It’s a battle when you start a business

First published in the Financial Times on 11th December 2012.

Discord is a fact of life in an activity driven in large part by human nature and ambition

If you want to avoid conflict, do not become an entrepreneur. There are much more peaceful vocations one can pursue: working as an artist perhaps, or a software engineer, or even a gardener. For those hardy characters engaged in building an enterprise, life can often feel like a constant battle.

Business is a struggle on many levels. There is the fight to gain market share from competitors – to seize their customers. You can gain an edge through price or quality or innovation, but often this contest descends into litigation. James Dyson’s autobiography Against The Odds is dominated by his patent disputes with various rival makers of vacuum cleaners. Even Apple, everyone’s favourite big corporation, participates in an apparent war of attrition with Samsung across several continents.

Then there are negotiations with suppliers – haggling and bullying, threats and promises unfulfilled, unilateral retroactive discounts, and on occasion being held to ransom. Buyers for big retailers are hated and feared because of their power and ruthless tactics. A number of Britain’s food producers are impoverished because they hold a weak bargaining position with the supermarkets. Similarly most shopkeepers complain that their relations with property landlords are by nature adversarial and one-sided. No wonder so many high streets are gradually becoming ghost towns – after all, no one signs a lease with upwards-only rent reviews when they can create a website.

Meanwhile, businesses poach each other’s best staff, and with them perhaps all the company’s secrets. A while ago I invested in a service business, only to suffer a series of walkouts across several offices – all defecting to a direct rival. Disputes are almost expected in certain realms, such as construction or shipping. Whole fields of law have sprung up to litigate these fields – to the general detriment of the trades, and the enrichment of the legal profession.

Takeovers are very public conflicts over commercial assets. There is an obvious collision of interests when different buyers want to own the same company. Contested bids are great sport for observers, but draining for the staff and often costly for the victor. Just look at the catastrophic acquisition of ABN Amro by Royal Bank of Scotland – an example of the Winner’s Curse writ large.

Occasionally, business can deteriorate from lawsuits to more physical encounters. A financier once threatened to punch me unless I signed a contract. And a casino owner I used to know was warned off applying for a new licence by a rival, who menacingly revealed intimate details of the daily movements of the former’s children – with the implication that there might be an “accident” if the application was not dropped. Luckily most entrepreneurs do not resort to actual violence (with the exception of the odd Russian oligarch).

In addition, the conflicts within businesses are legion. Departments and divisions clash over resources. Executives brawl about responsibilities, titles, bonuses and even car park spaces. Founders scrap over shareholdings. Office politics frequently absorbs more energy than sales, production and distribution combined. At least smaller, entrepreneurial outfits have less room for internal turf wars.

The extreme example of conflict in commerce is a bankruptcy. During an insolvency, almost everyone is at war. Employees are suing and perhaps stealing, administrators are sacking and disposing, bankers enforcing security, creditors claiming retention of title on goods, clients reneging over money owed, while competitors circle like ravenous vultures. Not an experience for the faint of heart.

It would be wonderful if reason ruled in every business dispute. But – be it fraud, corporate espionage, employment tribunals, warranty claims or regulatory breaches – so often the issues can only be resolved painfully. Emotion, pride, greed and bad advice inflame small differences.

Finite resources, ambition and human nature mean business will always be a fraught activity with elements of discord. Capitalism can never be a serene pastime for those who avoid disagreement – unless they want to be steamrollered. Perhaps the critics are right: it is the pursuit of war by other means – a rough and tumble game that rewards aggression too well.