Having had some time to ponder my ideas for a predictive framework around money in my post Money Matters, I found myself thinking about community. And that is such a huge arena in terms of its importance that again there are a lot of disclaimers. I'm expressing my personal opinions and not claiming to be an expert on money matters nor am I giving monetary or legal advice.
To introduce ideas around community and money I think it will be good to use an example I used from my prior post about two neighbors where one mows the lawn of the other who returns the favor by trimming his hedges. Where I also supposed hypothetically about the value of that behavior being potentially enumerated by money, if for instance the one neighbor could pay $50 US to have his lawn mowed and the other neighbor found he could have his hedges trimmed for $35 US.
The disparity of course is $15 US and represents a potential profit in the exchange for one of the homeowners and I suggest that how you think of that reality has a lot to do with the values of your community.
Stressing community values versus individual values makes sense here, as for instance non-profit corporations are a phenomenon of community, where supposedly they do NOT profit from their efforts presumably for the good of the community, where what the community is, can vary.
That profit is a matter of community values may seem strange. But different communities can vary a lot about how people should relate to each other even when it comes to favors. In one community people might feel it's your job to know the value of your efforts and others. While in other communities there might be a feeling there should be a fair exchange. So for instance in such a community with our hypothetical example the homeowner who did the hedges maybe should also give $15 US to his neighbor to even the exchange.
If your community values business exchanges more highly it might expect people to be aware of the value of their work, and even reward others for taking advantage of a lack of information--profiting from other's mistakes. That could be seen as an incentive to learn.
Community can mean a lot of things and I'm going to not try and define it, but I will offer the idea that community can offer support for members who need help.
So support of community has a value in insuring that a person has the potential of support later, and that social insurance is something that can be monetized to some extent as well which is the purpose of the insurance industry.
Many people may be surprised to learn that at least in the US, insurance companies are not to profit from premiums, and seek to balance the money received in premiums exactly with the money paid out in claims.
So where are they supposed to make profit?
Insurance companies are supposed to make profit on the return from investing the premiums paid into them, which represents a community value of the United States of America. People don't like the idea of someone profiting from the misfortune or potential misfortune of others. But it's quite fair to invest the money people pay to be insured, and make your profit there, as it doesn't hurt them one way or the other, as long as the money isn't lost on bad investments, and it's better than the money just sitting to the advantage of no one waiting to be paid out in a claim.
Profit can be win-win, or win-lose.
In a win-win profit situation both entities in a transaction walk away with an equal benefit. For example in our hypothetical situation if the one homeowner who receives the greater value in the exchange evens it by giving $15, the other homeowner technically "profits" by that amount, but in actuality the money merely balances the exchange and both homeowners win--they each get a needed service done. One person's lawn is mowed and the other has his hedges trimmed.
In a win-lose profit situation, one entity in a transaction walks away with more than given. Which is the situation if neither homeowner cares to balance things or one is unaware that mowing his neighbor's lawn is monetarily more valuable than having his hedges trimmed.
Communities can actually value either exchange. They can even go further and value charity, where one person simply gives benefit to another with no expectation of anything in return. Then "profit" is simply removed as a concept.
Hypothetically the win-win profit situation is the optimal one. Then both parties get as much as they give, in an even exchange, which notice betters each of them without harm.
Also notice that the win-lose situation depends on a disparity in the exchange. Whether that disparity is addressed or not can be about will or information. If one party is unaware of the disparity then that person can give more than received in return from lack of sufficient knowledge.
Information then can be seen to be the key to willful exchange outcomes, where people get to make a decision about how to address exchange disparities. To make that decision they must first know the exchange disparity exists!
My assessment that profit is a matter of community values is a personal opinion. Others may disagree, but I like that I can fit it so nicely with prior concepts already discussed as I work further in what I see as a functional science of money.
James Harris
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