Platt Perspective on Business and Technology

Some thoughts concerning a general theory of business 9: considering first steps toward developing a general theory of business 1

Posted in blogs and marketing, reexamining the fundamentals by Timothy Platt on September 6, 2016

This is my ninth installment to a series on general theories of business, and on what general theory means as a matter of underlying principle and in this specific context (see Reexamining the Fundamentals directory, Section VI for Parts 1-8.)

I focused in Part 8 on the general topic of interpretation in general theories, and on how interpretations arise in them, and on how they in turn shape and influence those theories and how they can be applied. And I began that discussion with the physical sciences, and with quantum theory and its diversity of fundamentally distinct interpretations. And I followed that with a macroeconomic-based, theory of business example where there are currently, as of this writing, at least two main interpretations in play as to what drives overall economic processes and activity: supply-side and demand-side approaches.

I will offer a second working example here of business and economic theory interpretation and its consequences. But to set the stage for that I will at least start presenting one of the core underlying pieces to my approach to a general theory of business and economics, as I have been developing it piecemeal here in this blog and as a compendium model theory. (See Parts 1-5 of this series where I explicitly define and discuss compendium model and minimalist general rules model approaches to general theories. And see Part 2 of that for the basic definitions of these two approaches.)

But turning here to begin considering the underpinnings of a possible minimalist general rules theory of business here, I note that:

• Business and economics are human activities and any meaningful minimalist general rules-based theory of them has to be solidly grounded in an understanding of human behavior and of what motivates it.
• Any such body of descriptive and predictive theory, like the empirically grounded transactional activity that it would be based upon, can best be seen as anthropocentric, and ultimately as being anthropomorphic in nature from how it is grounded in the human experience.
• And basic principles of human behavior, and of group behavior should underlie and inform its basic underlying axiomatic assumptions – and not simply be included as interpretive add-ons.

And as a corollary to that if nothing else, and since the approach to business and economics that I write of here is fundamentally grounded in the ongoing human experience, I add that:

• Any valid conceptual understanding of business and economics would for at least the most part be explicable and understandable in terms of normative human behavior,
• And explicitly understandable and explicitly stated deviation from that (e.g. the hysteria of crowds as that can drive fad-driven viral marketing and purchasing behavior.)

This does not mean that an empirically valid, accurately descriptive and predictive economic or business theory could not lead to unexpected conclusions, and even ones that would seem counterintuitive. Quite simply, no one thinks through all possible contingencies that they might be facing as a test for gaps and inconsistencies in all that they assume or presume, and both long-term and in their here-and-now as they make decisions.

• But the basic principles of a general theory of business or economics should be fundamentally intuitive, and certainly insofar as normal and normative behavior is, and certainly when considering group behavior.

And this leads me back to the questions that I raised concerning supply side and demand side economic theory as offered in my series: Open Markets, Captive Markets and the Assumptions of Supply and Demand Dynamics (at Macroeconomics and Business 2, postings 230 and following.) Ultimately, a more strictly supply-side economic theory, or a purely demand-side approach fail, because they carry within them fundamental gaps in their reasoning and in how they approach business transaction cycles. But at least as importantly, they both pursue and seek to describe business and economic behavior, without adequately considering the people who would actually perform this activity. They are axiomatically predicated on transaction-level process assumptions, but not on an axiom-level understanding of the people who would carry out those processes, or on what drives and motivates them.

This brings me to my second working example as promised above, which I now explicitly identify: communism as a theory of economics and of business and production. I have been writing for a number of years now, in this blog about the Peoples’ Republic of China, and their system of governance and its challenges (see my currently running series on this area of discussion: China and its Transition Imperatives, as can be found at Macroeconomics and Business and its Page 2 continuation, as postings 154 and loosely following.) But rather than focus on specific issues or exemplative details already raised in that narrative, I would turn here to consider communism as originally stated and presented, and without the historical baggage that accumulates when efforts are made to realize that type of system in the specific instance.

And I begin this with a quote from Karl Marx, the founder of communism as a social, political and economic system that is known to many:

• “From each according to his ability, to each according to his needs.”

Marx, in fact picked up on this proclamation and used it in his writings, where it goes back in its origins to at least 1851 and the writings of a scholar who Marx admired: Louis Blanc. But the origin of this sentiment is not as important here as is its pivotal role in both stating and understanding what an end-of-history, ultimate communist state would be like, as envisioned by Marx and his followers.

• Capitalism is viewed as a deeply divisive competitive system in which a small highly successful capitalist class rises to the top, by taking advantage of and suppressing a larger working class that they depend upon, even as they exploit them.
• But as a next step in sociopolitical evolution, and as a final possible evolutionary step in that process, communism is viewed as an essentially entirely cooperative system in which everyone plays by the same rules and in which no one does or even could seek out special advantage, except as an exception and aberration.

According to strict communist doctrine, this type of system can only arise in the most technologically advanced sociopolitical and economic settings, where means of production have developed to a point where they could meet all possible needs. But even when a society has developed technologically to a point where that is in fact possible, and for all basic and essential needs, conflicts of interest and desire for personal advancement still arise and even prevail. That, among other reasons is why regulatory law is needed, to rein in toxically short-sighted predatory and other destructive behavior in businesses and in the marketplace. And ultimately, this is both why and how attempts to actually realize a true communist state have always broken down and failed – as they did in the old Soviet Union and its vassal states, as it has in China, and as it has in countries such as North Korea.

There is a reason why the people of the Soviet Union would proclaim “from each according to his ability, to each according to his needs” in public, and to protect their own interests in the face of possible state sanctions. And there is a reason why those same people would also say things like “they pretend to pay us and we pretend to work.” The China of today has its counterparts to that sentiment, even as their people and government more openly publically proclaim Marx’s slogan and their one Party’s home-grown variations on it.

• Ultimately, communism fails as a system because of the way that its fundamental assumptions and tenets are disconnected from anything like a real understanding of human behavior.

I would argue that any valid, empirically useful descriptive and predictive minimalist general rules-based theory of business and economics would have to avoid this pitfall, by being built upon a deep understanding of human behavior, and for both individual and group behavior.

I am going to continue this discussion in a next series installment, where I will at least begin to explore business and economic transaction assumptions, as they would enter into this too. Meanwhile, you can find this and related material about what I am attempting to do here at About this Blog and at Blogs and Marketing. And I include this series in my Reexamining the Fundamentals directory, as topics section VI there, where I offer related material regarding theory-based systems.

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