Matter of trust

Four years before Jamsetji Tata arrived in the world, Andrew Carnegie was born in Scotland; two years before, J.P. Morgan, and D. Rockefeller arrived the same year Jamsetji was born — 1839. These three entrepreneurs went on to become the business titans of America in the late 19th century. After the civil war, inventions such as electricity and the telegraph buoyed American economic growth, allowing entrepreneurs to redefine in their own minds where the future opportunity would lie. For example, in 1872, Andrew Carnegie had become convinced that steel would “lie at the centre of the world”. As a well-travelled person, Jamsetji must have read and heard about these builders of wealth. They subsequently earned the unlovely label of “robber barons”, because in building their empires and fortunes, they had adopted tough postures with labour or restrained trade to hold margins.

Frank Harris, the biographer of Jamsetji Tata, wrote that for twenty five generations, the names of the family ancestors of Jamsetji were written on the priestly rolls. Fourteen generations ago, one of the ancestors took the name of “Tata”, conjectured to denote “hot-tempered”. Into this genealogy, in 1839, was born J.N. Tata.

It is said that writers of the time considered the Tatas as “backbenchers in the Bombay business world”. It was Jamsetji who decided to venture into industry through textiles. This was not the only evidence of his propensity for innovation. In Empress Mills, he introduced the ring spindle when the device was yet to come into general use in the United States of America, where it had been invented. He also introduced several labour welfare measures that were yet to become common. He even experimented with a new form of management whereby he became a salaried managing director reporting to a functional board of directors, long before the word “corporate governance” was even conceived of!

While doing these, he was fired by a fierce sense of nationalism, a passion to advance the economic status of India. Economists say that all entrepreneurs must have a sense of greed and optimism. If at all that be so, Jamsetji might have had his fair share. The difference, of course, lay in what he did with the fruits of his entrepreneurship. He helped build institutions for his people and his country even during his own lifetime.

Apart from his passion for the nation’s progress, he displayed a rare compassion for the less privileged in his country. In this respect, he replicated the virtues of wealth creation of Carnegie, Morgan and Rockefeller, but as a benign baron. He established the J.N. Tata Endowment Scheme in 1892, at least a decade before the Carnegie and Rockefeller Trusts were established in the 20th century.

Trusts and foundations are a 20th century phenomenon. After the American ones in the early part of the previous century, the first major British foundation to be established was the Leverhulme Trust Fund in 1925. William Lever was born in 1851, twelve years after Jamsetji. At age thirty three, he introduced Sunlight soap and never looked back. When he built Port Sunlight, the Liverpool factory, he bought 56 acres across the Mersey river. Right from the beginning, he envisaged it as a community as well as a business. Lever believed in profit as a reward for enterprise, but it was not the chief incentive which moved him personally. As was written of him on his centenary, “The ruling passion of his life was not money or even power, but the desire to increase human well-being by substituting the profitable for the valueless.” Through his will in 1924, he left a part of his wealth to the trust. The Leverhulme Trust was created a full thirty two years after the J.N. Tata Endowment!

I recount these events for two reasons: first, history creates romantic notions about the past; second, it sheds some light on what I call the samskar of the business. Like individuals, business enterprises too have a samskar. It is the mark of a successful business that profits are earned competitively in the early days. It is a mark of a “great business” that, in addition, good samskar gets so deeply embedded that it becomes part of the DNA. Arie de Geus wrote in The Living Company that an economic company is like a puddle of rainwater — a collection of raindrops, gathered together in a cavity. The other type of company is organized around the purpose of perpetuating itself as an ongoing community. This type of company is like a river. It is turbulent because no drop of water remains in the same place for long, it finally flows out into the sea. But the river lasts many times longer than the lifetime of the individual drops of water which comprise it.

For 135 years, the Tata “river” has flowed on, exhibiting the characteristics of the great rivers of the world — long traction, turbulence, overcoming obstacles, growing might, and sharing its might for the happiness and prosperity of those on the banks of the river. In 1939, the year of Jamsetji’s birth centenary, when the British government published a report entitled, “Indian Business and Nationalist Politics”, Tata was listed on top. In 1969, when the report of the Dutt Committee of Enquiry on Industrial Licensing Policy was published by the government, Tata was on top. Shortly, when the results of the year ending March 2004 would be analysed, Tata could well be on top once again. But it is not so valuable to be at the top for economic performance alone. It is far more valuable to be listed on top in the hearts of people as a synonym for trust over several generations.

It is that samskar, which Jamsetji created so powerfully, that drives the business today. The shareholding patterns and profits today are so aligned that of the $ 1 billion plus of profit after tax earned by the group, approximately a fourth is attributable to the good causes that the trusts espouse. It is to that that employees pay homage each day when they get to work.