Profit vs Non Profit

I was reading an interesting piece on internetnews.com talking about open source as a business model and how the economics of Adam Smith 200 or so years ago apply (or do not apply) to the current open source community. I guess they had some sort of debate at the Open Source and Free Software conference at the University of Toronto recently. Fair enough. Decent article. Some interesting thoughts. I was just skimming, though. But the very last sentence threw me a bit because I hear a version of it expressed over and over again in conversations:

[Red Hat founder Bob Young] recalled the theories of Adam Smith for his justification. "Good businesses will deliver more value to society than any non-profit will. The profit motivation is actually a very good one; it makes sure we're delivering real value to our customers."

I don't know my Adam Smith well enough to know if Young was quoting him directly. Or may he was just paraphrasing the old guy and mixing in his own economics for good measure. No matter. The statement is ridiculous on multiple levels no matter who said it. It also belies every experience I've ever had working in both non-profit and for-profit organizations. I simply don't see any appreciable difference between the two groups. Both have wonderfully talented people; both have incompetent sociopaths. Both have moral people on missions; both have immoral people bent on exploitation. Both have extremely well run organizations that garner great wealth; both have poorly run organizations that go out of business. Both do good; both do bad. In the end, both are focused on bringing value to their customers (or students, or donors, or citizens, or whatever) and both have surprisingly similar motivations. They just do their taxes differently, that's all.

The subtext of the comment above is that the "profit motivation" drives businesses, but does not drive non-profits, and therefore corporations deliver "more value to society than any non-profit will." Faulty logic aside, the thought is laughable. Ever seen the inside of a large private university or foundation "development" organization in full operation? (The corresponding department in business is "marketing" or "business development.") My goodness. Just spend five minutes with these non-profit development types and you realize that their motivations are exactly the same as any Silicon Valley corporate maverick -- money. Instead of getting cash from a customer, though, they get their cash from the nation's wealthiest and most successful business people who contribute for other reasons, such as putting a wing on a hospital, for instance. So when a billionaire funds a hundred million dollar extension to a children's hospital, Adam Smith and Robert Young would credit the private contractor who actually builds the wing as "delivering more value to society" because that enterprise is a business and is driven by profit motive. What about the development guys working at the hospital whose job it is to get that money? I can assure you, getting a donation like that is quite a sophisticated undertaking. No profit motive there? No profit motive in the guy who donates the cash? No tax write off? No marketing going on there? No ego involved? Hardly. I can give multiple of examples of all of these.

Truth is that non-profit organizations are businesses. Just a different types of business. Both types of organizations and their followers are cut from pretty much the same cloth. They have more similarities than differences.
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