Business, at least in its smaller and traditional form, tends to be a misunderstood and underrated part of society. It is one of the oldest of human activities, dating back at least 3000 years. It is also one of the most civilising. Watch, for example, how people treat each other in the local coffee shop and you will usually see a high degree of civility between people who do not really know each other.
What makes businesses work is mutuality: finding enough common ground between supplier and customer for a transaction to occur. This is not the impression, however, given by the relentless tabloid media stories about aberrant business behaviour. It creates a misleading impression. We notice instances of businesses behaving badly precisely because they are the exception, not the norm.
Businesses must achieve some degree of mutual agreement with those they serve otherwise they would not exist. The best way to grow small or medium businesses is for satisfied customers to recommend them to other people they know. This hardly fits the picture of the rapacious business person ripping of customers in order to profit handsomely, although of course such people do exist.
What also gets far too little attention is the commitment that business owners have to what they do, and the satisfaction they derive from having been able to provide value to customers over the long term. This writer worked for Business Review Weekly, a national business magazine, and I was repeatedly struck by the impressive stories of commitment.
There is often, literally, a high level of creativity, at least in the early stages – there was nothing, then there was something. That requires imagination, discipline and determination. Once businesses get to a certain size inventiveness becomes less important and the emphasis necessarily shifts to managing processes and people, the latter usually the greater challenge. Doing that well requires great fortitude.
Business is not just necessary economically, it is, more often than not, one of the better parts of the life of the community. Yet that truth is neglected. Many of the people I interviewed were appreciative that someone was even noticing, that there was some acknowledgement that their story mattered. Unlike big corporations they did not have public relations departments tasked with manipulating the media and the public.
'Taking a more refined, less prejudiced, approach to business is important to arriving at a true understanding of Australian society. The business people who spend their lives serving customers and creating a successful enterprise deserve that much.'
Why, then, is business so often presented in a negative light? One reason is that it is associated with the ideologies of capitalism and the political right. So it is worth remembering that business long predates the modern capital markets or the ideas of Adam Smith. It is even hard, given the range of countries described as ‘capitalist’, to determine exactly what the word means, besides something other than socialism.
Another reason is the problem of scale. Once organisations get bigger than about seven people, hierarchies start to develop and there is a shift away, at least in part, from the focus on the customer. Managers are appointed and internal power dynamics begin to develop. Some business owners handle this well, many do not. The skills required to guide growing enterprises require not just how to create a valuable product but also an understanding of human psychology, as well as knowing how to scale up production systems.
A third reason is that when the word ‘business’ is used people tend to be referring to big corporations. These are very different and should only loosely be defined as businesses. They are usually run by professional managers rather than owners. The nominal owners are typically institutional shareholders, who manage the funds on behalf of somebody else. Thus, shareholder meetings are managers talking to managers, which dissipates the significance of ownership. It is certainly not direct private ownership, which the International Monetary Fund describes as an essential feature of capitalism.
Corporations tend to suppress free markets, which the IMF also describes as a required feature of capitalism. Counter-intuitively, small and medium businesses often benefit from competition from local companies, although it is very different when the competition comes from foreign suppliers that can undercut the market because they have lower cost bases. The reason is that the overall market tends to expand. When BRW beat Kerry Packer’s Australian Business it was assumed that more advertisers would come to BRW because it was the only remaining option. It didn’t happen. All that occurred was that the market shrunk and eventually the business magazine category in advertising vanished, weakening BRW.
With corporations it is the opposite. They benefit from removing competition. Which means that, unlike small and medium sized businesses, they do not so much serve their customers as control them using their market dominance. A business intelligence analyst once told me that he witnessed many global corporations planning their strategies for product releases many years in advance, sometimes more than a decade.
That removal of competition, usually by acquiring competitors, is really the opposite of free enterprise. As for their internal dynamics, corporations are generally little different from government bureaucracies, especially at the upper end of the managerial hierarchy. In that sense, the line between socialism and capitalism is blurred. The brilliant ABC series Utopia, set in a government bureaucracy, could just as easily, with a few tweaks, have been set in a large corporation.
Taking a more refined, less prejudiced, approach to business is important to arriving at a true understanding of Australian society. The business people who spend their lives serving customers and creating a successful enterprise deserve that much.
David James is the managing editor of personalsuperinvestor.com.au. He has a PhD in English literature and is author of the musical comedy The Bard Bites Back, which is about Shakespeare's ghost.
Main image: High angle shot of two businesspeople working at the bar in a cafe. (Getty images)