The Bias Against Profit: An Interview with Amit Bhattacharjee

The following is an interview conducted by Archbridge Vice President of Research and Director of the Human Flourishing Lab Clay Routledge with Amit Bhattacharjee, associate professor of marketing at the Leeds School of Business at the University of Colorado Boulder. We discuss his research understanding anti-profit beliefs and their implications for human progress and flourishing.

Clay Routledge: You have done some fascinating research on anti-profit beliefs. What are anti-profit beliefs, and what have you discovered about them?

Amit Battacharjee: Anti-profit beliefs refer to the view that profit-seeking is fundamentally at odds with producing good outcomes for others. Our findings suggest that this view may be widespread among the non-expert public. The desire for profit is thought to necessarily motivate firms to reduce practices that benefit others (e.g., creating valuable innovations) and adopt practices that harm them (e.g., overcharging, making products less safe), and doing so is perceived as an effective way to increase profit. Accordingly, perceptions of profitability are strongly negatively correlated with perceptions of corporate social responsibility (CSR) and value creation; more profitable firms are thought to profit more at the expense of consumers and society. Business profit is thereby mostly thought to reflect value taken from others rather than created for them.

These beliefs suggest a zero-sum view of market exchange and a repudiation of its win-win ideals. But these subjective perceptions contradict what objective measures show: actual profits and objective CSR ratings for the same firms our respondents evaluated are positively correlated, and subject matter experts have reached a consensus that this positive relationship applies across firms in general. Similarly, economic experts are well aware that firms can profit from bad practices in cases of market failure. However, they uniformly agree that most markets are at least somewhat competitive, that consumers can typically choose from multiple options, and that profits thus tend to be determined by supply and demand. These widely accepted realities also suggest that better practices tend to be more profitable on balance, and none can be reconciled with the view that profit necessarily results from a zero-sum game.

Public perceptions of the overall relationship between firm profit and societal value are not simply excessively negative, but seem to mischaracterize its direction altogether.

Clay: Why do people believe that higher profitability equals lower social value?

Amit: One reason seems deeply rooted in human moral psychology. People’s moral intuitions severely punish selfish motives and assume they will lead to harmful outcomes for others. This may be because they evolved in hunter-gatherer tribes with no discernible growth or wealth creation for millennia and only fixed sums of resources to allocate. In other words, these ancestral settings were indeed zero-sum, such that selfish gains invariably left others worse off. But intuitions adapted to zero-sum contexts seem likely to be poorly suited for modern, global market societies with enormous growth and wealth creation, in which win-win exchanges are the norm.

So why do anti-profit beliefs persist in modern market contexts? Why doesn’t the abundance and prosperity of the developed world help people appreciate how profit-seeking enterprise benefits them? Importantly, most people experience the marketplace exclusively from the consumer side, one transaction at a time. And considered in isolation, any single transaction is zero-sum: it’s obvious that a firm could immediately profit more from that transaction by raising prices or making deceptive claims, but would do so directly at the expense of the consumer.

Of course, the potential gains from any one-off transaction are dwarfed by what firms could gain by consistently outdueling their competitors in repeated games. Under such conditions, overcharging and lying would quickly result in a bad reputation and lost future business. To maximize long-term profitability, firms must continually convince new and repeat consumers to choose their products over competing options (e.g., by offering lower prices or higher quality). They thus face selfish incentives to create more value than competitors by better understanding what consumers want, developing innovative products to better satisfy those wants, and doing so more efficiently so they can offer more attractive prices to consumers.

Notably, understanding these positive incentives requires considering long-term competitive dynamics and cycles of investment—complex, invisible forces that are removed in time and space from any single transaction. Compared to seeing how firms can profit at others’ expense, which is readily apparent from any firsthand marketplace experience and perfectly aligned with ancient moral intuitions, it is far harder to grasp how firms can profit by creating value for others. The counterintuitive notion that competitive markets can harness self-interest for the benefit of society has only been understood by a tiny, educated sliver of the populace for two centuries. Accordingly, a one-sided understanding of firm incentives may persist and be reinforced through observation simply due to its intuitive appeal and cognitive simplicity. Our evidence suggests that the public tends to neglect how profit motivates firms to create value in the first place (i.e., why useful products are created and made available at all), and may thereby systematically underappreciate how profit-seeking enterprise contributes to societal welfare.

Clay: Did you find any differences between groups? For example, are people on the political left more likely to see profit-seeking as socially harmful than people on the political right?

Amit: Our initial evidence suggests that anti-profit beliefs may indeed be somewhat stronger on the political left. But they seem to correlate only weakly with political orientation, and separately examining subgroups of progressive, moderate, and conservative respondents uncovers clear evidence of these views within every subgroup. Anti-profit beliefs thus appear robust across the political spectrum, and variation in them cannot be explained by ideological differences alone.

Why might self-described free market advocates also exhibit anti-profit beliefs? Notably, reflexively advocating a pro-business political stance may be no less compatible with zero-sum views of profit than reflexively siding with consumers over firms. Doing so does not necessarily imply any grasp of how competitive markets align the selfish motives of profit-seeking firms with the interests of consumers and society. Simply put, political leanings may be quite distinct from a true understanding of how competitive market dynamics reshape firm incentives.

Finally, we also find surprisingly weak associations between anti-profit beliefs and economic knowledge. But the range of knowledge within our exclusively non-expert samples may have just been too restricted to have much explanatory value. Given how sharply the views of economic experts diverge from those of the general public on a host of policy issues, it seems likely that samples with much greater variation in economic knowledge would yield different results. All in all, our initial findings suggest quite a bit of variation in anti-profit belief across individuals, but further research may be needed to clearly identify its drivers.

Clay: I discovered your work when I started a new project focused on the psychology of progress. There is a small but growing movement sometimes referred to as “progress studies” that seeks to understand and accelerate human progress. Much of the work in this movement is focused on economics, scientific discovery, technological innovation, the history of progress, and policies that promote or undermine progress. I think that psychology is a critical but largely neglected component of progress. I am particularly interested in the cognitive, affective, and self-regulatory characteristics, states, and processes that contribute to or threaten progress. Your research on lay economic beliefs seems very important for developing a psychology of progress. If people think that profit-seeking causes social harm, they are unlikely to appreciate the important role that entrepreneurship and business more broadly play in advancing human progress. Do you think anti-profit beliefs are a barrier to progress? If so, what can be done to help people working on big societal and global challenges understand that profit-seeking activities can be part of the solution?

Amit: The possibility that lay economic reasoning is motive-centered and zero-sum does have some important implications. For instance, for-profit firms are often sharply criticized for launching initiatives that benefit society and simultaneously serve their own interests (e.g., charitable efforts that improve their reputation, “greenwashing” that helps the environment and reduces production costs). But good outcomes produced by those with “impure” motives are no less real. And of course, firms could just as easily find alternative ways to profit that not only achieve less good, but might also be less likely to get noticed or criticized in the first place. To the extent that such actions are only rewarded when they involve sacrifice (i.e., win-loss rather than win-win scenarios), they may happen far less frequently.

Similarly, firms seeking to solve important societal problems may be subjected to greater scrutiny. Some of my current work shows that people find it immoral to maximize profits when serving the underprivileged but acceptable when serving the wealthy, thus discouraging firms from catering to the needs of populations who are already underserved. Even within the non-profit sector, practices that could demonstrably increase organizational effectiveness (e.g., paying for top talent, promotional spending) are often deemed unacceptable, undermining potential win-win scenarios (as elaborated by Dan Pallotta in his excellent book Uncharitable).

Moreover, in many industries with important welfare implications (e.g., necessities, housing, medicine), popular demand often results in price controls or regulations that produce unintended negative consequences (e.g., quashing incentives for entry, supply, or innovation). If firms and entrepreneurs cannot profitably operate in these spaces, they will naturally focus elsewhere. Hence, there’s a certain irony in claims that markets intrinsically encourage overproduction of needless luxuries and divert resources away from urgent individual and societal needs. That may very well be the case, but widespread mistrust in markets may also be a self-fulfilling prophecy at times, making it hard to assess their true potential to help address societal challenges.

And there is good reason to believe in that potential. Nearly all of humanity lived in extreme poverty just two centuries ago, but the advent of global trade has dramatically reduced its prevalence to less than a tenth of the population today. And given how radically new technologies have made every aspect of human life easier and more efficient during that time, market-driven technological innovations could play a key role in helping solve pressing societal problems like climate change. However, zero-sum thinking by advocates for the global poor (e.g., beliefs that trade with rich countries leaves poor countries worse off, contrary to expert perspectives on its mutual benefits), or by supporters of environmental causes (e.g., beliefs that economic growth inevitably harms the environment, contrary to expert perspectives that it is fueled by knowledge and can promote conservation), may make them unwilling to consider whether market-based solutions can contribute to these causes.

So what can be done about that? My work suggests that simple, context-specific “interventions” that bring unseen mechanisms to mind can attenuate anti-profit intuitions—for example, prompting people to consider how market competition and consumer choice might affect the profitability of good vs. bad business practices, or how relaxing price controls on a lifesaving drug might affect future supply, firm entry, and further R&D investment.

But more generally, most people may simply never be exposed to the most compelling positive moral arguments for markets (i.e., why global markets and economic growth might be the best way to promote human welfare and help the global poor). Support for markets might seem indistinguishable from political extremism or callous indifference to the poor. Accordingly, better understanding how to counter popular misconceptions, and to intuitively convey how markets align private and societal interests in the long term, may be crucial in ensuring that their enormous potential value to society is recognized and deployed.

Clay: Surveys find that Americans tend to have very positive attitudes towards small businesses but more negative attitudes about big business. I am curious if you have any thoughts on this. Is it just because people associate big business with higher profits, or do you think there are other variables that influence how people view businesses of different sizes?

Amit: Small businesses certainly are celebrated much more, and the dimensions underlying these judgments are worth unpacking. I’ll mention a few that seem especially worth highlighting.

First, people may not think that small businesses really seek profit to the same extent or in the same way. Our findings (including some from work in progress) indicate that rather than taking for granted that all businesses are trying to maximize profit, people tend to believe that some are selfishly motivated, while others genuinely care about serving society. And because small businesses are often associated with identifiable human faces or inspiring human narratives (e.g., mom & pop stores, family businesses, entrepreneurs who overcame steep odds), it’s far easier to see them as genuinely caring, passionate, or intrinsically motivated. Conversely, big businesses are much harder to humanize. Large collectives might be made up of individual humans, but aren’t perceived like individuals. They tend to be regarded as “faceless” entities who are devoid of real human feelings or passions, and thus motivated mostly by self-interest. Some big brands do succeed in being perceived as motivated by genuine passion or value commitments (e.g., Patagonia, Apple under Steve Jobs), but it’s much easier for small businesses. And profit is judged far more favorably when thought of as a “byproduct” rather than a sole objective.

Second, small businesses are more relatable and sympathetic for similar reasons. Taking the perspective of a “little guy” playing a rigged game against powerful foes comes very naturally to most people, and may mirror how they feel as consumers buying from large corporations. And of course, big businesses do tend to have disproportionate leverage in many exchanges, as well as greater resources they can use to influence regulation in their favor. So some aspects of these judgments seem well founded. But there are some fascinating open questions here. For instance, as small businesses with lots of goodwill scale up, when and how do they start to engender distrust and get punished for their success by the very people who contributed to it?

Finally, some of the advantages that come with firm size (e.g., more resources to invest in technological innovation) may themselves be associated with societal benefits that are harder to grasp than the corresponding harms. For instance, some of my ongoing work suggests that when judging firms’ use of new technologies that reduce costs, people tend to neglect the past fixed-cost investments needed to develop them, and focus on the more visible variable-cost reductions they enable in the present. Hence, they may judge these firms as having unfair competitive advantages and weigh the immediate costs of their disruption to existing industries more heavily than the enduring benefits their innovations might provide to all of society going forward.

Clay: Similarly, in my own experience, I have noticed that people who claim to hate capitalism often are very enthusiastic about the businesses that make their communities desirable places to live. They want lots of coffee shops, restaurants, bars, breweries, gyms, shops, and so on. And many of them want the types of good paying jobs and nice work environments that are created by the private sector. In surveys my colleagues and I have conducted with American college students, we find that students are more likely to associate capitalism with cronyism than free markets. So perhaps at least some of the critics of capitalism are really criticizing cronyism, not economic freedom. Do you have any thoughts on how people’s attitudes about capitalism appear to be in conflict with their lifestyle preferences and goals?

Amit: It’s always interesting to see how differently people diagnose the same societal problems. Is crony capitalism the inevitable result of unregulated corporate greed, or is government intervention by corrupt politicians itself the source of the problem?

More fundamentally, economic science sharply distinguishes the defining characteristics and welfare consequences of capitalism per se from those of crony capitalism (i.e., profit-seeking vs. rent-seeking, in economic parlance), but it’s not clear that non-experts are able to do so. Notably, pro-business policies often differ sharply from pro-market policies: a regulation that restricts competition may help existing businesses but hinder the functioning of the market (and thus increase those incumbents’ profits at the expense of consumers and society). But this distinction may often be blurred in the public discourse, especially since people may be far more accustomed to hearing policy arguments from non-expert politicians, who fail to grasp the difference themselves, than from actual economic experts. Accordingly, people may often have a clearer sense of the outcomes they hope to attain than of the policies best suited to do so.

An intriguing related possibility is whether people hold anti-capitalist beliefs despite having enjoyed the benefits of capitalism all their lives, or potentially because they have. International poll data suggest that zero-sum thinking and rejection of win-win market ideals is far more prevalent in the developed world (e.g., the US and Western Europe) than the developing world (e.g., India and Southeast Asia). Why might that be the case? For people in developing societies who are familiar with extreme poverty and currently experiencing wealth gains from economic development and growth, the societal benefits of profit-seeking enterprise may be quite apparent. Conversely, many developed societies grew wealthy generations ago. For those unacquainted with poverty, it may be far harder to grasp how material abundance is generated, and much easier to take it for granted. Shutting down the engines of global commerce may indeed have little effect on their lifestyles, but might introduce starker trade-offs in parts of the world where scarcity remains a bigger problem than overabundance.

Clay: Do you have plans for future research in this area, or are you conducting research on other related topics?

Amit: The notion that lay economic judgments are moralized, zero-sum, and focused on motivations can help explain a huge array of marketplace phenomena, and I’ve started to examine the implications across several other contexts.

Perhaps my most closely related research examines zero-sum judgments of labor exchanges. In particular, how do consumers from the developed world evaluate firms’ use of low-wage manufacturing (i.e., sweatshop) labor in developing regions? Though the wages and working conditions in these positions are completely unacceptable by developed-world standards, they are still more attractive than the few alternatives available in these impoverished regions, and are thus in high demand. Accordingly, we find that respondents from these regions, who are familiar with local market conditions, judge these wages to be fair and agree that these opportunities clearly improve the welfare of workers who voluntarily accept them. In contrast, consumers from the developed world judge these exchanges by their own standards, find them morally outrageous, and regard them as actively harmful to workers rather than mutually beneficial. They therefore praise firms who hire workers from much wealthier regions instead, even at the cost of eliminating opportunities for those who need them more desperately. Despite being rooted in moral concerns that are undoubtedly well-intentioned, lay economic reasoning may increase support for policies that displace disadvantaged workers who do not want to be displaced, closing off one of their few immediate routes out of poverty.

Beyond the research alluded to in my previous responses, some other ongoing projects examine the sorts of signals people use to distinguish genuine motives from self-interest, how indifference to consumer needs can increase preferences by indicating that producers don’t care about maximizing profit, how neglecting supplier incentives drives support for intuitive yet counterproductive policies like price controls, and when people regard disparities in market outcomes as evidence of systemic biases. There are far more interesting open questions here than I have time to pursue!

Amit Bhattacharjee
Amit Bhattacharjee
Amit Bhattacharjee, PhD, is an associate professor of marketing at the Leeds School of Business, University of Colorado Boulder. He investigates how moral psychology shapes consumers’ marketplace judgments and behaviors. He earned his Ph.D. in marketing from The Wharton School, University of Pennsylvania. Prior to joining Leeds, he served as an Associate Professor at INSEAD, an Assistant Professor at Erasmus University, and a visiting scholar at New York University and Dartmouth College. His work has appeared in several top business and psychology journals and is regularly covered by global media outlets such as The New York Times, Wall Street Journal, Washington Post, The Atlantic, and NPR.
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