Purpose First. Then Profit.

One of the most striking findings in the research that led up to the Manifesto was this: 90% of boardrooms tend to think profit is the fundamental animating purpose of commerce, companies, and trade. 

It’s not. Profit is an effect, not a cause; a reward, not the accomplishment (unless your goal is an economy that’s nothing more than a herd of drooling zombies lumbering their way around a game of creaking musical chairs). The cause, the accomplishment, the outcome—these are the stuff of purpose. In short: though the vast majority of beancounting, overquantified, fatally oblivious C-suites think so, from an economic perspective, profit is not purpose. Put the two together, and you get what might call a yawning, gaping “purpose gap”.

The result of the purpose gap? 90% of companies can’t get to grips with one of the most significant and powerful institutional innovations around. They can’t craft a meaningful, resonant—and disruptive—philosophy, a statement of first principles that defines in sharp, clear terms how they will create value (instead of merely extracting it), because they don’t (or won’t) put a bigger, more enduring purpose first.

The endgame? Many industries become ponziconomies, creating little or no authentic economic value—because the bulk of firms within them are earning profits which are mostly an illusion. 

Here’s the redoubtable Bill Black on what happens when profit replaces purpose.

“1. The fictional profits fool creditors and shareholders — they are eager to lend to and invest in firms reporting record profits. Rather than discipline accounting control frauds, creditors and shareholders fund their massive growth.

2. The fictional profits and the large bonuses they drive create a “Gresham’s” dynamic in which bad ethics tends to drive good ethics out of the marketplace. The CFO that fails to emulate the fraud recipe will report far lower profits in the near term and will fear losing his job. More junior executives whose compensation is based on the firm’s reported income have perverse incentives to engage in accounting fraud to ensure that the firm “hits the number” and have reduced incentives to blow the whistle on frauds.

3. Lenders engaged in accounting control fraud create “echo” epidemics of fraud. They use their powers to hire and fire and create compensation systems to create perverse incentives in other fields: among their employees, “independent” professionals, and agents (e.g., loan brokers).

4. When several large lenders follow similar fraud strategies they can hyper-inflate financial bubbles.”


See the problem? Chasing fictional profit—thin value—is more often than not just a messy, agonizing, prolonged way to commit competitive suicide.

Want to be disruptive? Get a bigger purpose. Embed it in a resonant, meaningful philosophy. Then live it, breathe it, create thicker and thicker value than your rivals even think is possible in their wildest, most impracticable dreams—use it to not just beat your competitors, but to better them.