The Living Company
by Arie De Geus
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Book Summary Information
Author: Arie De GeusEdition: Paperback
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2002-06-04
ISBN: 1578518202
Number of pages: 240
Publisher: Harvard Business Review Press
Book Reviews of The Living Company
Book Review: Inside the black box that is a company
Summary: 5 Stars
This book should be as instructive to economists as it is to students of business.
Formal economics has, for a long time, seen the company as a sort of black box which sits uneasily within a neo-classical framework of equations. The joint stock corporation exists much to the frustration of those mathematical modellers who would preferably wish it away.
Some progress to it's understanding has been achieved through developments in behaviourable and institutional economics as well as through the work of Ronald Coase but to may the company remains somewhat of an enigma.
The imperative behind this work is to examine why some firms exist for longer than others and the author draws on work in Royal Dutch Shell and other business stuies to develop an almost biological theory. Much of the argument is intuitively attractive and matches our day to day experience. We see how the shorter lived companies are closer to an economic portrayal where short-term profits are the top priority and where these are effectively syphoned off rather than invested back in the enterprise. In contrast the longer lasting corporation has almost entrepreneurial attributes where profit maximisation takes second place to profitability over a medium to longer term approach.
What I find particularly interesting about this case study, as I perceive it, is the relevance of the notion of catallaxy. "Friedrich Hayek used the term Catallaxy to describe as "the order brought about by the mutual adjustment of many individual economies in a market". (wikipedia) From this perspective, the market is an exchange process which is a much broader conception than the limited notion of economy. From this understanding, any exchange between individuals is part of a market order so that a firm can be properly understood as a network of exchge relations which is in itself involved in a bigger set of market relations.
Re-examining the two examples yields, firstly, the profit maximising economic firm where the network is a short-term association of individuals each affected by short-term considerations which result in low wages but low or poor levels of productivity. This type will be a relatively brief participant in an economic cycle prone to changes in developments in technology or to changes in fashion where any innovative ideas will be absorbed through takeover. The factors of production involved will be relatively mobile but cheap in price as they will not have achieved any great learning or embodied knowledge.
In contast the long-term enterprise will have relatively high factor values, engage in research and development and will persist in time.
What this book illustrates very well, aside from the total failure of the economics establishment to provide a fim analytical framework of the existance of such bodies, is theneed for a broader conception of the reality of the world. This indicates a need for a reappraisal of the view of economics as a hard science to one drawing more from the biological sides and to look beyond the notion that markets are all about a particular limited set of prices.
This is an excellent book which is suitable for everyone who has an interest in the world around us.
Summary of The Living Company
Most companies do not survive the upheavals of change and competition over the long haul. But there are a few remarkable firms that have withstood the test of several centuries. What hidden lessons do they hold for the rest of us? Arie de Geus, the man who introduced the revolutionary concept of the learning organization, reveals the key to managing for a long and prosperous organizational life. "The Living Company" speaks not just to aspiring leaders, but to anyone trying to adapt to a turbulent business environment. Only those steeped in the habits of a living company will survive. 'This profound and uplifting book is for the leaders in all of us. Arie de Geus challenges most of the conventional wisdom in management thinking today' - Dr. James F. Moore, author of "The Death of Competition".'Arie de Geus gives leaders of the future an indispensable guidebook in which commitment to values, people, learning, and innovation defines the living company. It's in my book bag' - Frances Hesselbein, President and CEO, The Drucker Foundation. Author Bio: Arie de Geus worked for Royal Dutch/Shell for thirty-eight years and is widely credited with originating the concept of the learning organization. Since his retirement, he has advised many government and private institutions and has lectured throughout the world.The average life span of a Fortune 500 company is less than half a century, yet there also are corporations around the world that have been in business for 200, 500, even 700 years. Arie de Geus, a retired Royal Dutch/Shell Group executive, maintains after studying both extremes that the most enduring treat their companies as "living work communities" rather than pure economic machines. The Living Company: Habits for Survival in a Turbulent Business Environment persuasively outlines his resultant prescription for organizational longevity.
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