A Better Kind of Capitalism

Among the victories in our Better Capitalism work is finding, connecting, and collaborating with others working to improve America’s current form of capitalism. One such victory is a new friend, Bill Fotsch, the internationally seasoned corporate executive and author of the insightful business book Partners on the Payroll. Bill has graciously granted us permission to publish an excerpt of his book to our readers. We trust this excerpt resonates with you as it did us, and that it prompts you to read the entire Partners on the Payroll to receive the full benefit of Bill’s insights.

“I began this book talking about capitalism and socialism. I confessed to being a capitalist through and through. But I hope I was pretty clear about capitalism’s chief shortcoming: the fact that it excludes so many. Too many Americans – too many people everywhere – don't understand business. They don't trust it. They figure that businesspeople are just out for themselves and don't mind screwing everybody else.

These attitudes are widespread, and no wonder. Most people never get a chance to take part in business except by working for a wage or salary and doing as they are told.

Image Credit: Indigo River Publishing

How can we change this state of affairs? Obviously, individual businesspeople have to hold themselves to a high ethical standard. The more connivers and cheats there are in the business world, the more people who focus on short-term gain alone, the more everyone else will be convinced that all of business is corrupt. Long-term success in business or in life can't be built on a foundation of fraud.

But it's equally important to transform the workplace so that people at every level of an organization get a chance to understand and to participate in the business. To learn the ropes. To become economically engaged. To become trusted partners and be treated as such. When a company transforms itself in this direction, good things happen. Its performance improves. It generates wealth for everybody. It turns hired hands into businesspeople – into capitalists.

There's another effect as well: the company also has to hold itself to a high ethical standard. A partnership company is transparent, and transparency is always in everywhere the enemy of wrongdoing. In my view, that's how business becomes a true force for good. It's how businesspeople can be encouraged to take the high road and be rewarded for doing so.

But there's more to it than transparency and honesty. Your business has to add value to the world. It has to make good profits, not bad ones.

Business people take the need for profit for granted. It's the lifeblood of any company – indeed, the lifeblood of capitalism. In a business, profit is an indicator of financial stability and success. It demonstrates that a company is serving customers efficiently and effectively. Companies that don't earn healthy profits over the long term don't stay in business. In a society, profitable companies make for a healthy economy, one that creates jobs and provides the goods and services that people need.

Many people, of course – and not just those who think of themselves as socialists – view profit as a dirty word. If a business is making a profit, so these people's thinking runs, it must be exploiting its employees or bilking its customers. Probably both. Unfortunately, some businesses provide these skeptics with evidence for their assertions. They really do bilk their customers and take advantage of their employees.

So there are good profits and bad profits, as the author Fred Reichheld of Bain and Company has repeatedly pointed out in his writings. Reichheld is primarily concerned with how companies treat their customers, so he defines bad profits as “profits earned at the expense of customer relationships”:

Whenever a customer feels misled, mistreated, ignored, or coerced, profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies shortchange customers . . . by delivering a lousy experience. Bad profits are about extracting value from customers, not creating value. When sales reps push overpriced or inappropriate products onto trusting customers, the reps are generating bad profits. When complex pricing schemes dupe customers into paying more than necessary to meet their needs, those pricing schemes are contributing to bad profits. (Fred Reichheld with Rob Markey, The Ultimate Question 2.0 (Harvard Business Review Press, 2011), p. 25.)

It's not hard to expand this definition a bit. Bad profits are also profits earned at the expense of a company’s employees. They’re profits earned by underpaying or mistreating the people who work for you, or exposing them to danger. Bad profits are profits earned at the expense of the community; for example, by polluting the air or by figuring out some barely legal tax dodge. Bad profits inevitably focus on near-term benefits at the expense of longer-term success. So bad profits damage the longer-term value of the company and therefore hurt long-term shareholders. They give both profit and capitalism a bad name.

Reichheld's definition of good profits is equally useful and expandable:

If bad profits are earned at the expense of customers, good profits are earned with customers’ enthusiastic cooperation. A company earns good profits when it so delights its customers that they willingly come back for more – and not only that, they tell their friends and colleagues to do business with the company. . . . The right goal for a company that wants to break the addiction to bad profits is to build relationships of such high quality that those relationships create promoters, generate good profits, and fuel growth. (Reichheld, Ultimate Question 2.0 , pp. 31-32.)

From an employee’s point of view, good profits are those that fund good working conditions, living wages, decent benefits, and an opportunity to share in the wealth. Good profits ensure job security and open up new opportunities for learning. From the community’s point of view, good profits are those that allow a company to pay its taxes, maintain and improve its property, and generally act as a good corporate citizen. Over the long term, good profits add to everyone's wealth. These are the profits that fuel a better form of capitalism.  . . . 

If you build a company of trusted partners – if you foster economic engagement and learning, and if you share the wealth accordingly – you will almost certainly be building a company that generates and thrives on good profits. You will be creating a business that can thrive in all kinds of conditions and that will be a force for good. You will be making the world a better place.

Image Credit: Bill Fotsch

I hope this book helps you along that path. Godspeed.” (Bill Fotsch, Partners on the Payroll, (Indigo River Publishing, 2022), pp. 112–116.

We hope you enjoyed this excerpt from Bill's book and his voice advocating for a better capitalism. What we particularly like about Bill's book are his eight (8) Partnership Principles that frame the ownership mindset everyone in an organization needs for sustainable profits and growth, and how to implement those principles. You can purchase Partners on the Payroll anywhere you buy books and we hope you do. If you'd like to learn more about or contact Bill directly, here's the link to his website with contact information. Thanks for allowing us to share this, Bill!

Fix Capitalism. Fix the American Dream.

Invite Us to Speak

Not sure? Let's schedule a call and talk.

⭐⭐⭐⭐⭐ Our Amazon number 1 new release: Unleash more with Better Capitalism: Jesus, Adam Smith, Ayn Rand, & MLK Jr. on Moving from Plantation to Partnership Economics.

Buy now, or get a free sample here >>

"This book merits close, sustained attention as a compelling move beyond both careless thinking and easy ideology."—Walter Brueggemann, Columbia Theological Seminary

"Better Capitalism is a sincere search for a better world."—Cato Institute

Donate Now >>