Forums: Discussions for entrepreneurs and small business.

Hello everyone. About two months ago, I read the book "The Art of Learning" by, Josh Waitzkin. Wonderful book and highly recommended.

In the book, Josh strongly recommended that one masters the core fundamentals of any practice in order to gain any solid foundation of your topic of study.

This got me to start thinking about the core fundamentals of business, thinking that if we can identify these core fundamentals and thoroughly understand them and their applications, we can learn a lot more about business just by identifying how these fundamentals are applied in various examples.

To be honest I could only think of one core fundamental, although it has a ton of applications: to turn inputs into more valuable outputs.
Can you think of any examples how this applies? Profit is one obvious example, but there are plenty other ways that this can apply such as the importance of reducing waste and defectives.

One more question: can you think of any other core fundamentals of business, or rules that cannot be broken in order for a business to be considered a business?

Thanks, and I look forward to the discussion!


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Motivation for Entrepreneurs
Entre-Propel.com

Long ago, someone very smart said that the answer to any question usually lies in the proper phrasing of the question. I can`t remember who it was, but it caught my attention and has stayed with me throughout my life.

Then as I got older, I began to understand that part of asking questions depends upon also knowing the meaning of the words used to ask those questions. Buried within most words we use, are many secondary levels of thought, and additional concepts. Taken together, they lead to all kinds of assumptions and presumptions.

So I`d propose that before laying out business fundamentals, it might do well to explain the basic concept of business in general. What is business?

The core fundamental of business is economic power.

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Making limitless possibilities much more limited.

I suppose that is more or less what I am asking. What is business, and what are the core concepts that surround a business that actually make it one?


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Motivation for Entrepreneurs
Entre-Propel.com

Interesting, but businesses don`t necessarily need to make money in order to be considered a business. Before the concept of money was even invented, we still had businesses, only businesses thrived on trade. The point here is that one business traded with another business because they felt the item that they were receiving was of greater value to them than what they traded away. So I think the more appropriate phrasing would be: A business is an organization that generates value.

Also, in regards to "people working together" what if a business is only a one-person operation? How can we tie in collaboration as a business fundamental? Would it be different parties working together (ie: business and customer)?

@mfackrell: So, in regards to profits, in essence it would be to convert inputs into more valuable outputs, correct?

However, in order to do this effectivly, you are arguing that a business needs the right systems, controls and people that is best suited for the type of business and culture, correct?


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Motivation for Entrepreneurs
Entre-Propel.com

Oh, you`re right. I didn`t think about one person businesses. I guess a few lines of my definition, which, on reading it again, really seem to apply more to the corporation than business in general.

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Making limitless possibilities much more limited.

Actually, too many people get distracted by the money issue. Business takes place in countless ways that don`t involve money. It`s why people need to understand that money is only a social agreement on a symbol.

Business is a pretty simple concept, when you strip away everything but the fundamentals:

• Buyer wants something.
• Seller has something or knows where to get it.
• They agree to exchange value.
• Seller transfers ownership to buyer.
• Buyer takes possession (ownership) of something.
• "Accounting" is the recording of the transaction.
• "Contract" and "title" are the recording of ownership.
• "Logistics" involves the transfer of the thing itself.

We could probably assign a fundamental category to "warranty" and another to "service," but they`re not really necessary to the functional business process.

That`s pretty much all there is to it. But each component of the process can become tremendously complex. Such abstractions as "ownership," for example, lead to property rights, copyright law, trademarks, patents, and so forth.

The fundamentals of business hold that there must be a "thing," a "buyer," and a "seller." Obvious, right? No, not so obvious.

Many people create something or put together a Web site designed to re-sell items created by someone else. They "assume" that there will be enough buyers to support a business. They never question that assumption, then can`t understand why they go out of business.

We`ve already been having a discussion on pricing. "Price" is a sub-set of the concept "Value." Another fundamental principle of business is that something must have a perceived value.

And so forth....

You seem to have nailed my idea of value (instead of money representing value) pretty well. So I guess we are all in agreement that money isn`t a requirement, but value is.

Craig, you said something interesting about a buyer taking OWNERSHIP of something. Is this really the case for a service business? If someone comes to your house and cleans it once a week, is there really anything you are taking ownership of?

Something I want to throw out there for discussions sake, just to more fully explore the topic: is it at all possible to have a business (or have a business-like operation) with only one party?



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Motivation for Entrepreneurs
Entre-Propel.com

Well, look at it this way: You come clean my carpets. Before doing so, we sign a contract. In that contract, you spell out what exactly you will be doing, and what exactly will be the results.

Do you own those results? Are you transferring them to me? Why do we have a contract? Suppose you fail to *deliver* on "something?" What would you deliver?

Is a "clean carpet" a form of property?

Or; let`s look at it another way: I don`t want to clean my carpet.

The reason I don`t want to is because it would take me 4 hours of my time. That time is more valuable to me if I spend it building houses. As a construction worker, I get paid $X/hr. Four hours would be a sum of money.

I own my own labor, and I`m transferring that labor to you. You, in turn, own your labor and are transferring it to me. How much is your labor worth? The actual dollar figure we agree to exchange represents the equitable exchange of the value of our labor.

So if you do a "good job," then your labor was equal to my labor. We spell out the definition of "good job" in the contract. If you tear my carpet in half, then you have taken not only my labor, but also produced "damages" to what I already owned.

Likewise, if you plug in your machine and my building has poorly-maintained electrical systems, which in turn blows out your machine, then who is responsible?