It’s not personal, it’s just business!

Here’s a summary of the main points of the book: The Theory Of Business Enterprise. It’s an interesting read and it definitely reflects the direction of our societies today. The video by Ray Dalio sums up the first few chapter of the book.

Our entire society is turning into a giant business and everything is getting impersonal.

Introductory

Veblen’s main points:

  • The majority of businesses today are run for profit in a machine-like manner.
  • Businessmen reap the most reward by creating a system. The system gives them wide indirect authoritative control of our daily lives.
  • People can be coerced into unwilling situations based on their personal circumstances and the lifestyle they want to lead.

Actionable points:

  • Growing a freedom fund enables us to take deliberate action so we will not be “coerced” into doing things we dislike.
  • Minimalizing the stuff we consume means we will have more opportunities to take chances with our lives.

The Machine Process

Veblen’s main points:

  • Modern societies are governed by machines. Every vocation and occupation are part of the comprehensive machine.
  • Every industry depends on each other in an endless sequence of processes and none can exist independently. Interdependence is the largest saving of labor in modern industry.
  • The efficiency of the machine/system depends on uniformity, precision, and accuracy. Standardization reduces the need for reflection and inference. The end product is what matters the most.
  • A system breaks down and the end product suffers if there are many disruptions in the process. No disruption, however, means inefficiency gets perpetuated.
  • Money is both a mean and a result to make societal adjustments and businessmen are the decision-makers.

Actionable points:

  • Becoming a specialist or a generalist requires different skill sets. You have to choose carefully because there are risks and rewards to your choice.
  • No man is an island. We all have weaknesses and we need to cooperate to bridge our gaps.
  • There’s money to be made if you have a different style to the current “efficient” approach.

Business Enterprise

Veblen’s main points:

  • Business is simply a transaction of buying and selling, and the primary motivation of a business is profit. In order to make money, a business needs to have methods and principles to influence existing cultural norms.
  • The more radical an idea, the greater value an idea can provide to society. More value represents more profits, greater hurdles to overcome, and less competition. However, radical ideas often fail because society doesn’t accept it. Business is a speculative attempt to take advantage of demand.
  • Business is about matching transactions to solve disturbances in processes. A speedy arrangement is a result of the alignment of business interest. It’s tedious to coerce people into any deals if the parties are not interested.
  • People who do the intellectual work need to prepare for pecuniary motives. The businessman’s ulterior end is an increase of ownership to benefit his self-interest. Whether a business is successful depends on its expediency and pressure, not industrial serviceability.
  • The larger an organization grows, the more wasteful and parasitic it becomes. Useless jobs that contribute nothing substantial to the society grows with the size of the organization.

According to Veblen’s own words:

“These pecuniary aims and ideals have a very great effect, for instance, in making men work hard and unremittingly, so that on this ground alone the business system probably compensates for any wastes involved in its working. There seems, therefore, to be no tenable ground for thinking that the working of the modern business system involves a curtailment of the community’s livelihood. It makes up for its wastefulness by the added strain which it throws upon those engaged in the productive work.”

Actionable points:

  • Create an honest business will allow you to generate continuous recurring dividends.
  • Creativity is the ability to accept failure. Don’t be afraid of failing.
  • Working hard will not reap you benefits if you are not working on the right things with the right people.

Business Principles

Veblen’s main points:

  • Ownership condition the growth and aims of business, which is why upper management inculcates views and principles with its employees.
  • But, business principles can be flawed because they rest on sentimental grounds: the principles of (primitive) blood relationship, clan solidarity, paternal descent, levitical cleanness, divine guidance, allegiance, and nationality.
  • Ownership is defined as the extension of discretionary control over labor. “Thus labor, in the beginning, gave a right of property.”
  • The concept of ownership breaks down when a person did nothing to achieve property rights, ie. inheritance. The money economy allows the transfer of ownership of the craftsmen to whose he sees fit to transfer.
  • However, if the value of money is not stable, then the function of money will cease to exist. Ownership runs in terms of money and money is trust.
  • Any judicious business venture will accrue “ordinary” rate of profits. Exploitation of ownership and labor will result in “extraordinary profits.”

Actionable points:

  • Ownership is what generate wealth. In order to own something, you need to create it.
  • Don’t just work for money. If the value of money can be manipulated, then you are essentially working for nothing.
  • Use your money wisely because somebody will have to pay the “real price” for the things you consume.

Value Of Loan Credit

Veblen’s main points:

  • Credit and loan are deferred payments for purchases. In order to increase turnover, you need to take advantage of opportunities afforded by credit. Money provides control, which is a differential advantage in business.
  • An enhanced value of a property grants a further extension of credit, which can be used to increase earning capacity.
  • Trust is an extremely valuable commodity in times of crisis.

Actionable points:

  • Use your savings to increase control so you can increase your earning capacity.
  • Don’t destroy your reputation because you will limit your ability to utilize credit to build wealth.
  • Productivity = Earning/Time. You can raise your productivity by increasing your earnings or reducing your time.

Modern Business Capital

Veblen’s main points:

  • Goodwill is “immaterial wealth” or “intangible asset.” Goodwill refers to business relations, reputation for upright dealing, franchises, privileges, trade−marks, brands, patent rights, copyrights, exclusive use of special processes guarded by law or by secrecy, exclusive control of particular sources of materials
  • Corporation is a higher business form of sole ownership and partnership because it grants businesses greater access to credit. The differentiation factor amongst rival corporation is its “immaterial wealth.”
  • Credit economy > money economy > goods economy. Credit allows an entity to increase its earning capacity through the use of money and employment of goods and equipment. Those with money can exert direct control over those with goods. However, having credit allows a person to remove the need of money and the control of goods.
  •  There will always be a discrepancy between industrial needs and community needs due to pecuniary interests.
  • The stock market is manipulated so business owners can reduce their competitions business value. This will reduce their competitions earning capacity because they are unable to access credit. Credit doesn’t always guarantee a higher earning capacity because business traffic is unpredictable.
  • Because traffic fluctuates, businesses need to accumulate gains to prevent the change in their earning capacity.

Actionable points:

  • Leverage on your network so you can build credit.
  • Find out the optimum level of debt you should take to increase your earning capacity
  • Use your savings to reduce your debt exposure so you can maintain your optimum earning capacity even if your business traffic fluctuates.

Theory Of Modern Welfare

Veblen’s main points:

  • Business oscillates in a cycle – there will be good times and bad times. People work to obtain their livelihood so that they can survive in the old economy. However, in the new industrial economy, people work so businesses can make profits.
  • In the old economy, the welfare of the community was regulated “by the skill, dexterity, and judgment.” In the new economy, industries are managed based on price and profits.
  • Boom and bust happen because of price and profit manipulations. Under the “natural” and “money” economy, crises do not occur frequently unless they are due to natural phenomenon.
  • Creditors to seek to mitigate the severity of liquidation during a depression by reducing lending because money value is inherently unstable.
  • On the long term, the supply of consumable goods will match its demand. Our wants are indefinitely extensible, therefore, we will never be satisfied. Production capacity needs to meet the demands so equipment, machine, and people need to work overtime.
  • Everyone is, therefore, working to out-consume and out-produce each other in a competition.
  • Depression is primarily a business difficulty and rests on emotional grounds, that does not hinder it having grave consequences for industry and for the material welfare of the community outside the range of business interests

Actionable points:

  • Skills acquired through traditional education system may not be relevant in our modern day economy. We need to acquire financial literacy so we can survive and thrive in the 21st century.
  • Use debt and credit wisely because you will eventually have to repay your creditors.
  • We are as irrational as our emotions and economies. In order to get out of the rat race, all you have to do is to stop consuming.

Business Principles In Law And Politics

Veblen’s main points:

  • Modern politics is to protect the interest of business people. There’s no such thing as natural rights. Taking advantage of business politics allows businessmen to accumulate wealth through ownership.
  • A society is not free unless there is no interference with others’ buying and selling, except by means of buying and selling. A workman is essentially coerced to work in the machine economy because that is the only way he can find his livelihood. On the other hand, workmen need to be able to take similar advantage of their employers to bring them to terms.

Business enterprise is an individual matter, not a collective one. So long as the individual business man sees a proximate gain for himself in meeting the demands for war funds and materials to maintain the courtly and official establishments that go with military politics, it is not in the nature of the businessman to draw back. It is always his profits, not his livelihood, that is involved; the question which touches his profits is the relative gainfulness of alternative lines of investment open to him. So long as the pecuniary inducements held out by the state, in bidding for funds or supplies, overbalance the inducements offered by alternative lines of employment, the business men will supply these demands, regardless of what the ulterior substantial outcome of such a course may be in the end. Funds and business enterprise are now of so pronounced an international or cosmopolitan character that any business man may, even without fully appreciating the fact, lend his aid to the hostile power as readily as to a friendly power or to the home government; whereby an equable and comprehensive exhaustion of the several communities involved in the concert of nations is greatly facilitated.”

Actionable points:

  • Take advantage of loopholes in the law because rules are created to protect people with greater business interest than you.
  • Don’t be afraid to travel and take advantage of inefficiency on a global scale.

Cultural Incidence Of Machine Process

Veblen’s main points:

  • The stage over which affairs, political, industrial and cultural, run their course is no longer Continental or British, but cosmopolitan, comprising all civilized communities and all civilized interests.
  • The quantitative precision required in operating a machine is different from the skill for habitual thinking. The machine compels the adaptation of the workman to his work, rather than the adaptation of the work to the workman.
  • The more specialized we become in our profession, the wider the gap amongst classes of the population resulting in an ever weakening sense of conviction, allegiance, or piety toward the received institutions.
  • The conditions of life imposed upon the working population by the machine industry discourage thrift. As a result, people are discouraged from investing savings into real property. The natural right of property no longer means so much to them as it once did.
  • The machine technology not only trains the work men into materialistic iconoclasm, it has also a selective effect – ineptitude for an uncritical acceptance of institutional truths.
  • Modern science does not inquire about prime causes, design in nature, desirability of effects, and ultimate results

Actionable points:

  • Live beyond your means, cut out waste so you can focus on things that are meaningful to you.
  • It’s perfectly fine not to continue working in a corporate machine, take the time and explore what you want out of life.
  • Don’t stop asking questions.

Decay Of Business Enterprise

Veblen’s main points:

  • We will all share the same culture as we become globalized. The cultural scheme will comprise of many interlocking elements and no one of which can be greatly disturbed without disturbing the working of all the rest.
  • In their struggle against the cultural effects of the machine process, therefore, business principles cannot win in the long run; since an effectual mutilation or inhibition of the machine system would gradually push business enterprise to the wall
  • The future of business will be a hybrid growth – a blend of personal freedom and equality on the one hand and of prescriptive rights on the other hand. Business will take the shape of charity organization, clubs and societies for social “purity”, for amusement, education, and manual training of the indigent classes, for colonization of the poor, for popularization of churches, for clean politics, for cultural missionary work by social settlements, and the likes.
  • The values that will be conserved are solvency, thrift, and dissimulation.
  • People will be doing things for practical reasons, which are useful for private gains. Any new departure in public instruction, whether in the public schools or in private endowed establishments, is scrutinized with this test in mind; which results in a progressive, though not wholly consistent, narrowing of instruction to such learning as is designed to give a ready application of results rather than a systematic organization of knowledge. The primary test is usefulness for getting an income.
  • The literary output of the magazines is of use for carrying the advertising pages, and as a matter of business, as seen from the standpoint of the business man’s interest, that is its only use.
  • Readers who are less conservative and less patient of affectations, snobbery, and illiberality than the average are in the position of doubters and dissentients. They are less confident in their convictions of what is right and good in all matters, and are also not unwilling to make condescending allowances for those who are less “advanced,” and who must be humored since they know no better; whereas those who rest undoubting in the more conservative views and a more intolerant affectation of gentility are readier, because more naive, in their rejection of whatever does not fully conform to their habits of thought.
  • authenticity and sacramental dignity belong neither with the machine technology, nor with modern science, nor with business traffic

Actionable points:

  • Life is short, let’s just have some fun!

2 thoughts on “It’s not personal, it’s just business!

  1. Interesting review on an interesting book, I must say. It seems like this book shows you a very real side of business and how you should view it in order to take full advantage of business in today’s society.

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