The fear of re-occurrence of recession in US and slow down in developing economies is round the corner. Time and again, the debates arise on the root cause. Though the immediate cause is how the Governments respond, the root cause is entirely different. The rise of big organizations is Pandora's box. Never in history till 19th century did we have a list of 'Fortune 1000' companies being made. Never were organizations scale influence the buying potential of a country. Never were people lured so seductively to do a routine boring job and still make money. Never did any economy forced people in vast majority to switch off the brains and just act on a few instructions.
Where did the emergence of large companies start?
From my financial history knowledge, my reckoning is the large companies have started in 18th century in Europe. Kings (read Govt.) needed money to run the country. The religious instituitions started losing shine in the eyes of common man and Kings. They had to devise new ways to pool large amount of money. The best way is to bring individuals together and sell them rights to start big companies. Most of these companies at that time were privateering companies or new land exploration companies. (Remember East India Company). The biggest fillip, is the post 1939 depression. When scale started mattering. People started investing in companies and as retail investors grew so did the number of the large companies. In summary the big companies were created not out of dire business necessity (remember economies of scale has a breakdown point) but out self interest. And large companies stay like that not because to be competitive (for which they have to be agile) but because they have enough clout which can be exploited by all its stake holders. (investors, employees, clients)
So what harm are the big companies doing to mankind?
1. They influence buying patterns of a whole country not because of the wealth they generate but because of wages they pay out. Wealth created for share holders is always good and is a motivating factor for entrepreneurship. But large wealth distributed in form of salaries takes a country's population to ransom. Recollect what has happened in the case of Satyam computers debacle. Had there been no intervention by government, more than 60,000 families would have less wealth to spend and hence the economy going down. The same has happened with the financial giants crumbling in 2008 in US.
2. Kill creativity, innovation by providing a boring option for a large sack in return. How many large companies do actually innovate? Even the few which do, is more because an influential person is inclined to innovate and not a company as such. Large companies want people to do mediocre routine jobs and are willing to pay a hefty sum in return. Though I have no qualms in pocketing the big money offered, but I am seriously against the killing of innovation. When the world did not have such big organizations, there was a free world. One could pick what he wants to do and be the best in doing that. In the process he also made big money. But now as big money can be made without being your best, large organizations are killing smartness in people.
3. Killing Motivation for smaller innovative companies to thrive: If you have not heard about the number of acquisitions companies like oracle, cisco, google make, please check them. They would gobble up any company in early stage as soon as they see that the company has a good potential. Nothing wrong in that, had the larger companies in all the right zeal and spirit continued the vision of the start-ups. But the motive is to nip competition in bud than to promote any healthy competition. This would demotivate most of the entrepreneurs.
4. Uncertainty in occurrence of economic cycles: If the infusion of economic cycles is one output of emergence of large companies, the uncertainty in occurrence of these cycles is the second. A company cannot control all the activities of its employees/ecosystem. The best example is of how Bear Stearns lost all it valuation for a single act of its employee Richard Marin. One stupid act not only sounded a death knell to the bank but also worsened the economic situation of the whole world. Because of their size, the large companies create ripples in the world.
Where did the emergence of large companies start?
From my financial history knowledge, my reckoning is the large companies have started in 18th century in Europe. Kings (read Govt.) needed money to run the country. The religious instituitions started losing shine in the eyes of common man and Kings. They had to devise new ways to pool large amount of money. The best way is to bring individuals together and sell them rights to start big companies. Most of these companies at that time were privateering companies or new land exploration companies. (Remember East India Company). The biggest fillip, is the post 1939 depression. When scale started mattering. People started investing in companies and as retail investors grew so did the number of the large companies. In summary the big companies were created not out of dire business necessity (remember economies of scale has a breakdown point) but out self interest. And large companies stay like that not because to be competitive (for which they have to be agile) but because they have enough clout which can be exploited by all its stake holders. (investors, employees, clients)
So what harm are the big companies doing to mankind?
1. They influence buying patterns of a whole country not because of the wealth they generate but because of wages they pay out. Wealth created for share holders is always good and is a motivating factor for entrepreneurship. But large wealth distributed in form of salaries takes a country's population to ransom. Recollect what has happened in the case of Satyam computers debacle. Had there been no intervention by government, more than 60,000 families would have less wealth to spend and hence the economy going down. The same has happened with the financial giants crumbling in 2008 in US.
2. Kill creativity, innovation by providing a boring option for a large sack in return. How many large companies do actually innovate? Even the few which do, is more because an influential person is inclined to innovate and not a company as such. Large companies want people to do mediocre routine jobs and are willing to pay a hefty sum in return. Though I have no qualms in pocketing the big money offered, but I am seriously against the killing of innovation. When the world did not have such big organizations, there was a free world. One could pick what he wants to do and be the best in doing that. In the process he also made big money. But now as big money can be made without being your best, large organizations are killing smartness in people.
3. Killing Motivation for smaller innovative companies to thrive: If you have not heard about the number of acquisitions companies like oracle, cisco, google make, please check them. They would gobble up any company in early stage as soon as they see that the company has a good potential. Nothing wrong in that, had the larger companies in all the right zeal and spirit continued the vision of the start-ups. But the motive is to nip competition in bud than to promote any healthy competition. This would demotivate most of the entrepreneurs.
4. Uncertainty in occurrence of economic cycles: If the infusion of economic cycles is one output of emergence of large companies, the uncertainty in occurrence of these cycles is the second. A company cannot control all the activities of its employees/ecosystem. The best example is of how Bear Stearns lost all it valuation for a single act of its employee Richard Marin. One stupid act not only sounded a death knell to the bank but also worsened the economic situation of the whole world. Because of their size, the large companies create ripples in the world.
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