By Arie P. De Geus - The Living Company: Growth Learning and Longevity in Business (New edition) Paperback – 24 Mar. 1999

Milton Friedman, probably the most famous--and most controversial--of the `Chicago School' of Economics stated that, "the business of corporations is to make profits". Friedman was only expressing the deeply-held views of many people when he made that statement; we go to work, start companies and run them in order to make profit, right? Arie de Geus challenges this conception of business in this book, The Living Company.Arie de Geus was a long-time senior executive of Royal Dutch/Shell and retired as Head of Corporate Planning. While at Shell, he was asked by the then CEO to study long-lived companies and report on what--if anything--accounted for the longevity and success of these companies. De Geus and his team found out that the average life expectancy of a multinational company was 40-50 years. In his view, this lifespan was premature, and represented a loss of commercial potential.In all, they studied 27 corporations; thereafter, the results of the study formed the basis for The Living Company. All the studied long-lived (and successful) companies had four key factors in common:- LEARNING. Long-lived companies are extra sensitive to their external environment, despite the ups and downs of politics and wars. These companies always remained attuned to their external environment--as opposed to internal navel-gazing;- PERSONA. Long-lived companies have a very strong sense of identity. They have a clear idea of what they stand for, who's `in' and who's `out';- ECOLOGY. Long-lived companies are tolerant of `mistakes' and `experiments'; and- EVOLUTION. All the long-lived companies had `conservative' financing structures.Using the results of the study, Arie de Geus posits that there are two types of companies: economic companies, for whom profit--and only profit--is the driver of the corporate machine; and living companies, for whom profit is only a means to an end: the maximisation of the potential of the company. Arie de Geus then compares companies to living systems using ideas from the biological sciences.De Geus does a good job of exploring the evolution of corporations, and how traditional measures of corporate performance, such as return on capital employed, shareholder value etc, are getting outdated in the modern knowledge-based economy. He argues that the `value' of a company in a knowledge economy is in the heads of employees, and not in the machinery, capital or physical infrastructure; therefore, in the future, successful companies will have to build learning organisations that take advantage of `human capital'.In the concluding chapter, de Geus posits that successful companies in a knowledge-based economy, like the long-lived companies in the Royal Dutch/Shell study, will not just be economic entities, but social communities whose members "subscribe to common values and who believe that the goal of the company will allow them to achieve their individual goals". As one who has worked for both `economic' and `living' companies, de Geus's insight into `living' companies hit home; however, a lot of the material is based on de Geus' experience at Shell. While his experience is valid (he worked in Shell his entire career), his insight is not much different from Jim Collins' in Good to Great; the Living Company deserves four stars.

This boos is a hidden gem and integrates many disciplines into one essentially predicting the emerging blind spots that would play out in the following 20 yrs or so.

As a Christian, would be entrepreneur I have read a number of books. Faith teaches you about God and to believe in abstract notions that most people don't want to confront. This book delves into observations about companies that we all feel in our guts but struggle to articulate.

Its ok, neat condition and received in good condition.

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.