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Four Stages of Business Evolution through the Lens of Ancient Indian Wisdom

By February 18, 2014Article

In the Upanishads and the Vedas, ancient Indian wisdom texts written over 2,500 years ago, the life of a human being is said to have four stages: student, householder, forest dweller and ascetic. 

These stages of human life are analogous to the stages through which modern business has progressed since the Industrial Revolution. 

By reviewing the history of modern business with these stages in mind, we can see how the current upheaval of traditional business models fits within a coherent — and thus less anxiety-inducing — evolutionary path. 

In ancient India, the four stages were as follows: 

  • The student reads wisdom texts, learns to be useful and gains self-control in order to acquire knowledge. 
  • The householder marries, raises a family and maintains a career or occupation in order to acquire wealth and pleasure. 
  • The forest dweller practices self-restraint regarding material desires and relaxes attachment to family in order to serve society at large with less of a vested interest in particular institutions. 
  • The ascetic renounces all worldly possessions and attachments, including family ties, in order to exclusively pursue spiritual enlightenment. 

First, let’s establish a framework for looking at the “health” of business, independent of era. It may seem obvious that business is more prosperous today than it was 100 years ago. 

But the picture becomes complicated when we consider, for example, the difference between the current state of natural resources and that of 1914. To account for such differences, we must look at a higher reality. 

The “higher reality of business” is that, like cells in a body, businesses are inextricably embedded within larger systems: the economy, humanity, nature and being. 

The health of business in general can be assessed by considering four types of capital that correspond to these larger systems: 

  • Economic/material capital — the material wealth controlled by a business, which includes material goods and services as well as physical assets and infrastructure 
  • Human/social capital — the value of human resources, skills and social interactions comprising the humanistic wealth of the business  
  • Natural capital — the stock of available natural ecosystems and biodiversity for providing natural goods and services  
  • Being capital — the presence of integrity, trust, ethics and benevolent values within a business 

By looking at the history of modern business through changes in these types of capital, we can see how the standard of business success has changed and provide a context for the changes we are observing now. 

As the Industrial Revolution picked up steam in the 1800s, business leadership was in the first stage, that of the student; learning to organize labor, production and distribution brought success. 

In the 1800s, the impact of business on natural capital was low due to the small scale of industry compared to today. However, pay was meager, workers had no benefits or legal protection, and because many people were desperate for employment, business leaders could exploit their employees. Thus, while natural capital was high and material capital was starting to grow, human and being capital were low. 

In the 1900s, techniques of mass production and distribution were perfected, leading to the proliferation of business models that are considered standard fare today. 

Throughout the 1900s, great growth ensued as business leadership entered the second stage, that of the householder. Here, the focus was on accumulating material capital and selling convenience, luxury and pleasure to the masses. 

Labor laws and unions secured crucial rights for workers, increasing the human capital of the workforce, and also increasing the being capital of business leaders who were required to meet new ethical standards. 

Particularly after 1950, as technology and mass media magnified advertising power dramatically, material capital grew exponentially throughout society. 

However, this material growth came at the cost of natural capital, which had been consumed with abandon for decades. By the end of the 20th century, natural capital was dangerously low. 

As profit-maximizing techniques were perfected, markets became hyper-competitive, the financial sector rose to prominence, and unethical business practices eroded public trust in the entire business endeavor. Being capital and natural capital, the two largest and broadest foundations for all business, entered a precarious state. 

Toward the end of the century, business essentially discovered the limits of natural and being capital, which until around the 1950s were largely treated as limitless or irrelevant. The presence of these newfound limits threatens the great achievements of business in material capital.

Now, at the beginning of the 21st century, having discovered the limitations of focusing exclusively on profit maximization, business needs a different aspiration in order to continue to progress. 

Business must now embrace the third stage, that of the forest dweller. Companies must refrain from predatory acquisition and growth and turn their immense resources and expertise, developed over the last century for the purpose of maximizing profits, toward the goal of benefiting society at large. 

This change would not be a relinquishing of economic power, but a refocusing of that power toward a more stable path to sustained and shared prosperity. 

What of the ascetic stage for business? It is difficult to imagine what it would even look like: How would renunciation of worldly attachments translate into business endeavor? How would value selflessly given be expected to return to the giver? These are questions without answers. 

Perhaps the path will emerge after the power of forest dweller business has healed preventable human crises like income inequality, climate change, and the loss of natural ecosystems, and unlocked the economic opportunities still held at bay by these today. 

Whatever the future will bring, one thing is clear: to save the forests and other ecosystems from destruction, business needs to move to the forest dweller stage as a whole. 

This article is a summary of Chapter 4: The Higher Reality of Business, from the book, “Two Birds in a Tree: Timeless Indian Wisdom for Business Leaders,” by Ram Nidumolu (Berrett-Koehler, 2013).

Ram Nidumolu is the CEO of InnovaStrat, Inc., a Santa Cruz-based strategy consulting firm. He was previously a high-tech entrepreneur and business school professor. His recent book, Two Birds in a Tree: Timeless Indian Wisdom for Business Leaders, has won widespread praise from prominent CEOs and other business leaders. 

Michael Elias is a lifelong student of psychology, philosophy, and spirituality, and a writer, editor and musician. He lives in Santa Cruz, Calif.

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