Milton Friedman, a Nobel-laureate economist of twentieth century, is known for many caustic observations on the role of business in society. He once wrote that the main function of business was to make money for the owners and not to engage in philanthropy such as corporate social responsibility. However unpleasant that may sound, his logic was not easy to refute. My induction to the world of business began with one of his sayings that 'the business of business is business'. The words together give a total picture of business as an enterprise, a vocation, and a transaction.
Though business as a transaction has existed since the beginning of civilisation, the term, as we understand today, dates to the eighteenth century, about the same time as the first industrial revolution. Before then the visibility of businesses in terms of transactions performed was minimal. The first industrial revolution changed the scenario as more goods could be produced in a given time. Increased productivity created increased visibility with respect to transactions performed. Machines were the driver for this increase. As machines got better human skill in terms of handling, the machines became an important factor of the total production process. Experiments on better methods of human engagement led to the creation of management as a vocation. The consequence was better and cheaper products that could reach further in the life of users. Business became an important area of studies for people to perform better. In turn, it became an important activity in the priorities for a nation. More business meant more national income. Wealth and Glamour found a haven in the body of business. This was further heightened by the media that regularly turned business icons such as Bill Gates into household names. The ever increasing number of business magazines kept emphasizing their role in society as well as the nation. The charisma of successive generation of business leaders from Ford to Sam Walton created a new genre of bestsellers to the delight of book sellers, again an area of business.
Over this period the profile of business changed much. Knowledge became a factor of production. A business could do better through using Knowledge as it operated. The rise of Microsoft in the seventies, with almost no tangible asset, in becoming a global company attests to this observation. Apple is a knowledge company of the same time. Having reinvented itself with the return of Steve Jobs it became the first trillion-dollar company of the millennium. There were four other companies that banded together as the FAANG with F for Facebook, though it has now rebranded itself as Meta. These were the new generation companies that forged ahead with the deviant use of Knowledge. The situation was very different a century earlier when companies operated inside brick-and-mortar structures. Ford was an iconic name of the time that quickly became a billion-dollar company. A century later that number rose higher with Apple becoming the first trillion-dollar company. Inflation alone was not the reason for the difference. The key driver was knowledge aided by a new profession called Management, different from Administration. However, this was attainable only if the Entrepreneurs would empower Managers to make key decisions in running the affairs of business. Unless this was done, a company could suffer such as Ford did in its early days. Its refusal helped General Motors to rise and shine. Peter Drucker called the Manager as the skeleton of business. Animals without any skeleton would not grow beyond a size. A larger body required a skeleton to help it stand firm and perform. However, some companies such as Facebook seem to successfully defy Drucker's skeletal rule.
A business is an entity created in the image of the entrepreneur. It has a lifecycle like the creator. It can be sued in the court of law for wrongdoing. It can also be terminated for gross violence. Though a regulator oversees the 'business of business', these were minimal in the early days apart from routine requirement such as paying the taxes. Rules and restrictions on activities as per societal dictates were non-existent. The pattern continued unabated well into the second half of the century.
As we entered the second half of the century, the Great War had ended. So, long business has been the sole preserve of the western world led by the UK and then the USA. Japan was the first country to challenge this dominance. More joined in succession. As the number swelled, the volume of overall business activity multiplied manifold. It was time to control their behaviour in the market. New regulations were framed to control the behaviour of business that ranged from Ethics to Competition to Governance. Not so easy as was seen in multiple violations by companies of various sorts from Barings Bank to Enron to Theranos.
Everything said, profit is the bottom-line of a business. It serves a very basic need like food for the human body. But neither alone can guarantee health. A trade-off is necessary where the present may have to accommodate the future. A business therefore needs a composite menu to include factors other than profit. In the past such factors were projected through mathematical processes. But the future had gotten very murky defying the normal behavioural pattern. Besides, the number of players in the market had increased manifold making the total environment very muddy. Too many changes were happening too fast leading to frivolous behaviour of stakeholders and customers. A business had to be on the go all the time, every day in a month.
The business magazine Fortune compiles a list of companies using parameters of various sorts such as revenue, profit, and stakeholder perception. Staying on the list, once onboard such as Global Hundred, can be difficult. The length of stay, in general, rarely exceeds the single digit. Competition is the killer that can emerge from anywhere with newer entrants armed with deviant practices such as Uber in taxi services. Ability to survive longer is compared to ability on the trampoline as each company tries to leap higher. That is the behaviour of new generation business leaders such as Musk who keep their adrenaline flowing by relentless jumping.
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