Why do Companies Exist?

Do companies exist to make products? Do companies exist to make profits? Do companies exist to do well in the world? What is the fundamental reason why companies exist and therefore why we work?

If a person goes to the very basic 'companies' - sole proprietorships, we can ask some questions and perhaps extrapolate from those answers the fundamental reason why we do what we do.

Why does the butcher, the brewer and the baker cut meat, bake bread and brew beer? Do they do it to provide exceptionally cut meat, the best tasting bread or the best tasting beer? Do they do it because they like to do it? Do they do it because people need meat, beer and bread?

Let’s answer the questions one at a time.

Do they do it for the intrinsic value of providing exceptionally cut meat, the best tasting bread or the best tasting beer?

Is it possible that the butcher, the brewer or the baker awoke one morning after a lifetime of farming on the land to the thought, “I am going to be the best butcher, brewer or bread maker alive. That is really what I love doing and I don’t care if I die doing it!” I think that is highly unlikely.

Or, did the decision to bake, brew and butcher meat come from the evolution of society when in a certain village of farmers a certain man had a natural talent that turned into a skill to bake, brew or butcher so well that people really liked their bread, beer and beef so much that they preferred it above everyone else’s?

From the baker, butcher or brewer’s perspective, providing bread, beer or cut beef for their own families would not be a hassle, but providing them for the whole community would be. Even so, the community liked their bread, beer and meat cuts so much that they eventually, to compensate them for the extra time it took to make these products for them and to induce them to do the extra work for them, began to offer something in return for the bread, beer or meet. Could it be that they first traded things that had different value to the different people? For example, they offered a pair of trousers to the baker, a candle to the brewer and a shiny stone to the butcher? They like their new items so much that they offered to provide the respective bread, beer and cut meet for more of them – the only problem is, you can’t eat trousers, candles or stones. You also can’t bake, brew or butcher them.

Following this possible scenario along, the village people liked these products so much that they were willing to support them in their specialization by providing the ingredients for them – as long as they got some of the desired product.

There is a slight problem though if the baker wants beer and all he has to trade with is bread and trousers while the brewer only wants candles (his wife made good enough bread). It is therefore possible that soon after skill specialization that a common medium of trade had to be agreed upon – something that all the people in the village valued and would accept as a medium of exchange. This medium would represent buying power.

Now, what if another baker opened shop in our village?

First, we have to ask why another person would even begin to sell bread if someone else already is. The answer is because they see some benefit in it for them. They see either more buying power in that or perhaps a better way of life for them. Baking bread all day, although it is tough, may be more appealing than tilling the ground and caring for animals. Baker #2 also sees that his talent can make him some of this new medium of exchange. This baker is innovative though; he added cinnamon to his buns. With this new development there is all of the sudden competition. They are all competing for the same “customers.” Baker number one is losing customers and baker number 2 is gaining them.

It is in that state that the baker wakes up and says, “I have to do something or else I am not going to be able to xyz (buy food, buy my wife that new scarf, provide meal for my animals, etc)! How am I going to sell my bread again? I know! I will provide my customers with better bread than baker #2! It will be the best bread in the whole village! Surely they will come back to my bread”

Baker number one then adds cinnamon AND sugar to his bread and starts to add additional benefits to customers for buying it such as a “So nice to see you today Mr. so and so. I sure do hope you come back soon. Thank you for buying my bread” and so on.

Why does he choose to make these improvements? Is it because he likes bread? Not necessarily; he wants to make the village’s best bread because if he doesn’t, not enough people will buy his bread to support his life style or physical needs to remain alive or maintain his level of temporal happiness. He also will not have enough buying power to provide for himself and others dependent on him any longer.

So, based on this quick response to that first question, do they do it for the intrinsic value of providing exceptionally cut meat, the best tasting bread or the best tasting beer? I don’t think so.

Our second question was, “do they do it because they like to do it?”

Do they do it because they like to do it? That is a great question. I am forced to ask this follow up question, why do we like doing what we do? Let’s just take sports. There are many people that like sports – many, many people. I am not one of them. Why don’t I like them? I don’t like them because I am not good at them. I am not even good at watching sports so I don’t like that either. Millions of people do like them though – why? I presume it is because they are good at sports and receive that positive reinforcement both from without and from within that comes from playing them. When we do something right (i.e., win the game, play the right move, make a loaf of bread that is the perfect taste and density, etc.), people tell us so and we tell ourselves too. We feel good – and we like it.

This reinforces whatever we are “good at” and we do it more. We like it as much as we do not just because we are good at it but because people reinforce it for us. When they ask us to be on their team it makes us feel good. When the crowds go wild as we make that tie breaking game winning score we like it so much we go crazy. When people like our bread and say, “My, that is the best bread I have ever had. Do you have the recipe?” We feel good. We all of the sudden like making bread more than we did before.

As a person becomes a better ball player they are known among their family, friends, peers, and the community as a great ball player. It becomes a part of their identity – it may even be their identity depending on how much playing ball consumes their time.

The same goes for the baker – he becomes known as the man who can make bread better than others. He becomes known among his friends and family and community as the baker. Not only can he make bread but he can make sweet bread, cinnamon rolls, pies and great birthday cakes. The whole town comes to him for their special occasions to make sure they have the right food. He does it because they tell him what a good job he does. Everyone knows him as a great baker. He becomes part of everyone’s family in a way.

Lets not forget though that the baker does still need to get some intrinsic value and like it just for the sake of liking it – irrespective of the outside. How can he get this intrinsic value? It is by his own adding of value to his own creation. It is by taking that bread and by making it better, and better and better. It is by making sure that it really is his best. It is the constant quest to get it to perfection but secretly hoping that it never makes it.

It’s when perfection is reached and sustained that a person stops liking what they do. But that is a whole other subject…

So, does the baker cook his bread before he likes it? Yes and no. He cooks it because of the reinforcement he gets each time he cooks it and he likes that.

He doesn’t like it just because he likes it, he also likes it because everyone else likes it too – and that is what he likes about it so much – that is why he continues to cook bread and sell it.

Finally, do they do it because people need meat, beer and bread?

Does the village buy or trade for it because they need it? Well, they can cook their own bread, do without beer, and hunt/cut their own meet. But they don’t want to. Why? For a myriad of reasons but need isn’t the only one. Some buy the bread because they like it – not because they need that bread.

People survived for a long time without their bread, beer or cut meet. So in the very primary sense, the sense of survival, they don’t need the bread, beer or meet. However, the people buying their products feel that they need it – for whatever reason. They “need” it for a birthday party, they need it to “drink their sorrows away” or they need it to have a family BBQ. They want it – so, in their minds the need it – and filling this need will advance them in their own personal goals – which we can assume are good because of the nature of man.

We can make the assumption however that they would only make enough bread, beer and cut meet as there are people to buy or trade for it. If they had no buyers they wouldn’t make their product.

So, do they make it only because people need it? Well, they make it - or as much of it as they do – because there is someone there to buy or trade for it. If there weren’t, there would be no bakers, brewers or butchers, right?

Not entirely.

There is something great in human nature – something that provides a service to others with the expectation of nothing in return. Let me explain.

While in Brazil, I saw something amazing. One skill, not that of a baker, brewer or butcher, became one that was needed but not compensated for. It was the skill of teaching. The teachers in a town where I lived had not been paid, that is to say compensated for the trade of their skills, for over 18 months. They worked diligently. They even went on strike in an effort to get the city to pay their wages. However, the city answered simply by saying, “We have no money to pay you.” And the teachers went back to work. Why? Because kids need an education and these people cared about their fellowman to such a degree that they were willing to give, with nothing – except gratitude and satisfaction – in return. So, they did it because there was a need – a true need – for it.

Conclusion

So, in conclusion, we can understand why, in this scenario businesses exist. They exist because they have a talent that they develop into a skill that others are willing to trade for. In trading, the skill holder earns collateral that is desirable for the person’s needs and wants. He improves his skill due to competition and to ensure that he is able to meet his personal and family needs. He uses skills not only as a means to an end but as a means in and of itself. They like it because others do and they like it because it provides a personal sense of fulfillment. Finally, they do it because there is a need for it. People need them to do what they do and therefore they need them – even if they can’t pay them for it. They do it because they are good and can do good for others.

The growth of society, the comfort of society, the advancement of society and the good of the human race depends on business and the people that make it work.

What does that mean for us? To do (which assumes there is a market & need for it) what we love most – because that is probably where we are able to make the greatest contribution because that is what we do best – and to do the best we can at it for the good of mankind and society.

It also means that large corporations, those that extend beyond the village must, in order to fill the purpose of their existence reach out and become a part of the community, do things out of the good of their hearts wherever they operate, do the best they can, and provide needed services. Why? For the good of society and the advancement of the race and to show that their existence is warranted and human.