Ep. 055 - A Biblical Perspective on Profits: What Scripture Teaches Us About Wealth and Investing

Episode Transcript

Spencer
We've been talking about a biblical framework for investing, but we haven't talked about profits yet. So today we want to dive in and see what the Bible has to say about profits how we view those and how they form an important, but not the ultimate part of investing.

Austin
So, Spencer, again, we come back to this idea of a biblical framework of investing, and we want to say that one God is the investor. He leads us into how do we invest, what does it look like to deploy capital to clothe companies and capital? And we always come back to this idea of we are stewards. And I was reviewing our conversation about John Wesley recently.

Austin
And the reality is debtors, if you are a debtor, you can use the money however you want, but stewards have to use the resource that we have been given to steward on behalf of the master, as the master would have a steward. So when we think about stewardship, and we think about utilizing the resources that God has given us, we really need to think about this is how does God want us to use them?

Austin
So we've talked about how do we think about good products, good practices, how do we choose and clothe companies and capital, which is the term investing to invest means to put clothing on. And so how do we deploy that capital in ways that honors God? So as we think about this, as we come back to this idea, how do we look at profit?

Spencer
Well, it's interesting because profit is one of those things that is addressed in the Bible, actually. And there are some who would run from profit, you know, in our world and say profits all bad. Well, actually, biblically it's not. Scripture doesn't take a low view of profit. We say, a number of different passages would, would suggest this, but Deuteronomy 8:17 and 18 says, you may say to yourself, my power and my strength of my hands have produced this wealth for me.

Spencer
But remember the Lord your God, for it is he who gives you the ability to produce wealth. So God gives us abilities, talents, circumstances where we can produce wealth. And there's a recognition in the Bible that we need to use that wealth in ways that honor God. So there's an assumption that we can create wealth. You know, we talked about Matthew 25, and there's an assumption that the, the, owner who goes away, the master who goes away, he's empowering his servants, to make money on his behalf.

Spencer
He is expecting that they are going to have some kind of profit. Now, that's not the only thing that he's expecting. He's expecting faithfulness. But it's really interesting as we look at this, profit is one of those components that gives us an indicator of whether a business is sustainable. And there's an expectation that if you're running a business that you're going to make a profit biblically, but it's not the only thing that we're looking at there.

Spencer
And that's where we diverge from the world's perspective.

Austin
Yeah. And I think that's really crucial to understand is that when we are ultimately focused on profits, when that is the only end that we see as the good of investing, right? If profits become the ultimate, then they become an idol. And idols are never good, right? Faithfulness to the Lord and hoping for profits and trusting in the Lord.

Austin
That as we deploy his capital, that he will move through the companies that we invest in and then profits will be generated. Is the way we want to start thinking about this? It's not I must seek profit at all end. It's how do I seek profit through a biblical lens of what is good and true and beautiful, and deploying capital to companies that are seeking human flourishing, that are seeking the common good?

Austin
But again, when we think about it as an ultimate, the only thing that matters as profit, then, like you were saying, we get into the world story.

Spencer
Well, and we need to distinguish here. There's an assumption actually, that the way that business will be set up is that there are many different entities and that they will be taking care of things, and there will be some kind of free market out there. Now, there'll be constraints and such, and we see those within a biblical framework, but it is not a command economy.

Spencer
It is not economy that is just run by the government. You know, we look through history and the economies that are just run by the government. They always end up flaming out and fairly quickly because there's not a level of innovation of capacity for each person to kind of do, different things and to figure things out along the way.

Spencer
It's all from, you know, one person projected on downward. And so there's there's this assumption that, even within a biblical framework that people will bring their wealth to be able to fund the temple activities. You know, for instance, will be able to help the poor around them. The biblical example is never that the government comes in and makes all of the payments for everybody and makes everything right.

Spencer
It is that you have a lot of individuals who are living in community, who care for each other. So that's one of the things I think that's important to distinguish. And there's this assumption that businesses are going to make profit, they are going to do well, and that they're going to think about how they use those profits in some redemptive ways.

Austin
One of the quotes that we like when we think about businesses creating capital, deploying capital comes from Bonnie Wurzbacher. She's a former executive at Coca-Cola and World Vision. And she says, as the sole source of wealth creation in the world, business enables every other social, civic and even spiritual institution to exist. And the reality is coming back to like what you were saying, if there are individuals who are running companies and corporations, they generate profits that are then passed on to both investors, but also pushed to employees to then deploy those resources into their community.

Austin
So business must exist. So we really as investors, we get to think about how do we again, clothe those companies to then generate profit so that that profit can then be pushed out to the world? It's really a beautiful cycle as we think about that.

Spencer
Yeah. And we even see this from John Wesley. You know, Wesley wanted to keep resources out of his hands as much as possible and to deploy those. But he wrote, prodigiously, and he had a lot of income through the course of his life. And his perspective. Again, a quote from him, we are to gain all we can without hurting our neighbor.

Spencer
So he he viewed it as a tremendous good that he's selling all of these books, that he has all of this income so that he can give out as much as possible to those who are in need, basically, and to expand, churches, planting churches, different places.

Austin
Right. So how do we see that? Maybe in contrast, we've kind of talked about the world story, but how do we see just that framework? You know, Wesley says we're to gain all we can without hurting our neighbor. How does the world see it?

Spencer
Well, I think what we really like is another quote from Tim Keller, because I think that it it sharpens the differential here. Keller says idolatry happens when we take good things and make them ultimate things. And the narrative, the dominant narrative of the last 50 years has been particularly that business only has one purpose, and it is to make money.

Spencer
Yeah. You had, gentleman Milton Friedman, who published, a kind of a landmark article, a seminal article, in the New York Times Magazine in 1970, called The Social Responsibility of Business is to increase its profits. So you got to love those titles that say it all right there. But in that, he argued, and this is a key quote that has really shaped modern thinking of what it is to run a business and what a business is for.

Spencer
But he says, and I quote, there is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. What's been interesting is that progressively that statement has been whittled down, where really it's only the profits that a company is looking at.

Spencer
So I had a professor at University of North Carolina who was one of the thought leaders in terms of good governance for businesses, and what he argued was that you could take away the last half of that. So basically, the social responsibility of business, if we look at it from this newer perspective, is to use its resources and engage in activities designed to increase its profits.

Spencer
Full stop.

Austin
Yeah.

Spencer
So because this, this thought leader and many now kind of argue that this phrase, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. Basically, the thought process is we live in a global economy. There are a lot of different value systems that are out there.

Spencer
What is, open and free competition without deception or fraud in one part of the world might not be the same in another part of the world. The rules of the game, he would argue, it might not be profitable or wise for a company to play within the rules of the game. They might violate certain rules and just pay the fines for those rules, or they might just put their their company a little bit at risk and not even pay the fines, but say, well, is anyone really going to enforce this against us?

Spencer
So his perspective was and a lot of the thought leadership there is that companies just need to look after their long term profits. And if they harm people, if they harm, the environment, if they harm, society as a whole. Why that's not their responsibility. Their responsibility. The only thing that all investors, that all shareholders will agree to is that more profit is better than less profit, and sooner profit is better than later profit if those are equal.

Spencer
You know, if you can have $1 million of profit today versus a million in a year, take it today. Yeah. You know, if you ask two investors, would you rather have $2 million of profit or $1 million of profit? The only thing. All other things being equal, that they will agree with is that more is better than less, right?

Austin
And, you know, as I was as you were talking about that, I started thinking about Jeremiah 29 And God is telling Israel, they're about to go into exile. They're about to be captured by Babylon, taken into exile. And God could say, don't do anything with the Babylonians. Stay away from them. But he says, no gardens. Build homes.

Austin
Seek the good of your neighbor. And this idea of maximize profit at all cost. Goes against that biblical framework of seek the good, seek the flourishing of your neighbor. Even though your neighbor is putting you into exile, essentially putting you into entrapment within their culture. God says no, you need to be a light within that dark place.

Austin
You need to show a different side of of who I am. He doesn't say, okay, well it is what it is. Continue to make your own living. Forget everybody else. It's very clear throughout all of Scripture that as Christians we are to live amidst a global people seeking the welfare of a global people. We don't just seek the good of myself.

Austin
And I think that's oftentimes what we need to really wrestle with when we think about investing is when we only think about profits as ultimates. When a business only thinks about profits, it's ultimate. It's what is benefiting me. And the scriptural reality is no, I need to see it as what is benefiting all around me. What is alleviating poverty for the greatest number of people?

Austin
What is bringing about human flourishing for the greatest number of people? How do I not entrap my neighbor into a deceptive pattern or an addictive pattern? And so as I clothe companies and capital, am I doing it in such a way that empowers them to bring about human flourishing? Or does it empower death?

Spencer
Well, and it there's a lot of wisdom that we have to use here and that we really want the company leaders to use here, because you could go on one side of the this concept or another, and you can say, well, we're just going to take all of the revenue and we're going to try to zero it out at the end of the year where, you know, if we have more, that comes in more profit.

Spencer
Instead of actually declaring that profit, we'll just give some really healthy bonuses to all employees. We'll just pay our suppliers a little bit more. We'll reinvest in our communities and society and such. But that's not really, a viable option either. There has to be a return for the investors to keep those funds there. There has to be some level of return.

Spencer
There there has to be also a recognition that there needs to be margin, you know, within that business. There. So it's not it's not a situation where it's easy to create these, these rules that, are black and white. You know, if this is how we're going to run things, it takes a tremendous amount of wisdom.

Spencer
Now, what Friedman put together there was basically a rules based approach, which was you should just get all that you can. That's one thing that we can all agree on is let's just make make a ton of money. But, you know, coming especially at that time and even so now we're are we have so many Christians who are investors.

Spencer
We should be raising our voice and saying, hold on. That's not all that matters to me. It's one of those key and important things, but there's a lot of ways that you could actually argue that if I'm doing better, for, all of these different pieces, that my long term prospects might actually be a little bit better than just looking at this short term.

Spencer
You know, approach.

Austin
Right. So sponsor another one of those quotes that we like comes from Charles Handy. And he says to turn shareholders needs into a purpose is to be guilty of a logical confusion to make, to mistake a necessary condition for a sufficient one. We need food to live. Food is a necessary condition of life. But if we lived mainly to eat, making food a sole or sufficient purpose of life, we would become gross.

Austin
The purpose of a business, in other words, is not to make a profit full stop. It is to make a profit so that the business can do something more or better. So we see this in contrast with what Friedman was saying. So you want us to. Will you lead us through kind of how to where do we go from here?

Spencer
Well, again, we come back to this concept where clothing companies and capital, and we're clothing them so that they can enlarge, they can expand their impact in the world. Profit is one of those things that will come as a byproduct of that. And as a company is able to grow and expand. Typically, if they're doing things in a wise way, their profit will also expand and grow.

Spencer
So we look at this as kind of a symbiotic relationship rather than just an adversarial relationship there. Now as we talked about, this takes a lot of wisdom. We would love for all CEOs to come in with a James one five attitude and say, Lord, I need wisdom this morning, today to make these decisions. You know, James tells us that we need to ask God for such wisdom.

Spencer
Because he will not, keep it from us. He will give us wisdom as we ask. But it we've got to look at this and expect businesses to be able to do something more and better. And one of the ways that we see them doing more and better is we say, okay, you have products and services that we think are contributing to human flourishing, and you're using practices that also contribute to human flourishing.

Spencer
So if we have a good product and service that's being deployed, and it's actually blessing people as they buy the product or, you know, select to use the service. And at the same time, if we have solid practices that are in place where employees are being, you know, rewarded and they have reasonable benefits, and we are engaging, you know, with the society and an environment, and there's a blessing, you know, that's being passed in each one of those, those areas.

Spencer
It's not adversarial. Then enlarging the opportunity set of that company is going to be a tremendous blessing, not just from a profitability standpoint, but from actually, a redemptive standpoint, you could argue.

Austin
Yeah. You know, Spencer, as we think about good products, good services, leading to good profits. We come back and we anchor this in the reality. The one God does not need our profits. He is our provider. He will provide for our daily needs. Oftentimes he provides for our daily ones as well. But the reality is sometimes that when you pursue a strategy that is actively looking for companies, it may or may not reflect the rate of return to the market.

Austin
So when we think about how we look at this idea of actively selecting companies that are pursuing human flourishing, what does that look like in terms of rates of return, in terms of how we look at the market and expectations?

Spencer
I think it's great that we have to identify, again, God is provider. So he has entrusted us as stewards with this capital that that has to be the governing thought process that we have here now. There are a lot of different studies that are out there. Some would indicate that the rate of return will be consistent. If you are screening out certain companies, other, studies that I have seen would suggest that that actually gives you a competitive advantage.

Spencer
The companies, because there is a long term kind of focus with those companies. Other studies would suggest that actually screening out some of the sin stocks, for instance, creates a lower rate of return over time. I think what we can recognize, though, in all of these different studies, though, is that there is still an expectation that there will be a rate of return.

Spencer
We just know that the rate of return will diverge from the broader market, because you're not investing in every one of the companies out there. You're saying, okay, I'm only going to I'm going to restrict myself to to invest in a subset of those companies. They may perform a little better. They may perform a little worse. They may perform very similarly.

Spencer
But as we look at that, I think what we have to do is, is just take a step back and say, okay, if I am a steward and I'm looking at God as my provider, profits and rate of return cannot be the only thing that I'm looking at. And so there will be periods. I'm I'm certain there will be periods, whether it's a year or three years.

Spencer
Five years, the next 20 years, who knows? There will be some period where the rate of return will be less. Yeah. For investments that are screened, you know, in this manner. And we have to be comfortable with that if we're going to go down this path. We have to go in looking at this soberly and saying, well, this, I have to cling to God as as provider.

Spencer
It doesn't mean that there won't be profits. It doesn't mean that I'm just investing in non profit companies. You know? But there has to be a whole different set and framework of looking at these and being content with what God gives right?

Austin
Well, Spencer, thanks for walking us through that idea. And I come back to Psalm 50:10, for every animal of the forest is mine, and the cattle on a thousand hills, God owns it all. Every aspect of our lives. God is looking out for us. He is providing for us. He is giving us air to breathe. Hebrews one reminds us that he upholds us by the word of his power.

Austin
And we we come back to this over and over and over again to re anchor ourselves that our trust is always in the Lord. It is always in his provision. We have no control over what the stock market's going to do. We have no control over what these companies are going to do. But as faithful stewards, we want to come back and say, God, you have given me these resources.

Austin
I live open handed to you and trust in you. And so clients, if you want to have a conversation with us about how to clothe companies in capital, how to really honor the Lord with your wealth, we would love to have a conversation with you. If you have questions, feel free to leave those in the comments below and we'll see you again next time.

Spencer
We want to thank our friends at the Eventide Center for Faith and investing. Jason Meyer and his team did a fantastic job helping us to grapple with the biblical wisdom on investing. Many of the quotes and thought leaders that we cite come from their original research.

Austin
If you found this episode valuable, share it with a friend and subscribe on your favorite podcast platform so that you don't miss the next episode.

Disclosure
This content was provided by Second Half Stewardship. We are in Knoxville, Tennessee and you can visit our website at www.SecondHalfStewardship.com. The information in this recording is intended for general, educational and informational purposes only, and should not be construed as investment advisory, financial planning, legal, tax, or other professional advice based on your specific situation. Please consult your professional advisor before taking any action based on its contents.