Altometrics Blog

Intelligence Amplification, Data Visualization

On Business

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From SirRobert.net

ABSTRACT

This is an explanation of modern business. It introduces you to the six main roles in a business as characters: owners, directors, officers, managers, contributors, and customers. It starts with the relationship between owner and customer. In the early story–really a sort of prologue–that shows the evolution of a man into the owner of his own business. He begins as a man with some property and, through a series of mostly glossed interactions becomes first a “property owner,” the lowest form of owner in the business sense, then a “seller” and a “businessman.” Through an unexpected twist, the businessman becomes a property owner again, but this time on a different level, with a more complex relationship to his original property.

During the course of this prologue, another character, the customer is introduced. The customer undergoes his own, lesser transformation starting out as a seeker of property, then becoming a “buyer”, before maturing into the Customer. The Customer is the owner’s foil–the two of them act out a relationship that exists as the precursor to a business. This relationship, itself, evolves and takes on a more complex tone. To deal with the expanding responsibilities involved in the relationship, the owner takes on a series of facilitators: the director, officer, manager, and contributor become involved in the owner/customer relationship collaborating (and sometimes vying) to keep it functioning

MY STUFF & YOUR STUFF A PROLOGUE ABOUT PROPERTY AND TRADE

Before the idea of business is just simple trade. You want someone else’s property and someone else wants your property, so you trade. It’s really important to establish that fundamental concept as the root of business. In the end, all business is this same kind of trade at different scales. I know it sounds really obvious, but sometimes the basics can get lost in the “higher theory” when we try to understand things with all the layers and complexities of real-world concerns. Keep that simple trade in your mind.

For our purposes we are going to assume the following broad definition of property: A thing is your property to the extent that you have the right to use it at your discretion. In this definition, we’re considering a person’s labor to be property. Of course, we’ll also include in property things like land, cars, and onions — physical things that are yours. There’s a special kind of property called “money”. Money gets to be in its own special “class” of property because it’s not valuable on its own; it’s a proxy property. People give you money so they don’t have to carry all their property around when they want to make trades, so it stands in the place of other property.

In this discourse we’re mostly going to assume that you’re trading things for money, and money for things. Because money has a special status as property, trading involving money has a special status among trade. We call it “selling.” When you trade your property for someone else’s property, you’ve engaged in a trade. When you trade your property for property in the abstract (money), you’ve engaged in a sale. In a sale, the one with the concrete property is the seller. The one with the money is the “buyer.” Just as the idea of trading is fundamental to having a clear understanding of how a business works, so does this relationship between buyer and seller. Everything that happens in a business resolves to this relationship.

GETTING BUSY FROM TRADE TO BUSINESS

In a sale, one person has some property and trades it to another for his money. If this happens once, or a few times, he’s just selling his stuff. But sometimes someone realizes that they can get property that other people want and can’t or won’t get on their own. If that person decides to busy himself with gaining more of the property to sell, then he has just started a business. If a person is doing this, he is making himself busy towards the task of getting this property to sell to another. That is his “business” (busy-ness), and he has become a Businessman — a man of busy-ness. One of the interesting things about being busy is that people tend to get better and better at the things we do. After a while, a busy person (who is good at his work) has various fixtures in place to streamline the process of acquiring the property to be sold.

For example, imagine a craftsman who makes furniture. In this scenario, the craftsman makes furniture for personal enjoyment. Every once in a while he comes across some wood that’s especially nice and makes himself something out of it. Over time, enough of his friends mention how nice it is that he decides to start making furniture to sell to others. At first he still makes pieces very occasionally. After a while, he meets a property owner with a large amount of timber on his property. Our furniture craftsman returns to the land owner week after week to get more choice wood. Over time, the land owner is the de facto supplier of all the craftsman’s wood.

Look at what has happened: the Businessman started out with no particular process in place for acquiring fine wood for his furniture. Over time, because he is immersed in that world, he makes a series of contacts. One of them consistently provides high enough quality wood to satisfy the Businessman, so the Businessman always buys wood from him first. Now he no longer has to spend time and energy searching out high quality timber; he has a ready supply of it. The value of this to the Businessman is that he wants to busy himself with making furniture, not with finding timber. The finding of the timber is a necessary step to the making of the furniture.

This knowledge about where to acquire high quality timber has special value to the craftsman: the way in which he busies himself to make furniture how has some proprietary knowledge attached. He can always go to his timber source without having to look around for a provider of timber each time he wants to make a piece of furniture. His business process now includes proprietary knowledge and relationships that increase his production and decrease the cost of building furniture. Because there’s value in this knowledge and relationship, he know owns something else valuable besides his furniture. This is a very important development: the business, itself, has become property. This is enormously significant! Now that there’s some proprietary process or value in the way the craftsman busies himself, he could tell someone else how to do the same thing. He could let another craftsman in on his secret supply of high quality wood. Let’s say he decides to stop making furniture, but knows an up-and-coming furniture maker (a “joiner”). He approaches that joiner and tells him that he will show him where he gets his wood and how he builds his furniture in exchange for some money. They agree and complete the exchange. In this moment, the craftsman’s business has become property and he has sold this property. In modern business, it is assumed that businesses are treated as transferable property and are owned. At this point, the Businessman has become the Owner.

LET’S MAKE A DEAL GIVING AND GETTING AS WAR

Buyers and sellers generally look out for their own interests. This means that the buyer’s and seller’s are focused on their own interests during the exchange. This creates a tension: both the seller and the buyer want to maximize their gains and minimize their losses. You can think of sort of like playing Tug-of-War: each side pulls for what he wants and tries for the best outcome. Assuming it’s a simple sale in which each party wants exactly what the other is willing to give, and if the buyer and seller are evenly matched (in terms of savvy, for example), you generally get a “fair trade” in which each party gets exactly what they want. When one party is at some sort of disadvantage, you often get a lopsided deal. In such a deal, the buyer or seller may get a better deal than they normally would because of some extenuating circumstance. When the seller has the advantage, the buyer may pay more than he otherwise would (this is sometimes called things like, “selling water to a thirsty man”). When the buyer has the advantage, you get things like sales: for example, if the seller accidentally creates more property than he can store, he may sell it to the buyer for less than he normally would.

So, the owner of the business hopes to get a maximally favorable outcome in his trades. This means that he wants the most money he can get for the least amount of his property. Similarly the customer wants to get a maximally favorable outcome in the trade. This means that he wants to get the highest value property for the lowest amount of money. Their two interests are in tension; in fact, they are opposites. The ideal case for the business owner is to relinquish no property in exchange for all of the customer’s money. The ideal case for the customer is to receive all of the owner’s property in exchange for no money.

This tension is the essential nature of business exchange, and understanding this tension is essential for a full and complete understanding of business structure and organization. Of course, the deal still needs to be agreeable to both parties, so they each offer the least they think the other will take in exchange. A savvy owner provides enough property for the customer to remain interested in the deal (and future deals), and a savvy customer provides enough money for the owner to be motivated to continue generating property inexpensively.

GETTING HELP GOING FROM BUSY TO PRODUCTIVE

At some point the business grows so much that the businessman is so busy that he needs help to get everything done. He has grown his processes sufficiently to meet the needs of lots of customers, perhaps with multiple kinds of property (for example, offering two different products– such as a chair and a table). With the addition of a new person, the formerly simple seller-buyer relationship now becomes a little more complex.

Over the next few posts, we’ll look at the addition of four new roles to the relationship:

  • Contributor
  • Manager
  • Officer
  • Director
As the business grows, these four roles can become necessary to maintain a good balance in the tug-of-war between buyer and seller.