Useless Businesses and the Damage Done

Umair Haque, Director of Havas Media Lab, and one of my favorite troublemakers.  His recent article, titled Is Your Business Useless?, provides a great framework for thinking about the value of organizations and enterprises of all sizes. Good reading for people considering new ventures. As Guy Kawasaki says, “Tell me how you make meaning in the world?” It takes about as much effort, capital, life force, and other resources to start a business that has no social value as it does to start one that has piles of it. The ones that are imbued with real social benefit can operate on much less capital and return far more “value” to all concerned – investors, workers, and customers.  Too often, when we make economic calculations, we fail to recognize forms of value other than cash, but these other value measures tend to have a far greater impact on decisions than purely economic decisions.

Capitalism is a completely sustainable and efficient system if certain orders and rules are maintained. Specifically:

  1. The information to make informed economic decisions must be available to all decision makers. That means you and I can easily determine whether some transaction makes sense for us.
  2. Treasure must follow value. That means that the more value you create, the more resources you have.

Regulations have tried to safeguard these principles, but, as the banking crisis has illustrated, a global, complex economy makes policing much more difficult. But regulation shouldn’t be about puritanical right and wrong, but about applying the constraints that keep the economic engine growing at a sustainable rate – maintaining the bonds between value and money.

My family comes from Quakers, so I tend to seek out the simple truths. In the long run, nothing that anyone can do creates value at the rate that we saw the economy rise over the last decade.  If you look at the economic cycle from this perspective, all of the crashes were predictable. Regulation policy should really constantly be looking at the top ten places where money is being made and slow it down – not to punish success but to maintain an environment where success is sustainable and where there is some economic justice – where value and treasure move together. Ultimately, windfall profits always suggest an inefficiency in the economic feedback system and pure arbitrage should be minimized as it puts real value creation at risk.

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