Tag Archives: Industrial Revolution

The Great Shirt Debate

3 Nov

During America’s Industrial Revolution, various industries became proficient in producing whatever it was they were trying to produce. In fact, they became good enough at producing that they were at the point where they could produce more than the market could consume. Of course, the ability to produce more was a waste if consumers could not purchase at the same rate of growth. This condition was no way to maximize profits. If there was something the industrialists loved more than anything, then it was maximizing profits.

Into this situation walked someone who had a grand idea about how to increase production and convince consumers to increase their purchasing. The idea was called product diversification. When I talk about the Industrial Revolution in class, I use flour mills as examples. I am not sure where they fit into the Industrial Revolution, but it is easy.Flour

In the old days, people went to the store and bought bags of flour. When they got home, the flour would be used to make cakes, cookies, biscuits, pies and all sorts of delicious things. Knowing that their product was used for various things, the leaders of the flour industry diversified. When consumers went to the store, they saw bags of flour. However, they also saw bags of cake mix, cookie mix, biscuit mix, pie mix and all sort of delicious things.

I can see the consumer walking down the aisle. I need flour. Wait, I want to make cookies. I had better get some cookie mix. Hold on, there is the cake mix, I had better get that, too. Oh yeah, I need to make that pie. Instead of purchasing one bag, the consumer purchases several bags. Therein lies the trick of product diversification.

All of this came to mind while my wife and I were shopping for clothes. I needed some new stuff, and today was a good day to get it done. We walked into a store, and I found a shirt that I liked. The resulting conversation went something like this.

“I like this shirt.”

“That’s a summer shirt.”


“You can’t buy a summer shirt.”

“Why not?”

“It’s not summer.”

“What does that have to do with it?”

“You can’t buy it because you can’t wear it.”

“Why not?”

“It’s not summer.”

“We will have another summer. It’s not like we have seen the last one. Besides, why can’t I wear the shirt anytime I want?”

I stopped because I could tell that she was getting upset, but I still did not understand why I could not buy a shirt and wear it whenever I wanted. Then, it hit me.

Product diversification.

Decades ago, someone in Paris or New York came up with a brilliant idea to increase sales. I cannot remember the last time I listened to what someone in Paris or New York had to say, but that is not the point. The point is that the idea has sunk in. It went something like this.

What if we convince people that they need to wear different shirts for every season. Then, our sales will increase every three months. At some point, this will become the style, and people will be afraid to break it because of peer pressure. If they wear the wrong thing, then other people will think they are not out of fashion.

Now, we have summer shirts, winter shirts, spring shirts and fall shirts. Product diversification was an art form. Then, it became fashionable.


Fortune Everlasting

24 Jun

The other day, I was sitting on the couch at parents’ house and picked up a copy of Fortune 500, the annual list of America’s largest businesses. Like most people, I look at the top companies, but I also look for other things. How many are based in Tennessee? How many are new additions? How many dropped out? There is a lot of interesting information once you start digging in.

This year, I noticed something else. It was not that long ago that the History Channel put out a program called The Men Who Built America about the big industrialists of the late 1800s. It covered Cornelius Vanderbilt, Andrew Carnegie, John D. Rockefeller, J.P. Morgan and Henry Ford. There were others, but those guys were the main characters.

As I thumbed through the Fortune 500, I thought back to those men and wondered how many of their companies are on the 2014 list. Obviously, Ford Motor Company is going to be on there. Heck, everyone has seen a Ford vehicle going up and down the road. But, what about those other guys?

Cornelius Vanderbilt was into ships and railroads. In the old days, his companies dominated, but I could not find any of them on the current list.

Andrew Carnegie made his fortune with Carnegie Steel. He sold out and spent the rest of his life giving money away. Carnegie could do that because he sold the company to J.P. Morgan, and this is where things get interesting.JP Morgan

Morgan learned investment banking from his father and took it to a new level. He bought Carnegie Steel and merged it with another mill to form U.S. Steel, which currently ranks 166th on the list. Morgan also owned General Electric, currently the 9th largest company in the United States. However, that is not all. He was also on the ground floor of American Telephone and Telegraph. We know it better as AT+T, and it ranks 11th.

This means that J.P. Morgan owned three corporations that currently rank in the Fortune 500. But, there is more. J.P. Morgan Chase and Company is the 18th largest business in the country.

Then, there is the story of John D. Rockefeller, who owns Standard Oil. He created a trust system, which allowed him to controlled the vast majority of the world’s oil supply. The United States government, fearful of an important resource being controlled by one person, busted the trust into smaller companies. Being a major stockholder in the new companies, Rockefeller became the richest man in the world. In other words, the federal government really showed him.John D Rockefeller

Anyway, a few of those smaller companies still exist. Exxon Mobil ranks 2nd. Chevron ranks 3rd. Marathon comes in 25th.

The History Channel called them The Men Who Built America. Others call them robber barons for their ruthless business techniques. Regardless of what one might think of them, there is no doubt that they played major roles in the American economy. What is more, they continue to play major roles many decades after their deaths.