Why We Need Business Histories

Archifacts October 1993, p.32-43.

Keywords: Business & Finance; Political Economy & History;

When invited to give an outsider’s, or even user’s, view of the role of business history in the wider intellectual community, I responded with some diffidence. When pressed I agreed to give a personal account, from someone who has been working in economics and related social sciences for a number of years, and who is not without a sympathy to history.

What I shall do is first relate some of my experiences with business histories, to give you some idea of how at least one outsider uses the product, and to identify some features which I have valued in contemporary business history.

As will become apparent, I do not have any narrow definition of what constitutes a business history. Users have needs, and cannot afford to be too concerned about the academic niceties of official scope. Indeed, given the shortage of good business histories although there are some very good ones – none of us can be too precious about what constitutes a business history. Although as a rule the illustrations in this paper are from what constitutes traditional business history, the generalisations come from a wider range, including union history, the history of public organisations, and the histories, and some weaknesses I have cursed. After bringing these themes together I will make some remarks about the future of business histories.

Using Business History: A Canterbury Student

I first met business histories of New Zealand while taking my economics course at the University of Canterbury. In those days some quarter of the introductory course was devoted to New Zealand economic history, which was taught by Graham Miller, a man who will probably be best remembered by his students as he did not publish a great deal.

The two things that struck me about Graham were his compendious memory and his kind manner. He was an old-fashioned historian a little out of place in the Canterbury Economics Department of the 1970s, with its emphasis on quantitative analysis. Instead Graham accumulated facts and anecdotes, both in his mind and in his room, which was piled high with papers, books, and records. I seem to remember some of these being kept in sacks; certainly he stored the station records he collected in sacks.

Although the room seemed shambolic, I do not think it was “muddled, at least as far as Graham was concerned. It was a bit like his dress: a formal suit which hung around him comfortably rather than smartly. In the middle of a conversation he would introduce some anecdote, and start shuffling through one of his piles of paper to illustrate it. Both he and his audience were frequently distracted by anecdotes.

I experienced this as a student because a couple of us – John Patterson, now a philosopher at Massey, was the other – had a clash between our third-year maths course and Graham’s lectures. A special tutorial was arranged for the two of us. Each week we would have the privilege – we were first-year students – of an hour with Graham in the room which was once the headmaster’s study in the stone building which had been the first Christchurch Boys’ High School, with a secret inner circular stairway which crept up to the staff room.

This was as close as I ever got to an Oxbridge-type tutorial in my time as a student – although I did not have the pain of having to write a weekly essay. Graham treated us most generously in a sort of lecture anecdote format, which focused on the rise of the South Island (European) economy. I was sufficiently enthused to get through most of his reading list.

In those days there was no good general New Zealand economic history – there still is not. We did have Bill Sutch ‘s two books, although his works are not pure economic history. J.B. Condliffe just never turned me on, and Colin Simkin ‘s invaluable Instability of a Dependent Economy was more of a macro study than the development economics with which Graham was concerned. I must have read Keith Sinclair’s and Bill Oliver’s general histories, which were also just out, but they are both like the typical novel, in which one has no sense of the underlying economics which make possible the events being described.

I also read a number of business histories. The ones 1 remember were the bank histories which, with one exception, were just awful. One was so awful that it remains memorably so, though courtesy makes it also unmentionable.

Looking back, I think I learned one fundamental lesson from Graham ‘s course and that reading, plus – of course – a lot of anecdotes, and a bit of my nation’s economic history. Graham had started off as a clerk before he did his degrees in economics and history, and anyway he was a Canterbury lad. This engendered a certain scepticism that economic history was about what governments did. Instead, the focus was on the history and, indeed, the economics of about what happens on the farms and in the firms and households of New Zealand. This is one of my major disagreements with the Victoria tradition in economics, which concentrates almost obsessively on the governmental process, while looking down on – when not ignoring all together – what happens to people in places and through time. It is not appropriate to pursue this contrast here, except to say that the stance is not a peculiarity of Wellington’s university, but pervades the capital, to the detriment of good government.

This focus on firms was very much reinforced while I was at the New Zealand Institute of Economic Research, with Conrad Blyth, and at the University of Sussex, with its strong industrial economics base. My Sussex economics history teacher was Barry Supple, who was then writing his history of Guardian Royal Insurance. Barry used this business history to examine attitudes to prudence and thrift in the nineteenth century, and the policy debate that took place over life insurance. I shall come back to the notion of using a business history to provide a perspective on a wider issue. I mention it here because Barry’s GRI study is the first place I recall seeing the practice.

The Business Cycle and Depression

Returning to New Zealand in the early 1970s, I began working on a series of seemingly disparate topics, all concerned with some contemporary economic and social problems which were puzzling me. In hindsight I realise that they were tightly linked around the process of development and structural change, and so they had a strong historical perspective. But that was not how I saw it at the time.

Fortunately I tend to be an omnivorous reader, so I was dipping into a range of history books, more out of curiosity than because of a focus. But inevitably when tackling some contemporary problem I began to see parallels with what had gone before.

This came to a head when I got interested in the relationship between asset prices and product prices, which seemed to be so important in the post-war farm economy. You did not need much sense of economic history to identify that this was also one of the central features of earlier farm history. While I had some data series from Bryan Philpott’s Lincoln team going back to the 1920s, and also some work by Condliffe and Rodwell covering an earlier period, most useful were two nineteenth~century business histories.

There is no prize for guessing that one was Russell Stone’s Makers of Fortune, an outstanding work which should be compulsory reading for anyone doing a business or history degree in New Zealand. Russell is, of course, not an economist, and I had to pull the economics of his story out. But it is well enough written to do that. The same underlying economic processes also appear in H.J. Hanham’s ‘New Zealand Promoters and British Investors, 1860-1895’, in the essays in honour of Willis Airey, Studies of a Small Democracy.

At this point I went back to Keith Sinclair and W.F. Mandle’s Open Account, which I had read as a first~year economics student. It has a couple of useful chapters on the Great Depression. This is an example of the strategy I learned from Supple: a good business history can be remembered and valued because it uses the story of the firm to illustrate some wider issue.

Being totally eclectic, I also raided Frank Anthony’s Gus Tomlins for a useful, if fictitious, account of the business of farming in the 1920s. Perhaps here ‘eclectic’ is a euphemism for the more down-to-earth scavenger.

Stock and Station Agents

As I shall report, the study of the depressions of’ the late nineteenth century and the inter war period, and some analogous behaviour in the post~war era, prepared me well for a later economic trauma, but before that another project caused me to use business histories again.

I had moved on from the University of Canterbury to the Institute of Economic Research. There I became involved as an expert witness in a case before the Commerce Commission over whether Wrightson NMA should merge with Crown Dalgety.

The economics of the case are not important here, but pertinent to it was the question of why there were stock and station agents at all. In particular I was puzzled about what bound together the various services they provided, and why they were losing some of these services to specialist providers.

I do not need to tell a conference of historians that looking back through history can often give clues to contemporary problems. So I began reading histories of stock and station agents. I can report that many of them are about as successful as the average bank history. But as a result of my persistence I learned that this process of horizontal disintegration was not new and, for instance, that the agents had once provided liquor and groceries to their customers. It was all done on credit, and there is the account of a worried agent writing to a farmer in the 1930s, advising that given the state of the farm’s finances he should cut back on his drinking of tea.

Most people will say that it was credit which bound the stock and station agency’s operations together. That is only part of the story, for it does not explain why stock and station agents only appear in pastoral farming in the Southern Hemisphere. My conclusion was that it was not the credit per se, but the cost of monitoring the assets on which the credit was secured. Advancing money on the basis of livestock which could wander off, die from poor management, or even be miscounted, required a close familiarity with the farm and the farmer. It was this familiarity which the stock and station agent had, and this was why he had a competitive advantage over the trading banks. Of course none of the business histories told such an explicit story, but it could be inferred from a well-written history.

The 1987 Crash

As the published record shows, I was not surprised by the 1987 share-market crash. There was the work on previous asset price realignments, a central feature of any depression process, and while at the Institute I had been associated with a study of the share market in the 1970s by Des O’Dea and Anne Horsfield. There had been a major crash in the mid-1970s which this work nicely traces. So I knew a little about how asset prices could get out of alignment, and the inevitable consequences.

Nevertheless, on the weekend immediately after the October crash I curled up with every book on every previous financial crash I could lay my hands on. There were some old favourites, like J.K. Galbraith’s The Great Crash, and some new ones. I do not think I had previously read about the boom and bust in the Dutch tulip industry in the sixteenth century, or other such arcane examples. Once more a recourse to history was shedding light on a contemporary issue. A lesson I learned from this reading, which is still being proven, is that the recovery from such crashes takes years, perhaps a decade, or even a generation.

It is a pity more of our financiers did not have a sense of financial history, a point made by commentators in other countries that went through milder crashes thanks to the excesses of the ‘short-pants brigade’. The theory is that a new generation of financial whiz-kids who were in short pants during the last boom think in their ignorance they are not subject to the underlying economic, financial, and historical processes. Any fool can make money during a financial boom, but that money neither buys nor indicates wisdom. The lesson for the investor is to get your money out of a speculating market as soon as it becomes dominated by those who were still in short pants during the previous crash.

Even so, our commerce faculties and business schools have some responsibility to ensure that their graduates acquire the sense of financial history which is so evidently lacking. We need good business histories to underpin these courses. The firm which has a good business history available to its better entrant staff will inculcate its history into its culture.

One of the useful outcomes of the crash has been a couple of instant histories about New Zealand businesses. Bruce Ross’s The Ariadne Story and John McManamy’s Crash! are both good reads in their own right, and they are underpinned by a lot of economics. One special merit is that they are stories about the business failures. Too often business histories record the triumphs of successful firms. Add to these Allan Hawkins and Gordon Mclauchlan’s The Hawk, and Yvonne van Dongen’s Brierley – both biographies offering insights into the business world – and Bruce Jesson’s The Fletcher Challenge and Behind the Mirror Glass. These six are probably the best set of business histories available for any period, although purists may object to their being classified in this way.

Some Lessons

Why have some business histories been more valuable to me than others? It will be clear that to this scrounger of ideas and anecdotes, relevance has not been important. Nor do I need to reiterate the standard requirements that they be well-written and well-presented. Let me start off with some of the common features of bad histories.

The worst is hagiography and its close ally, vanity publishing. One of the first things a newly independent colony in Africa did was to create an army, despite being under no threat from its neighbours and having secure natural borders. When asked why, the new president replied that ‘a gentleman needs a tie’.

Similarly, many well-established firms see a need for a business history of themselves, and have no clearer idea than that as to the purpose of the commission. The outcome is a book which celebrates the firm, its triumphs, and its great men ( women do not appear centrally in business history as yet), presented in a lavish publication with stunning pictures (or not -because often by the time the book has been finished the board of directors has lost interest, and publication is expensive). The result is a totally boring book which ends up sitting on the shelves of employees and scholarly libraries gathering dust. In my view, the firm would be better to spend its money on a leather binding with the company’s name embossed in gold, and blank pages inside. Or perhaps there should be a standard text on computer to which a few details about the firm and its great employers can be added. They can do this for children, so why not for some of the childish attempts to record a firm’s history?

Closely related to the hagiographic is the unprofessional writer. Very often they come from the firm itself, I assume as a form of early retirement on full pay for some much-loved or well-related but ineffectual employee. Knowing a lot about the business of the firm – and for all I know, these people were once experts – or being a good raconteur, is not enough to do a professional job of writing a history.

The Last Two Chapters

Professional writers do not always do well either. Sometimes it is under funding or time constraints that damage them. But one issue that seems unresolved, even when there are no resource limitations, is the problem of the last two chapters of a commissioned work.

By the time the writer gets to the events described in the last two chapters, there are persons living who were involved. Business can be a dirty activity, people make faulty judgements, and sometimes the key to understanding is some personal failure at senior level, such as alcoholism. What is the writer to do about such things? There is a certain point in a business history of a contemporary firm by a good writer at which the alert reader realises that we have reached the era whose actors are still living or have powerful children. You identify it by a lack of vigour in the account and a tippy-toeing around the edges of interest. Even a well-written book loses its thrust.

There is a paper to be written entitled ‘Writing the Last Two Chapters of a Business History’, which would set out the various strategies and give successful illustrations. Alas, I am not the one to give it. My reading strategy is to skip the last two chapters if I am in a hurry, and to fall asleep reading them if I am not.

One Damned Thing After Another

Another contribution to somnolence is the ‘one damned thing after another’ approach. This medication is not confined to business histories, but they face a special problem. The writer stumbles on a rich source of data, reports, or even diaries, from some obscure part of the firm, and suddenly this section has a significance in the firm’s history that it never had in the firm.

A good writer can use this sort of material to give a flavour of the industry. Even if the reader is familiar with the industry today, practices in the past may have been quite different. Sometimes he or she gets little feel for the way that technology is shaping the firm’s destiny. How is today’s student to make sense of the banking practices of the nineteenth century? As the child said about the reconstructed bank in the museum, ‘where is the automatic teller?’

A diary or a good set of records from a branch can be used to describe a fictitious day in the life of the firm, especially that of an ordinary worker or in a typical branch. Very often the writer has steadfastly stuck to the facts and given every detail, without imagination but with a commendable concern for the insomniac.

Another valued strategy is to place some aspect of the firm in a wider context. Supple’s GRI and Sinclair and Mandle’s Bank of New South Wales histories illustrate this approach. A goodly number of studies could have been improved if the writer had begun by asking why any general reader would want to read about this firm, and if the answer was that they would not, how the story of the firm could be used to entice the reader to tackle the book. The result would be a better book which would actually be read, much to the pleasure of the commissioning firm. It would also add to our knowledge, and enrich both the nation’s understanding of its history and the writer’s professional and academic reputation.

If the history is to avoid the one-damned-thing-after-another syndrome, should it be written with a strong theoretical perspective? Resolving that dispute is a swamp for all historians, which I shall skirt around.

But I will say this: the issue is not whether the writer has theories or writes without a theoretical basis, but which theories are used, and whether they are good or bad ones. We can be reasonably sure that those who claim to have no theories merely have bad theories that they do not understand. Moreover, readers also have theories. I do not think the writer can allow for all the idiosyncracies of every potential reader, but it is worth recognising that good business histories will be read by business people and commerce students, with intellectual frameworks from economics and related disciplines. Thus it is an advantage if the writer has some knowledge of economic, accounting, and business theories.

On the other hand, the authors of some of the books I have most valued show no evidence of familiarity with any of these theories. But the story is well enough told for the reader to make use of their own analytic frame to gain some new insights. There is probably no substitute for writing well.

The Role of Economic History

Adding tables of random numbers to an account is no substitute for analysis. Some writers seem to think that a tabulation or two in an appendix adds to their academic credibility. On more than one occasion I have looked at a table proudly displayed in a text, and wondered what on earth it was meant to be telling me, other than that the writer was a numerical neophyte.

Undoubtedly writers often include such tabulations in the hope that someone else will interpret them. Usually these are senseless even to a professional statistician. Part of the problem is that our economic history has no sound quantitative basis. I know that quite a bit of work has been done, albeit much of it in universities where there is more concern with input than output. But the material which does exist is not readily accessible to even the professional quantitative social scientist and historian.

The historical data base reflects a more fundamental problem, and one which causes me a little embarrassment. Having asked business historians to be aware of the needs of economists, I know we have very little to offer you.

What a lot of the histories – general as well as business ones – require is a reliable schematic account of the economic environment in which their firm existed. Sometimes reading a text one has the impression that at no point in the narrative is the writer sure whether the economy is in boom or in slump; or whether the importance of the firm’s sector and/or region is increasing or diminishing.

Sadly, there is no passable economic history of New Zealand which a business historian could use to provide such a macro-economic framework, and there is no master account of our general economic history, as there has been for general history since at least the late 1950s. I would have thought that a decent economic history reference text was a priority at this stage of the history profession’s development. But perhaps as an economist I over-emphasise the role of the economy in the development of a nation.

Promoting Business History

There is no easy remedy to the lack of a reliable economic history. But in a second problem area I can think of a way to make progress. Earlier I mentioned the lack of professionalism in a lot of business histories, particularly commissioned ones. We are not going to be able to prevent some managing directors retiring their dipsomaniac uncles on full pay as the firm’s official historians. But ve can improve the public’s understanding of the standards of professional business historians by publicising those standards.

I am not merely concerned with having a standard contract, operational guidelines, and indicative fees for commissioned business histories. What I would like to see is the honouring of the best with some prize or award. I shall leave the mechanics of organisation and funding aside, and concentrate on the public spectacle.

Once the awards were known, it would percolate into the business consciousness that there were standards, and they would become keener to commission professional histories in the hope of that of their firm obtaining a merit award. Even showing them those studies acknowledged as meritorious would help the firm understand what was achievable. Of course not all the merit successes would be commissioned works, just as not all business and organisational history is commissioned. But a process which recognised excellence would, I believe, do much for this genre of literature.

Indeed business history is hardly recognised as a genre. With the possible exception of Russell Stone’s studies of John Logan Campbell, which are treated as biography, I do not think there is a single reference to a business history in Peter Gibbons’ chapter on non-fiction in The Oxford History of New Zealand Literature. One should not get paranoic about this: there are hardly any references to social science or natural science literature either, apart from some on Maori studies. You find the same absences in the non-fiction book awards. The literary establishment may well -for all I know -consider such scientific writing as fiction, or perhaps they think the works are written in Swahili.

Yet, as we have seen even in this superficial review, there is a body of business history, patchy in scope but ranging in quality from the awful to the excellent. For at least one person, the best of these works have been useful as well as interesting and enjoyable reading. They have not only filled in gaps in general economic history, but assisted in the study of industry and monetary economics.

More fundamentally, they provide an antidote to the idea that economies revolve around the clever actions of Prime Ministers and Ministers of Finance. Rather they are about households, firms, and other organisations and the people in them, all facing a constantly changing and bewildering economic environment.

This paper from an outsider is a way of expressing thanks for what business historians have done in the past, and of strengthening your resolve to extend your contribution to the nation’s understanding and welfare in the future.