Captains of Industry
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 outmaneuver 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.