Looking back to move forward: new paradigms in business affecting future investment trends

The world is changing and paradigms of business that worked so well during the industrial revolution are becoming less relevant. What is the future of business and how will this affect investment?

When you think of the origins of business, what comes to mind? Cavemen and women bartering with stone tools, or perhaps something more recent, like the East India Company – the original multinational, in a time long before air travel or the internet.  Either way, business in some form or another has existed pretty much as long as humans have.

But business, in its earliest forms, was often a much simpler concept on a small community scale – some individuals saw the needs or challenges in their community and came up with innovative solutions, and if those solutions had value they were supported by the community (through bartering, money, or some other means of power or favour acquisition).

This is interesting, because in modern times if the above were taken as a definition of social enterprise or social business it would fit rather well, since a social enterprise is often described as a business meant to address a societal challenge. Some may ask however, when exactly did traditional business stop being exactly that?

As the history of business progressed from the dark ages and we underwent major civilisation developments, including mass urbanisation, global travel, and eventually the industrial revolution, the concept of the corporation emerged. Originally, this was yet another innovation that addressed challenges in terms of economies of scale, and thus as a model, it prospered and spread around the world.  In this new reality, communities and their needs gradually became a far-removed concept and instead, the concern was on faceless mass markets and customers. Additionally, although the customers still had power, the information that these customers received could be manipulated and controlled and so the power sat largely with the large companies instead.

Further to this, economic theories that started cropping up around this same time were interpreted as promoting self-interest in the name of prosperity, and made huge assumptions about hypothetical rational and largely unemotional human beings.  However, also during these shifts came the rise of national governments as well as the non-profit sector, which in turn rose to protect the masses and provide for some gaps and inequalities.

Speeding up to the present time, humanity has continued to progress and develop and we have seen massive technology innovations that rapidly accelerate communication and efficiency, and can make our lives easier even as they make our learned skills obsolete. In this context, corporations have come under scrutiny, and power is slowly starting to shift back towards consumers, who are often driving socially and environmentally responsible practices. In essence – the community aspect to business is becoming important again. And with the pressure that corporates are facing, NGOs are also coming under financial strain as grant funding dries up through fading interest in donations while at the same time becoming ever more competitive and oversubscribed. They too need to become self-sustaining. Everything is starting to converge in the middle.

So we have to ask ourselves, what does the future of business look like?

At Simanye we believe the future of all business is going to be a lot more like the origins of business – providing the best products or services that people actually need and which help make their lives better without destroying the environment or taking advantage of others. Moreover, this will likely be done through new models of economies of scale – ones that will need to rely less on physical proximity, 40+ hour work weeks, and rigid structures, and more on things that new technology allows us to do: such as network models of organisation, working smarter and not harder, getting rid of the need for repetitive/dangerous tasks, thinking of our customers as part of our community and communicating in that way with them, and so forth. Money itself may even start to get de-centralised and democratised as monetary reforms start taking place around fledgling blockchain technology and the use of cryptocurrencies like Bitcoin.

Does this all sound far-fetched? Well, certainly some investors have started to look much closer at things like Bitcoin – and in the past year many major banks have finally started investigating what this new currency is all about (as evidenced here, here and here). Additionally, companies that pay very high minimum wages, as well as those looking at ensuring employees work no more than 20 hours a week, are gaining notice and also doing well, as rote work becomes more automated and people search for meaning.

Furthermore, such thinking is clearly becoming more mainstream as for example, last year at Davos World Economic Forum saw the launch of the Business and Sustainable Development Commission, which brings together leaders from business, finance, civil society, labour, and international organisations, with the aim of demonstrating the real value to business if Global Goals are achieved, and helping corporates understand how they can contribute to achieving them. Looking at corporate sustainability or responsibility is no longer just a marginal thing nor something companies do just for good PR.  Companies with integrated strategies are starting to show off what they can do in the new paradigm, and are appealing to the next generation with a vision of the future not only nicer to live in, but with more promised balance and the ever-elusive meaning. Certainly, there is no lack of new and upcoming technologies to invest in to help us get there as well.

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