Heroes, Historical Consulting, and Marquis James

The roots of historical consulting lie in the early to mid-20th century when corporations began to see their stories as an asset even as professional historians grew more specialized and less interested in institutions. Two biographers led the field. Alan Nevins attempted to craft compelling and contemporary history that met academic standards. Marquis James, on the other hand, favored more historically remote subjects and a more sensational approach.

Marquis James grew up in the late 19th and early 20th centuries in the “Cherokee Strip,” the newly opened Oklahoma Indian lands where rapacity (toward both native Americans and less fortunate settlers) was part of daily life. In the 1910s James became a journalist, reaching the height of the profession in reporting on the 1925 Scopes “Monkey Trial” that pitted legends William Jennings Bryan against Clarence Darrow.

Then James began the work that had an immediate impact on American popular history, writing biographies of Sam Houston, Andrew Jackson, and John Nance Garner (Franklin Roosevelt’s first vice president). In these works, James demonstrated both an enduring strength: the ability to tell a good story; and fatal weakness: the tendency to see the heroic individual as the locomotive of history.

In 1941, in telling the life story of Alfred I. DuPont, James turned from political biography to business history. Two insurance company histories and books on Texaco and The Bank of America followed. James did meticulous research, but he invariably interpreted his sources to the credit of larger-than-life characters above all else.

This preference for the heroic made James a celebrated author in his day (he won two Pulitzer Prizes in the 1930s) and a forgotten one in ours. For in building up his heroes, James stripped away historical complexities, including the possibility that the bald-faced exploitation which American culture countenanced, and in which many of its legends participated, was anything but heroic.

It seems that at least one of Marquis James’s clients figured this out. In the late 1940s, J. Peter Grace, CEO of the chemical company that his grandfather had built by stripping Latin American countries of guano, commissioned a business biography of the founder.  But when James completed the manuscript, Grace buried it, apparently realizing that documenting in admiring prose the exploitative underpinnings of the W. R. Grace & Company would undermine already fragile relations in Latin America. Merchant Adventurer: The Story of W. R. Grace did not see the light of day until 1993, a year after J. Peter Grace stepped down as CEO.

Today, historical consulting involves much more than the writing of books as it did in the days of Marquis James. And it also must involve much more than reflexively repackaging the one-dimensional legends and self-promotional stories that may have passed as history in an earlier day.

1920 in Business History: “Cooperative Capitalism”

The year 1920 marked the emergence of decentralized management, which enabled large, capital intensive firms to succeed for the rest of the century. But every company was not a GM or a DuPont. There were other businesses in mining, textiles, and construction, for example, which sought to remain efficient and competitive while operating on a smaller scale. For industries such as these came another transformative moment at almost exactly the same time, the establishment of “cooperative capitalism.”

As with decentralized management, the context was created by World War I. When the United States entered the war, the Federal Government immediately sought to boost the nation’s productive capacity to its most efficient level. One step was encouraging, through the United States Chamber of Commerce, the creation of trade associations so that every industry could speak with one voice in Washington, and most importantly, so that Washington could get members of every industry to cooperate. To ensure that competitors were not working at cross purposes, the government even suspended antitrust laws for a time allowing businesses to set industry standard prices. All worked closely with the government’s War Industries Board.

At the close of the war the Chamber of Commerce hoped to keep this comfortable arrangement intact. Price fixing in peacetime was beyond the pale for most senators and congressmen, but legislators had no problem with industry cooperation, so long as competition was protected. The extent to which they would continue to work with the government had yet to be determined.

Then, in 1920 Warren Harding was elected president. He chose Herbert Hoover as his Secretary of Commerce. It is imperative to forget what we think we know now about Hoover to understand his importance at the time. Before the United States entered the war, the globe-trotting mining engineer had, on his own, orchestrated a system of public/private relief for Europeans displaced by the conflict. After 1917 he continued to work effectively as Food Administrator for the United States.

Hoover firmly believed, and had seemingly proven, that working together, business and government could serve the general welfare yet still preserve competitive individualism. When Hoover took over as Secretary of Commerce the nation was reeling from the recession that had begun in mid-1920. He began turning what had previously been a collection of relatively unimportant bureaus into a powerful administrative apparatus that would help business survive and thrive.

Hoover’s Department of Commerce began systematically collecting and disseminating the kind of information previously available only to the largest businesses—data on raw materials, production costs, and markets. Next, the government began working closely with new trade associations such as the Associated General Contractors of America to develop priorities and objectives much as it had done during the war. This did, to some extent enable smaller firms to operate efficiently and compete effectively. Events of 1929, however, brought the demise of Hoover’s vision of “cooperative capitalism,” although the structures established in 1920, an effective Department of Commerce and strong industry-wide trade associations, endure.

1920 in Business History: Decentralized Management

The year 2020 may well change the course of business history for years to come. The year 1920, another time of turmoil and recession, most certainly did. The turn of the century had begun a lengthy period of growth for American business giving rise to national, capital-intensive companies that could obtain ever higher efficiencies due to their size. For a time it was not certain that these firms would be allowed to exist. Then in its 1920 US Steel decision the Supreme Court affirmed that large firms need not be broken up so long as they did not inhibit competition. But as that barrier fell a new one arose—large firms were simply becoming too big to manage, especially during a time of economic hardship.

Take the history of DuPont, for example. From 1914 to 1918, its capitalization increased from $86 million to $310 million and its workforce rose from 5,300 to 85,000. Its roots were in explosives, but DuPont had diversified into chemicals, dyes, paints, and artificial fibers. As the company grew ever more complex, the corporate structure remained centralized. It became increasingly harder to conduct all of its businesses effectively: selling rayon was very different from selling black powder.

President Pierre du Pont had already developed sophisticated forms of reporting and accounting that indicated where the problems lay. In 1920 he began planning to decentralize management. The goal was for executives in the central office to stop trying to conduct the day-to-day affairs of the company. Instead, using the kind of information that DuPont was developing, they would monitor overall performance and set strategic priorities for the company as a whole. The plan also called for creation of administrative divisions, each responsible for sourcing, producing, and selling one particular type of product.

By pure chance, it was GM rather than DuPont that first implemented the plan. During the 1910s the munitions maker, looking for a place to invest its extraordinary earnings, invested heavily in the automobile business founded by entrepreneur William Durant. Durant had steadily folded individual car companies and even consumer products manufacturers into his General Motors Corporation. By the time the recession hit in mid-1920, Durant’s agglomeration was in trouble. That fall, Pierre du Pont stepped in, and working with Alfred Sloane, a brilliant manager that Durant had ignored, he began implementing his decentralized management structure. It took about three years to take hold, but decentralization worked well, enabling GM to soon overtake Ford.

Decentralization was not for every firm, but over the next few decades nearly every diversified, capital-intensive company adopted it. DuPont did so in 1921, Westinghouse in 1934, International Harvester in 1943, and General Electric in 1950. In time, changing markets, technology, and regulations would expose weaknesses in decentralized management, but the legacy of this watershed in business history remains into the 21st century.

A Brief History of Circuit Breakers

There have been moments in my fifteen years studying financial regulation that have seemed arcane, even irrelevant. Not yesterday. When the S&P fell seven percent in the first few minutes of trading, I knew what would come next, and why.

Yesterday was nothing compared to October 19, 1987 when the Dow plunged more than 22 percent. To avoid a repeat, regulators proposed pausing all trading after specific point drops, allowing markets to recover. SEC official Rick Ketchum implemented these market-wide “circuit breakers,” in 1989. “I’m glad they haven’t been used very much,” Ketchum told me in 2008.

When first activated in 1989 the circuit breakers were based on points.  By the time they kicked in again in 1997 they were calibrated to a percentage of the market—the first circuit broke after ten percent drop. But the breaker failed in the spectacular May 2010 “Flash Crash” when the market dove (in mere minutes) by about nine percent.

So the SEC adjusted the machinery for the era of lightning-fast trading, with regulators like James Brigagliano concerned about volatility in both directions.  “Limit up/limit down prevents executions beyond the market band,” Brigagliano told me a year after its 2013 implementation, “it’s designed to prevent trades at absurd prices.” The first band was set at seven percent of the S&P 500. Yesterday the market dropped below that, trading stopped for 15 minutes, and the market recovered.  The circuit breaker worked.

For more on this and other topics related to financial regulation visit the SEC Historical Society Virtual Museum and Archive at

Transportation History

Contours of Corporate History: Contesting 20th Century Transportation

A century ago a turning point in corporate history came when, despite political debates, trucking emerged as a competitor to railroads.  At the time a three-sided battle was raging between the government, which had taken over the railways during World War I, organized labor, and the railroad companies. Legislation passed on February 28, 1920 returned the lines to private ownership but imposed regulations that weakened them over the next 60 years. Largely ignored during the debate was a factor that did even more to remake freight transportation over the same period—the rise of trucking.

Before the war, draymen had done short hauls in solid-wheeled vehicles. By 1917, as I point out in my book Never Stand Still (1999), the pneumatic truck tire was widely available and designs like the “Bulldog” Mack allowed for dependable long hauls. Ironically, the overwhelmed railroads’ inability to get Army “motor trucks” shipped to Europe before war’s end left plenty available for returning servicemen who became truckers—easy to do since unlike railroaders they did not need to build their right-of-way. By the time of the battle over railroad control, the long-haul industry was taking shape. Trucks rather than trains emerged the winner from the February 1920 fight over 20th century transportation.

Walter Chrysler building in Manhattan, New York City, NY

Contours of Corporate History: Chrysler

A landmark in corporate history was reached 90 years ago today that auto tycoon Walter Chrysler opened his namesake building in Manhattan. The art deco masterpiece was by far the most visually compelling addition to the New York skyline and also the tallest, outstripping the Woolworth Building by more than 200 feet. Walter Chrysler’s moment in the sun did not last long: The Empire State Building overtook it less than a year later.

As the smallest of the “Big Three” automakers, Chrysler knew what it was like to be in the shade of Ford and GM. By the 1970s all three were in trouble due to rising production costs, quality problems, and years of design complacency. In 1979, Lee Iacocca created a new corporate landmark when he famously convinced the United States Congress to provide Chrysler with a $1.5 billion relief package. That landmark held until 2009 when GM received its own, much larger, federal bailout. Today, Walter Chrysler’s company (now Fiat Chrysler) remains a distant third among US automakers. His building has dropped to 11th place in the Manhattan skyline sweepstakes.

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