American Business History by Walter Friedman

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American Business History is a brief but dense introduction to U.S. businesses from the early colonies to the present day and what made the U.S. environment so unique and dynamic compared to the rest of the world.

The Notes

• “This book emphasizes several overlapping themes: a capitalist orientation in policymaking that, while at times varying in the extent of government regulation and intervention in the economy, generally favored economic growth; a spirit of democratic entrepreneurship that encouraged people, both domestically and from around the world, to found businesses in the United States; an approach to management that embraced innovation and pursued operation at immense scale; and a financial system that, through investment banks, venture capital firms, and other institutions, enabled the commercialization of new technologies and ideas. All four themes, sometimes in concert with each other and other times in conflict, help explain the growth and trajectory of American enterprise to the present day.”
• 1783: The US was an agricultural economy with a small export of grain, tobacco, fish, and limited manufacturing.
• 1800: The U.S. population was 5.3 million (not counting Native Americans and 17% were slaves) compared to Great Britain’s 10.5 million, France’s 26.8 million, and China’s 300 million. The U.S. experienced a surge in population and GDP growth in the late 1800s.
• 1913: The U.S. was the largest producer of agricultural and manufactured goods.
• “Unlike Europe, the businessman…finds himself the dominant power in the life of the nation and almost alone in his control over the direction of its entire life, economic, social, intellectual, religious, and political… It is a situation that, so far as I know, is unique in history.” — James Truslow Adams, Our Business Civilization, 1929
• 1530 – 1780
  • French built settlements in the 1530s in modern-day Canada and built trade routes along the St. Lawrence River down to the Mississippi River.
  • Spanish discovered silver in modern-day Mexico and Bolivia in the 1540s and set up mining operations.
  • The first surviving settlement in the modern-day U.S. was set up by Spain at St. Augustine, Florida.
  • The English built its first settlement in 1585 at Roanoke, modern-day North Carolina. It failed. Jamestown was settled in 1607. The Massachusetts Bay Colony in 1628. The English took control of New Amsterdam, and renamed it New York, in 1664.
  • English trading companies behind the settlements built a network of Atlantic trade, which planted the seeds of American business. The trading companies were joint-stock companies like the Muscovy Company (1551), Hudson Bay Company (1670), Virginia Company (Jamestown, 1606), and the Massachusetts Bay Company (1628).
  • With the settlements came diseases — smallpox, cholera, bubonic plague — that wiped out 90% of the native population by 1700 due to their lack of immunity. By 1800, the native population was about 600,000 — down from an estimated 5 to 10 million in what is now the U.S. and Canada in the 15th century.
  • Tobacco was the first big export from Jamestown in 1612. Exports grew from 2,600 lbs in 1615 to 20,000 lbs in 1617.
  • The first documented slaves were brought to Jamestown by Dutch traders in 1619.
  • The Massachusetts Bay Colony focused on the fur, salted fish, and shipbuilding trade.
  • “Eleven other colonies joined Massachusetts and Virginia: New Hampshire (1629), Maryland (1632), Connecticut (1636), Rhode Island (1636), New York (1664), Delaware (1664), New Jersey (1664), Pennsylvania (1681), North and South Carolina (1712), and Georgia (1732).”
  • 221,500 people arrived in the British colonies from 1763 to 1775. Most were Europeans — 55,000 Irish, 40,000 Scots, 30,000 English, and 12,000 Germans — along with 84,500 enslaved Africans.
  •  A merchant class rose in the colonies that created banks, insurance, retail, wholesale, import/export, distillery, paper mill, and shipbuilding businesses.
  • Thomas Hancock (uncle of John Hancock) was one of the wealthiest in Boston. He started a bookshop, expanded to a paper mill, then began importing British goods and exporting codfish, whale oil, and potash.
  • Salutary Neglect — a period of unregulated trade between the colonies and Britain in the 17th and 18th centuries. It ended in the 1760s. Britain imposed taxes and tariffs on the colonies to help pay the massive debt built up during the Seven Years’ War with France. Stamp Act (1765), Townsend Acts (1767 and 1768), and the Coercive Acts (in response to the 1773 Boston Tea Party) led to taxes and tariffs. The taxes were less than those imposed on British taxpayers but it led to questions in the colonies about taxation and representation.
  • “In short, the way to wealth, if you desire it, is as plain as the way to market… It depends chiefly on two words: industry and frugality.” — Benjamin Franklin, The Way to Wealth, 1758
  • “Remember that time is money.” — Benjamin Franklin, The Way to Wealth, 1758
• 1780 – 1820
  • The U.S. population grew from 3.9 million to 9.6 million from 1790 to 1820.
  • The Louisiana Purchase, in 1803, double the land of the U.S.
  • 83% of the workforce was in farming and agriculture in 1800.
  • The new country fell into a deep recession (almost as bad as the Great Depression) following the Revolutionary War.
  • The Constitution helped the local industry by allowing tariffs on imports, forbidding taxation of goods across states, and forbidding states to pass laws against the obligation of contracts.
  • Alexander Hamilton
    • Played a major role in early economic policy.
    • Promoted a plan for the national government to assume the state’s war debt and reward speculators who bought up that debt at a deep discount to par value.
    • Proposed subsidizing local industries, tariffs on imports, and a central bank.
  • E. I. du Pont de Nemours & Company was created in Delaware in 1800 by Éleuthère Irénée du Pont. It became the country’s largest supplier of gunpowder.
  • In the late 1790s, companies fueled transportation innovation by building turnpikes and canals. The Lancaster Turnpike linked Philadelphia with Lancaster, PA. The Erie Canal lowered shipping costs, increased speed, and allowed goods to reach the interior.
  • The steamboat debuted in 1807, cutting travel times further. It cut travel down the Mississippi from weeks or months to days. It made upriver travel possible. By 1848, New Orleans was the 2nd largest port in the U.S. behind NYC.
  • Cotton was the fastest-growing export. Eli Whitney’s cotton gin removed seeds 50x faster and sped up production. Cotton exports accounted for 16% ($5 million) of total exports in 1800 and rose to 60% ($200 million) of total exports in 1860. The Southern economy became dependent on agricultural exports and slave labor.
  • The U.S. Congress banned the import of slaves in 1807. It did not end slavery. Rather, the slave population continued to grow. Historians believe slaveowners favored the bill because it increased the value of their slaves.
  • The growth of the cotton industry led to a rise in middlemen and brokers. Henry Lehman (founder of Lehman Brothers) immigrated in 1844 and got his start as a cotton broker.
  • Whale oil was a booming industry in the north. There were 700 whaling vessels, over 75% of all ships operating globally. It was an early form of venture capital. It required a capital investment of $20k to $30k. Insuring the ships became another big business. The industry peaked in 1846.
  • Nye Lubricant, Inc. was founded in 1844 and used whale oil in its products. It survived to supply lubricants for NASA.
  • The fur trade was the other large industry of the time. Over 200,000 pelts were exported per year in the early 1800s. Montreal became the center of the fur trade industry because of the Great Lakes and the St. Lawrence River.
  • The American Fur Company was created by John Jacob Astor in 1808. It traded fur, teas, sandalwood, opium, and more internationally. It peaked from 1810s to 1830s. Astor became one of the first business tycoons. He donated his library to the public, which became the New York Public Library.
• 1820 – 1850
  • The transition to a manufacturing economy began in New England. From 1810 to 1850, the labor force in manufacturing increased from 3.2% to 14.5%.
  • Textile mills, metal makers, and leather products (especially shoes) dominated. More raw materials stayed in the U.S. to be turned into saleable goods.
  • Women and young men made up 40% of the labor force by 1832. Most women worked in the textile industry.
  • “The critical organizational development in the first decades of the nineteenth century was the expansion of the factory system. The factory brought workers to a single location to work together, created a specialized division of tasks and labor, and regulated the start and end of the workday.”
  • Water power was the primary power source, placing factories near rivers.
  • Textile Mills
    • “The country had “cotton mill fever,” according to one observer. By 1810, there were some eighty-seven cotton textile mills in operation or under construction from Massachusetts to Virginia, most within thirty miles of Providence, Rhode Island.”
    • It cost about $10k ($140k in 2020) to open a small mill.
    • Boston Manufacturing Company was founded by Cabot Lowell. He built the first fully integrated mill that turned raw cotton into cloth. Lowell hired women, built dormitories, and charged workers a fixed rate for room/board. Work was six days a week from 5 am to 7 pm. The Lowell Female Labor Reform Association was formed in 1845 to organize laborers after wage cuts.
    • The invention of the sewing machine in the 1850s spurred the clothing industry. Most Americans bought, rather than made, clothes by the 1860s.
  • Interchangeable Parts
    • The idea that every part was made exactly the same got its start in a letter to John Jay in 1785 regarding musket production.
    • It was developed in 1822 by Thomas Blanchard, an employee at Springfield Armory. The Blanchard lathe produced identical gunstocks.
  • U.S. manufacturers began to move abroad to become international businesses.
• 1850 – 1880
  • Civil War — 1861 to 1865
  • The country was transformed by energy, communication, and transportation. Coal became the leading power source. The telegraph delivered news and messages instantly across continents. Railroads moved goods and people faster and farther than before.
  • Telegraph
    • Invented in the 1840s.
    • Samuel Morse sent, “What hath God wrought,” in 1844.
    • There were 50 telegraph companies by 1851.
    • Over 2,000 miles of telegraph lines were hung by 1860.
    • Made it easier to manage large businesses across multiple cities.
  • Railroads
    • Rose in the 1840s supplanting turnpikes and canals moving people and goods.
    • Cut travel from Chicago to New York from 3 weeks in 1840 to 3 days in 1857. New York to Boston or Washington DC took 1 day.
    • Cornelius Vanderbilt
      • Pioneered railroad construction and consolidation.
      • Bought his own ferry boat at age 20. He undercut his competition to run them out of business, then raised his rates.
      • He turned to ocean steamships to profit off the discovery of gold in California.
      • He bought stock in railroad companies in the 1850s.
      • “By 1864, Vanderbilt gained control of the Hudson River Railroad and, in 1867, the New York Central Railroad. In 1869, he began construction of Grand Central Depot as the terminal of his New York Central Railroad, which connected New York City with Boston, Chicago, and St. Louis. (It became Grand Central Terminal in 1913 and now is adorned by an 8 1/2-foot statue of the “Commodore,” as he was known.) When he died, Vanderbilt was said to control more than a tenth of the entire capital of the United States.”
    • The U.S. government offered 129 million acres in land grants to railroad companies from 1855 to 1871.
    • The transcontinental railroad was completed on May 10, 1869. Leland Stanford drove the golden spike for the Central Pacific Railroad Company.
    • Changed the Structure of Businesses – the size of railroads made it difficult to make schedules, budgets, and procedures out of one office. Salaried managers were hired and trained to create rules of operation, negotiate finances and distribution, and handle regulations.
    • Daniel McCallum created an organizational chart to detail the hierarchical structure of the New York and Erie Railroad in 1855. His goal was a “proper division of responsibilities” and an ability to “detect errors immediately, but will also point out the delinquent.”
    • The Knights of Labor, founded in 1869, advocated for workers’ rights. It peaked at 700,000 members in the 1880s.
    • American Federation of Labor, founded by Samuel Gompers, pushed for wages, benefits, hours, and working conditions.
    • Railroads drove growth in the finance industry globally. They regularly raised capital. Analysts, like Henry Varnum Poor, created journals that rated companies.
  • Chain Stores
    • Railroads allowed for mass migration west. Companies followed people moving west creating a national market. Chain stores were a byproduct.
    • Great Atlantic & Pacific Tea Company was founded in 1859 in NYC. It expanded to 16 cities by 1878 and 200 stores in 28 states by 1900.
    • F.W. Woolworth opened the first 5 and 10-cent discount store in Lancaster, PA in 1879. There were 120 stores in 21 states by 1904.
  • Mail Order Businesses
    • Mail order stores benefited from the railroad too. Aaron Montgomery Ward created the first catalog sales business in 1872, with a single-page catalog. It was 500 pages in 1887, with over 24,000 products and over 1,000 pages by 1900.
    • Richard Sears and Alvah Roebuck sold watches by mail in 1886. Aaron Nusbaum and Julius Rosenwald partnered with Sears, Roebuck and Company in 1893 and expanded the number of goods.
    • There were over 1,200 mail-order companies in the U.S. by 1900.
  • Department Stores
    • R. H. Macy & Co. opened in NYC in 1858. Macy’s created a one-price policy to eliminate haggling.
    • Wanamaker’s in Philadelphia offered a money-back guarantee.
  • Harvesting Machine Company
    • Made agricultural machinery and tools.
    • The railroad made it easier to transport large equipment to farmers and turned the midwest prairies into farmland.
• 1880 – 1910
  • Chicago was the fastest growing city in the U.S. It grew from a population of 5,000 in 1840 to 1.1 million in 1890 (2nd largest city in the U.S.) to over 2 million in 1910.
  • Minneapolis, Cleveland, Milwaukee, and Detroit all grew 10x or more during this period.
  • The Northern U.S. had 3 cities with over 1 million people. The largest city in the South was New Orleans with 340,000.
  • A sharecropping system became widespread in the South after the Civil War.
  • Industrialization and mass production took hold in the era.
  • Standard Oil, Alcoa, Armour, Swift, and National Cash Register were dominant U.S. businesses.
  • Oil
    • Produced kerosene, fuels, and lubricants.
    • Low cost of entry, no regulations.
    • Rockefeller – Standard Oil
      • Started as wholesale grocer in Cleveland.
      • Got in the oil business in 1863.
      • Sold the grocery store in 1865 and partnered with a chemist, Samuel Andrews, entered the refining business, bought the largest refiner in Cleveland at the time, and built a second refinery.
      • Reincorporated the firm to Standard Oil Company in Ohio in 1870, with a market cap of $1 million. Rockefeller owned over 25% of the shares.
      • Shares of the new company were used to buy out other refiners. Bought 5 large and 7 small firms by 1871. They controlled the Cleveland market and 25% of the U.S. daily capacity of the industry by 1872.
      • He cut kerosene prices by half from 1865 to 1870 by turning waste products into saleable goods. Used his high-volume advantage to cut deals with the railroads and block competition.
      • Controlled 20,000 wells, 4,000 pipeline miles, and over 100,000 employees by 1882.
      • Secretly set up the Standard Oil Trust, run by 9 trustees that controlled semi-independent companies, to better manage the massive organization spread across numerous states.
  • Steel
    • Sir Henry Bessemer created a new steel-making process in the 1870s that led to massive growth in the steel industry.
    • The U.S. was the largest steel producer in the world by the end of WWI.
    • Andrew Carnegie – Carnegie Steel
      • Immigrated to the U.S. in 1848 with his family and worked as a bobbin boy in a cotton mill.
      • Got a job with the Pennsylvania Railroad for Thomas Scott, who advised Carnegie to invest part of his salary in bridge-building companies.
      • Built his first steel mill in 1872, after Congress imposed a tariff on imported steel, protecting U.S. producers. The new mill increased production speed, produced a larger variety of products, and at a lower cost than other mills.
      • He used vertical integration — owned every aspect of the production process from coal mines, coke ovens (converted coal to coke), to mills — which locked out the competition and lowered costs further.
      • Hired unskilled immigrant labor, opposed unions, and kept costs lower. Used Pinkertons and 4,000 state militia to “quell” an 1892 strike by the Amalgamated Association of Iron and Steel Workers. It ended in violence.
  • Tobacco
    • Most people smoked pipes, cigars, or chewing tobacco prior to 1884.
    • James Buchanan Duke bought two machines that rolled 120,000 cigarettes in 10 hours. It produced more cigarettes than demand allowed.
    • Duke turned to advertising and distribution to increase demand. Built a national sales force, sales offices in cities around the country, and partnered with wholesalers globally.
    • Had $4.5 million in sales by 1889 with $800,000 in advertising costs.
    • Merged with the four competing companies to form the American Tobacco Company in 1890 and controlled 90% of the U.S. market.
  • Food
    • Chicago was the central hub of the meat packing industry.
    • The refrigerated railcar, by Gustavus Swift Sr, turned a seasonal industry into a year-round business.
    • Swift moved his meta-packing operation from Massachusetts to Chicago to save money by butchering animals in Chicago and shipping the meat products east. Developed a process — carcasses moved along a “disassembly line” — to more efficiently process animals.
    • Armour hired chemists to research potential uses for meatpackers’ waste products that led to soap, glue, and fertilizer.
    • Swift, Armor, and other meatpackers formed the National Packing Company in 1902.
    • Kellogg — John Harvey Kellogg and Will Keith Kellogg — developed Toasted Corn Flakes in Battle Creek, Michigan.
    • C.A. Pillsbury and Company was founded in 1872 producing flour and grains.
    • Campbell’s was founded in 1869 making canned tomatoes, vegetables, and soups.
    • H.J. Heinz Company was founded in 1969 making ketchup and bottled/canned food.
  • Industry consolidation played a big role in the growth of leading companies. Andrew Mellon and J.P. Morgan played a lead role in the consolidation of General Electric, AT&T, International Harvester, U.S. Steel, Alcoa, and others.
  • Criticism of “big business” grew in the 1880s.
  • “In a country where business is dominant, business men must and will corrupt a government.” — Lincoln Steffens, McClure’s Magazine
  • “Very often people who admit the facts, who are willing to see that Mr. Rockefeller has employed force and fraud to secure his ends, justify him by declaring, ‘It’s business.’ That is, ‘it’s business’ has come to be a legitimate excuse for hard dealing, sly tricks, special privileges.” — Ida Tarbell
  • The Sherman Antitrust Act of 1890 prohibited anti-competitive industries. Teddy Roosevelt’s administration went after monopolistic companies — National Packing Company (1905), Standard Oil (1911), and American Tobacco Company (1911).
  • Standard Oil was split into 34 companies including modern-day Exxon and Chevron.
  • American Tobacco Company was broken up into smaller companies including R.J. Reynolds, Liggett & Myers, and Lorillard.
• 1910 – 1930
  • The U.S. had some of the largest businesses in the world by 1917. U.S. Steel ($2.45 billion in assets), Standard Oil ($574 million), Bethlehem Steel ($381 million), Armour & Co. ($314 million), and Swift & Co. ($306 million).
  • The invention of electricity, the combustion engine, and the telephone transformed business and society again. A “second industrial revolution.”
  • Many new innovations were consumer-oriented due to higher disposable income.
  • Door-to-door sales was a growing distribution strategy for books, perfume, cosmetics, brooms, and more.
  • The California Perfume Company was created in 1892 by David McConnell to sell powder, perfumes, and cosmetics, mostly by female agents, door-to-door. It changed its name to Avon in the 1930s.
  • The North Carolina Mutual Life Insurance Company was founded by John C. Merrick, a former slave, in 1898 to provide burial insurance. It became the largest black-owned company in the country.
  • Advertising and marketing became a big business in the battle for market share of new consumer products.
  • The Coca-Cola Company, founded in 1886, spent $763,400 on advertising between 1892 and 1903. It expanded by selling its soda at restaurants, soda fountains, and groceries. It did so with giveaways — Coke-branded calendars, mirrors, glasses, pendants, trays, and more.
  •  Office Efficiency
    • The first adding machine was built in 1886 by William Burroughs. Its machine was in use by over 22,000 companies by 1905.
    • E. Remington and Sons (firearms) began manufacturing the typewriter with a QWERTY keyboard in 1878.
    • Dupont came up with the idea of return on investment, allowing management to effectively evaluate the success of investment in new projects.
    • Harvard Business School was founded in 1908 to teach business management via real-world case studies.
  • Automobiles
    • Gas, steam, electric, and gas/electic hybrid automobiles were being produced by hundreds of companies across the U.S. by the 1910s.
    • Duryea Motor Wagon Company, founded by Charles and Frank Duryea, was the first auto manufacturer in the U.S. in 1893.
    • Ford — Henry Ford
      • Ford was a machinist at Westinghouse.
      • He started his first auto company in 1901 with C. Harold Wills but left after one year.
      • He started his second auto company, Ford & Malcomson, Ltd. in 1902, and reincorporated it in 1903 (privately held). He introduced the Model A the same year.
      • The Model T was the first major success.
      • Ford borrowed the “disassembly line” concept from meatpackers to create his assembly line concept in the Ford factory and improved efficiency.
      • Ford controlled the entire supply chain from timberland, rubber plantations, iron mines, glassworks, and auto factories.
      • He used bicycle retailers to sell his Model T. Price of the Model T dropped from $850 in 1908 to $290 in 1924. He sold over 15 million cars by 1927.
      • “Machine production in this country has diversified our life, has given a wider choice of articles than was ever before thought possible—and has provided the means wherewith the people may buy them… Standardization, instead of making for sameness, has introduced unheard-of variety into our life.” — Henry Ford
      • He introduced the five-dollar workday and lowered work hours from 9 to 8-hour days. The higher wage for fewer hours reduced turnover and allowed his workers to afford to buy his cars.
    • General Motors
      •  Was a publicly traded company incorporated by William Crapo Durant and the DuPont family.
      • Alfred Sloan was named president in 1923.
      • DuPont introduced a multidivisional structure (M-Form) with autonomous units pioneered at DuPont. The units allowed for multiple models to be produced at once under different brands — ” Chevrolet (the low-priced model), Pontiac, Buick, Oldsmobile, and Cadillac (the high-end model).” The M-Form structure became standard in businesses with multiple product lines or multiple regions.
      • GM built a national dealer network to sell cars and created an auto loan business (General Motors Acceptance Corporation) to boost sales.
      • It introduced annual models and different color choices.
      • Became the largest automaker, surpassing Ford, in the 1930s and was the largest in the world until 1980 (surpassed by Toyota).
  • Electricity
    • Thomas Edison founded the Edison Illuminating Company in 1882 with backing from J.P. Morgan and the Vanderbilt family.
    • Electricity brought electric lights and motors to factories and allowed for 24-hour shifts. Factories were also no longer locked to a water-based power source.
    • Led to the invention of electronic appliances.
    • “From 1919 to 1929, the share of homes that had washing machines rose from 8 percent to 29 percent; vacuum cleaners from 4 percent to 20 percent; and radios from 1 percent to 40 percent.”
    • Hoover Suction Sweeper Company created the first profitable vacuum cleaner and leading vacuum manufacturer. Eureka Vacuum Company, founded in 1909, sold vacuums door-to-door.
    • Iceboxes, and ice delivery, was a booming business until 1910. The first electric refridgerator was the Kelvinator in 1918. The Frigidaire brand, by GM, followed soon after.
    • The Radio Corporation of America, a subsidiary of General Electric, was created in 1919. 40% of Americans had a radio by 1930 and 80% by 1940.
    • The radio brought immediate news, sports, and other events to people. It created a new industry around news, entertainment, and advertising.
  • New York City became the financial center of the world following WWI. The rise of new innovations and businesses relied on Wall Street for funding new ventures and expansion. J.P. Morgan & Co. and Kuhn, Loeb & Co. led the way.
  • “The number of industrial stocks listed on the New York Stock Exchange rose from 20 in 1898 to 173 in 1915. Stock ownership increased dramatically as a result of rising per capita wealth and marketing campaigns—including the World War I Liberty Bond drive that introduced many Americans to the idea of owning securities. At the start of the twentieth century, only 500,000 Americans owned stocks (less than 1 percent of the adult population); by the end of the 1920s, that figure had increased to 10 million (about 12 percent).”
  • The rise of financial markets in the 1920s led to financial information companies like Moody’s, and forecasting newsletters like Roger Babson’s Barometer.
• 1930 – 1945
  • Government policy played a bigger role in business during the Great Depression and WWII.
  • 9,000 or 30% of all banks failed between 1930 and 1933.
  • Unemployment increased from 15% in 1931 to 23% by 1932.
  • President Hoover believed the economy would fix itself due to the collective common good. He was wrong.
  • Roosevelt’s administration passed the Banking Act of 1933 (separated commercial and investment banks and created the FDIC), the Securities Act of 1933 (created the SEC and required financial reports by public companies), the Tennessee Valley Authority Act (brought electricity, flood control, etc. to a region without it), the National Industrial Recovery Act (minimum wage, maximum hours, and abolished child labor), National Labor Relations Act (right to join unions), the 1935 Social Security Act (universal retirement pension, unemployment insurance, and welfare benefits).
  • Innovation
    • Movies – Paramount Pictures and Metro-Goldwyn-Mayers produced about 5,000 movies in the 1930s.
    • R&D labs were a new addition to corporate structures. AT&T created Bell Labs in 1925. An average of 73 corporate labs were created annually from 1929 to 1936. The number of employees in R&D more than doubled from 1933 to 1940.
    • DuPont created synthetic fibers.
    • Innovation in radio by Zenith, Westinghouse, and Radio Corporation of America eventually lead to the creation of television.
    • Geophysical Services, Inc. was founded in 1931 — later became Texas Instruments.
    • Hewlett-Packard was founded in 1939.
    • IBM focused on information processing — the U.S. government became its biggest client.
  • WWII
    • The U.S. war machine didn’t exist prior to WWII. The country lacked the military equipment and infrastructure to make it. Any military production facilities built for WWI were dismantled or scrapped.
    • The war effort required a massive business/government partnership to attain victory. Factories had to be overhauled. The auto industry played a key role in the process. There were 1,050 factories in the industry producing vehicles and parts with 7.5 million people, directly and indirectly, employed in the industry at the beginning of the war.
    • “When we were mobilized during World War II, we were obliged to transform the great bulk of our operations almost completely, to learn rapidly and under great pressure how to produce tanks, machine guns, aircraft propellers, and many other kinds of equipment with which we had no experience at all.” — Alfred Sloan, president of General Motors
    • 5 million women joined the workforce from 1940 to 1945 and accounted for 37% of all workers.
    • “Among the largest contracts to build US war machinery were $2.9 billion to Ford to produce airplane engines, $2.6 billion to Chrysler to manufacture tanks and trucks, and $2.5 billion to Lockheed Aircraft Company to build airplanes. Indeed, during the war, the aircraft industry grew tremendously—from producing 5,900 planes in 1939 to an astonishing 95,300 in 1944, the year of highest production.”
    • Boeing Aircraft, founded in 1916, would produce the B-17 (Flying Fortress) and the B-29 (Superfortress) — the most successful bombers.
    • Polaroid, founded in 1937, designed infrared glasses and would later develop the instant camera — Polaroid Camera Model 95.
    • DuPont built factories that produced plutonium for the atomic bomb. Eastman Kodak and Union Carbide had two facilities that produced enriched uranium.
    • “I told you it couldn’t be done without turning the whole country into a factory.” — Niels Bohr
    • “The total wartime output of American factories exceeded Roosevelt’s initial estimates. Manufacturers had produced 456,000 aircraft engines, 86,000 tanks, 600,000 jeeps, 2 million trucks, 17 million guns, 193,000 artillery pieces, and 41 billion rounds of ammunition. Shipyards in California alone had launched 12,000 warships and merchant ships and 65,000 smaller boats and landing craft.”
    • “By the beginning of 1945, planes were flying out of Uncle Sam’s star-spangled costume like a plague of moths.” — Donald Nelson
    • The success was due to:
      • Standardization and Mass Production — U.S. businesses had more advanced manufacturing operations than any other country.
      • Cooperation — business leaders showed an unusual amount of cooperation by sharing patents and organization strategies for the national effort.
      • Competition — the War Production Board harnesses the competitive nature of business leaders to drive them to set production records.
• 1945 – 1980
  • “The United States suffered 418,000 war-related deaths and its infrastructure emerged unscathed, in fact, stronger than it had been before. Its large corporations dominated global markets, its superior military power was unquestioned, and its capacity for technological innovation was unsurpassed. Indeed, the decades immediately after the war were a golden age for American business. Manufacturers in the United States—located in cities that had escaped aerial bombing—became world leaders in oil, rubber, chemicals, pharmaceuticals, electric equipment, mass-produced machinery, appliances, automobiles, metals, processed foods, drink, and tobacco.”
  • A housing boom followed WWII with over 1 million homes built annually from 1946 to 1955.
  • The era saw the rise of the “military-industrial complex” in the U.S.
  • The emerging airline industry changed travel. United Airlines offered men-0nly “Chicago Executive” flights from Chicago to NY and LA to San Francisco from 1953 to 1970.
  • Fortune published its first list of the 500 largest U.S. companies in 1955.
  • By 1950 the U.S. produced 75% of the world’s automobiles. Great Britain was second at 10%.
  • Aviation/Aerospace
    • Boeing, Douglas Aircraft, Lockheed, North American Aviation, General Dynamics, Curtiss-Wright, Martin, and American-Marietta lead the industry. Boeing had $1 billion in revenues in 1955.
    • General Electric built 60% of the jet engines in the U.S. after transforming itself during WWII.
  • IBM saw the biggest growth as it innovated in digital computing. It developed FORTRAN (computer language), SABRE (airline reservation system) for American Airlines, and IBM System/360 (mainframe computer).
  • 9% of U.S. households had a TV in 1950. 83% owned one by 1959.
  • Breakfast Cereal
    • The breakfast cereal industry added new products tied to TV market strategies in the 1950s.
    • The 4 largest cereal companies spent $47 million annually on TV advertising by 1958.
    • Kellogg sponsored its first television show with the creation of Tony the Tiger (Frosted Flakes) in 1952.
    • Post’s Alpha-Bits was introduced in 1958.
    • Kellogg’s Apple Jacks was conceived in 1965.
    • Quaker Oats’ Cap’n Crunch was in 1963.
    • General Mills’ Lucky Charms come about in 1964.
  • The franchise business model became popular with the rise of the fast-food, restaurant, hotels, grocery, and auto supply industries. There were 380,000 franchises operating in the U.S. in 1969, and 440,000 by 1980.
  • “The burger industry became a site of franchise-based competition between White Castle (1921), Jack in the Box (1951), Burger Chef (1954), Burger King (1954), and McDonald’s (1955).”
  • U.S. businesses looked globally, first to help rebuild after WWII and second to grow their business overseas. Foreign investment increases in the 1960s.
  • Safeway supermarkets, founded in 1915, expanded stores to Great Britain, Germany, Australia, and Canada by 1966.
  • McKinsey & Company, business consulting, grew throughout the 1940s/50s consulting with European companies.
  • The conglomerate craze took hold in the 1960s. Over 6,000 M&A deals occurred in 1969 alone.
  •  RCA saw its downfall due to excessive M&A deals. It moved into computers in the 1960s to compete against IBM, then bought Hertz Rent-a-Car, Random House publishing, frozen food, carpets, and paper manufacturing businesses. Sony, Matsushita, Sanyo, and Sharp dominated RCA’s core business while it was playing in industries it knew nothing about. All the businesses were sold off and what was left of RCA was bought by GE in 1986.
  • The U.S. became an oil importer starting in the 1950s. Prior to that, it was an oil exporter. In 1920, it exported 65% of the global supply. Oil imports grew from 850,000 barrels/day in 1950 to 1.8 million in 1960. The first oil crisis came in 1973, then again in 1979. Oil prices rose 12x from 1970 to 1980.
• 1980 – 2020
  • Government deregulation influenced businesses in this era.
  • “President Jimmy Carter signed the Airline Deregulation Act of 1978, the Motor Carrier Act of 1980, which deregulated trucking, and the Staggers Rail Act of 1980, which deregulated the railroad industry—an industry that, over decades, had suffered dramatically from automobile and trucking competition. His successor, Ronald Reagan, extended deregulation to include interstate bussing, ocean shipping, and other industries.”
  • Friedman’s “Shareholder Capitalism” drove institutional investors like pension funds to take a more active role with corporate boards in the 1970s. Hostile takeovers and corporate raiders rose in the 1980s.
  • The end of Glass-Steagal, repealed in 1999, brought commercial and investment banks back together again.
  • “While roughly 160 million shares were traded per day on the New York Stock Exchange in 1990, that figure rose to 1.6 billion in the early twenty-first century. The financial future of many Americans became entwined in the activities of the market, as nearly one-quarter of household wealth was tied to stocks.”
  • Silicon Valley
    • Became a prized destination for tech businesses.
    • “The area’s fruit-drying and packing plants had been transformed to perform war production during World War II, and after the war, Lockheed, Northrup Grumman, and Litton Industries used the facilities to produce aircraft, radios, and engines for the civilian economy.”
    • Frederick Terman, provost at Stanford, set aside 209 acres in 1951 to create Standford Industrial Park and leased it to tech companies. Hewlett–Packard, Lockheed, Xerox (PARC), Varian Associates, GE, and others planted roots.
    • “Industry is finding that, for activities involving a high level of scientific and technological creativity, a location in a center of brains is more important than a location near markets, raw materials, transportation, or factory labor.” — Frederick Terman
    • William Shockley created Shockley Semiconductor Laboratory in 1954 in Palo Alto after leaving Bell Labs. 8 scientists left Shockley Semiconductor to found Fairchild Semiconductor in 1957 (with a $1 million investment from Arthur Rock and Sherman Fairchild). 2 of those scientists, Robert Noyce and Gordon Moore, left Fairchild to found Intel in 1968.
    • By 1976, Intel was the largest supplier of semiconductor components in the world.
    • Arthur Rock, founder of venture firm Davis & Rock, invested in Apple, Scientific Data Systems, and Teledyne.
  • Personal Computers
    • Intel, Texas Instrument, Motorola, and others produced integrated circuits for mainframe computers.
    • The Steves, Wozniak and Jobs, cofounded Apple, created the Apple I in 1976, and sold it for $500. The Apple II came the next year and sold 2 million computers in less than a decade.
    • IBM entered the PC market in 1981 with a price of $1,565. Microsoft, founded in 1975, won the contract to develop the operating system and kept control of the software.
    • Competition for IBM came from Compaq, Dell, and Gateway, who used Microsoft’s operating system in their computers.
  • Internet
    • “The Internet did not originate in the business world… It was too daring a technology, too expensive a project, and too risky an initiative to be assumed by profit-oriented organizations.” — Manuel Castells
    • Was developed by the Department of Defense as ARPANET and eventually opened to the public.
    • Netscape Communications developed the first browser in 1994, Netscape Navigator.
    • Microsoft released Internet Explorer in 1995.
    • There were 2,700 websites by 1994 and over 1 billion websites 25 years later.
    • 75% of Americans owned a computer with internet access by 2014.
    • Google, founded in 1998, became the dominant search engine globally. It offered a massive amount of information access to everyone with its launches of Google Earth in 2001, Google Maps in 2005, Google Translate in 2006, and Youtube acquisition also in 2006.
    • Facebook (2004) rose as the leading social media company.
    • Amazon became the leading online retailer after being founded in 1994.
    • User data — “surveillance capitalism” — became a major business model of the era.
  • 35% of the U.S. owned a smartphone in 2011, and 80% by 2018.
  • PCs, the internet, and smartphones transformed businesses similar to the telegraph and telephone decades earlier. Bank transactions, for instance, shifted to ATMs and online accounts.
• “The rise of American business has not been linear, but turbulent and episodic, marked by bursts of innovation by new firms, with new technologies, products, and services… These innovations, often fought by established interests, brought tumult to existing methods of business and frequently unleashed the destructive features of capitalism, including shuttered factories, unemployed workers, and failed companies. This cycle of creative innovation and disruption has been a long-standing feature of US economic growth.”
• “Constant, relentless change is the hallmark of capitalism.” — Joseph Schumpeter
• “A belief in the ability to prosper through business has been present almost from the founding of the country, and though often denied to many Americans based on race, gender, and ethnicity, has nonetheless endured as a core value. Indeed, the aspiration to pursue economic opportunities has inspired immigrants from around the world to come to the United States. This democratic aspect of the US economy is often cited as an explanation for why American society is especially tolerant of the turbulent and chaotic nature of capitalism. As the Economist noted in the mid-1990s, ‘Whereas in Germany and Japan a businessman who fails suffers a permanent stigma, Americans smile benignly on entrepreneurs who go bust, and this gives the society as a whole an invaluable license to experiment.'”

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