What is wrong with the business practises of today
Posted by: Uma Shashikant on Sep 11, 2017, 06.30 AM IST
The "cutting chai" is something most Mumbaikars will know about. We would spill out on the roads when we needed a break from work, and sip on those little half-filled glasses of piping hot tea, spiced liberally with ginger and stirred in a large pan on a small stove. The entire makeshift arrangement would be wheeled in early morning, and go away as the office-going crowds returned home. Are we sure that branded stores with their huge choice of tea bags and sterilised paper cups are a better choice? Business opportunities emerge and evolve all the time, but our responses seem to mostly fall short.
When we look at businesses, we are trained to take the “modern” post-industrialisation era view, which celebrates the benefits of size, the economies of scale and the standardisation of processes. We focus on the efficiency, the low cost, easy availability and dependability of the branded largescale producers of food. We like this model elsewhere too—clothes, houses, toys and consumables. I will focus on food for this column, in the interest of clarity.
Over time, much of an ecosystem changes because of demands of large food producers. For instance, large factories making burgers demand a specific kind of potato, in the interest of standardisation. Farmers convert their lands into production lines, trying to grow that specific quality to match the needs of the large buyer. It makes economic sense to become dependent on outside resources for seeds, fertilisers, pesticides and to seek economies of scale in mass producing the one crop that has a ready buyer. Produce travels thousands of miles, and has to be harvested, packed and preserved so it stays good.
Producers modify products to ensure they last longer, taste better and sell better. These efforts include synthetic additives, sugars, salts, preservatives and chemicals. Promotional activities disrupt the eating habits of the markets. Households give up traditional foods for the packaged food that is attractively advertised. Many of these ads also gloat about nutritional content, and see no need to mention that the original produce they began with was actually nutritionally richer. Greed takes over as the perusal of large size and growth overtakes all else.
The convenience of buying something that is clean, standardised, cheap and easily available is tough to resist. Eating such food has societal approval of being modern and “cool” as youngsters like to say. It does seem that large businesses offer farmers the stability of income, consumers the convenience of choice, and the other economic benefits of employment, taxes and such.
We have now begun to understand the deeper damage that packaged and processed foods do to our health. We are now questioning how mono-cropping of large tracts of land, and treating them with synthetic chemicals has harmed the health of the soil. We know that the seeping of pollutants into water and air are harming the environment. We see that the addictive properties of sugar-filled food might have put in danger the lives of so many susceptible consumers, including children. We began with began with noble objectives. But ended up with unexpectedly harmful outcomes.
Is the neighbourhood cutting chai seller the better alternative? Would the same objective of low cost, easily available food, be served by the thousands of streetside vendors who have demonstrated the capability to serve indigenous food and working in a smaller localised scale? While the model of the small-scale local entrepreneur is attractive, it is not fool-proofed from the perils of greed and harmful shortcuts. There are no quality controls, hygiene standards or badges of approval that protect the consumer from unscrupulous small-scale operators who work alongside the others playing by the rules. The rules themselves can be nonexistent or poorly implemented. The buyers at these small shops simply trust the sellers whose reputation hangs by the promise of taste and quality that they deliver over time.
If the large businesses raise capital from the markets and are beholden to their equity investor’s need for maximising the value of the business, the small businesses raise money in informal markets and are beholden to its usurious and unlawful ways. If large businesses lobby, small businesses bribe. Both find ways to curry favours with the powers that be. Efforts to create rules and laws, inspections and ratings, disclosures and transparency have mostly fallen short.
Structure of business is a product of human design. The models we have, both large and small, optimise for the enterprise in isolation— its costs, revenues and profits. There is no incentive for a business to take a holistic view of the stability of the ecosystem, especially when that ecosystem includes competitors. We believed for the longest time that the forces of a competitive marketplace will solve for the inefficiencies and that the poor-quality businesses will eventually fail.
What we did not account for is the reinforcement of business practices that still hurt the common long-term good, but remain worthwhile to pursue from the economic and financial angle. We do not know how we can redefine the role of the government to enhance its powers to oversee business, without the perils of uninformed interference. We now know free markets don’t always deliver common societal good we desire, but we do not know what else would.
We have enough growing evidence to show that we need designs that are sustainable. We need business designs that do not cause harmful consequences but hold in them corrective capabilities that rein in the bad while allowing the good to thrive.
Uninhibited nature manages to do this rather effortlessly. The little termites that convert wood to soil are only focused on building their homes, finding food and fighting predators. Some destruction ensues even as the larger good prevails over time. They go about their work blissfully unaware that they are part of the larger ecosystem, and are designed to digest tough cellulose into digestible nutrition for plants.
The intelligence in nature’s design where each organism optimizes for its need, while contributing to the whole constructively, is what makes these ecosystems awe inspiring. Our designs fall woefully short. We still do not know how to build businesses that will serve its micro purpose while contributing positively to the macro structure.
The author is Chairperson, Centre for Investment Education and Learning. Disclaimer: The facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com