Greed is Good

February 25, 2009

I have always had a fascination with economics going back to my college days. Some of my classmates and I used to spend hours discussing economic theory and poking holes in our professors’ beliefs, particularly those who followed John Maynard Keynes (insert your own political commentary/sarcasm here). It was a fun time and formed the basis for many of my beliefs about how business and the economy should be run. I even passed some of that passion on to my daughter who has a degree in economics.

As a student of economics, I try to read articles from as many of great economists of the past and present as I can given the constraints of having to work, raise a family, etc. One of my favorites is Walter Williams, a professor at George Mason University in Virginia and frequent contributor to blogs and various network broadcasts. In one of his recent articles, he used the example of a supermarket and the miracle that 60,000 items can come together under one roof and operate smoothly without Congressional meddling (again, insert your own political commentary/sarcasm here). It got me to thinking about SoftLayer and what goes in to provisioning one server in our datacenter. Think about all the manufacturers building the component parts, assembling those parts and shipping those parts via a truck which has its own component parts, assembling etc. to be able to transport those servers. Add to that all the networking gear, software, bandwidth etc and I would be willing to bet that thousands, maybe even millions of inputs and people are required to bring one server up and keep it running in a datacenter. And the whole process runs relatively smoothly and efficiently from start to finish.

How does that happen? In his article, Williams quoted Adam Smith, the acknowledged father of modern economics who said:

"He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain."…"He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." …"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

From my perspective what Smith is saying is that more often than not, by pursuing our own goals and being greedy, we end up creating more value to society than when we actually try to do something good. Those motivated by profit tend to produce more value than those in the non-profit world (i.e., academia and government). Before you attack me, with what parts of your own life are you most satisfied? As Williams asked at the end of his article, are you more satisfied with the profit-motivated Wal-Marts, ebays, and Amazons of the world or the non-profit motivated schools, postal service, social security or motor vehicle registration? Who would you rather have in charge of your datacenter, the government or SoftLayer?

While we may not say it out loud, we are all greedy. And contrary to what certain segments of today’s society will have you believe, that is not necessarily a bad thing.