Business Giants: Rise, Fall, and Change - The Corporation in the 21st Century

Okay, so let's dive into this chapter, it's all about, you know, business in society, the role of business, how it's changed, that kind of thing. It kicks off with a really interesting quote about new wine and old wineskins. The basic idea is you can’t just keep doing things the old way when the world’s moved on, right?

And that's kind of the theme, because it then jumps into examples, like J.P. Morgan creating US Steel, and Rockefeller and Standard Oil. I mean, these were giants, absolute giants, that really shaped the economy, and everyday life with things like the rise of the automobile industry.

There’s this business historian, Alfred Chandler, who wrote about how these huge corporations, like General Motors and DuPont and Sears, they were dominant. They had so much economic and political power, it felt like they were, like, invincible, forever.

But, surprise, surprise, things change. Right? General Motors, they actually went bankrupt! Sears is basically gone. Only ExxonMobil, which used to be Standard Oil, is still, kind of, doing okay, but even that’s questionable, you know, with the push away from fossil fuels.

And then it gets into the tech boom, you know? Everyone thought IBM would be the big leader. But then these new companies came along, the so-called ‘FAANGs’ like Facebook, Apple, Amazon, Netflix, Google... Then it shifted a bit and people were talking about the 'Magnificent Seven', some reshuffling with Nvidia, Tesla and Microsoft thrown in there, Microsoft actually making a comeback, which is interesting. And the thing is, these aren't your typical manufacturers. They're different. A lot of the employees have fancy degrees. And well, let’s just say things have changed when it comes to the whole dynamic of workers and stuff.

The point is, even these seemingly unshakeable tech companies are likely to change. It’s all going to shift again. Nothing lasts forever, you know? Just like US Steel... I mean, there are negotiations for it to be bought out by a Japanese company.

The author's big idea is that the language we use to talk about business hasn’t really kept up with how business has actually changed. We're not in this world where multinational corporations totally control everything. And we used to need huge amounts of capital for things like factories and railways, but now, leading companies, they don't really need that much equipment. Their assets are more like offices and data centers, things that can be used for all sorts of stuff, not just one specific industry. So, this old idea of "capital" and "means of production"...it's not really how things work anymore.

And, you know, workers aren’t necessarily at the mercy of these capitalist owners, because a lot of the time, they don’t even *know* who owns the building or who the shareholders are, and honestly, it just doesn’t matter. It’s a different kind of dynamic.

Now, it’s all about knowledge and working together. The boss can't just bark orders because the boss doesn't necessarily have all the answers, or all the information. You need everyone's input, everyone's skills, and that requires cooperation. It’s much more social than just straight up business transaction.

And that knowledge is what they call, you know, "collective knowledge." It's everything we've learned from books, from the internet, from experience. It's more than just the average, it's the aggregate knowledge. No one knows everything, right?

So, the really important thing now is a company's capabilities, the things it can do that other companies can't easily copy. Things like customer relationships, how good they are at innovating, their brand reputation. That’s what makes companies stand out. It's not just about having the same factories and churning out the same products.

And that brings in the idea of "economic rent." It basically means earnings that come because you’re just better at something than other people. Think of Taylor Swift, or successful sports teams. They earn economic rent because they're unique. And it's the same with companies like Apple and Amazon. It's because they do things better, and that’s a good thing, because a market where everyone is the same... it's boring, you know?

Now, there’s also this thing called "rent-seeking," which is like trying to grab value that *other* people have created, by, you know, abusing the system. That’s bad. We need to encourage the good kind of economic rent, the kind that comes from being innovative.

But, the language we use, things like “return on capital employed,” it's not really relevant anymore. Economic rent is central to a healthy economy. You get ahead by doing things better, and that inspires others to compete and innovate. And that’s what we need. It’s about a market economy, a pluralist economy, where people can try new things without needing permission from some central authority.

And it's also about acknowledging failure. Big bureaucratic organizations, they find that hard. The Soviet Union, they had problems with that. But if a company fails in a market economy, other companies can just step in and take their place.

The problem is, the term "capitalism" often gets mixed up with this old idea of a system controlled by a wealthy elite. But the real market economy isn't like that. It's not controlled by anyone for long. And the values we've been pushing, like maximizing "shareholder value," it’s kind of created problems. People reward themselves handsomely, and then sometimes end up destroying the very companies that created that value in the first place. It's eroded business ethics and created these crazy inequalities. The public ends up hating the companies even though they buy their stuff.

And all this, you know, these ideas about individualism and shareholder value, they come from the US, but they’ve spread everywhere. But different countries have different laws and customs. And all that matters, you know, depending on where a company is based and where it's doing business.

The author, who's British, points out that Britain has played a big role in shaping modern business. And the US has had a huge influence too, with thinkers like Alfred Sloan who was at General Motors.

And the author also mentions Peter Drucker who wrote a classic book about business. And there are all these business books out there, but they're often either just trying to give you quick tips to get rich, or they're ranting about how capitalism is evil.

This book isn't like that. It’s for people who are interested in a serious, thoughtful look at how business really works. People who want to learn more about business without getting bogged down in jargon or clichés.