Standard Oil (CMC, Thursday, Week 5)
coming-of-managerial-capitalismyear-twoWhen J.D. Rockefeller's wealth peaked in 1912, he was worth $900M --- 2% of U.S. GDP.
He would've been about five times as wealthy as Bill Gates.
Humble beginnings: started off as a bookkeeper for a Cleveland produce shipper.
Big accomplishment: takes oil from a land-grab business to a tightly-controlled empire.
Old industry (ca. 1860) = no production controls, no experts, no regulation, low barriers to entry, huge boom/bust cycles to due variability in production (bad incentives), short-lived cartels
Standard empire (ca. 1878) = ridiculous economies of scale, skilled managerial team, consolidation both upstream and downstream, order to chaos.
1863 == Standard oil marketshare = 0%
1872 == Standard oil marketshare = 25%
1878 == Standard oil marketshare = 90%
Was it brains or luck?
Or, "Was it inevitable that someone would horizontally and vertically consolidate the oil business, or was Rockefeller's success due to a series of brilliant strategic decisions?"
Probably some of both.