1 00:00:00,320 --> 00:00:07,880 What's profit? And why is it so important to everyone, not just business owners and entrepreneurs? 2 00:00:07,880 --> 00:00:13,600 Here's a simple quiz: When you spend $100 on a new pair of shoes does the shop owner 3 00:00:13,610 --> 00:00:16,110 get to keep that $100? 4 00:00:16,110 --> 00:00:18,190 The answer, of course, is...no. 5 00:00:18,190 --> 00:00:24,580 The shop owner has to pay all his business costs: employee salaries, inventory, rent, 6 00:00:24,589 --> 00:00:33,109 supplies, taxes and a dozen other expenses. His profit is what's left over. It's his payment 7 00:00:33,110 --> 00:00:40,170 for the time and money he's spent and the risk that he's taken to keep his business going. 8 00:00:40,170 --> 00:00:46,590 Thank goodness for profits. Profits motivate people to work hard for themselves 9 00:00:46,590 --> 00:00:49,470 and make life better for others. 10 00:00:49,470 --> 00:00:56,060 Take the example of Bill Gates. How did he become so wealthy? The answer is that he came 11 00:00:56,070 --> 00:01:01,960 up with something that millions of people so wanted and needed that they reached into 12 00:01:01,960 --> 00:01:07,970 their pockets to pay for it -- his Windows operating system, Word software and other 13 00:01:07,970 --> 00:01:16,460 Microsoft products. What's more, he produced these products in a way that efficiently used resources. 14 00:01:16,460 --> 00:01:21,320 And what motivated him, and just about every other successful entrepreneur, 15 00:01:21,320 --> 00:01:25,420 to work so hard? The answer is ...profits. 16 00:01:25,430 --> 00:01:32,430 Without the incentive of profits, why would anyone spend his savings, work countless hours, 17 00:01:32,430 --> 00:01:38,090 and take all the risks necessary to bring their product or service to the marketplace? 18 00:01:38,090 --> 00:01:40,760 There's a simple answer: they wouldn't. 19 00:01:40,770 --> 00:01:44,210 You don't have make billions like Bill Gates. 20 00:01:44,210 --> 00:01:50,080 Take a Montana cattle rancher who goes out in the dead of winter, even in blizzards, 21 00:01:50,100 --> 00:01:56,659 to feed his cows, to keep them safe, and care for them, making huge personal sacrifices 22 00:01:56,659 --> 00:02:00,959 so that New Yorkers can sit down to eat a nice steak. 23 00:02:00,960 --> 00:02:06,140 Why does that rancher do that? Do you think he does it because he loves New Yorkers? 24 00:02:06,140 --> 00:02:13,720 Of course not! The rancher tends to his cattle because he wants more for himself and his family. 25 00:02:13,720 --> 00:02:15,900 He wants profits. 26 00:02:15,900 --> 00:02:20,560 You can go to a supermarket any day of the week and if you want steak, they have it. 27 00:02:20,560 --> 00:02:26,749 If you want potatoes, they have them. Sugar, salt, potato chips, strawberries, peanut butter 28 00:02:26,749 --> 00:02:33,749 -- they have it. In fact, the average well-stocked supermarket in the United States has over 29 00:02:33,749 --> 00:02:40,069 fifty-thousand different items on its shelves. How does all that get there? 30 00:02:40,069 --> 00:02:42,649 It seems like magic, but it's not. 31 00:02:42,649 --> 00:02:48,649 Every one of those items is on the shelves thanks to one thing -- profit. 32 00:02:48,649 --> 00:02:54,740 The same holds true for the device you're watching this video course on -- whether it's a TV, 33 00:02:54,740 --> 00:02:59,600 a desktop or laptop computer, a smart phone, or a tablet. 34 00:02:59,600 --> 00:03:06,320 And for every component in those devices! They all exist -- as millions of other products 35 00:03:06,329 --> 00:03:14,340 we treasure and depend upon exist -- because of the profit motive. No profit and it all goes away. 36 00:03:14,340 --> 00:03:20,580 Here's another reason the profit motive is so important. Ask yourself this question: 37 00:03:20,580 --> 00:03:27,300 Which establishments do you tend to be most dissatisfied with? The answer is likely to be 38 00:03:27,300 --> 00:03:33,600 government agencies. Why? Because they don't operate for profit. 39 00:03:33,600 --> 00:03:40,780 So no one is rewarded for good work and almost no one is ever punished for inferior work. 40 00:03:40,780 --> 00:03:46,559 And which establishments are you most satisfied with? The answer is likely to be the ones 41 00:03:46,559 --> 00:03:53,559 that operate on a for-profit basis. If I'm unhappy with, say, a department store 42 00:03:53,560 --> 00:03:59,720 like Macy's or Bloomingdale's because it's not providing me with the goods or services that I want, 43 00:03:59,720 --> 00:04:05,420 I can, in essence, fire that store by taking my business elsewhere. 44 00:04:05,420 --> 00:04:10,900 But consider a government agency like the Department of Motor Vehicles or public schools. 45 00:04:10,900 --> 00:04:18,420 If I am frustrated with their performance, I can't fire them because I don't have many alternatives. 46 00:04:18,420 --> 00:04:23,740 Business owners must please their customers or risk failure and bankruptcy. 47 00:04:23,740 --> 00:04:29,220 Government agencies risk nothing and therefore have to please no one. 48 00:04:29,220 --> 00:04:35,320 Am I saying that we don't need government, that everything should be on a for-profit basis? 49 00:04:35,320 --> 00:04:43,140 Of course not. But what I am saying is that we should want as little government as possible. 50 00:04:43,140 --> 00:04:47,380 That's exactly what the Founding Fathers of our nation believed. 51 00:04:47,380 --> 00:04:53,960 They understood that the profit motive pushes people to do extraordinary things. 52 00:04:53,960 --> 00:05:00,620 Take that motivation away and the world becomes a very different and darker place. 53 00:05:00,620 --> 00:05:05,420 I'm Walter Williams of George Mason University for Prager University.