We often hear 'profit' spoken like it is a dirty word. The fact is, however, that without these nasty little profits, we would not have anywhere near the innovation, entrepreneurship, productivity, and standard of living we enjoy today. Why would anyone do all the work and take the risks of inventing and innovating unless they believe it will make them better off?
Let me explain it this way. Suppose you have been saving your money to buy a new mountain bike, priced at $1,000. Just as you are ready to lay your money down, a stranger comes up to you and asks you to lend him that $1,000 so he can buy a mountain bike instead. He promises to pay you back in one year. You will probably wonder why you should you forego the enjoyment of a full year of mountain biking just so this other guy (a perfect stranger) can ride? Most likely you will not make this loan because you are not getting anything in return.
BUT if you are compensated for giving up all that bike riding, now that is a different story. If the borrower offers to pay you $1,500 next year (instead of just returning your $1,000), you may be very happy to make this loan. It depends on whether or not the $500 interest adequately compensates you for the lost enjoyment. If $1,500 isn’t enough, then maybe $2,000 or $10,000 will do the trick. The point is that you will need to be made better off (make a profit) to be willing to defer consumption into the future.
The same thing applies when we purchase shares of company ownership in the stock market (or lend our money in the bond market, buy CDs, or deposit money in a savings account at the bank). If companies don't make profits that can be shared with their investors, we will not purchase their stocks and these firms will not have the funds needed to make investments in new technology and new products and our standard of living will be static.
So profits are desirable. Without the profit motive we wouldn't have automobiles, iphones, computers or air-conditioning. The pursuit of profits is what unleashes the forces of innovation. It is what allocates scarce resources to their highest valued use. It is what determines if we have too many hair dressers, lawyers, truck drivers, or not enough engineers.
Please see the Paul Solman video below (about 7 minutes)
What is Profit?
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