we have now. Government has to work together with guiding companies to create a playing field where these methods can’t be used anymore, but we can’t wait for that to happen.