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Walt,
I enjoyed your description of "good business", "providing value", and "win/win" objectives. However, in the end, business really is much like the stock market, with some of what Jerry Rehert called a backwind -- or perhaps a headwind depending upon whether a market is expanding or contracting. Let me explain.
Say you and I make widgets -- we are in competition with each other. The market for widgets is not infinite, it's estimated to be a $100M market this year. Yes it could grow some, or it could contract some. The point is that there's only so much market for widgets and we're competing for it. If I am successful at capturing market share, you loose. If I capture enough, you have to close factories and people who work for you loose their jobs. The attributes of good business practices, providing value to customers, and creating win/win scenarios with others are tools that I may use to capture market share -- or >perhaps< in the widgets market those attributes are of little consequence.
By the end of the year my market share will have increased or decreased, and your market share will have increased or decreased. And for the most part one will come at the expense of the other. In years when the widget market is expanding the looser will be somewhat buffered, and in years when the widget market is contracting the looser's bad fortunes are compounded.
There was a series of articles in one of the business periodicals some time ago about companies who were considered "best in class" in business practices and providing value in the 80's. Many of them lost significant market share over time because ultimately their markets did not value those attributes as much as innovation. In those industries, the companies who came out ahead were those capable of investing in R&D -- probably at the expense of some "best in class" attributes.
This is why I believe the "good guy" approach to business has to be kept in context. To the degree that being a "good guy" lets me take market share from you it's useful. If our particular market doesn't care about "good guys", then it's of little value.
BTW -- I prefer to do business with local companies who behave in the manor you describe. A good example is small computer shops. They provide more value and are better community citizens than the big computer warehouses. Unfortunately, most of them have lost market share, and many have gone out of business, to the benefit of the big warehouses.
Take care, Dave
zdave@xxxxxxxxx
-----Original Message-----
From: Walt Downs [SMTP:knight@xxxxxxxxxxxx]
Sent: Friday, June 05, 1998 10:37 PM
To: RealTraders Discussion Group
Subject: Re: Gen: Is trading gambling?
Hi Pete,
You have stated this argument several times. I didn't respond further
because the list had been chewing on the subject for some time.
However, It *has* been a while, and it *is* Friday.... so I would
like to offer a rebuttal. <g>
To compare business to trading in this context is fallacious.
Trading:
The primary goal of trading, to put it bluntly, is to take the
other fellow's money. However, BOTH realize that they are playing
a zero sum game. BOTH realize the risks and the rules involved, and
BOTH accept that risk, each believing his view of the market to be
superior. If we do harm to the other person by taking his money
so be it. He understood the risks when he took the trade. The
winner has done no wrong. This is "good trading"
Business:
Let us address the modern concept of what is considered "good business":
The goal of a good businessman is to be a *provider of value*. By this
we mean that he provides for the needs of his clients, employees,
partners, and those who sell him what he needs to produce his product.
It is a synergistic "win/win" situation for all concerned. He stays
up nights thinking about how he can add value to the lives of those
that are connected with him. For this effort, he receives money.
Lest I now be accused of "Lutheran ranting", let me point out
coldly and logically why this approach is correct, why it works, and
why the business world came to embrace its use:
How does our businessman fair?
He is often well-liked and respected by his clients. His partners like
him, and the fellows he orders goods from make sure to get his orders
out first, and they always make sure to remind him if he has forgotten
a discount he can apply. All understand that he tries his best for them.
Since all are happy, no one complains and the government and the state
have no reason to give him grief. In every respect, his business is very
likely to succeed.
Let us now consider the old "dog eat dog" business paradigm. *This*
businessman has *one* goal: MAKE MONEY. He screws his suppliers out
of every nickel. He believes business is WAR. He provides product of
little value and asks high prices. He counts on "hype" to get the
selling done. He fulfills no real needs, and he produces no lasting
value.
How does our businessman fair?
His (ex)clients hate his guts when they figure out they have been ripped
off. His partners watch their backs. His suppliers send out his orders
last, and they make sure to charge him full price. Everyone is
complaining so loudly, the government and state are on him like
white on rice. His chances of success are not good.
This approach gives power in the beginning, but destroys in the end.
A perfect example of this is what has happened to Japan, as well as
our old friend Jake B. .Much of the legislation that has shackled
honest enterprise has been a direct result of such.
Granted there are a few, like Microsoft, that can get away with it, but
only by virtue of their OS. Still, they are carrying a lot of law suits,
and everyone is trying to find a way to eliminate them. Some guy in
France smacked Bill Gates in the face with a cream pie, when he was
there on a business deal. Money is power, but the Gates mansion must
seem cold and empty at night.
Why has business changed its view? Because they understand that
creating value and fulfilling needs also creates value for them. It
insures their survival to a much greater degree, and for the long haul.
This is "good business"
SUMMATION:
Good trading and good business can not be considered analogous
at all. Trading is a game of speculation between two participants who
understand and agree to the rules of the game. The goal of business
is to provide value.
References:
Competing on the Edge: Strategy as Structured Chaos by Brown and
Eisenhardt
Sense and Respond: Capturing Value in the Networking Era by
Nolan and Bradley (Harvard Business School Press)
Ben and Jerry's Double dip: Lead with Your Values by Ben and Jerry
Regards,
Walt
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