There is a bit of orthodox thinking that having a job, which is working in someone else’s business, is somehow entirely different and a lowly thing from running your business.
I recently tweeted:
Aim of this article is to elaborate on the above thought and throw more light on the job vs running your business debate.
Pursuing Your ‘Calling’
There is a widely held romantic notion that you should find your ‘calling‘ and devote your life to it.
If you can identify your ‘calling’ and, more importantly, you accept the compromises on other aspects of life that it may require, then that’s awesome. Get on with it.
More often than not, people don’t have a specific ‘calling’. Or if they have one, they are unwilling to compromise on other aspects of life, particularly those involving material comforts.
The ‘calling’ doesn’t distinguish between whether your work involves running a business or it involves working as an employee.
Some ‘callings’ like designing rockets to send to Moon and Mars are only possible as an employee of the government or a few private companies.
And some don’t even acknowledge there is a difference:
I don’t know what a business is.
All a company is a bunch of people working together to create a product or service.
There’s no such thing as a business, just pursuit of a goal – a group of people pursuing a goal.
Elon Musk
The Orthodoxy in the Job vs Business Debate
A decade or two back, being an employee of a big company was the ultimate status symbol. However, with the new startup culture, today, there is a glamourisation of running your business.
Many imagine the picture of the business founder sipping a pina colada on the beach, while employees toil day and night in the office. Running your business is supposed to provide the ultimate freedom, flexibility, luxury and quality of life. Not to mention, each business owner is a multi-millionaire, and about to become a billionaire.
There is a reverse perception with being an employee – it is new-age slavery, where you toil 24×7 in an inhuman working environment to earn a meagre sum insufficient to cover even the most basic needs. Not to mention – you are physically beaten up and abused by your boss every day.
These stereotypes may be right in some cases. In others, the truth is probably the reverse, with the carefree employee on the beach sipping margarita, while the owner is toiling away into the night.
Let’s take a small detour to Economics to understand why businesses and employees exist.
We will come back to the discussion of being an employee vs running a business.
Economics and Factors of Production
Economics considers both as factors of production – employees (as Labour) and running a business (as Entrepreneurship). The other factors of production are Land and Capital.
Employees and the Business owner contribute to and are compensated for contributing to the production of goods and services.
When an owner works in a single person business – Economics distinguishes between Labour and Entrepreneurship. A portion of the effort is rewarded as salary (for being an employee) and the part left over after all expenses as profits (for the risk bearing function of being an entrepreneur).
Let’s get into a bit more into the specifics.
Ronald Coase and The Nature of the Firm
Ronald Coase, a British economist, was awarded the 1991 Nobel Prize in Economics for two path-breaking ideas:
- The Nature of the Firm (1937) introduces the concept of transaction costs to explain the nature and limits of firms. This is the article relevant to our discussion.
- The Problem of Social Cost (1960) suggests that well-defined property rights could overcome the problems of externalities (see Coase theorem).
Modern businesses and employees emerge when an entrepreneur begins to hire people.
The Nature of the Firm
The question Coase asked and answered in “The Nature of the Firm” is:
Why does an economy feature several business firms instead of consisting exclusively of independent, self-employed people who contract with one another?
The answer is Transaction Costs.
Going to market involves transaction costs – searching for self-employed people, their willingness to provide the desired product or service, negotiations, contracts, the management of the work and commitments, legal disputes and so on. Transaction costs often exceed the price of the thing purchased.
Businesses, and hence employees, are born when someone brings these different people who can build a product or service into the business by converting them into employees, thus avoiding the transaction costs. The business creates internal processes that enable employees to work together to deliver the product or service efficiently.
These internal processes (often criticised by employees of large organizations as being bureaucratic) are more efficient than contracting everything out. But no one asks how some large companies with these bureaucratic processes produce billions of dollars of profits.
Our modern human civilisation resides and prospers on the co-operation and co-ordination that the concept of businesses and employees enables. Business firms serve society through their employees by providing products and services that society needs cost-effectively.
Both the businessman and the employee serve a social purpose.
Business and Employees are a Package Deal
Most businesses cannot exist without employees. Employees cannot exist without business. Both have a role to play.
Most business ventures fail to grow beyond their owner or owners as many were never profitable enough to have employees.
Exceptions may exist, but it is rare for a successful business to have only the owner working with no employees. The businesses that succeed and scale up always have employees who are critical for the success of the business.
Large global corporations also have a separation of ownership and management – millions of shareholders own the company, and employees manage it, not their owners.
Even the glamorous billionaire owners often hold a minority stake in the company they founded and rely on leaders, who are employees, to run the company smoothly and profitably.
Which is Better – Running Your Business or Being an Employee?
Being an employee or running a business are just roles people play based on:
- What is important to them, or
- What they like doing, or
- What they are good at doing, or
- A combination of these
There are very few things in this world that can be done profitably, at a scale by just ‘one’ person.
The job vs business debate misses a crucial point that everyone needs to work with other people.
- If you are an employee, you need to work with your bosses and colleagues.
- If you are running your billion-dollar company, you need to work with your investors, customers or employees.
When you are dependent on others, the concept of absolute freedom (often the reason for starting a business) does not exist and varies by situation.
I consider the job vs business debate as a personal choice to be made based on your unique situation, skills, attitude and what is important for you in life.
There is nothing wrong with picking up one or the other.
The qualities that make you successful in either role are the same.
My advice to anyone who needs to make this choice:
Pursue your ‘calling’ if you have one. Else just do what you know and are good at doing.
Always consider yourself as a ‘Business of One.’
You are a ‘Business of One’
Adopting the framework of ‘Business of One’ is critical to transforming your perspective towards work and unlocking growth.
Every day, whether you are running a billion-dollar business or whether you an employee, you only bring yourself to work. Others may join you voluntarily, but
You are always a Business of ‘One’.
The framework helps you focus on the only thing you can truly control in life – yourself.
The actions, the skills and the attitude that you bring to the table are always your own. You need to keep evolving these to grow your ‘Business of One’ – whether in the role of an employee or as someone running a business.
The business owner and employee are human. Neither is perfect.
Both display human failings in their work.
- The business owner may feel no one can do something better than him, and thus constrain the growth of the business. After initial success, the owner may get complacent and not bother to stay relevant to evolving customer needs and market conditions, or may be unwilling to make the decisions necessary to grow due to emotional attachments.
- Often, employees get complacent and feel entitled to something just because they have been around for some time. They stop learning and staying relevant to what the business and customer needs.
Only with this framework in mind will you identify when you need to change and adapt to stay relevant in a continually evolving world.
Qualities to be Successful
Following qualities will enable you to be successful whatever role you perform at work (in no particular order and not exhaustive):
- Growth Mindset.
- Always looking for new opportunities.
- Learning, unlearning, re-learning.
- Sales and Marketing for your contributions.
- Taking calculated risks.
- Problem-solving
- Focus on outcomes, not a.ctivities.
- Balancing personal and work life.
- Delivering more than expected.
- Flexibility and adaptability .
- Investing time, money and energy in yourself to build new skills relevant to the society.
- Getting along with other people.
- Building trust and relationships.
- Communication.
- Focus on what you are good at.
- Letting others do when they are to better than you.
- Grow and mentor people.
- Take responsibility for someone else’s mistakes.
- Willingness to take feedback.
Thoughts and Recommended Reading
Peter Drucker touches upon this topic in his book Managing Oneself (read my summary):
Managing oneself demands that each knowledge worker think and behave like a chief executive officer.
[..]
Managing oneself can lead one to begin a second career.
[..]
Successful careers are not planned. They develop when people are prepared for opportunities because they know their strengths, their method of work, and their values.
[..]
The only purpose of business is to create a customer.
[..]
Only functions a business needs are marketing and innovation.
Peter Drucker
Rolf Dobelli, the founder of getAbstract, suggests in the The Art of the Good Life:
Business Studies is an ideal degree if you want to obtain a Business Studies professorship, but not if you’re going to work in the business.
Studying literature is perfect if you’re going to be a literature professor, but don’t imagine it’s going to make you a good writer.
Rolf Dobelli
Naval, the founder of AngelList, calls it out clearly.
There is no skill called “business.”
Avoid business magazines and business classes.
Naval Ravikant
Simon Sinek in his Start with Why (read my summary) says:
The goal of a business should not be to do business with anyone who wants what you have. It should be to focus on the people who believe what you believe. When we are selective about doing business only with those who believe in our WHY, trust emerges.
Simon Sinek
Let’s close with Osho’s views.
A business should be just an outside thing, just one of the ways of livelihood.
When you close your shop, forget all about your business.
When you come home, don’t carry the shop in your head.
Osho
Thanks for your time reading the article. Please use comments below to share your thoughts on the article.
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Thank you Satyajit for taking the time to spread wisdom and advice. The blog articles are many a times the best thing I read all week as they are filled with actionable insights and written with sensitivity to audience looking for something – to act on.
It seems you are on learning spree. Nice one, following your blogs they are soothing sometimes, sometimes knowledgeable, forcing to think out of the box. Keep it up 🙂
Warm Regards,
Prasad