The meaning of business

Lately, I've been mulling over a comment made by my uncle--who has the reputation in the family of being a super savvy investor--to the effect that it doesn't matter what a business does per se, so long as it turns a profit. I've argued before on this blog that my uncle's position unfairly impoverishes the concept of value. I've even gestured (crudely) in a few directions which might help us to enrich our concept of value.

Over at The Bastiat Society Blog, however, Ben Rast has a post entitled Business as Creative Act, which takes the first few steps down what I think is the brightest path toward a full and mature understanding of what business is (and why my uncle is mistaken). Simply put:

Business, as a creative act, draws on the very same strengths and suffers the same weaknesses as the creative act in art. They are more alike than dissimilar.

By "creative act," Rast means to emphasize entrepreneurship particularly:

We can illustrate just how much artistic creativity and business creativity have in common with the following paragraph of advice to writers, taken from an interview of William Faulkner published in the Paris Review in 1956:

"Let the writer take up surgery or bricklaying if he is interested in technique. There is no mechanical way to get the writing done, no shortcut. The young writer would be a fool to follow a theory. Teach yourself by your own mistakes; people learn only by error. The good artist believes that nobody is good enough to give him advice. He has supreme vanity. No matter how much he admires the old writer, he wants to beat him."

Now, notice how well it works as advice to entrepreneurs -- those troublesome dreamers and innovators in business -- with a few strategic substitutions.

"Let the entrepreneur take up surgery or bricklaying if he is interested in technique. There is no mechanical way to get business done, no shortcut. The young entrepreneur would be a fool to follow a theory. Teach yourself by your own mistakes; people learn only by error. The good entrepreneur believes that nobody is good enough to give him advice. He has supreme vanity. No matter how much he admires the old business, he wants to beat it."

Rast is astute to catch this similarity. People who launch new enterprises resemble artists in their drive to make something new, to add an original trope to the poem of humanity. But it's obvious, in a sense, that entrepreneurs are creators. What's not so obvious is that all productive activity (in the economic sense)--that is, all business activity--is creative as well.

To put it succinctly, human creativity is coextensive with human endeavor. Wherever people get stuff done, there people come up with new ways to think, do, and make. It doesn't matter what you call the end product--good, service, artwork--productive human activity demands creativity for the very simply reason that every object humans make with intention and every action humans do with intention bears the stamp, as it were, of the intention that brought it into being.

Aristotle identified four causes which obtain in the world: the material, the formal, the efficient, and the so-called final cause. It's the last one which concerns us here. The

final cause explains the cause of something in terms of its conceived end, or the purpose why it is made. According to Aristotle, [the] final cause is “the end (telos), that for the sake of which a thing is done.”

Every good is made and every service performed for the sake of something else--specifically, they're made and performed for the sake of the customer's good. That's why we call them "goods," right? Yes, yes, the producer produces goods in order to get paid, and the service provider serves in order to get paid, but they only get paid if someone recognizes the value of their goods and services. (And this objection is weak, since money is only and always a means to an end. "To get paid" can never be a final cause for making or doing something for the simple reason that money always points beyond itself to another end--one always exchanges the money on something else. It is not, simply put, final.)

Because goods and services are self-evidently intended to do someone some good (otherwise who would buy them?), we can say that economically productive activity is not only a functional activity, but is additionally an expressive activity--that is, it means something. In particular, it speaks to a vision of the good in general and the customer's good in particular. Even further, each good produced and each service provided changes the world; each good and each service brings into being a new state of affairs which must be presumed to be better than had the good been left unmade, the service undone (again, otherwise who would buy them?).

From this line of thinking two absurdly important conclusions follow:

1. Businesses really do change the world--so they'd better get it right. The presumption of "providing value," of making or doing something "good," is built into the very possibility of business. If a business doesn't add value--that is, if it doesn't make the world a better place--then it has no business being in business. It seems almost too obvious to need saying, but... businesses may be judged by the same standard as every other human endeavor, and that standard is whether or not the business's making and/or doing makes the world a better place.
2. Investors are to companies what patrons are to artists--so they'd better get it right. Warren Buffet famously advises investors to buy shares of a company only if they'd be willing to buy the whole company. I'll take Mr. Buffet one step further. You should buy shares of a company only if you'd be willing to be that company's sole customer--like an artist's patron, buying, owning, and enjoying responsibility for that company's entire output. Just as being a shareholder means being wholly and individually responsible for (and dependent upon) a company's entire financial performance, so being a shareholder means being wholly and individually responsible for (and dependent upon) a company's entire, world-changing making and doing. Just like a patron, you've put money down so that the companies you own can make what they make, do what they do. You enjoy the financial fruit of the shares you own for the single, simple reason that the companies you own get paid for changing the world, and the world they're making and enacting is the world we all live in--the world our children are growing up in.