How to Succeed in Business (According to a 15th
Century Trade Merchant)
Does a 15th century Italian merchant have something to teach
leaders about the proper ways to conduct business? Sophus
Reinert and Dante Roscini discuss the first English translation
of The Book of the Art of Trade.
In what could be considered the first business how-to book, an
Italian merchant from the 1400s advises leaders to be charitable, ethical, and
treat people fairly; be modest; look for the right qualities in a wife; be
selective in deals; and retire at 50, when “natural fervor abates, his blood
calms down, his intelligence dims and his memory becomes less quick, so that he
risks committing many errors in his business.”
“In a sense, these are very early concepts of corporate social
responsibility,” says Harvard Business School professor of management practice
Dante Roscini, “He’s addressing the issue of responsibility to the community
and who you are as a person.”
Written in 1458 in Venice by trade merchant Benedetto
Cotrugli, The Book of the Art of Trade has just received its first
English translation. Baker Library at HBS and the HBS Business History
Initiative (BHI) recently hosted a reception celebrating the new release. The
library’s late medieval and early Renaissance Italian business records housed
in HBS’s Historical Collections in Baker Library are among the largest and most
important collections in the world outside of Italy.
“Sponsoring this event
was an opportunity to highlight the extraordinary treasure trove we have here,
as well as the larger return to studying early capitalism in a global context,”
says HBS associate professor Sophus Reinert, a BHI faculty member. While
Cotrugli’s manuscript is not housed at Baker, guests had the opportunity to
examine ledgers and other records in the collection from the same era.
Written in 1458, Cotrugli’s treatise was not published in Venice
until 1573, when it appeared in a significantly abridged and revised edition.
The new English translation by John Francis Phillimore is based on an earlier
and more complete manuscript discovered in Malta. Edited by Carlo Carraro and
Giovanni Favero of Ca’ Foscari University of Venice, the new edition includes
commentary by Niall Ferguson, Favero, Mario Infelise, Tiziano Zanato, and Vera
Ribaudo.
A reluctant merchant
Born into a family of cloth and wool traders, Cotrugli was a
reluctant merchant, pulled from his studies at the University of Bologna to
join a profession that he considered lacking in intellectual and moral
discipline: “I found the state of general education inadequate, ill-organised,
arbitrary and useless,” he wrote in the book’s opening pages. “...[I]t pained
me that this useful and necessary activity [trade] had fallen into the hands of
such undisciplined and uncouth people, who carry on without moderation or
orderliness, ignoring and perverting the law, and that this profession should
be considered of so little importance and be so neglected by the wise...a forum
for empty chatter where anything goes.”
To correct this sorry state of affairs, Cotrugli took a holistic
approach, laying out a four-part handbook that encompasses the origins and
principles of trade; the role of religion; civic duties, which includes
chapters on topics such as modesty and fairness; and a number of domestic
matters, from the desirable qualities in a wife to the proper furnishing of a
home.
“It’s a period that maybe for the first time saw wealth and its
broader potential as a societal goal,” says Reinert. “You needed to be wealthy
to give to others. Instead of conquering, you could achieve greatness through
excellence in trade.”
“They incorporated business into a larger social and ethical
framework,” adds Robert Fredona, an HBS research associate who is cataloging
Baker Library’s holdings from this period. “Cotrugli is one of the earliest
texts to talk about business ethics, such as treating people fairly.”
Stay out of politics
Readers also find clear instructions on what to avoid (chess,
board games, cards, dice, fencing, wrestling, playing instruments, dancing,
hunting, fishing) and how to conduct oneself, including the importance of
attending mass, praying, and charity to others: “The merchant must be generous
in extending his hand to the poor and in giving alms out of his own property in
proportion to its extent.” Merchants should not be involved in politics, or the
courts, “because these are perilous areas”—a statement that continues to
inspire debate in the era of businessman-turned-president Donald Trump.
Honor, prudence, integrity, diligence, civility, composure, and
temperance are all highlighted in separate chapters—but Cotrugli gives equal
due to the importance of luck and boldness. A merchant also must be canny, but
not overly so: “The shrewdness of the merchant, or his cunning, must be
employed in moderation: he should neither hurt others nor allow himself to be
got the better of, but manage to intuit where deceit and falsity lurk.”
To be a good merchant, in other words, you first had to be a
good citizen, with education playing a key role in creating the “universal man,
equipped with the capacity to understand and deal with all types of men.”
“Cotrugli was elevating the idea of a merchant from a very
trading-oriented persona to a broader and nobler figure in society,” says
Roscini, noting that this concept fit well with the highly literate, numerate
culture of Renaissance Italy and its emphasis on cultivating the whole person.
“It wasn’t just about pursuing a noble ideal, either,” Roscini adds, “if you
followed this path, you would be more successful.”
With that said, the art of trade also requires a strong base of
technical knowledge. In the book’s first section, Cotrugli covers the
particulars of barter, selling for cash, selling on credit (and receiving
payment), and keeping one’s books “in a mercantile manner,” among other
business topics.
Scholars have noted that it is the earliest known work to cite
the system of double-entry bookkeeping, which would be covered in greater
detail more than 30 years later in Luca Pacioli’s Summa de arithmetica,
geometria, proportioni et proportionalita (1494), a first edition of which
is housed at Baker.
Cotrugli also notes the importance of a business’s location, and
offers his opinion on risk and diversification in commentary as relevant in the
21st century as it was in the 15th: “Be careful not to take on too many or too
large transactions: do not try to net every bird that passes, because many have
failed for taking on too much, but no one for exposing himself too little.”
Be prepared to write-off debt
Extending credit was as much a necessity for trade in Cotrugli’s
time as it is today, but charging interest was illegal; instead, debts were
compensated through commissions or insurance premiums that skirted the
definition of usury. And Cotrugli was clear on the treatment of nonperforming
loans; after one year, the amount due should be cut in half, and written off
entirely after two, “because for the merchant losing time and losing money are
the same thing.”
Succession planning is also touched on (even if it doesn’t go by
that name in Renaissance Italy). Cotrugli’s attitudes are surprisingly modern
in this regard. That one’s offspring will follow in the family business, for
example, is not a given.
“...we need to take particular care, when we are beginning to
channel the disposition of a son...when directing them towards the practice of
trade, because if that son has a leaning elsewhere...he might not well prosper
in that life, or would only get on with difficulty or remain stuck halfway with
small profit to himself and without reaching his objective, which should be to
enrich himself honourably.”
If, however, he is lively by nature, well turned-out and of
noble character, and not too fickle nor an idler, but rather aspires to acquire
both honour and profit or victory in war, Cortugli opines, “then we can say
that he is suitable material for a career in trade.” And if that is the case,
he should learn his trade with an outside mentor for several years: “as soon as
they are grown, they should be placed with a good and knowledgeable merchant so
as to learn their trade, because although many want to become masters without a
master, this is not possible.”
The book concludes, appropriately enough, with the proper way to
end a merchant’s career. According to Cotrugli, the appropriate age for
retirement was not 65 or 70, but 50 (life expectancy was shorter in those days
and Cotrugli himself would die at 53). At 50, the merchant’s “natural fervor
abates, his blood calms down, his intelligence dims and his memory becomes less
quick, so that he risks committing many errors in his business.” According to the
laws of nature, “it is good that he rest. He wanted money: he has got it; good
name: he has it; possessions: he has them; he has married off his sons and
daughters, he has made his pile, fathered and reared children, he has seen them
learn his trade, he is fifty or sixty years old: what more does he want?” he
demands, chiding anyone who wishes to continue working for fear of letting
oneself go or being thought a “layabout.”
“You can think of Cotrugli’s book as an early manual for
business,” Roscini says. “As Niall Ferguson notes in his introduction, it’s the
beginning of the ‘how to’ tradition, in a sense. The book is a direct
consequence of his everyday business practices and happens to contain some
seminal concepts that are still here today.”
Much has changed in the centuries
since The Book of the Art of Trade was published, perhaps most
notably the role of women in society. But many of Cotrugli’s observations have
continued relevance, despite the obvious differences in how we buy and sell
today. And the differences that do exist are instructive.
by Julia Hanna
https://hbswk.hbs.edu/item/how-to-succeed-in-business-according-to-a-15th-century-trade-merchant?cid=spmailing-17845383-WK%20Newsletter%2011-29-2017%20(1)-November%2029,%202017
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