Monthly Archives: January 2019

Business Versus Government

What’s the difference between business and government? They are both institutions as old as humanity. They both involve resources, money, labor, and people organized into hierarchies. But there is something fundamentally different between the two.

Let’s think about how each originated. Government emerged out of a pact between leaders and the rest of the people: “We’ll protect all of us from external threats, and as payment we get perks.” But government doesn’t begin and end with that pact; there’s more to the story.

In Homo Deus by Yuval Noah Harrari, the author brilliantly describes the thing that makes humans so productive and capable: our stories. Our human-made intersubjective fictions erected pyramids and launched crusades.

We still believe in stories of course. Capitalism relies on the imaginary concept of markets. Socialism relies on the imaginary concept of social classes. That is not to say that imaginary concepts aren’t useful; they certainly are. It’s just that they don’t actually exist in the material world; you cannot point to them.

The first stories were mythologies. They allowed mass cooperation via getting people to do things against their best interest. In exchange people got the promise of cosmic significance or eternal bliss. Thus government, while a social pact, also relied heavily on intersubjective fictions for its genesis and growth.

Now let’s circle back to business. Business originated from a pact also: “I’ll give you this if you give me that, and if we’re both happy we can do it again. If not, we won’t.” No doubt, business relies on intersubjective fictions as well such as money, brands, and best practices. But these are supplementary to the chief principle of voluntary, mutually beneficial transactions.

Government needed stories in order to exist and pull off mass cooperation. Business however can achieve mass cooperation simply by appealing to self-interest. There is the true difference: to this day government is driven by ideology; business by profit.

That is not to say that business hasn’t incurred casualties. But when sustainable profit is the motive, it will always win out over ideology.

Inspiration MK. Thanks!