ORGS 3016: Evolution of Business – Comparative Perspectives
Questions for Review: The Company – A Short History of a Revolutionary Idea
Introduction (pp. xiii – xxiii)
In this section, Micklethwait and Wooldridge refer to the invention of the limitedliability, joint-stock company as “yet another quirky Victorian invention that had changed
the world.”
 In Wright’s book we have learned about another Victorian “invention” – the
modern, Western view of progress. How does the “company” fit in with this ideal
of progress?
 The authors claim that the new companies “were speeding the first great age of
globalization.” (p. xiv) How so?
 On page xv, the authors state:
The most important organization in the world is the company: the basis of the
prosperity of the West and the best hope for the future of the world. Indeed, for most
of us, the company’s only real rival for our time and energy is one that is taken for
granted – the family.
Who are “most of us?” Is the company the most important organization in the world
in your view? Discuss how the company form impacts us.
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The authors claim that there are two ways to define a company. Find this
section and identify these two ways.
The authors claim that there are three big ideas behind the modern
company. Find this passage and discuss.
On page xx, the authors state that their book has three themes. Identify these
themes and discuss.
On page xxii, the authors refer to Alfred Chandler. Who was he? See below.
What is the relevance of the quote from Chandler?
Alfred DuPont Chandler, Jr. (September 15, 1918 – May 9, 2007) was a professor of
business history at Harvard Business School, who wrote extensively about the scale and
the management structures of modern corporations. Chandler graduated from Harvard
College in 1940. After wartime service in navy he returned to Harvard to get his Ph.D. in
History. He taught at M.I.T. and Johns Hopkins University before arriving at Harvard
Business School in 1970. He received a Pulitzer Prize for his work, The Visible Hand:
The Managerial Revolution in American Business (1977). Source: wikipedia
Merchants and Monopolists (pp. 3-14)
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The authors refer to the Sumerians on page 3. What did we learn about the
Sumerians from Wright?
What is the “Athenian model”?
Discuss the Roman “societates” – what were they and why are they relevant to
our discussion of the history of the company?
On page 5 the authors refer to the practice of usury. What is usury? Why is it
significant? What is the “muqarada”? See below.
At this stage in history, the Chinese had “a huge technological lead over the
west.” (p. 5) What was this lead? Do you see any relevance to modern times?
Why did the Arabs and the Chinese loose their economic lead?
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What is the “Rialto Effect”?
Who was Datini (see below) and do the authors find him relevant?
In the middle ages, we see the beginnings of ‘corporations’ – discuss.
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Muqarada: A system of finance that is bound by religious laws that prevent the
taking of interest payments (see halal; haraam). Joint ventures in which the funder
and the borrower share profits and risks are, however, acceptable. There are a
number of different techniques by which this takes place. Murabaha is a good
vehicle for temporary idle funds, which are used to purchase goods from a supplier
for immediate sale and delivery to the buyer, who pays a predetermined margin
over cost on a deferred payment date. The term can be as short as seven days.
Musharaka transactions involve participation with other parties in trade financing,
leasing, real estate, and industrial projects. Net profits are shared in proportions
agreed at the outset. Shirkah is a partnership between a bank and a customer to
share the risks and gains of a project. Muqarada is a joint venture by finance
providers. Ijarah involves profit from rental income on real estate. Ijarawa-iktina is
leasing of large capital items, such as property or plant and machinery. Leasing is
achieved by the equivalent of monthly rental payments, and at the expiry the lessee
purchases the equipment.
"Islamic finance." A Dictionary of Business and Management. 2006. Retrieved October
23, 2009 from Encyclopedia.com: http://www.encyclopedia.com/doc/1O18Islamicfinance.html
Italian merchant and bankerin full Francesco Di Marco Da Prato Datini
born c. 1335, Prato, near Florence [Italy] died Aug. 16, 1410, Prato
Italian international merchant and banker whose business and private papers, preserved in
Prato, constitute one of the most important archives of the economic history of the
Middle Ages.
Datini lost both parents, two brothers, and a sister in Prato to the Black Death of 1348.
After a year of apprenticeship to a Florentine shopkeeper, he went in 1350 to Avignon,
France, where the wealthy papal court was in exile. Remaining there for 32 years, he
made his fortune by trading in armour, cloth, religious articles, paintings imported from
Florence, jewelry, and other objects.
When the papacy returned to Italy in 1378, Datini followed, moving back to Prato, where
he opened a cloth manufacturing and importing business. In 1386 he transferred his
headquarters to Florence, continuing to maintain a branch in Avignon. He also opened a
series of other offices in Italy and Spain and transacted business in Brugge (Bruges) and
London. He diversified his interests, joining the silk-merchants’ guild of Florence,
underwriting insurance, and opening a bank.
When the Black Death again struck Florence at the end of the 14th century, Datini fled to
Bologna, then returned to Prato, where he spent the rest of his life. In 1870, during
alterations to the house in which he had lived, his letters, documents, and account books
were discovered in a pile of sacks stuffed into a disused stairwell; included were some
150,000 letters, more than 500 account books and ledgers, 300 deeds of partnership, 400
insurance policies, and thousands of miscellaneous commercial documents.
Francesco Datini. (2009). In Encyclopædia Britannica. Retrieved October 23, 2009,
from Encyclopædia Britannica Online:
http://www.britannica.com/EBchecked/topic/152262/Francesco-Datini
.
Imperialists and Speculators (pp. 17-36)
Chartered companies make their appearance during the 16th and 17th centuries. Some of
the most prominent chartered companies were the British East India Company, The
Hudson’s Bay Company (based in Canada and still surviving), the Muscovy Company,
the Virginia Company, and the Dutch East India Company(known as the VOC).
 What were the features of chartered companies and why were they successful?
 On page 28 the authors discuss the Mississippi Company (France) and the South
Sea Company (England). What did these companies do and how did they
contribute to a collapse?
 Who was John Law? See brief biography from Wikipedia below. What was his
significance to the South Sea Bubble?
 What was the South Sea Bubble? Is it similar to the global financial crisis of
2009?
 As early as the 1600’s the idea that companies were “a body without a soul”
emerged. How is this distinction still relevant today?
 Find the poem by Peacock in this chapter. What does he say about office life?
Think of the comedy show, “The Office” or the film, “Office Space.” What, if
anything, has changed since Peacock’s time?
John Law (economist)
From Wikipedia, the free encyclopedia
John Law
John Law, by Casimir Balthazar
Born
Died
21 April 1671
Edinburgh
Scotland
21 March 1729 (aged 57)
Venice
Italy
Occupation Economist, Banker, Financier, Author.
Signature
John Law (usually pronounced Jean Lass by contemporary French) (bap. 21 April 1671
– 21 March 1729) was a Scottish economist who believed that money was only a means
of exchange that did not constitute wealth in itself and that national wealth depended on
trade. He was responsible for the Mississippi Bubble and a chaotic economic collapse in
France.
Law was a gambler and a brilliant mental calculator and was known to win card games
by mentally calculating the odds. He originated economic ideas such as "The Scarcity
Theory of Value" and the "Real bills doctrine."
A Prolonged and Painful Birth (pp. 39-54)
In this section the authors explore the rise of the modern company. They also discuss the
infamous slave trade, the start of industrialization, and the rise of the English and
American modern company.
 What legal changes took place to allow this “rise?”
 How was the slave trade operated? How can this business horror have been so
exploited by the invention of the company? Do you see any modern parallels?
 Many critics of the company focused on the principle of “limited liability”. What
is the issue?
 The chapter ends with a question (p. 54):
Is the company essentially a private association, subject to the laws of the state but with
no greater obligation than making money, or a public one which is supposed to act in the
public interest? This question was posed in the mid-1800’s and is still being asked today.
What is your answer? Why?
The Portuguese presenting themselves before the Manikongo. The Portuguese initially
fostered a good relationship with the Kingdom of Kongo. Civil War within Kongo would
lead to many of its subjects ending up as enslaved people in Portuguese and other
European vessels.
Diagram of a slave ship from the Atlantic slave trade. From an Abstract of Evidence
delivered before a select committee of the House of Commons in 1790 and 1791.
The Rise of Big Business in America (pp. 57-78)
On page 59, the authors contend that:
The behemoths that were created in this period helped found modern America. It was
their jobs that lured people from all over the world to America’s big cities, their abuses
that hastened the development of labor unions and antitrust law; their indifference to the
environment that meant sunlight could hardly penetrate the smoky air of Pittsburgh and
Chicago; and their capacity to produce wealth that posed questions about equality and
meritocracy.
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Who were these “behemoths”?
What, if anything, has changed since the late 1800’s? Is this similar to the
experience of the developing world in the last thirty years?
What is the significance of the railway?
What is the experience of retailers?
Why is the American Civil War relevant to business? Are wars generally “good”
for business?
What is the significance of Henry Ford?
On page 69, the authors refer to a “race to the bottom.” What does this mean?
What is the “backlash” discussed on pages 71-74? Is this similar to the recent
backlash experienced by the G8 summit participants and the anti-global trade
movement?
On page 74, the authors claim that “most Americans were ambivalent about
business.”
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What do they mean? Is the attitude of most Americans today one of
ambivalence? What about the rest of the world?
What would Ronald Wright say?
The Rise of Big Business in Britain, Germany and Japan (pp. 81-99)
On page 81, the authors refer to this period (1850-1850) as follows:
The much-ballyhooed gulf between shareholder capitalism and stakeholder capitalism
had already opened up.
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What is this “gulf”? Why is it relevant to the discussion of Britain, Germany, and
Japan?
When comparing America to Britain, the authors say,
This reflected a difference in philosophy. For American industrialists, companies were
almost an end to themselves. They were tended and grown. For British industrialists,
they were a means to a higher end: a civilized existence. They were there to be
harvested. (p. 84)
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Do these different philosophies still exist today? Discuss.
The authors use the metaphor of agriculture to describe the different philosophies.
What did Wright say about the invention of agriculture? How does the
agricultural metaphor reflect our ideas and experiences of progress?
What is the German concept of “interessengemeinschaften” and why is it relevant
to their philosophy?
What is Japan’s “zaibatsu”? Why is it relevant?
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How did the German and Japanese concepts discussed above contribute to the
“success” of their nations during that period in a positive and a negative way?
Are the British, German, and Japanese approaches to business “better” or “worse”
than the American one? Have these approaches survived today?
Refer back to the quote from Fukuyama from Wright’s book. How does this
quote about capitalism relate to the American view about business (see above)
where “companies were almost an end to themselves”?
The Triumph of Managerial Capitalism (pp. 103- 121)
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What is the “organization man’?
Dwight D. Einsenhower (the former U.S. General and a former U.S. President
in the 1950’s) said, “Beware the military-industrial complex.” To what was
he referring? What is “corporate imperialism”? How is it linked to the
political imperialism discussed by Wright?
On page 109, the authors discuss the “new culture of management”. What did
they mean? Has this changed over the years?
On page 111, the authors state that three questions were debated in the 1930’s
and 1940’s: Why did companies exist? Whom were they run for? And what
about the workers? Discuss.
34th President of the United States
Dwight David "Ike" Eisenhower (October 14, 1890 – March 28, 1969) was a five-star
general in the United States Army and the 34th President of the United States, from 1953
until 1961. During the Second World War, he served as Supreme Commander of the
Allied forces in Europe, with responsibility for planning and supervising the successful
invasion of France and Germany in 1944–45. In 1951, he became the first supreme
commander of NATO.[1]
As President, he oversaw the cease-fire of the Korean War, maintained pressure on the
Soviet Union during the Cold War, made nuclear weapons a higher defense priority,
launched the Space Race, enlarged the Social Security program, and began the Interstate
Highway System. He was the last World War I veteran to serve as U.S. president, and the
last president born in the 19th century. Eisenhower ranks highly among former U.S.
presidents in terms of approval rating. He was also the first term limited president in
accordance with the 22nd amendment. Source: Wikipedia
The Corporate Paradox (pp. 125-157)
In the 1970’s regulations were on the rise in Western nations. By the 80’s and 90’s,
however, “deregulation” was the mantra of governments and business.
 What social, political, economic and other factors changed over the two decades?
The authors claim that
In general, the larger the business got, the more they tended t converge on the joint-stock
idea. Around the world, institutions that had stuck to partnership structures or mutual
societies for decades – Goldman Sachs, Lloyds of London, a whole host of insurers,
friendly societies and farmer’s banks – converted to joint-stock companies. (p. 128)
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Why did the size of the company dictate this trend? How might this fit with
Wright’s criticism of the material progress ideal?
The Company was written in 2003, before the global economic collapse of
2008/2009. What happened to the joint-stock structured companies like those
listed above?
The authors refer to the “unbundling of the company” on page 128. What was
this phenomenon and what is the relevance of what the authors call, “corporate
icari” like Enron? Why is Enron like Icarus? See notes from Wikipedia on the
Greek myth of Icarus below.
The authors claim that three factors played a leading role in unbundling
corporations: the Japanese, Wall Street, and Silicon Valley. What is their
relevance?
Icarus
From Wikipedia, the free encyclopedia
.
"Icarus", by Hendrik Goltzius
Icarus (Greek: Ἴκαρος, Latin: Íkaros, Etruscan: Vicare) is a character in Greek
mythology. He is the son of Daedalus and is commonly known for his attempt to escape
Crete by flight, which ended in a fall to his death.
Escape from Crete
Landscape with the Fall of Icarus (c. 1558) by Pieter Bruegel the Elder
The Lament For Icarus, by Herbert James Draper
Daedalus and Icarus, by Frederick, Lord Leighton, ca 1869
Icarus' father, Daedalus, a talented and remarkable Athenian craftsman, attempted to
escape from his exile in the place of Crete, where he and his son were imprisoned at the
hands of King Minos, the king for whom he had built the Labyrinth to imprison the
Minotaur (half man, half bull). Daedalus, the superior craftsman, was exiled because he
gave Minos' daughter, Ariadne, a clew[1] of string in order to help Theseus, the enemy of
Minos, survive the Labyrinth and defeat the Minotaur.
Daedalus fashioned two pairs of wings out of wax and feathers for himself and his son.
Before they took off from the island, Daedalus warned his son not to fly too close to the
sun, nor too close to the sea. Overcome by the giddiness that flying lent him, Icarus
soared through the sky curiously, but in the process he came too close to the sun, which
melted the wax. Icarus kept flapping his wings but soon realized that he had no feathers
left and that he was only flapping his bare arms. And so, Icarus fell into the sea in the
Parallel in Hindu mythology
A near parallel to the Icarus story exists in the Hindu epic Ramayana. The demi-god
Jatayu and his brother Sampaati, who had the forms of vultures, used to compete as to
who could fly higher. On one such instance Jatayu flew so high that he was about to get
seared by sun's flames. Sampaati saved his brother by spreading his own wings and thus
shielding Jatayu from the hot flames.[8]
In the process, Sampaati himself got injured and lost his wings. Luckier than Icarus, he
did not die a painful death, but had to live wingless for the rest of his life.
The Ramayana is attributed in Hindu tradition to the poet Valmiki who lived about 444
B.C, and presumably the story of Jatayu and Sampaati existed in earlier versions. Thus, it
is roughly contemporary with the story of Icarus. Prior to the time of Alexander the Great
there was hardly any direct contact between Greeks and Indians, but both were in contact
with the Persian Empire and enough trade existed for elements of myth to pass over great
distances [9].
Agents of Influence: Multinationals (pp. 161-179)
On page 161, the authors say, “Even in rich countries, where the threat to the state is
non-existent, multinationals arouse suspicion.” The history of the multinational is
embedded in the early banks of the middle-ages, followed by the chartered companies
of the 16th and 17th centuries, and then the industrialists (aided by the inventions of
steam power, the telegraph, and the railways of the 1800’s and the automobile in the
early 1900’s). Today, multinationals are “everywhere.”
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What, according to the authors, are the reasons for the rise of the American
multi-national firm?
According to the authors, “for critics everywhere, the evil of the new breed
was symbolized by ITT.” (p. 171). Why?
By the 1990’s the multinational was everywhere, could come from almost
anywhere, and go almost anywhere. The authors claim there were three
important changes to multinationals during this period. What were they?
Return to the opening quote about the “threat” of multinationals. After reading
the chapter, do you find multinationals suspicious?
Conclusion: The Future of the Company (pp. 181-191)
The authors draw several conclusions about the rise of the company. One of them
is:
Even when it has not directed them itself, it has shown, to borrow a phrase from
Henry Adams, a remarkable ability to “condense” social changes.” (p. 181)
Another conclusion is:
The problems in the future may stem less from what companies do to society than
from what society does to companies. (p. 190).
Discuss both conclusions. What is your conclusion?
_____________________________________________________________________
Central Questions for this course and the Final Exam:
1. Is business an “end unto itself”? How can this mindset shape the practice of
business and both the history and the future of human experience? How does this
fit in with Wright’s view? If it is true, as Micklethwait and Woodridge claim, that
the company is the most influential organization in the world – what does it mean
for our survival?
2. In The Company, the authors state that three questions were debated in the
1930’s and 1940’s: Why did companies exist? Whom were they run for? And what
about the workers?
Today, we could add to those three questions another set of questions derived from
a reading of A Short History of Progress and The Company:
 What is the impact of the material notion of progress on nature? How did
the rise of the company affect the course of human history? What role
might business company play in the future of our species?