Dear Bob ...
[Regarding "The reason corporations exist," Advice Line, 4/20/2008)] the gambler analogy is particularly intriguing [the best businesses think of money as gamblers do -- as a way to keep score -- Bob] and, I would bet, the very philosophy that most entrepreneurs start out with. (It was that way with my wife and her business.)
I think you make some very good points. I'm old enough to remember when the purpose of just about every business was to provide goods or services that satisfied customers and provided adequate revenue for wages, expenses, and a fair profit for the authors of the firm's success. I would operate a business that way, myself. I strive to do my job in that spirit. Philosophically, I am with you.
But my philosophy has been sorely tested. I have watched over the past 35 years or so the escalated corruption of business: "Creative" accounting, vaporware, corporate Ponzi schemes, unconscionable salaries and bonuses for failed executives, and the quickly-built house of cards that is sold to a Google for an obscene price.
I've watched familiar product brands consumed, assimilated, and ultimately diminished by conglomerates. I've watched tens of thousands of jobs moved offshore, sacrificing quality, safety, service and customer goodwill. I've seen companies slash payrolls, so as not to fall short of analysts' dividend forecasts for a quarter. I've found myself out on the street more than once due to some of these circumstances.
These days it seems to be ALL about the profit. Fewer and fewer companies are "going to be around very long." It's grow fast, sell fast, run fast - and the devil take the hindmost.
(And don't get me started on predatory lending ...)
I am a staunch pro-business capitalist -- and it shames and sorrows me to see looters thriving under our colors.
So, Bob, I'll concede that your three purposes of a business are correct and primary -- in a principled, rational world. But we ignore, or deny, the realities of our current business environment at our own peril.
Sorry to come off so cynical.
As always, thanks so much for your response.
- Increasingly cynical
Dear Ambrose ...
I've been thinking more about this topic since my first response. I think one of the disconnects is the difference between being descriptive and prescriptive. I was being the prescriptive -- it's how business works well. You were being descriptive, I think.
The problem with the descriptive approach to answering this question is that there is no real answer, except in the case of a new venture.
In a new venture you could talk to the person starting it up, dig past the baloney in the business plan that's there only to attract investors, and find out why the business actually exists (a complex mix of the desires for independence, wealth (or maybe just affluence), achieving something important, status, or whatever.
In an existing business, every stakeholder with influence over business direction might easily have a different answer, and the business itself, being a legal fiction, won't be in a position to reply. The reason the average business exists is that the aggregated preference of everyone involved is that it exist, and do a bunch of stuff, whatever that is.
This is, in short, one of those onions that, once you've finished peeling away all of the layers, has nothing left.
- Bob
Posted by Bob Lewis on April 28, 2008 08:09 PM
