What Defines a Modern Business?

There is an old joke about a fish stand with a sign reading 'Fresh Fish Sold Here.' One by one, passers-by argue that one word or another is extraneous: 'Here' because where else would it be?; 'Sold' because it's obviously not being given away; 'Fresh' because one hopes it wouldn't be sold otherwise; and 'Fish' because it can be smelled from five blocks away. A similar argument can be made about the three so-called pillars of business: land, capital and labor. (Some add 'entrepreneurial spirit' as a fourth pillar; I consider this late comer to be doubly extraneous.)

That land is a necessary ingredient for any business is an antiquated concept. While true enough for crop or livestock farmers, large-scale manufacturers, and most real estate developers, there are many who never own the land where their business resides. There are plenty of others who run businesses that occupy no land at all: the roving newspaper vendor, the rickshaw taxi driver, the consultant, the web page designer, and the guy sitting in the coffee house editing his online newspaper. In an increasingly liquid real estate market, land is recognized as nothing more than a special variety of capital: it is capital with trees growing on it, and not a dollar sign in front of it.

Is capital still a requirement for a businessperson? It is understood that the capital itself was never actually needed; rather it could be exchanged for what was needed. A man with several tons of peanuts to shell and a few thousand dollars is no better off than a broke man until he exchanges the money for a shelling machine or a few dozen laborers. But if capital was never a requirement save as a token for exchange, it is now obsolete; through the revolution in credit finance (the idea of borrowers and lenders is prehistoric but the gold card and the credit scare belong to modernity) one does not need any actual capital but merely the credible promise to produce such capital at a later date. The confident entrepreneur may be hoping to convert his borrowed capital into a sum far greater than the principle and interest he owes; for most borrowers it is their own labor and that of their employees that will convert debt into profit.

Labor, then, remains as the only recurring ingredient for the successful business. Even so, the traditional definition of labor needs updating. Most of the essential 'work' in producing the average revenue stream is not physical labor; the aphorism 'work smarter, not harder' betrays the fact that it is often innovation, not effort, that is rewarded. But with no clear linear relationship between amount of labor and amount of reward, how valid is it to associate the two? There are, after all, revenue streams that do not scale with amount of labor: royalties, residuals, rent and endorsement contracts. In this era where every blogger can sell banner ads on his site for a few cents a click and a few bucks in an interest-bearing checking account can add a trickle of pennies to one's income, labor-free revenue is no longer the exclusive domain of the wealthy. It's a fine line between such practices by individual consumers and the three-figure 'microbusiness' of modernity. Imagine the diversified portfolio and business interests of a multi-national corporation, scaled down to the individual level: a business can lack land, labor and capital (at least in measurable amounts) and still be a business.

Finally, there's entrepreneurial spirit. This encompasses, among other things, the willingness of the entrepreneur to do the ground work in establishing the business. This is a specific type of labor and definitely helps, but is also not an absolute requirement. Taken more broadly as the motivation or attitude that makes starting and operating a business possible - The Donald Trump Spirit - this spirit is reduced to nothing more than a tautology.

The modern business, then interpreted very broadly than any entity that generates revenue, may consist of some combination of land (or other tangible assets), capital (or other valuables of variable liquidity), and labor (or any other effort, formal or informal, that adds to the revenue of the business.) No single element is essential and a business can function just fine without it: even with all four words missing from your sign, customers will still be able to smell your fish.