If you can’t recall the past, you’ll repeat its mistakes
First published in the Sunday Times on 19th July 2015.
Napoleon once said that to understand a man, you need to understand the world when he was 20 years old.
There is a great deal of truth in his observation. To an extent, we are all prisoners of our past, moulded especially by the conditions prevailing as we enter adulthood. Of course, everyone loves to think they embrace change as they age, but character, opinions, habits and behaviour are typically fairly settled by the age of 20. So if you really want to know your partners, your staff, your customers and your competitors, look back — and study history.
And not just the past few decades — it pays to study the grand sweep of history too. In this matter I am perhaps biased, being the son of a historian. I have always believed that we can learn from the mistakes of previous eras, even if the pattern of each generation varies. Of course, many business practitioners have no time for history at all. They live in the present, or more likely the future, projecting forward growth, new inventions and spectacular rising fortunes. After all, enterprise is about the better times to come, which generally belong to the optimists. Often such entrepreneurs follow Henry Ford’s famous dictum, uttered in 1916: “History is more or less bunk.” But even if Ford was a brilliant industrial pioneer, on this point he was wrong. History matters in commercial affairs as much as it does in so many aspects of life.
It disappoints me that memories are so short in the business world. The urgency of the moment can blind one to a longer- term perspective. Companies and tycoons rise and then fall, and are all too soon forgotten. My interest in historic narratives is not because I have a sentimental desire to preserve some sort of legacy myself. Moreover, I realise that dry, academic disciplines can seem very remote from the realities of selling goods in the moment, and making a profit so as to meet a payroll this week. But I think we are all rooted in our yesterdays. Indeed, societies are inevitably the product of their past. The crisis in Greece is not really a sudden catastrophe, even if it can appear so. In truth it is a problem that has been festering for many years, stemming from a particular culture and certain attitudes towards debt, work, retirement, taxation and the rule of law. Expecting a nation suddenly to reform once it joined the European Union, and then the euro, was always a fantasy.
History even matters in sectors like technology. Of course, Silicon Valley believes it is disrupting all the old economic rules. But we also know that the phrase “this time it’s different” is an exceedingly dangerous premise. Stock market bubbles and property booms are invariably followed by busts. No one can predict the precise timing of such cycles, but analysis of similar rises and falls should forewarn investors. We have the 1929 crash, the 1970s slump, Black Monday in 1987 and the dotcom collapse to warn us that the current valuations of some tech companies are ridiculous.
For example, Uber raised money fairly recently at a valuation of $50bn (£32bn) — the world’s most highly capitalised start-up ever. This is reportedly 125 times its historic revenues — not even, I hasten to add, profits. Given the extraordinary storm of litigation and hostility it has been suffering globally, and the various existential threats to its whole business model, I think history tells us this pricing is foolish, and that shareholders will lose money.
This carries echoes of the “go-go” late 1960s, when the “nifty fifty” stocks ruled Wall Street and brokers were in love with a previous bout of innovation. Until it all fell apart.
Almost complete ignorance of past follies leads to repeats of the same errors. Of course, history does not only reside in dusty libraries; experienced older figures will remember previous phases of over-exuberance and subsequent regret. Unfortunately, the tendency towards arrogance among some fund managers, bankers and entrepreneurs means they ignore the wisdom of age. Whole cohorts are now in senior roles who have never experienced high interest rates, lived through a big fall in London property prices, or seen the stock market on single-figure price/earnings multiples. However, as the 16th-century philosopher Francis Bacon said: “Men of age object too much, consult too long, adventure too little, repent too soon, and seldom drive business home to the full period . . .” One can see why the impetuous young might find them tedious.
Occasionally business histories, biographies and memoirs do well, but most sell a tiny number of copies these days. In a modest effort to rectify this error, I have listed on www.lukejohnson.org my favourite 20 such titles for those who care. We live in an urgent time, when few really bother to read whole, serious books, preferring to gather information on YouTube or Twitter — or even articles like this. But such snippets can never substitute for a proper appreciation of the context and detail of the life of an entrepreneur, or indeed a business.