The Nonprofit Trap

Does Walmart create more value than your favorite charity?

Can you believe how greedy Walmart is?

They rake in hundreds of billions every single year selling junk to working-class people! Meanwhile, they only pay their employees minimum wage!

Does this narrative sound familiar? I know I’ve heard similar rants innumerable times over the years.

A huge faction of our society loves to bemoan rich CEOs, selfish shareholders, and market dominators like Walmart. If Walmart and its ilk are on the “Evil” end of the spectrum, who’s on the “Virtuous” side?

For a lot of Americans, the answer is the nonprofit organization.

While business executives are “getting rich,” the leaders of nonprofits are “giving back.” Nonprofits are seen as equivalent to the concept of charity. They are often assumed to be staffed by selfless folks donating their time and treasure to helping society.

For a lot of reasons, I think this mental model is wrong, and can be pernicious.

Let’s pick apart the problems with it and arrive at a better model of the for-profit vs. the nonprofit.

1…