What does it take to build a really great company? One that is not only financially successful, but one which endures and which becomes a household name? There is no reliable guide, unfortunately. However, there is Tom Levitt’s interesting book, ‘The Business of History’. Levitt’s career has been in teaching and in politics: he was a Labour Member of Parliament from 1997 – 2010.

His approach to the subject is idiosyncratic, to say the least. He begins with a widely forgotten book that was published a hundred years ago: ‘Romance of great businesses’, by William Henry Beable. Beable compiled a list of thirty-two companies which were industrial leaders in Britain in 1925, and his book is a series of ‘informed reflections’ on them. The second, part of Levitt’s book is a précis of Beable and an update on what has happened to those thirty-two companies since 1925.

The first part of the book (which might logically have come second) is called ‘The lessons’ and sets out the author’s conclusions drawn from the individual company histories. He conveniently summarises them as follows:

‘…long-lived companies share some common qualities.

• Sensitive to their environments: they were in harmony with the world around them and aware of social change, whether deliberately driven or not.
• Cohesive, with a strong sense of identity: valued employees shared the established company purpose (possibly for reasons of self-interest).
• Tolerant: they were open to change, innovation and succession. ‘Dogmatic tolerance’ is not incompatible with the autocratic leadership that some of our companies experienced.
• Conservatively financed: they employed low-risk financial strategies with good assessment and management of risk.’

This reads a bit like a centrist politician’s wish list. Levitt’s precepts don’t have much in common with Joseph Schumpeter’s depiction of capitalism as ‘creative destruction’. For example, Amazon, having put so many shops out of business, might not be thought of as ‘in harmony with the world around them’, and it has c created social change rather than merely being aware of it. And the growth of job mobility and a flexible labour market has weakened the relationships between workers and employers.

Beable’s list of companies curiously didn’t include any banks, even though the banking industry had settled into an oligopoly of five by 1920, the remnants of which are still recognisable in in the banking industry of today. This is unfortunate, because the banks developed a distinctive culture. They looked after their own. In the Great Depression, when the Bank of England cut interest rates to 2%, they acted as a cartel and set a minimum rate for loans of 5%. The Chairman of Midland Bank explained it in 1934 by saying that a reduction of 1 per cent in the rate charged on advances would have entailed either a one-third cut in salaries or an almost complete suspension of dividend payments. The banks’ cohesion and sense of identity, in other words, helped to retard economic recovery.

As to conservative finance, it’s great if you can get it, and afford it. But think of the great railway companies of the nineteenth century, which had to finance colossal investments, entirely from private sources, before they could sell a single ticket. Conservative finance of such projects would have been impossible. One of the morals is that regulatory insistence that financial institutions concentrate on low-risk investments is very dangerous.

Levitt has his opinions, which he states robustly, and as though they were obvious facts rather than matters for discussion. He has no time for Milton Friedman’s assertion that the only objective of companies should be to maximise profits. He therefore is in favour of ‘responsible’ investment only. But what does ‘responsible’ mean? And what might it mean tomorrow? Until Russia invaded Ukraine three years ago investment in armaments production might not have been regarded as responsible, but things can change quite quickly. Levitt says that the practice of Corporate Social Responsibility in the 1970s was unsatisfactory, partly because the outcomes of CSR are hard to measure. But the search for a measurable target for everything worthwhile is doomed to failure: if we don’t do unmeasurable good deeds, we will commit a lot of sins of omission.

The second part of Levitt’s book contains a great deal of fascinating information. For example, it describes how the financial affairs of companies were entangled with those of their founders: in several cases, when the founders died, the company’s finances were severely disrupted by the liability for death duties. One common strand among many of the companies was the leadership of people of strong moral, and often religious, convictions. For example, many of the characters were Quakers – as were the progenitors of Barclays Bank, not included in the book. Another strand is the enormous influence that business leaders had on society in general. John Maynard Keynes wrote rather condescendingly that “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist”, but after reading this book, I wonder whether it is actually the other way round: decision made by practical men, and women, as implementers of advances in science, have an enormous influence on human behaviour and the human environment.

The book’s subject matter is fascinating. Levitt’s approach to the subject, if neither scientific nor entirely convincing, is always interesting and illuminating. The book is well written and entertaining. It is well worth reading.