What do a priest, a politician, and T. Boone Pickens have in common? You would think this is me talking about a weird thing I saw in a bar in Oklahoma once but it isn’t. (I’ve never been to Oklahoma nor would the good citizens of The Sooner State want me there.) The answer is they all have a profit motive and that profit motive isn’t necessarily always driven by financial gain. As economists will tell you, it isn’t just money that acts as an incentive driving individuals, but in either case people will make choices that seem illogical and unprofitable, at least in the short term. So why do people do the things they do? It’s an age old question, and though Charles Sauer (a contributor to this magazine) doesn’t pretend to have all the answers, he’s taken a hammer to one of them with his first book, Profit Motive: What Drives the Things We Do, due for release on March 13 and available here for preorder.
When I spoke with Charles I asked him the cliché question that he’s going to get from everyone for at least the next month, “What’s your profit motive with this book?” The answers—aside from selling books of course—were multiple: a dream his father had to write a book carried forward to the son; friends and colleagues that pointed out to him the myriad instances in life where profit motive appears, and not just in an accounting ledger; and in his words “to help people make sense of the world around them.”
The book covers a wide range of subjects in its chapters, the one on corporations being most obviously pertinent to the concept of profit that we normally consider. More opaque is media, driven by a combination of advertising revenue and Nielsen ratings that results in a profit motive to target audiences and tailor messages. Murkier still is politics, whose profit motives are a key insight of Mr. Sauer’s after years spent working for Senator Chuck Grassley and Governor Jeb Bush. Chapters on non-profits’, individuals’, and even families’ profit motives are initially surprising to see because at first thought they wouldn’t necessarily seem profit driven, but enlightening to read about and understand that they are. And then of course, what book about profit motive would be complete without a chapter on our nation’s favorite debate? Healthcare!
Indeed, the chapter on healthcare is illustrative of the broader themes of the work. We all know firsthand the bogged down, over-priced morass that is healthcare in our country. The endless layers of insurance companies, reinsurance companies, preferred provider organizations, third party administrators, not to mention the hospitals themselves, all acting as multiple degrees of bureaucratized and profit motive incentivized interlopers between doctors and patients. Add in government intervention and its additional layer of bureaucrats to the mix and you’ve got the recipe for prices above and beyond what the market would bear if the doctor and patient were the only factors in the equation.
Sauer has spent a considerable amount of his career working on healthcare markets and policy, and it shows. He’s also privy to something you learned I’m not at the beginning of this article, a weird—if you look at the current environment of healthcare in America—thing going on in Oklahoma. In fact this book circles back to Oklahoma more than once. (T. Boone Pickens anyone?) This weird thing going on in Oklahoma isn’t so weird to anyone with a mind to look and see the simplicity and logic of it. I’ll let you read more about it in Chapter Five of Charles’ book but suffice it to say that for about seven years now, starting in Oklahoma, there’s been a movement to cut out the middleman, well middlemen, separating doctors and patients.
What happens when you cut out those middlemen? In economics it’s called increased consumer surplus—or reduced producer surplus if you’re one of the middlemen—but to Average Joe it’s called money in his pocket. Sauer has a graph halfway through the chapter on healthcare. The numbers it represents are astounding: $390,329.68 total cost for a coronary bypass surgery before insurance; $253,004.57 after a preferred provider organization applies a discount worked out with an insurance company for using their services. These numbers are averages, but the thing is, nobody bats an eye at those numbers. A quarter of a million dollars seems downright normal in this country to have heart surgery. But here’s the truly astounding number: $50,547.80 for a coronary bypass on the free market that began in Oklahoma seven years ago and has spread beyond The Sooner State since. That’s 13 percent of the before insurance price and 20 percent of the after insurance price! Why hasn’t this movement to free markets spread? Profit motive. All those middlemen have a multi-billion dollar incentive to use the current advantage of scale they carry to maintain the status quo. Also, grassroots movements—which this is most assuredly an example of—take time and just getting people to know about them. When I read Sauer’s chapter on healthcare my jaw dropped, because like so many people I thought those numbers written above were just normal. I went on to the website of the Free Market Medical Association mentioned in his book and was astonished that I knew nothing of this movement and had my mind boggled by low prices for healthcare.
But this book does that time and again. I’ve been nerding out on economics for four years now and it wasn’t until reading his chapter on corporations that I was made aware of something that seems obvious in retrospect but revolutionized my thinking. John D. Rockefeller is hailed as the quintessential capitalist, dying in 1937 with a net worth four times larger than Bill Gates in today’s dollars. But he didn’t ride to the top—nor did Gates—on the whims of the free market. Rockefeller was as protectionist as protectionists come, in Sauer’s words “relying on market collusion… as well as government regulations and rules to control… the oil industry.” Thus Sauer elucidates the difference between being pro-market and being pro-business (which is inherently pro-protection whether against domestic or foreign competition), and makes clear that all too often politicians use the former term in their rhetoric but really mean the latter, relying on obfuscating language to deceive the public into supporting policies that take more money out of their pockets via loopholes, grants, and subsidies for business at the expense of taxpayers. A free market indeed.
Sauer’s book explores all of the above and much more in greater detail than I can hope to replicate, and he does it in an immensely readable manner. Sauer rejects the dry scholarly exploration in which each of these issues could be treated in favor of personal stories from his, and his friends’ and colleagues’ lives. The individuals featured in this book are from different points on the political spectrum and from occupations that vary from leading Sunday sermons to starting a software company. Sauer synthesizes the wisdom of this collection of individuals into appreciating, as he told it to me, that “understanding other peoples profit motive can help you realize yours,” and does it in a way that makes you feel less like you’re reading a book, and more like you’re sitting with Charles having a drink in a bar in Oklahoma.
Brian Wemple holds an MA in International Affairs from American University’s School of International Service with specializations in U.S. Foreign Policy and National Security, and International Economic Relations.
