Biting Off More Than I Can Chew

OK, so one final blog entry for the class and I will do my best to make it outrageous!  I’ve been reading a couple of author’s recommended to me by another professor.  First, a couple of books by Peter Turchin called “War and Peace and War” and “Historical Dynamics”.  Turchin is sort of a quantitative World Historian attempting to understand why civilizations rise and fall.  He uses Khaldun’s concept of asabiya, solidarity or cohesion, as an indicator of civilizations ability to expand / contract or collapse.  He provides several cases in support of his analysis and argues that having metacultural frontiers helps in the formation of asabiya. 

 

The second author is Joseph Tainter, “The Collapse of Complex Societies”.  Tainter is an archaeologist who puts forward an economically-based theory of social complexity, arguing that early investments in simple advances yield significant returns, but the more complex a society the more we get into a domain of diminishing returns.  An example would be education.  The most valuable education results from early education.  It is most broadly usable, etc.  As we become more specialized it takes more and more investment to achieve probably marginal at best societal returns.

 

So what does this have to do with American business?  As I read these books I thought about how businesses, or corporations as the form in which most businesses are presented, go through the cycle of birth, life, and death.  In my own experience the new company has strong asabiya, reason to live and cohesion.  In my two cases having a large, obnoxious and legally aggressive opponent allowed the creation of an “enemy” (or us and them) which contributed to a focused attack into the business sphere.  As the enemy was defeated and the companies grew, it became harder and harder to maintain that cohesion.  As territory was won, leaders grew more reluctant to take on aggressive strategies, resulting in a defensive posture that often led to loss of territory.  Like how I am using a military metaphor for businesses? ;-)  What is interesting about this entrenchment is that when you are being defensive, anything lost is never regained.  There is no offensive capability.  In the case of my two businesses we never completely went on the defensive, but it is a tough fight to remind people to keep on attacking even when things seem to be going well.

 

Secondly, as the companies grew we found significant inefficiencies (not nearly as inefficient as our competitors and certainly nowhere near close as to other large companies I have worked in) that dragged things down a bit. Luckily, we still retained a comparative advantage over our opposition.

 

So the questions I ask myself regularly – Can a business maintain asabiya and the aggressiveness necessary to continue to grow?  Does it need enemies?  When we get too dominant, say in the case of Ford Motor, do we by definition exceed our levels of efficiency and, without the cohesion (or asabiya) that drove us early on, are we doomed to collapse or at least cycle through massive losses before identifying and prosecuting a new enemy?

Comments

[Salvatore DeGennaro]

Wayne, I like your analogy between business and nations. I think there are many parallels. It is a credible point that nations seem to need enemies to maintain cohesion. Just look at the level of patriotism in this country during WWII and the level of patriotism now. Likewise, I am sure in business the idea of having an enemy makes people work harder and perform better. The “us against them” mentality appeals to a competitive nature that a lot of people have. Take away the enemy and perhaps that drive is gone.

[www.facebook.com/profile.php?id=7800990]

The classic explaination for why civilizations fall has to do with them collapsing under the weight of their own decadence. They linger on for awhile, only to eventually be finished off by a tribe of lean, agile, and hungry nomads/barbarians from the Steppe/Desert. Over time, the invaders become domesticated and live large on the fruits of civilization until they too become fat, old, and lazy and are kicked out by another wave of young invaders.

It's astounding that observant Philosophers and Historians from Ancient Egypt, Greece, China, and Medieval Muslim Middle East have made similar arguments like this. Most good world/global historians reference this.

Considering most pre-modern governments (monarchies, aristocracies, and republics) were also businesses enterprises (that had the power of the state behind them), this is an apt analogy for businesses today.

[Wayne Z.]

p { margin: 0; }
This is the reason for the references I made. They argue that perceived decadence is reasonably either unidentifiable or indistinguishable over time, or is simply symptomatic rather than causal.

[Tom D]

The gales of creative destruction occur in natural fluctuations during the business cycle and regenerate the market. At least that's what those of us who worship at the idol of Schumpeter would claim. Seems to me you've teed up at least some of the factors that drive the bus towards those gales.

Been a pleasure being in class with you--take care.