An Aristotelian Perspective
Chapter 1: Changing Conventional Wisdom: The Firm is not a Money-making Machine
1. Changing conventional wisdom: the ﬁrm is not a money-making machine I BUSINESS ‘COMMON SENSE’ There are a few simple things that anyone who comes in contact with a ﬁrm – and past a certain age, that makes almost everybody – should know: in a ﬁrm there are people or groups of people called ‘owners’. They are the ones who put in the money, thanks to which the ﬁrm is able to operate and, in exchange, the rest of society recognizes their right to call the shots. In other words, despite the boss’s self-suﬃcient airs and penchant for ordering everyone else around, he’s a mere stand-in for his own boss, the real boss, that is, the owners. Next is that owners put their money in the ﬁrm expecting some rewards. They do not do so out of selﬂessness, love of neighbour or some other lofty ideal. They just expect to earn more money after a given time, hopefully, not too long. That is the logic of investment. Owners are entitled to the surplus money the ﬁrm generates for having parted with their money in the ﬁrst place and allowing other people (managers and workers) to use that capital productively. Of course there are several ways of investing money and, generally, the risk each one entails is directly proportional to the possible gains. Nonetheless, a keen investor is precisely the one who is able to choose from among the diﬀerent options that which yields maximum returns. In principle, therefore, business...
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