We Think Firms Are Just Like Us, And That’s Not Good
Essay by Laurence Ashworth
The Archbishop of Canterbury, Justin Welby, made headlines recently for his speech at the Trades Union Congress conference in Manchester, England. His speech was forcefully pro-union and strongly disapproving of corporations, the profit motive, and the wealthy. He singled out Amazon for not paying their fair share of taxes in the UK, and the gig economy as a “reincarnation of an ancient evil.”
To the Archbishop, capitalism, with its pursuit of profit and inequality of outcomes, is inherently immoral. Other religious leaders have, over the years, made similar points. In 2015, Pope Francis denounced capitalism and the pursuit of money. In 2008, then Archbishop of Canterbury, Rowan Williams, wrote an article for a British magazine criticizing capitalism in the wake of the financial crisis.
Such views of business and profit are not uncommon. A recent article in the Journal of Personality and Social Psychology documented widespread anti-profit beliefs. In my own research with some of my graduate students, I have found that people often take a dim view of businesses, interpreting many different actions (such as a small price increase or a product recommendation) as an attempt to take advantage of consumers. But what underlies these views? Why is business and the pursuit of profit so maligned?
We think the answer lies, in part, in how people view firms and the resulting inferences they draw from firm attempts to make a profit. To the first point, people seem to view firms as conscious entities, as living, breathing organisms with thoughts, feelings, intentions, and motives. Research using fMRI scanners has found that patterns of neural response when considering other people’s mental states (the “theory of mind” network) are indistinguishable from the pattern of response when considering organizations’ behaviour. What this means is that people are likely to attribute distinctly human motives to business actions that are the product of an entirely different process.
Because we mentally represent firms as people, making a profit is seen as a willful act – a deliberate attempt to take advantage of customers – and this violates an important norm of interpersonal conduct
In addition to viewing firms as people, consumers often view their transactions with firms as zero-sum games – situations in which the pie is fixed so that more for one person means less for the other. This means that when firms are perceived to be making a profit, that profit is viewed as coming at customers’ expense. This is where profiting becomes problematic. Because we mentally represent firms as people, this is seen as a willful act – a deliberate attempt to take advantage of customers – and this violates an important norm of interpersonal conduct that proscribes benefiting at others’ expense.
We have found that a wide range of firm actions appears to be interpreted in this light: price increases, discounts for other people, product recommendations, and many advertisements. Even when people don’t transact and there is no profit to be made, perceptions that a business tried to profit led to negative responses. In one extreme example, we found that even when a salesperson recommended the cheaper of two alternatives, customers still assumed it was to benefit at their expense.
Our research has not yet investigated how firms can mitigate such reactions. If our results are anything to go by, some readers may even think these are legitimate reactions that should not be curtailed. We would point out, however, that purchases are consumer decisions, not firm decisions; that firms bear the burden of the risk in offering products for consumers’ consideration; that the products firms make available to us are a tremendous source of value in our lives; and, ultimately, that the only reason firms develop and offer such products is due to the possibility of profit.
Laurence Ashworth is an associate professor at Smith School of Business, Queen’s University.