Tycoon. The word comes from Japan, where it means the equivalent of shogun. But long ago America confiscated the title. It was in the U.S. that tycoons became paragons of power and influence. American tycoons swung deals, not swords, and changed the
From the Print Edition:
J.P. Morgan, Mar/Apr 00
Tycoon. The word comes from Japan, where it means the equivalent of shogun. But long ago America confiscated the title. It was in the U.S. that tycoons became paragons of power and influence. American tycoons swung deals, not swords, and changed the business landscape forever. The Gilded Age was the greatest era of tycoons. At the end of the nineteenth century, the Industrial Revolution was in full swing and every emerging market seemed to have at least one power broker ready to corner it. No antitrust laws stopped monopolies.
No income tax sapped personal wealth. Men were free to form trusts and build great monuments with their riches. To be sure, tycoons had already existed, but new technology created a boomtown. The courts and taxes did their best to remove tycoons from the playing field, breaking up the great trusts and making it harder to pass wealth through generations. What arose was an age of managers. Corporate power was consolidated by the likes of General Motors' Alfred Sloane--great businessmen but not really tycoons. F. Scott Fitzgerald seemed to think that the tycoon phenomenon had run its course when he wrote about a movie mogul in The Last Tycoon. Not by a long shot. The Electronics Age has ushered in a new round of tycoons itching to take over computer and communications markets.
Herewith, we've assembled a list of the nation's great tycoons. What do they have in common? It isn't higher education. Most of our choices never graduated from college, although five have their names on universities. The two who went to Harvard dropped out. It isn't technical preeminence. Astor never set a fur trap. Rockefeller never dug an oil well. Gates didn't design his operating system. Tycoons are set apart by their ability to change the world and their belief that the world should be theirs. Add a ravenous work ethic and you have a fair description of the men who follow.
ANDREW CARNEGIE (1835-1919) STEEL WILL
When Andrew Carnegie was a boy in Dunfermline, Scotland, his mother impressed upon him a favorite credo: "Look after the pennies, and the pounds will look after themselves." That tenet would guide Carnegie throughout his life. In 1848 Carnegie's father, a skilled weaver, lost his career to the power loom, and the family sought opportunity in America, settling near Pittsburgh. The 12-year-old Andrew started as a bobbin boy in a textile mill, then ran telegraph messages. Pennsylvania Railroad superintendent Thomas Scott hired 17-year-old Carnegie as an assistant. The young apprentice repaid his boss by boosting the railroad's profits with cost-cutting measures that would become his hallmarks: he increased the flow of freight on the lines, lowered costs with revolutionary cost-accounting techniques, and cut wages.
By 24, Carnegie was running the western branch and investing his own money in oil, iron and other companies. (During the panic of 1873, Scott would ask Carnegie for financial help. Carnegie turned him down.) By his mid-30s, Carnegie was a wealthy man with an affinity for iron and the metal of the future, steel. He built his own steel mills using the latest technology and hiring the best employees. He secured every facet needed for steelmaking, from iron deposits and coal mines to railroads and ore ships. He plowed his profits back into the business and continued to cut costs. Extremely competitive, the diminutive (5-foot-2-inch) Steel King was soon outproducing, underbidding and crushing rivals, while supplying low-priced rails and bridges to burgeoning America.
Carnegie Steel became the largest steelmaker in the world. Carnegie's business techniques belied his public persona. Son and nephew of social reformers, Carnegie portrayed himself as a friend of the working class, publicly supporting eight-hour workdays (the standard was 12) and union labor. Yet his workers labored at blast furnaces 12 hours a day, seven days a week for a Carnegie-reduced wage of 14 cents an hour. In 1892, Carnegie's partner, Henry Clay Frick, crushed Carnegie Steel's last union in bloody clashes at its Homestead steel plant outside Pittsburgh. The public was horrified, and Carnegie tried to blame Frick.
In 1901, Carnegie sold out to financier J. P. Morgan for a stunning $480 million, with Carnegie's $250 million cut making him one of the richest men in the world. Whether it was his relatives' reformist influence or a Presbyterian regard for the Final Judgment, Carnegie embarked on philanthropy with the same zeal he had brought to building his empire. Declaring that "the man who dies rich dies disgraced," Carnegie disbursed $350 million of his $400 million fortune, building more than 2,500 libraries and other institutions before his death in 1919.--Terrence Fagan
J.D. ROCKEFELLER (1839-1937) TRUST IN GOD
In 1855, a devout young Cleveland Baptist took a bookkeeping job with a local merchant and found it so fulfilling to pore over the minutiae of accounts that he thereafter celebrated the anniversary of his first payday as joyfully as his own birthday. John D. Rockefeller was so convinced that it was his providence to become rich through figures that he would later say, "God gave me my money."
Rockefeller soon embarked on a produce business, which boomed during the Civil War and must have further convinced him of his destiny. Young Rockefeller had strong antislavery sentiments, but believed so fervently in his fate to be wealthy that he paid a substitute to serve for him. His eye for opportunity was drawn to the nascent oil industry in the wilds of Pennsylvania.
Rockefeller and his partners built a business refining crude into kerosene. He brought to the venture a talent for watching the books and scrupulously securing every economy in a boomtown business full of imprudent wildcatters. His other genius was for spotting failings as well as abilities in his partners; when associates displayed weaknesses he eliminated them and replaced them with colleagues, such as Henry Flagler, Oliver Payne and John Archbold, who offered strengths.
The fledgling industry was rife with problems, not the least of which was the cost of transporting oil to market. Rockefeller solved that by securing clandestine contracts with the railroads that afforded huge rebates. With that edge, he was able to squeeze out the competition, which he usually then enveloped. With fewer bidders, he could pinch suppliers and regulate wildly fluctuating prices.
Industrial espionage and close association with politicos (his son married the daughter of trust-friendly Sen. Nelson Aldrich) smoothed out other snags for the tycoon. Another problem was retaining control of the empire while amassing the capital it would take to run it. With Flagler's aid Rockefeller incorporated. Later, Samuel Dodd helped him create a byzantine holding company, or trust, to circumvent laws that blocked businesses from owning property out of state.
Called Standard Oil, the company would come to control every facet of the business, from production and refining to shipping and barrel making. The trust garnered not only a worldwide monopoly, but the lasting enmity of ruined competitors and a horrified public. The lightning rod for disdain was the work of muckraking journalist Ida Tarbell. Rockefeller would argue that his business methods, common practice at the time, had slashed oil prices. Nevertheless, antitrust suits dissolved Standard Oil into dozens of smaller companies in 1911.
The ironic upshot was that his holdings gained so much on the open market that Rockefeller, already retired, became the country's first billionaire as a result.--Jack Bettridge
JAMES B. DUKE (1856-1925) THE DUKE OF TOBACCO
When Washington Duke returned from the Civil War to his farm near Durham, North Carolina, he had 50 cents, two blind mules and some cured tobacco. Seeing the success of the Bull Durham brand of chewing tobacco, Duke determined that selling rather than growing tobacco held a better future.
It was Washington's irrepressible son James Buchanan "Buck" Duke who saw that prerolled cigarettes represented a market segment not controlled by Bull Durham. When Duke was 33, he met with his four largest competitors in a lower Manhattan hotel on April 23, 1889 as the rough-hewn thorn in the side of the cigarette-making industry. He would emerge with an agreement that he would head the American Tobacco Co., the newly minted cigarette trust that would come to control the market for most tobacco products in the United States and gobble up more than 250 companies in its wake.
It was a combination of keen foresight, unmatched negotiating ability and cutthroat competitiveness that had put the young tobacco farmer in the position to rule his world. He attacked with a vengeance with marketing schemes such as brand names, in-store displays, trading cards, athletic endorsements, coupons and innovative packaging. Determining early on that sex sells, he even procured the endorsement of a comely actress. It was his introduction of the cigarette-making machine that allowed him the economies to go toe-to-toe with the serious competition in New York City.
Undersold at the store counter and outspent on promotions, his enemies had little choice but to join his tobacco trust. Manufacturing more than 90 percent of the country's cigarettes, Duke's trust squeezed farmers, distributors and even the manufacturer of the cigarette-making machine. Soon American Tobacco was able to corner the plug, snuff and pipe tobacco, as well as cheroots markets and start a British subsidiary. The steamroller could be stopped only when the government stepped in to divide it, in 1911. Duke groused that "in England, if a fellow had built up a whale of a business, he'd be knighted. Here, they want to put him in jail." Undeterred, Buck sought fortune in another business--electricity.
The Duke utility controlled most of the Carolina region before his death. After his will made his daughter, Doris, the country's richest woman, enough was left to fund the hastily renamed Duke University and the Duke Endowment, which is hailed as a model charity in philanthropy circles. He also left his daughter a lifelong distrust of others, and she died heirless in 1993, her affairs in as much disarray as her father's were organized.--JB
HENRY FORD (1863-1947) AUTO PILOT
Throughout his life, automotive pioneer Henry Ford had a love-hate relationship with reporters. In 1943, after columnist Drew Pearson dared to suggest that the government take control of the Ford Motor Co. because its chief was too old and frail, the 80-year-old Detroit industrialist and exercise fanatic responded, "I can lick him in any contest he suggests." Ford's adept handling of the press resulted in his being one of the best-known, best-loved and most-publicized figures of his time, despite his famous obstinacy and anti-Semitic writings. Although he didn't invent the automobile, he reinvented it, making it accessible to the public and spurring the American auto industry.
The eldest child of Irish immigrant farmers who settled near Dearborn, Michigan, Ford loved machinery and loathed farm work. He dropped out of school at age 15 and became an engineer. Ford struggled for many years to create a gas-powered car, succeeding in 1896, at age 32, when he drove his first gas-powered car, the Quadricycle, amidst little fanfare through downtown Detroit. Three years later, he built his second car, which caught the attention of several local businessmen. With their financial backing, Ford Motor Co. was launched in June 1903. Named vice president and chief engineer, Ford received a quarter interest in the firm. He publicized his cars through racing and advertising. But it wasn't until he built the now-famous Model T, in 1908, that he changed history.
At the time, cars were priced for the affluent. The Model T, the firm's ninth model, was sold at a more accessible $850, and was met with great enthusiasm. Introducing the first moving assembly line and other economies, Ford continued to reduce the price (it cost only $360 by 1916), and demand increased, with sales reaching more than 472,000 by the First World War. For the next 18 years, Ford was the preeminent automaker, producing more than half the cars sold (a whopping 15.5 million).
Profits soared and so did Ford's reputation as a man with a formidable business acumen. Workers revered him because he believed in paying them well, reducing their work hours and sharing profits. Not content with building cars, Ford made several forays into politics, embarking on an ill-fated 1915 peace campaign to Norway to end the First World War. He ran for the U.S. Senate three years later but was defeated by less than 4,400 votes.
He would never seek public office again but was politically active, vehemently opposing U.S. involvement in foreign wars and the formation of labor unions. Groomed to run the business, Ford's son, Edsel died before his father, then was commemorated by the hapless car model named for him. A grandson, Henry Ford II, eventually took over the reins to the company.--Shandana Durrani
W.R. HEARST (1863-1951) PUBLISHING PRINCE
In 1897, when renewed hostilities between Spanish colonialists and Cuban rebels seeking independence threatened, publisher William Randolph Hearst wanted lavish headlines with which to sell newspapers. He dispatched the artist Frederic Remington to Havana to supply images. Remington cabled him: "Everything is quiet. There is no trouble here. There will be no war. I want to return."
Hearst's alleged reply was in keeping with the tone of "yellow journalism," a style he helped create: "Please remain. You furnish the pictures and I'll furnish the war." The son of a millionaire gold miner turned senator, Hearst wasn't your average silver-spooned brat content to take over daddy's business. At 23, Hearst begged his father to let him run the San Francisco Examiner, which the elder Hearst had won as a gambling debt. Spending lavishly for writers, the son built circulation with sensational reportage on scandal and corruption. The newspaper became the cornerstone of an influential media juggernaut.
During the Spanish-American War, Hearst blurred the line between reporting the news and creating it. A Hearst reporter aided the escape of a Cuban political prisoner, and his New York Journal implied that the Maine, an American warship, had been sunk by Spain. A skilled editor, Hearst put his stamp on the empire. In memos, he dispensed helpful hints that became editorial guidelines. Among his dictums: "Don't print a lot of dull stuff that people are supposed to like and don't." Hearst's free spending built and ultimately endangered his empire, which at its height included more than 20 newspapers, nine magazines, telegraphic news facilities, radio stations and motion picture production syndicates. But projects such as San Simeon, his opulent modern-day castle, drained cash.
The Depression hit Hearst's empire hard, and he was forced to borrow money and sell holdings. Like his father, Hearst pursued political ambitions, serving as a U.S. representative from New York and losing gubernatorial and mayoralty races. His wife bore him five sons, before their relationship fell apart. Never bothering to divorce, Hearst lived his final 30 years with film actress Marion Davies. This and other peccadilloes were exposed in the 1941 Orson Welles film Citizen Kane, loosely based on the publisher's life. When he couldn't quash the film's release, Hearst instructed his media empire not to acknowledge it. The film was roundly hailed, but it is also credited with ruining Welles's promising career by tweaking the vindictive Hearst. Hearst passed his still-vital empire onto his sons. His granddaughter Patty became sensationalized in her own right when kidnapped by the Symbionese Liberation Army in the 1970s.--Jason Sheftell
DAVID SARNOFF (1891-1971) NETWORK NABOB
On April 15, 1912, when the Titanic plunged to the depths of the north Atlantic, David Sarnoff was a young telegraph operator manning the wireless machine atop the Wanamaker Department Store in Manhattan. Sarnoff glued himself to the wireless for a reported 72 hours, relaying news of the tragedy to newspapers and the families of the survivors.
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