A Better Assumption
The Significance of Money
Fairness and Value
A Mixed Blessing
'Economies' of Scale
Return to:World Views
Ardue Site Plan
See also:Business Focus for the Owner-Director
The grossly mistaken idea that individuals set up in business only out of greed for monetary riches is too often allowed to go unchallenged. A simple change of perspective is enough to reveal business as the great benefactor of mankind because it, and it alone, generates the goods, services, salaries and taxes which make the material comforts of civilisation available to billions of people throughout the world. Thus the founder of a good business deserves to be honoured above all politicians, judges, bishops, bureaucrats, and others whose comfortable lifestyles ultimately depend on a successful outcome to the efforts of a relatively small number of entrepreneurs. However, it is necessary to distinguish good business from bad.
A moment's reflection should be sufficient to show that civilisation advances mainly because people are willing to exchange mutually beneficial services. This includes goods — because goods are 'good' only if they are serviceable. By exchanging surpluses generated by individual skill and labour, advances in knowledge and improvements in individual performance are shared out to benefit whole populations.
The answer is surprisingly simple: fairness and value are both determined by the participants in each individual transaction. No exchange takes place without the mutual agreement of both parties to the bargain. The bargain is an expression of each participant's subjective assessment of the value of the service offered and accepted. When both participants are satisfied with the exchange, each considers himself 'better off'. No third party is required, or entitled, to intervene. The mutual exchange of surplus goods, services, or money is a natural human activity which will tend to take place whenever and wherever humans meet and communicate with one another. The intervention of governments or other regulatory agencies merely gives rise to complications and should be countenanced only in circumstances in which it can be clearly demonstrated that untrammelled exchange would be detrimental to the interests of society at large.
Money has proved itself so useful in facilitating exchange that it has become customary to record the value of each transaction in terms of a unit of currency. It is important to bear in mind that the accepted value of the unit of a currency is not something that can be arbitrarily determined by a bank or a government. It is determined essentially by the aggregate of the very large number of transactions which are recorded in terms of that currency. If a currency is held in low esteem, perhaps because of a history of rapid devaluation through inflation, people will prefer to use a 'stronger' currency which they hope will ensure that the passage of time will not seriously erode the value of their deferred services.
But large size has its disadvantages. Sheer momentum implies resistance to change in response to subtle changes in the operating environment. Furthermore, the bigger a business becomes, the more wasteful it inevitably gets. For long-term success, the founder of a business simply must put his customers' needs and preferences at the top of his list of priorities. For the employees of an established business, on the other hand, there is a strong temptation to give relatively more weight to their own pay-packets, job security and conditions of work, and thus to put up costs while allowing service standards to slip. Large organisations also attract more attention from legislators and their attendant enforcement agencies and thus have to expend more resources in complying with (or getting round) ill-considered regulations and idiosyncratic interpretations of legislation.
Financial muscle enables the large business to enlist the aid of highly talented publicists, lobbyists and advertising agencies to promote its interests and present its large-scale predatory activities in the best possible light while blurring the uncomfortable details.