Genuine question: what is the purpose of business?

Two of the most influential thinkers—Adam Smith and Milton Friedman—offered on-the-surface competing answers, which not only created capitalism, but have driven some of the biggest debates in capitalism. And, interestingly, one of the most searched topics in our Robinhood Learn library is on
this topic
. Understanding their views isn’t just an intellectual exercise—it’s key to understanding how modern businesses operate and why certain economic policies shape our world.

Let’s start with Adam:

In 1776, Adam Smith, the so-called father of macroeconomics, attempted to answer, publishing the first edition of what came to be known as The Wealth of Nations. In it, he established scientific aspects of economics we still use today. These included:

The division of labor and specialization for increased efficiency.

The wealth of a nation is not calculated by how much money (or gold in his time) is in the bank, but is instead derived by how value is created (through the transformation of raw materials to goods) that then 'flows' through society. This came to be known as gross domestic product (GDP).

Invisible Hand theory: in the pursuit of self-interest to be the best under certain conditions, competitive society benefits from the unintended and uninterrupted consequences of individuals pursuing their own self-interest. Free trade was an intricate part of this.

For anything you read, it’s crucial to understand the author’s frame of reference, so here’s the context behind his theory: Adam Smith’s book was purposefully political, opposing the vested interests who advocated protectionism and who were driving forward Britain’s colonial and slave trades of the time. Smith was also a moral philosopher which came through in his dissonance for over-simplification.

Fast forward nearly 100 years later, to September 1970, Milton Friedman wrote in the NY Times: “
A Friedman doctrine
–The Social Responsibility of Business Is to Increase Its Profits”. As the title shares, he asserted that the only “social responsibility” of a business is to increase its profits within legal and ethical bounds, while any money or time spent on the pursuit of social initiatives was effectively imposing “taxes” on shareholders, employees, and customers. The one cross-over with Adam Smith is that the focus on a free-market system and similar assumption that businesses (vs people) will naturally act responsibly to maintain their reputation, retain customers, and attract employees.