Business 100: Why Business Matters

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Coexistence 303: How To Teach

Business happens as a result of economic activity

  • Economics studies the transfer of goods and services in society, and is essentially a philosophical framework for things that have value
    • People care about personal costs and benefits even when it’s selfless, economical, political or social
    • Everything has a cost, even free things, since they all have a sacrifice of other options given up
  • People make decisions to manage their items and services, and those decisions are known as the “invisible hand” of the marketplace
    • These decisions are made when the cost of one more of an item becomes greater than the perceived benefit
      • Things are bought because the item has more value to someone than that amount of money
      • Things are sold because the item has less value to someone than that amount of money
      • Things are given away because the item has less value to them than the work to make money off it or more value to them in the building  of a relationship
      • Time is routinely traded for money because the money has more value to someone than that amount of time
    • Prices will be driven to what people are willing to pay and/or are willing to sell over time
      • Transaction costs are an obstacle to trade
        • This includes many things like the cost of delivering items, taxes, fines, loss from theft, loss from damage
        • Ruling authorities may try to tax some things or illegalize them, but nothing is ever truly “unattainable” beyond being unaffordable
      • Black market activities work the exact same as well, but they’re impossible to measure
      • Sometimes people can specialize as middlemen who find more affordable options and collect a commission for it
    • People make choices with their limited resource of money, and those choices can be defined as “freedom”

Business is vital to everything in a free society

  • Whenever something is traded for goods or services, people are doing business
    • Trade moves goods from people who value them less to people who value them more
    • Through extended trading, people can specialize in what they want to do, meaning greater output and greater possible levels of consumption
    • Whenever government intervenes, the market is replaced with politics, which increases waste
  • Though larger business organizations have sometimes received criticism, the purpose of business is not in simply “acquiring money”
    • The purpose of a business is to maximize profit, and is done through proving to others that there is value in spending towards the company, and therefore creating a mutual benefit as a result
      • The activities that increase wealth include maximizing company productivity, making customers and workers happy and attaining success through applying creativity in a competitive market that creates a superior value to the intended customers
        • People must feel like they are receiving a genuine service from another person in a way that improves their life or they won’t want it
        • Though many people consider large companies evil, they have simply mastered the art of pleasing people to get that large
      • A company must have a type of self-awareness, which starts with accounting and moves to marketing and beyond
Next: Accounting Summarized