Is Greed Good?

by Neal Frankle, CFP ®

The Occupy Wall Street people have done us all a great service by forcing us to re-examine our relationship with money and ask the question, “Is greed good?” They are sure that the greedy pursuit of wealth is the root of all evil. While in reality, just the opposite is true, we can only understand that truth if we ask if greed is good or bad. Thanks 99%’rs.

So…is greed good? No.

Greed isn’t good…greed is great.

Of course it’s important to define your terms, and by greed I don’t mean deceit or fraud. Here’s how Wikipedia defines greed:

Greed is an excessive desire to possess wealth, goods, or abstract things of value with the intention to keep it for one’s self.

While the term “excessive” is open to interpretation, I think we can all agree that, in essence, greed means wanting more. The definition above certainly doesn’t say anything about stealing anything from anybody. We’ll come back to this in a bit.

Why Greed Is Great

Greed is what gets you and me out of our beds and off to work. It’s what keeps us out of debt and saving for our retirement. We work because we want more than we currently have for ourselves and our families. When we go to work we produce goods and services that others value. If the market doesn’t value what we produce, it won’t pay us and as a result, we won’t get what we want.

If that happens, we’ll look for some other way to get what we want because of our greed. For those of us who obey the law, that means we look for another career or business that produces things others really do want and are willing to pay for. Sure we get “psychic payoffs” by helping people. It certainly feels good to help others. But without financial rewards, a vast majority of us would not put our hearts and souls into our work. That’s just human nature.

I saw this firsthand when I lived on a kibbutz in Israel several decades ago. For those of you who don’t know, a kibbutz is a communal farm. Nothing belongs to any one person. Everything belongs to everyone. Like many other kibbutzim, ours had an elected manager who decided who was going to do which job. There was also a committee that decided who would get what goodies.

If it sounds like communism to you, you would be spot-on. That’s what it was. This is the kind of community the Occupy Wall Street mob dreams about.

So was it really nirvana? No. It was anything but. Nobody cared about anything. The motto was, “Let the next guy take care of it…I’m going for a nap. It’s no skin off my nose.”

There was really no financial reason for anyone to work hard or come up with new ideas, so very few people did either one. There were a few exceptions, but not many. This is why it slowly fell apart. And today, there are basically no kibbutzim (plural for kibbutz) left operating under this original system. They have almost universally adopted a capitalist model to run their society. The old system was a failure.

If you give someone a financial reason to do something, they’ll go to extraordinary lengths to do an outstanding job. Take that incentive away and they won’t produce. Take the rewards away from Steve Jobs and the only apple you’d have in your home would be full of little black seeds. Take that opportunity away from Mark Zuckerberg and the only Facebook you’d have would be wedding albums collecting dust on your bookshelf.

Does greed lead to excess? Yes. Do people get treated unfairly because of greed? Yes, and it’s not OK. Greed can lead to unrestrained capitalism, and that sometimes allows a small number of people to control a great many people. It’s smart that we have laws to prevent that from happening. But the “down with greed” mob fails to consider the alternatives and fails to consider the positive along with the negative.

Anyone with a mentality greater than a first grader and who is intellectually honest can understand that no system is perfect and the issue is always relative.

Is there a better alternative to greed?

When you take away the opportunity “to get more” by doing better, how do you decide who gets what and who does what? Somebody has to decide…right? When you let individual greed decide, it’s called capitalism. Everyone is out there trying to sell goods and services that others want to benefit themselves. The capitalist market decides.

But if you take away greed, capitalism and the market you have to use another mechanism to direct the resources. That task falls to government in controlled economies.

Those are your choices: capitalism which allows greed and the market to direct resources, or a government that does the job. While the capitalist model can lead to excesses, those problems can be rectified and they usually are. When you allow a central government to make those decisions, you will absolutely have excesses, and historically those excesses eventually lead to violent revolution.

Let’s get back to our original question: is greed good? The reality is that greed isn’t good or bad. It simply “is.” We are all greedy to some extent. We all want more. Anyone who denies this is not telling the truth. We can either leverage that greed to create freedom and prosperity (while doing the best we can to protect ourselves from people taking advantage of the system) or we can become a victim of the greed of a few people in government telling us how to run our lives. When many individuals compete because of greed, everyone usually benefits. When you go the other route and allow the government to nourish its greed, we all lose because we can’t compete with the government’s size and strength.

I say, wear the greed badge of honor proudly. The record isn’t perfect, but it’s far better than any other system on the planet. What say you?

 

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