Business leaders, industrial magnates, and entrepreneurs of the late nineteenth century.
Men like John D. Rockefeller, Andrew Carnegie, and John Pierpont (J. P.) Morgan, among many others, owned and coordinated large business enterprises such as oil production, steel manufacture, and investment banking. These captains of industry introduced products and employed methods of organization that fostered national economic growth while allowing them to accumulate massive fortunes and wield tremendous power. Though they achieved great wealth, status, and power, these men routinely risked significant financial loss. Ironically, a primary motivation for their risk-taking included their desire to bring order to an environment of chaotic competition.
The original entrepreneurs of sixteenth-century France did not take risks in commerce but operated rather as “fortune captains” who hired mercenaries for wars of gain and plunder. American captains of industry often pursued their economic goals with the same creativity and ruthlessness of military leaders. Via innovation, intense competition, and new organizational processes, captains of industry both eliminated competitors and changed the rules of doing business. Sociologist Joseph Schumpeter argued that, although entrepreneurs differed fundamentally from military leaders, they nevertheless acted out of a desire for conquest and control and remained capable of astounding innovation. The captains of industry generally did not create the industries in which they excelled, but they achieved success because of organizational, promotional, and administrative skill.
John D. Rockefeller manifested these skills at his company, Standard Oil. By eliminating competitors through horizontal integration (that is, merging with or controlling other organizations that produce the same product), Rockefeller mastered the use of the holding company, in which one company controls other companies by holding the majority of their stock. Rockefeller also achieved astounding success through vertical integration by controlling the sources of production and outlets of sale for a particular product. For instance, in addition to building his own tankers and pipelines, Rockefeller obtained railroad rebates that gave him a significant cost advantage over competitors.
Few captains of industry proved more skillful than Andrew Carnegie, who used vertical integration to outma-neuver competitors and create Carnegie Steel, the largest steel business in the world. Obsessed with reducing costs, Carnegie acquired not only his own sources for the raw materials used in steel production but also sales outlets for that production.
The investor and financier J. P. Morgan imposed a similar order on his business environment through investments and financial control. Morgan provided capital for the nation’s rapidly expanding industries, thereby acquiring control of company management decisions and ultimately controlling entire economic sectors. Believing that unfettered economic competition led to chaos, Morgan acquired partial or full control of such key economic concerns as railroads, American Telephone and Telegraph, a host of financial and banking concerns, and even Carnegie’s steel empire.
Through horizontal or vertical integration or through financial maneuvering, Rockefeller, Carnegie, and Morgan imposed stability and predictability on the highly competitive business environment of the late nineteenth century.
