Here’s an interesting thought exercise.
Two (2) people, Andy (A) and Benji (B), come together to start a small business.
Andy contributes 100k to the business, which is actually all of his life’s savings. He needs at least 10k a month from the business in order to take care of his family.
Benji contributes 200k which however is only 10% of his life savings. He just needs 5k a month to be okay because he doesn’t have any dependents.
They expect the business will generate at least 30k a month, which would be more than enough for both of them.
Unfortunately, due to unexpected external factors, the business only brings in 15k a month.
How should they split the returns?
Option A: Proportionately (in line with their respective contributions), i.e. A gets 5k and B gets 10k. This means Andy only gets 50% of what he needs after investing 100% of what he has. Life happens, right?
Option B: Even split (50:50), i.e. 7.5k each. Andy still gets less than what he needs but this seems fair enough, no?
Option C: According to their needs, i.e. A gets 10k and B gets 5k. Both parties are able to meet their needs but is this actually fair to Benji? Would it matter if they were not friends and the only thing that brought them together was this business deal?
Option D… Other considerations (proposed by Microsoft CoPilot)
- Risk Tolerance: Since Person A took on more risk by investing a larger portion of their savings, that could be factored into the decision.
- Future Growth: The pair may consider revisiting the split as the business grows.
This is an allegory exploring some of the philosophical differences between Capitalism, Socialism, and Communism.
It came to me while musing about the fact that in most companies, certain employee benefits (for instance company cars, extended health insurance, etc.) are reserved for more senior managers. The managers probably need these perks less (since they already earn much more), but since they [arguably] contribute more to the organisation, they can justify receiving the additional perks.
This principle suits Option A above, which interestingly aligns with Socialism, i.e. “to each according to his contribution.” Option C, (“to each according to his needs”) actually aligns with Communism. Option B would be most in line with Capitalism, assuming each party had agreed to equal ownership of the company.
All things considered, it would appear that even the most capitalist of all organisations are still socialist at heart.
I would love to read your thoughts in the comments.
