Sun Tzu’s The Art of War is justly known as one of the great works in strategic thinking. But although the text nominally concerns warfare, through the centuries it’s often been used as a business handbook more than as a military manual. Just like good economic writing, it brilliantly expresses complex ideas simply and concisely, and its dramatic prose makes for compelling lessons about conflict.
However, while analogies between the boardroom and the battlefield might seem appealing, they are erroneous. Economists like Mises have emphasized that market competition and military competition could not be less alike; one is productive and increases human welfare, while the other is destructive of human life and economy.
But The Art of War remains popular in business because it isn’t really about armed conflict. It’s about finding ways to advantageously avoid or resolve confrontation of any kind. It’s this sort of idea that opens the door to insights about enterprise.
One of Sun Tzu’s major attractions for the business world is his emphasis on entrepreneurial thinking. For him, strategic excellence is about creating opportunities and taking risks, the same abilities necessary for success in the market, where uncertainty constantly challenges the good judgment of would-be entrepreneurs.
Good decision-making also means one must be “formless,” so as to instantly take advantage of fleeting opportunities and adapt seamlessly to changing (market) conditions. The classical strategists realized that competitive success depends on one’s ability to control and manipulate the internal and external conditions of conflict. This means knowing one’s own abilities and weaknesses as well as those of the competition, as summed up in The Art of War’s most famous aphorism: “One who knows the enemy and knows himself will not be endangered in a hundred engagements.”
The qualities that these classical strategists recommend in great generals are actually the traits of successful market entrepreneurs. For example, entrepreneurs are decisive and willing to bear the uncertainty of the market—unafraid of committing resources to projects that might fail. And they must be willing to endure hardship on the road to success, while never taking it for granted by becoming complacent or arrogant—traits that consumers often punish severely.
Comparing strategic and economic ideas raises an important question, though: If the analogies to the business world are so obvious, and the ancient texts really do have something in common with economic thinking, why didn’t the classical strategists realize their ideas were applicable to peaceful exchange? A simple response is that the market economy as we know it didn’t exist in ancient China (specifically, during the Spring and Autumn and Warring States periods). A more complete answer is that it couldn’t have existed. That is, ancient China lacked much of the institutional framework necessary for entrepreneurship and commerce to flourish—strong property rights, individualism, and the social acknowledgment of the importance of profit.
As William Baumol argues, a society’s institutions influence the course its entrepreneurial energy takes. Many of the great minds of the Renaissance—for instance, the inventors and innovators perfectly suited to improving welfare through the market—were military entrepreneurs in service to competing city-states. Political institutions offered patronage and the possibility of advancement, while opportunities to commercialize ideas were scarce, if not actively frowned upon. That is to say, the ancient Chinese states, along with countless others throughout history, lacked the “bourgeois virtues” that Deirdre McClosky argues provided the foundation for the industrial revolution.
This then is one explanation for the military turn of The Art of War and the other Chinese strategic classics. Having little explicit acknowledgment of the virtues of commerce, analysis of market competition presumably offered slight appeal. Without the institutional and cultural basis for market entrepreneurship, classical thought turned to analyzing destructive forms of competition that offered better “profit” opportunities—specifically, the chance to wield influence within the State bureaucracy. Spreading ideas usually meant finding a place in court and becoming a trusted advisor to the powerful. This much the classical strategists had in common with Renaissance intellectuals like Machiavelli—who, perhaps not coincidentally, also wrote a book titled The Art of War.
The lesson is that all societies face the problem of developing and keeping the institutions that allow enterprise to thrive—those institutions that direct the best of human creative energy to improving the lives of others, not to the service of the military State. Ideology plays a vital role in this social process and paves the way for peace and commercial prosperity. Instead of a guide to violent competition then, texts like The Art of War can help us develop a strategy for the battle of ideas. Ideas ultimately shape both society and our roles in it, so it falls to us to embrace and spread those that lead us away from the destruction of war making and toward the “creative destruction” of enterprise.