When Is Greed Good?

Nov. 11, 2005 — -- A lot of us think the world would be a better place if people were more caring and less greedy.

Take the crucial job of lifeguarding. If my child's in the pool, I don't want some greedy profit-driven company overseeing lifeguards. I'm relieved that most lifeguards are trained by the Red Cross. They're nonprofit. So, they're selfless. And that's a good thing when someone's drowning.

But entrepreneur Jeff Ellis, who heads Ellis & Associates, says he's proven otherwise. Ellis doesn't work for the Red Cross; he trains lifeguards because he wants to make money.He says he can provide better trained lifeguards and turn a profit for his company.

"We're constantly criticized for being a profit company versus a nonprofit agency. And I think, by all measure, the profit company delivers a better service at a cheaper price," he said.

To win business, Ellis has had to constantly innovate. That profit-motivated creativity, he says, ultimately leads to better lifesaving techniques.

Ellis invented the "rear huggie" rescue, which places the weight of the victim on the rescue tube, instead of on the lifeguard. He was the first to require the "compact jump."He makes his lifeguards carry a plastic mouthpiece to help with mouth-to-mouth. The Red Cross has since adopted many of Ellis' techniques.

Ellis thinks complacency kept Red Cross from coming up with those innovative techniques on their own. It may be one reason that hundreds of pools have now switched from Red Cross lifeguards to guards trained by Ellis' company. They like the training and the follow-up.

Does a profit motive really make people better lifeguards? Isn't saving lives enough to keep the Red Cross vigilant?

No, says David Kelley, founder and senior fellow of the Objectivist Institute. He points out that money is a very effective motivator."There's always an extra mile to go in creativity, in thinking of that solution no one has yet tried," he said.

People will work harder and longer to make sure their companies flourish and succeed, Kelley said.

To make money, Ellis has to win over more pools. He does that, he says, through diligent oversight, which includes secretly taping his lifeguards to make sure they follow his rules.

The monitoring, Ellis says, keeps the guards on their toes. "We don't consider it spying. They were given forewarning that in order to be in this lifeguard program, they were going to be held accountable," he said.

Knowing they're accountable for upholding Ellis' standards means guards must constantly scan the water with their rescue tubes always in hand. His camera caught one guard being friendly, talking to a girl, getting off the chair to sit next to her. The guard was still looking at the swimmers, but Ellis yanked his license.

And the lifeguards apparently don't mind Ellis' scrutiny. "I'm glad he's doing it because with the Red Cross, we never had anybody really come up and check up on us," one female lifeguard said.

Maria Sheba, who manages a Florida pool that hired Ellis' lifeguards, says she's happy with Ellis' guards and his scrutiny of them. 'I think it really makes a difference to them. They want to do well," she said.

Economist Walter Williams says we usually benefit more from for-profit companies. "Normally in our country," he said, "those areas where people are motivated the most by greed are the areas that we're the most satisfied with -- supermarkets, computers, FedEx. Those areas where people say we're motivated by caring are the areas of disaster in our country, such as education, the post office, city garbage collection, police services."

I'd add my own selection: the Department of Motor Vehicles. Again and again, these agencies that are supposed to help us, don't serve us as well as people driven by what Williams called greed.

I'd call it enlightened self-interest, and self-interest does a lot of good things. In 1776, Adam Smith explained how pursuing profit helps others: "He intends only his own gain, and 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."

New York City teacher Steve Mariotti has seen it firsthand. He taught kids at one of the city's worst schools. Its reading scores ranked the lowest in the state. Kids assaulted teachers more than once a week. One teacher's hair was set on fire.

It was around that time that Mariotti left his import/export business to teach there.

At first he says he was a horrible teacher. "I lost control of my classes. A kid got me in a headlock," he said.In desperation, he asked the kids why they were treating him so badly.

"One kid said, 'Well, we did it because we can't stand you. You are boring.' And I said, 'Well was there ever at time when I was a good teacher, when I touched you or taught you something that had any value?' And the same young man said, 'The only time you really had value to us, to me, was when you told us about your import/export business. And you'd bring ladies shoes in from Agra, India, add $1 on for insurance and freight, take it down to the Lower East Side and sell them for $7, and your income statement would be $126,000,'" Mariotti recalled.

The student had remembered that story from the beginning of the term. "Here was a guy that had been defined as -- as brain-damaged, emotionally upset. … People were afraid of him. And he'd re-created in total a Harvard Business School income statement," Mariotti said.

That prompted Mariotti to change his teaching methods. He started talking about making money, and suddenly the kids were different. "They're suddenly interested in learning. And they come to life in the classroom," he said.

In high school, Frank Alemeda was floundering, until he took Mariotti's course. He graduated and went on to open a sporting goods manufacturing company. Now he employs people from his old neighborhood. "I'm probably the biggest thing to happen to my family," Alemeda said. "Because I got people looking up to me, people that I grew up with, just were patting me on my back, would say, 'Frank, keep it up. You're the only guy that got something going for you out here.'"

Jimmy McNeil started a music business that was worth a million dollars. Now he runs Bulldog Bicycles, a high-performance bike company. He's even made it onto the cover of Black Enterprise magazine. He says he achieved this because of what Steve Mariotti taught him in high school.

"Children that are born into poverty are fascinated by capitalism and by ownership and by markets," Mariotti said. "We think of capitalism as something the privileged practice. But in some ways, capitalism is the big equalizer. Money doesn't care if you're black or white or green."

The Objectivist Center's Kelley said, "It's the people at the bottom who need capitalism most, who need the system in which everyone is free to trade and free to pursue money because capitalism opens up opportunities to climb up that economic ladder.

McNeil agrees. "Somewhere along the lines, Bill Gates started off with zero. Somewhere along the lines Quincy Jones started off with zero. It's not a color thing. You know, it's an opportunity thing."