Advance Praise for Profit Motive “Profit Motive is a must-read book that guides readers through one of the most fundamental foundations of leadership—understanding the motivations driving the world around us.” —Governor Jeb Bush “What Charles is talking about in this book, Profit Motive, is how to work smart That is a pretty good start to making your first billion.” —T Boone Pickens, Founder, Chairman and CEO at BP Capital and TBP Investments Management and author of New York Times best seller The First Billion Is the Hardest “Charles Sauer’s Profit Motive is the Ronald Reagan of economics books.” —Grover Norquist, president of Americans for Tax Reform “Profit Motive, by Charles Sauer, is a compelling read that conveys an idea common to economists People and businesses are profitseeking Put out a bread crumb trail of incentives—profit—and it will be followed.” —John C Goodman, President of the Goodman Institute for Public Policy Research and the “Father of Health Savings Accounts” “Profit Motive is a must-read for someone on both the political right and left On the left, we need to understand how a radical like Charles Sauer views the world, and on the right well you all can what you want.” —Thom Hartmann, nationally syndicated radio show host Four-time winner of Project-Censored Award, New York Times best-selling author “Profit isn’t a four letter word Thanks to Charles Sauer for reminding us of that.” —Stephen Moore, former senior economics writer for the Wall Street Journal and former member of the Journal’s editorial board He was also founder of the Club for Growth and author of numerous popular books “In Profit Motive, Charles Sauer channels Milton Friedman, showing that self-interest, broadly defined, rules our every behavior and collective outcomes.” —Laurence J Kotlikoff, William Fairfield Warren Distinguished Professor and professor of economics at Boston University, New York Times best-selling author Copyright © 2018 by Charles D Sauer All rights reserved Published in the United States of America No part of this book may be reproduced or transmitted in any form or by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage or retrieval system, without the permission in writing from the publisher This edition published by SelectBooks, Inc For information address SelectBooks, Inc., New York, New York First Edition ISBN 978-1-59079-476-0 Library of Congress Cataloging-in-Publication Data Names: Sauer, Charles D., author Title: Profit motive: what drives the things we / Charles Sauer Description: First Edition | New York: SelectBooks, Inc., [2018] | Includes bibliographical references and index Identifiers: LCCN 2017020724 | ISBN 9781590794449 (hardbound book: alk paper) Subjects: LCSH: Profit | Organizational behavior | Motivation (Psychology) Classification: LCC HB601 S24 2018 | DDC 338.5 dc23 LC record available at https://lccn.loc.gov/2017020724 Book design by Janice Benight 10 This book is dedicated to my father He taught me to think He taught me to love life He taught me to love people and to cherish every conversation And he taught me to love writing I wish that he were around to read this book, because it wouldn’t have been possible without him CONTENTS Foreword Acknowledgments What Does Profit Motive Really Mean? Corporate Decision-Making Money and “Profit Motive” in Politics Media Profit-Driven Health Care for All The For-Profit Nonprofit Individual Profit Motive Family To the Last Penny! Interviews Held with the Author for This Book Notes Index About the Author Foreword Throughout Profit Motive, Charles Sauer explains in an engaging way something that is a cornerstone to dealing with people People are motivated by incentives Charles calls that incentive gaining a “Profit.” Understanding Charles’s concept of “Profit Motive” is one of foundations that can be used to run a successful business, be an effective leader, and just make it through everyday life intact—or perhaps even successfully As one example, in an early section Charles demonstrates how understanding the profit motives of your car dealer can make your next car purchase a much better experience Incentives aren’t always financial though, so Charles also makes it clear that gaining a “profit” isn’t always about money In fact, the profit or incentive people react to can be many things besides financial reward The incentive might be both practical and meet a strong desire, such as arranging a work schedule that allows more time with your family Or “the profit” could be an opportunity to take on greater responsibility to boost your career in the long run, or a referral to a mentoring program to increase skills that can lead to a more powerful position or gaining more respect The point that Charles is making is something that I have employed in my career to help lead people At the early stages of starting a company, it is just you and an idea The success of an entrepreneur often relies on convincing others to follow you on that journey That can be based on dreams of wealth I have promised briefcases of money to people (and delivered on that promise) That can also be promising an inclusive workplace—I have done that, too Each person is different, but they all have some motivation I might not agree with all of Charles’s political views or conclusions, but I agree with his main point that understanding how people are motivated and working from that foundation would be a benefit to us all And, the way that he makes this point, and the creation of his “Profit Man” to further help readers walk through profit motives makes Profit Motive a must read By making his point through interviews and his character “Profit Man” Charles effectively makes the case that if you can identify your own profit motives, and if you can identify the profit motives of others and leverage these motivations, you are more likely to achieve your goals Charles aims to provide readers with a method to increase success in many areas If you follow his advice to observe the world around you to identify people’s profit motives, it’s likely you’ll first find these motivations in business decisions that you did not recognize in the past In fact, this could be what you need right now to identify a new business idea or opportunity Or understanding this principle might help you to enjoy greater success at your current company Also, understanding people’s motivations to profit can be useful in the other parts of our life Charles shows how an understanding of what drives people applies to the goals we have for our relationships with our partner and children and to what we hope to gain from our government or political and religious institutions—and how it is key to making good choices for important things like health care options Charles starts and ends his book with a thought experiment I like that idea, so here goes: What amount of profit could you lose by learning a new principle for success? And what amount of profit you stand to gain from learning this new principle? So, what is the potential percentage of profit gained? In other words, read Profit Motive —DOUG HUMPHREY Cofounder of Digex and internet pioneer Acknowledgments THANK YOU TO MY WIFE AND KIDS for their support during my writing of Profit Motive It was both a time and mental commitment, and they were supportive and understanding through the entire process Thanks to Nancy Sugihara, the editor, for her patience, thoroughness, and ideas that fully helped shape the book into a finished product And thank you also to the illustrator Max Espinoza for drawing Mr Profit Man according to my idea to adapt a cartoon based on Fredrick Burr Opper’s famous political cartoons of late nineteenth century industrialists Opper’s caricatures were intended to villainize the industrialists, but we wanted something different, and Mr Espinoza pulled it off well In our updated rendering of an Opper caricature, Profit Man doesn’t seem lovable at first, but Max expertly allows Profit Man to appear more friendly as you get to know him throughout the book, and his trustworthiness and loyalty shine decrease limitation perception risk/security, relationship Competitive advantage, government provision Competitive Enterprise Institute Competitors government-provided advantage teaching Congressional staff decisions roles Congress, running Conservative ideas, promotion Conservative Political Action Conference (CPAC) Corporate decision-making Corporate healthcare drivers Corporations, actions Country clubs exclusivity services Covey, Stephen Coworkers profit motive Credibility, loss Cronyism problem proof tactics Crony profits, saving Cruz, Ted Current Population Survey (CPS) Customers, profit motive D Dallas T Boone Pickens Hospice and Palliative Care Center, gift Daraprim, price (increase) Death Wage Debt, payment Declaration of Independence Deductible, reaching Delayed gratification Development staff, usage Devine, Ron Digex Direct-mail industry, impact Direct Primary Practice, initiation Discounts Dividends, payment Dixon, Godwin G Doctors, opting out DOL Donation difference, capability increase maximization psychological reasons size, maximization Donors large-dollar donors, examination leverage money supply salespeople, knowledge understanding Drinking, level Drudge, Matt Drudge Report E Early retirement, pursuit Economic man (homo economicus), Profit Man (contrast) Economy, downturn Education, absence (cost) Ego enhancement growth Electric cars Emergency (price controls) Emmons, Bob Emotional profit Employees automation, impact motivation profit motive risk-averse employees roles, switching work/effort, valuation Employers exemption profit, seeking Employment Enemies competitors, contrast making Entity, funding Entrepreneurs defense ideas, usage long-run profits profit motive, risk profit, seeking success Entrepreneurship opportunities, opening Equilibrium point Equilibrium price point, understanding ERISA requirements Error, committing Evacuation, importance Exchange plan, enrollment Exclusivity, value Export-Import bank loans, benefits F Facebook examination motive Facetime, usage Facilities, ideas (practice) Failure, importance/problems Fairness Doctrine Family argumentative side long-run profits profit motive resources togetherness Federal Communications Act (1927) Federal Drug Administration (FDA) review levels Federal Drug Administration (FDA), approval process Federal Insurance Contributions Act (FICA) taxes Field experiment Financial giving, decision Financial profit driver, absence impact Firings First Amendment freedoms First Billion Is the Hardest, The (Pickens) First-to-File patent system First-to-Invent patent system 501(c)(3), designation fivethirtyeight.com For-profit church, motivations For-profit fundraiser For-profit nonprofit For-profits, changes Foundations portfolio rules Fox News dominance media entry Fox News, Special Report FreedomWorks Free Market Medical Association Free markets avoidance birth capitalism/capitalist, contrast ideas, support (absence) principles, attraction win-win solutions Free news Free service, government funding Free speech Fundraiser, usage Fundraising Fund-raising G Gadget insurance Gambling, dislike Generosity, altruism (relationship) Girl Scout Cookie sales problems Gneezy, Uri Golden Rule, The Good Morning America (CBS) Goods, allocation Google support Government employees, interaction interventions parties, differences regulations, minimum size, contrast Government bureaucrats motives pressure Grace Presbyterian Village, renovation campaign Graduation rates, improvement Grassley, Chuck Greed concession Groseclose, Timothy Growth opportunities H Hannity, Sean Hartmann, Thom Health care business, frustration exchange, creation free market basis movement necessity plan, creation prices, increase treatment, discounted rate Healthcare, buyers Health plan, lobbying Heritage Foundation Hirsch, Jerry Homo economicus Hospitals actions, expectation incentives industries, loss insurance companies, impact profit systems, drivers Hour cuts HOV lanes Human incentive, accountability Humphrey, Doug Hypertension, prevalence/diagnosis I Iglesias, Matthew Imperfections, identification Incentives flipping reverse incentives Independent judgment Individuals bureaucrats, profit motive long-run profits motivation profit motive Industry, impact Influence, addiction Informercials Inherited wealth Innovation Institute for the Economic Empowerment of Women (IEEW) Insurance carriers, TPA masquerade companies commissions, provision profit motive understanding gadget insurance industries, loss underwriting company, product (positive aspects) Intellectual property Internal Revenue Service (IRS), status Inventories excess management Investment multipliers Investors impact Irrational decisions, increase J Junior League of Dallas (JLD) K Kaiser Family Foundation, Medicaid survey Kempton Group Administrators third-party administrator Kempton, Jay Kempton Premier Providers price surgery center list Khasi, study Kickstarter Krauthammer, Charles L Labor, value Land cost developer risk Lantier, Steve Large-dollar donors examination levels Leaders creation cultivation Leadership profit motives skills Leahy-Smith America Invents Act (AIA) Google support Ledger, Graham Left (political party) goal Legislation, stopping Lemonade stand nonprofit lemonade running/lessons Levin, Mark Liability, burden Liberal bias Limbaugh, Rush List, John Lobbying, policy (relationship) Lobbyists impact Long-term market, building Long-term profit centers, advantage Low-cost objects, placement Lunch, productivity (relationship) M Madoff, Bernie Mainstream media (reporters/producers), policy directives (absence) Management By Objective (MBO) Market change, factors distortions growth manipulation pricing, problems second-hand market trends, change wages Maximum delivery of value, concept McCain, John McCullough, David MD Anderson, Pickens investment Media bias measurement ownership Medicaid coverage, effect eligibility employees, incentives enrollees (growth rates), Kaiser Family Foundation (tracking) expansion, ACA (impact) participation, variation population, expansion (Oregon) reform Military, volunteering Minimum wages employees automation, impact profit motive lens government creation worker benefits Missionaries, benefit Mohel, Dave Monetary profit Money capabilities/opportunities discussion, discomfort exchange, absence flexibility, contrast importance, measurement loss making opportunity profit motive contrast saving, goal ubiquity usage Monopoly rights, granting Morality, contest Motivations absence attention awareness cessation difference leverage Obama Administration, relationship profits, nonprofits (contrast) rewards, usage setup understanding Motives, thought experiment MSNBC Murray, Iain Musk, Elon N NASCAR advertising National Republican Campaign Committee Natural monopoly Neese, Terry Network New Jersey, price controls New learning, increase News presence public interest sites usage NewsNight (CNN) New Testaments Nietzschean egoists Nondenominational mega churches, growth Nonprofit hospitals, competition limitation Nonprofits impact initiation, drawbacks issues net benefits organizations problems profit motive profits, contrast running tax law, importance Non-risk-takers Non-wage perks, reduction/elimination Norris, Christina NPR NRCC O Obama Administration agents, signup motivation Obama, Barack Objectivist ethics rational self-interest morality Oil business/profit Oklahoma State University (OSU), Pickens investments One America News (OAN) credibility, loss One-off churches OpenSecrets.com data Operant conditioning Oregon, Medicaid population (expansion) Organization effectiveness, increase focus, absence involvement leadership motivation nonprofit status nonprofit support Outpatient surgery center Outreach staff, usage Overtime money, attainment P Paperwork, usage Parties Patent Troll Patients money, loss physicians, relationship Patreon Patriot Act Paycheck policy Pay gap myth, disproving Paywalls PBS PBS NewsHour Peace Through Business (PTB) PEACE THROUGH BUSINESS Program Performance, goal Personal phone numbers, usage Personal selfishness Pharmacy Benefits Manager (PBM) Philanthropy, organization vetting Phone, purchase Physician practices, purchasing Pickens Foundation, operation Pickens, T Boone choices competitiveness contributions/investments Policy directives, absence experts, usage lobbying, relationship Political Action Committee (PAC) Political advocacy Political candidates, donations Political donors, age distributions Political media Politicians decisions, incentives influence, buying profit motives voting records Politics money, impact parties problems profit motive leverage Ponzi schemes history Power, addiction Price controls (emergency) equilibrium gouging trap Pricing motive profit motives, relationship unfair pricing Privatization, impact Products hit product identification insurance company push positive aspects pre-payment platform unity/design integrity Profit consideration critique decisions definition drive ego collision growth examination increase knowledge leverage long-term profit centers, advantage maximization monetary profit profit-driven effects profit-driven healthcare profit-making, goals profit motive-driven symptoms, production Profit Man Economic Man, contrast Profit motive attention church recognition concept defining discovery driving force effects examination examples focus forecasting errors function impact individual profit motive insurance company understanding involvement knowledge, usage leveraging money, contrast non-monetary version perspective, usage politicians, relationship politics pricing, contrast problem recognition reversal strength understanding valuation variance Profits, nonprofits (contrast) Promotion, desire Public Service Announcement (PSA) Public transportation, usage Punishment, long-term impact Q Quality decrease improvement R Racism Radio guests Radio shows, caution Rand, Ayn theology The Virtue of Selfishness Rational self-interest action morality Rational selfishness Recruiter, profit/motivation Red Bull Racing, acquisition Red Cross Relationship give and get style maintenance problems profit Religion belief aspect belief systems, liberalization impact Reporters/producers, policy directives (absence) Responsibility, decrease Return, multiplier Return on capital Return on investment (ROI) calculation Return sales, achievement Revenue, gross margin Reverse incentives Review process Rewards schedule usage Right (political party) Rising Tide, The (Young/Murray) Risk abatement absorption aversion, overcoming competition/security, relationship consideration factor, increase level non-risk-takers perception risk-takers Rockefeller, John D Romney, Mitt Rove, Karl Russian Television (RT) America Rwanda, women (oppression) S SaaS (software) Sale, layering Sales achievement pitch, usage Sauer, Andrea Science and Human Behavior (Skinner) Second-hand market Security competition/risk, relationship having Self-funded employer, interest Self-funded health plans Self-funded public entities, savings Self-insured businesses Self-interest Selfishness rational selfishness Sermon, production value (increase) Service, per employee per month fee Sesame Street Sessions, Pete Seven Habits of Highly Effective People, The (Covey) 1776 (McCullough) Sex Bank Sexism Shkreli, Martin Show sponsorship Silver, Nate Simpson, Molly Skinner, B.F Slug lines, subculture Small Business Health Options Program (SHOP) Marketplace Smith, Keith competition frustration market change money, loss surgery center access Smoking, cessation (goal) Social Security battle privatization reform, forecasting Social Security Trustees, problems Social Security Trust Funds Social trends, change Society, expense SolarCity Southeast Oak Cliff, retirement community South Improvement Company SpaceX Special Report (Fox News) Staff See Congressional staff possibilities, nonprofit leader (impact) staff-driven operation time, impact Standalone entity, money (loss) Startups Stop loss carrier Strategic actions, creation/implementation Subsidies, increase Superstorm Sandy, impact Supplies, cost Surgery center competition list payment prices, competitiveness state employee visit Surgery Center of Oklahoma Surgical procedure, cost T Talking heads Talking methods Tandem Computers Taxes benefit break implications “Teaching Others to Win” (Sessions) Teammates interaction need Technology, impact Terry Neese Personnel Texas Women’s University, Pickens investment Third Party Administrators (TPAs) Thought experiment Tipping Tourists, perspective Trading, benefits Turing Pharmaceuticals Daraprim price, increase rational action, perspective Two-party system U Umber, Josh Unemployment rate Unfair pricing United States educational achievement, increase patent system, change United States Patent and Trademark Office, outcomes University of Texas at Dallas USA Today UTSW, Pickens investment V Value assigning goal maximum delivery, concept Vendors, rewards Virtue of Selfishness, The (Rand) W Waiting room, reception Walden Two (Skinner) Wall Street bailouts Wal-Mart Stores, Inc Washington, George Washington Times Web designer, access Weight loss, goal Why Axis, The (Gneezy/List) William Jewell College Winning Win, profit Wins/losses Win-win solutions Wood, Genevieve Workday, shorting Workers, minimum wages (benefits) Work, transportation Y Young, Ryan Z Zuckerberg, Mark About the Author Photograph © Max Taylor Charles Sauer is an economist, policy specialist, and writer He has spent time on Capitol Hill working for the Chairman of the Senate Finance Committee, and he has worked for a governor on tax, immigration, and labor issues; and was Deputy Legislative Director for an academic think tank focusing on tax, finance, and health care Charles runs the Market Institute, is a founder of the Savings and Retirement Foundation, a CoDirector of the Inventor’s Project, and host of the Prosperity Caucus Charles is a frequent contributor to The Weekly Standard , a Washington Examiner contributor, and has written for Forbes, Investor’s Business Daily , Entrepreneur.com, The Washington Times , The Daily Caller, and numerous other publications Additionally, Charles Sauer appears frequently on One America News as well as The Big Picture with Thom Hartmann, and the Thom Hartmann Radio Program In addition to his life in politics and writing, Charles enjoys spending time with his family He is married to Andrea Sauer, the love of his life and the supporter that he credits for being able to freely pursue his dreams, and they have three beautiful daughters: Anna, Madonna, and Charlotte ... tips in their favor They have ensured the profit motive of the buyer is met by making them feel that they got a good value and at the same time that their own profit motive was maximized as well... of the current supporters/donors are older? Is the church as effective as their donors think they are? When we buy a Snickers bar we know the quality of the bar when we eat it, but when we donate... Acknowledgments What Does Profit Motive Really Mean? Corporate Decision-Making Money and Profit Motive in Politics Media Profit- Driven Health Care for All The For -Profit Nonprofit Individual Profit Motive