Mind Your Business

Illustration by Ayo Arogunmati

Defining words correctly can save you time and increase your tolerance for disappointment. Relative words such as like, love, peace, harmony, win and success pull our behaviour to match the expectations embedded in those words. But in everyday speech, we fail to recognize the words that push our behaviour towards an expected outcome. The difference in pull and push words are less of an issue in written form because writing enforces boundaries, more restrictive than speaking. With speech we can course correct our logic train but we must get it right before publishing.

A musician might say they work in the music industry and in the same conversation refer to the music business, not to confuse you but because the difference is unimportant, perhaps irrelevant. It is not only artists who make this claim, but also people who work in what society deems non-creative spaces. But do the two words, industry and business, mean the same thing?

The seamless transition from business to industry during speech suggests the person may be unaware of their error. The word business refers to the act of buying and selling and those who work for the business earn an income for performing a specified task.

A business always has one objective, to earn a profit, otherwise it would be called not for profit. Business wants to grow its profits, but industry I'm realizing is a different engagement. Industry is the collective knowledge of all participants. Industry is inclusive, while business is exclusive.

Veblen was an early thinker on the two spheres of industry and business, but he is more famous for his theory on *Veblen Goods*. The popular concept in economics suggests that some items have higher demand at higher prices, for example a Rolex watch. This is in contrast to the normal demand curve, which shows that demand falls as prices rise.

While he is more known for his demand theory, an often ignored concept are his thoughts on industry and business. For Veblen, industry and business are separate spheres but they are interdependent. Business is concerned with profit.it ensures it remains profitable through exclusionary behaviour such as imposing regulatory constraints. You may want to start your own bank but you can't because there are regulations to exclude you. Other forms of exclusion includes patents, trademarks and copyrights.

While the exclusionary methods help us determine when we are in business, it is how profit is organized that prohibits industry growth.

Business is interested in its differential accumulation and often uses a breadth approach to achieve profit accumulation. One way is to acquire industry players that are expanding the total production. The other way involves investing in innovative activities that expand total production.

The acquisitive approach ensures that total production remains the same but the business share of total production increases relative to other businesses. The innovative approach has to invest in industry and is less favoured by business because this will raise total production.

Many people are frustrated by the lack of creativity in business and want business to do more to tap into the industry knowledge. But the frustration develops not from business pursuing its stated objective, profit, but the lack of understanding of how profit is organized across firms operating a business. If more firms take an acquisitive approach then we should expect a slower industry growth. Silicon Valley has lost some of its shine because more and more businesses are taking the acquisitive approach. The lack of a competitor to Google or Facebook is a sign of the industry structure in search and social media. Business, in our contemporary times sabotages industry.

Artists should be mindful of the organization of profit. Business makes its purpose clear implicitly through rights in the form of trademarks or patents or explicitly, by stopping you from entering a concert hall if you don't have a ticket, for example.

The acquisitive breadth approach leads to higher and higher differential accumulation of existing profits, resulting in lower and lower creativity in business.

Profit is not inherently a bad metric, but it does lead to perverse behaviour when it is organized based on the stagnation of total production and not on long term sustainable innovation. If artists understand the organization of profit within business, it opens the opportunity to foster more industry growth and the entry of innovative participants.

Notes

[1]Business means big business, pursuing monopoly profits and not competition

[2]https://en.wikipedia.org/wiki/The_Theory_of_Business_Enterprise

[3] Other forms of exclusion includes patents, trademarks and copyrights

[4] Differential accumulation is the profit share of an industry relative to other businesses

[5] Another way to expand differential accumulation is through a depth approach, using cost cutting to drive  margins, but it is often short-term. You can't cut costs forever