Profits Are Progressive | 5 Minute Video

Is profit a dirty word? Would the world be better off without them? Or are profits progressive -- the only thing that can move potatoes from Idaho to Manhattan and medicine from America to Africa? Professor and economist Walter Williams explains.

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Script:

What's profit? And why is it so important to everyone, not just business owners and entrepreneurs?

Here's a simple quiz: When you spend $100 on a new pair of shoes does the shop owner get to keep that $100?

The answer, of course, is...no.

The shop owner has to pay all his business costs: employee salaries, inventory, rent, supplies, taxes and a dozen other expenses. His profit is what's left over. It's his payment for the time and money he's spent and the risk that he's taken to keep his business going.

Thank goodness for profits. Profits motivate people to work hard for themselves and make life better for others.

Take the example of Bill Gates. How did he become so wealthy? The answer is that he came up with something that millions of people so wanted and needed that they reached into their pockets to pay for it -- his Windows operating system, Word software and other Microsoft products. What's more he produced these products in a way that efficiently used resources.
And what motivated him, and just about every other successful entrepreneur, to work so hard? The answer is ...profits.

Without the incentive of profits, why would anyone spend his savings, work countless hours, and take all the risks necessary to bring their product or service to the marketplace? There's a simple answer: they wouldn't.

You don't have make billions like Bill Gates.

Take a Montana cattle rancher who goes out in the dead of winter, even in blizzards, to feed his cows, to keep them safe, and care for them, making huge personal sacrifices so that New Yorkers can sit down to eat a nice steak.

Why does that rancher do that? Do you think he does it because he loves New Yorkers? Of course not! The rancher tends to his cattle because he wants more for himself and his family. He wants profits.

You can go to a supermarket any day of the week and if you want steak, they have it. If you want potatoes, they have them. Sugar, salt, potato chips, strawberries, peanut butter -- they have it. In fact, the average well-stocked supermarket in the United States has over fifty-thousand different items on its shelves. How does all that get there? It seems like magic, but it's not.

Every one of those items is on the shelves thanks to one thing -- profit.
The same holds true for the device you're watching this video course on -- whether it's a TV, a desktop or laptop computer, a smart phone, or a tablet.
And for every component in those devices! They all exist -- as millions of other products we treasure and depend upon exist -- because of the profit motive. No profit and it all goes away.

Here's another reason the profit motive is so important. Ask yourself this question: Which establishments do you tend to be most dissatisfied with? The answer is likely to be government agencies. Why? Because they don't operate for profit. So no one is rewarded for good work and almost no one is ever punished for inferior work.

And which establishments are you most satisfied with? The answer is likely to be the ones that operate on a for-profit basis. If I'm unhappy with, say, a department store like Macy's or Bloomingdale's because it's not providing me with the goods or services that I want, I can, in essence, fire that store by taking my business elsewhere.

[massspike]

The anti-profit commentators in this thread should try to own and operate a business that doesn't turn a profit...digging in to your savings to make payroll gets pretty lame pretty fast.

[BrisLS]

Great to see Williams and Prager coming together before my eyes. Two great sources of wisdom now validating each other. I know I am listening to the proper voices. Thanks.

[mnahi-znqh]

Thank you very much Professor Williams for this excellent lesson!

[HappySqrl]

Good video.

The one thing that has always bothered me about discussions of corporate profits is the double standards that are applied. Apple's record profits are never treated in the same negative way as Imperial Oil's profits; and the outrageous margins on designer clothing are overlooked while everyone questions the margins on energy.

[saltyman]

4:54 Didn't Hamilton believe in a large government?

[necrolord]

I especially loved his comment at 4:00 its something I wish more people understood.  You don't like a company, DON'T GIVE IT YOUR MONEY.  Just like you shouldn't cave in and do something someone wants just because they get mad, you are just reinforcing bad behavior.

[bwa]

Great video, thank you Prager University. Democrats take it for granted how hard it is to run a business, they think products just magically appear on store shelves.

[coltonb-net]

Walter Williams explains Adam Smith's most basic concept of self-interest in the span of 5 minutes and 21 seconds.

[juanjoseph]

Great video! However, it's sad that something as simple as profit has to be explained to people who have their high school degree, or worse, who are at college.

[maxradke]

Watch the documentary "the men who built america" it does not focus on founding fathers or presidents, it focuses on wealthy business owners who got the USA lots of industry and advancements because they are looking for this profit motive.

Its on netflix, watch it! It cool!

[davidroy]

Profits shouldn’t matter, operating costs and simply making ends meet should matter the most.

[subscribermaniacz]

I think Ben Franklin said this : the best form of government is the one that governs the least

[hanssmirnov]

I appreciate the sentiment, and that this is the way it should be. In reality, corporations can get too big to fail. McDonalds isn't nearly as good as it used to be, their was the infamous kangaroo meat scandal with it, and it's doing just fine. You can't easily fire McDonalds, because other burger joints can't compete with its prices and often it is the closest and most assuredly consistent option (so no salmonella from bad food, normally). And this is the mildest example I can think of, of corporate power misuse.

[evillizard]

Great vid. Question: why do some people develop open software? Can "profit" be explained more abstractly?

[mackycabangon]

3:25 Not me. I dont like that airplanes are slow, and that is because of profit, to lessen costs, so more customers could come. Profit is not all good.

[Ideaman]

I think that omission of nonfinancial incentives was unacademic.

[stojs]

public vs private debate is more complex than what is presented here. Espeically in cases of monopoly

[calumduke]

He contradicts himself by saying that government organisations do not work for profit but the rancher does. If "the best for his family" is the rancher's profit, then the best for the country is the government organisation's profit. Also, people in government organisations do work to keep their job, therefore that is profit. This argument also makes the hidden assumption that you are happy with private companies and not public ones which simply isn't true. There are many private companies that people are not happy with and do not shop with, but this doesn't prevent the companies from progressing until the vast majority of people decide they want nothing to do with them. On the other hand, government organisations do feel the public's wrath when there is a public scandal which means that although profit is not a factor, the organisation is held to account. This video is mostly logical but some hidden assumptions has led it to the wrong conclusion.

[mackycabangon]

Oh. I thought starting a company brings me NO profits.

[ectoplasmicentity]

I bet the people on here trashing the profit motive live with their mommies who worked hard to give them the life they live.