Is A Little Greed Good?

In Wallstreet Part 1 Gordan Gekko gave a spell-binding speech:

“Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.”

A few months later Mr. Gekko found himself indicted by the SEC and was hauled off to Federal Prison.

The point is that greed is NOT good.  In Jim Collins’ book How The Mighty Fall, he points out that hubris born of success is the starting point of the demise for many leaders.

It’s true.  Over the past few years I have seen a lot of awesome marketers lose million dollar deals over greed.

Greed creates a zero-sum game in all situations.  Through greed you may take a $1,000,000 salary only to pay your star employee  $40k.  I’ve seen scenarios where CPA networks take a 30-40% margin on an offer.  Instead of passing the savings down to the affiliate who’s doing all of the work AND RISKING ALL THE MONEY, the network takes a huge rip.

Over time the laws of nature catch up with greedy people. Greed has caused many of men to go broke, or even worse, go to prison.

When structuring deals, always align the interests of your client with yours.  Don’t put them before.  Don’t put them after.  Put them right in line with you.

Instead of taking a 30% margin, the greedy CPA networks I mentioned ought to have taken a 5-10% margin, passing the savings back to the advertiser and to the affiliate.  That way the advertiser’s profits would be higher, hence more dollars are brought to the table for adverising.  The affiliate would make a better margin, resulting is more media spending.  The CPA network would have earned more money on an economies of scale basis – higher volume + consistent advertisers = more profit.

In summary, the more value you create for your clients, vendors, and partners, the more value you will in turn create for yourself.

Rich Gorman is an internet entrepreneur. His primary focuses are on direct response offers and SaaS models. When not working Rich enjoys spending time with his family.