Business history


Succeeding with what you have | Charles Schwab

No Comments

Published in: 1917

Amazon | Goodreads

Charles Schwab was an American steel magnate who worked his way up from the floor to top of the country’s leading steel company. The companies he ran often had higher profitability and higher wage levels than their competitors. During his heyday, he had a net worth of $500m-$800m in today’s money, and at the beginning of the 20th century he built the Riverside mansion with 75 rooms on the Upper East Side of Manhattan for $6m ($170m in today’s money value). After an extravagant life combined with the stock market crash of the 1930s, Schwab died poor in 1939, 77 years old.  

LEARNED HIS TRADE AT CARNEGIE. Schwab was born in 1862 into a working class family in Williamsburg, Pennsylvania. In the early 1880s, he began his working life at Andrew Carnegie’s steelworks. By 1897, he had reached the top and at the age of 35 was CEO of the Carnegie Steel Company. In 1901, Carnegie Steel was sold to what later became the U.S. Steel Corporation and Schwab became the Group’s CEO. He then left U.S. Steel in 1903 to run the Bethlehem Steel and Shipbuilding Company, which under his leadership became the world’s largest independent steel producer.

DO MORE THAN WHAT IS EXPECTED. The safest way for young people to qualify for the next level of the career ladder is to work harder than anyone else at their current job. To devote all their time and all energy to work. Only when the intended position is secured can you enjoy the pleasures – you lose nothing by waiting a few years and gain much else in the form of experience and capital.

“He also had a natural willingness to do more than he was paid for. This quality was so pronounced in him that he actually went out of his way to get into the way of work. He not only went the extra mile, but he added two or three extra miles, and went with a smile upon his face and the right attitude in his heart. He also went in a hurry and came back for more when he had finished any task assigned to him.” – Andrew Carnegie on Charles Schwab

SET YOUR OWN PRICE. There is no way to hold back someone who always does more than expected. Whoever does it decides his own price and will be willing to receive it. If an employer is short-term enough to hold back recognition, through adequate compensation, a wiser employer will soon discover the talent and offer a better job.

”The man who fails to give fair service during the hours for which he is paid is dishonest. The man who is not willing to give more than this is foolish.“

THE SMALL THINGS MAKES ALL THE DIFFERENCE. The one who gets attention from the top of the organization is the one who constantly thinks and excels in the small everyday chores. Anyone who tries to impress their employer by doing the spectacular will fail. Being careful and methodical in all things, no matter how small or insignificant they seem, makes a big difference over time.

“If a young man entering industry were to ask me for advice, I would say: Don’t be afraid of imperiling your health by giving a few extra hours to the company that pays your salary! Don’t be reluctant about putting on overalls! Bare hands grip success better than kid gloves. Be thorough in all things, no matter how small or distasteful! The man who counts his hours and kicks about his salary is self-elected failure.“

”STARS” ARE OVERRATED. Schwab thought that “super geniuses” in working life were so unusual that they basically did not exist. His experience was that when “stars” left, they were usually replaced by “ordinary” successors who, through application and self-discipline, learned to use the full capacity of their ordinary brains. He did not choose leaders because they were geniuses, he chose those who day in and day out did the little extra and actively thought about how they could increase their productivity.

BEING A LEADER. A leader who blames his employees for trivial mistakes will undermine their job satisfaction and lower their willingness to try new things. When Schwab noticed mistakes among his employees, he said nothing and when he was pleased with their efforts, he praised them. They felt his silence but it was not insulting. It made them think and work harder.


King Ichan | Mark Stevens

No Comments

King Icahn is an unparalleled human drama. It is the story of a man who rose from humble beginnings to emerge as the most powerful, eccentric, galling, pugnacious and successful force in the business world. The Icahn drama is rife with contradictions, juxtapositions, paradoxes and epic power plays. All have led to a reshuffling of the business\financial landscape, to the electric fear on the part of CEOs when they hear the terrorizing words “Carl Icahn is on the phone” and to one of the world’s greatest fortunes. King Icahn is the only book written about Icahn, completely independent but with full access to the man himself. It reveals the back story of the greatest financier/pit bull of his generation, his multi-billion dollar epiphany, his real motive for taking on the CEO elite as well as his loves, feuds, idiosyncrasies and intellectual brilliance. Available on Amazon / Audible.


Dear Chairman | Jeff Gramm

No Comments

Published in: 2015

Amazon | Goodreads

Dear Chairman is about shareholder activism in the United States over the past century. The book is written by Columbia professor and fund manager Jeff Gramm and consists of eight studies based on investor letters, newspaper clippings and interviews. According to Gramm, the starting point for shareholder activism was Benjamin Graham’s collision with the Northern Pipeline in 1926. As America then became richer and shareholding more widespread, more and more disputes over corporate control broke out.

STARTS OUT IN THE 1920SIn 1926, Benjamin Graham discovered that the profitable Northern Pipeline (NP) had $90/share in bonds while the stock price was $65. NP held its AGM in Oil City, Pennsylvania, far from the company’s headquarters – probably so that the board and management would get work undisturbed. Graham went there but had forgotten to pre-register his case and had to go home unheard. After working with major shareholders and after several rounds with the board, Graham got hold of two of five board positions. He then got the company to distribute the excess capital to the shareholders.

THE SALAD-OIL SCANDAL IN THE 1960S. Buffett started his partnership in 1956, and experimented in the beginning with everything from activism to short selling and pair trades. A classic story is that of American Express’s (AE) salad-oil scandal that erupted in 1963. The share price fell sharply and Buffett realized that the scandal did not damage AE’s highly profitable core business and invested 40% of the partnership’s capital in the company. He then began to persuade management and the board not to fight against the compensation of the swindlers. Legally, AE did not have to pay any compensation and shareholders loudly began to complain that a payment would still take place. Buffett realized that a lack of compensation could damage AE’s good brand and customer confidence and in the long run overthrow the company. If they took a big “one off”, AE would quickly be on the track again – which got to be the case.  

THE RANSOM LETTERS OF THE 1980S. The 1980s were the decade of “corporate raiders” and the big names on Wall Street were Carl Icahn, Michael Milken and T. Boone Pickens. “Bear hug letters” (an unwelcome but generous takeover bid), greenmail (targeted buyouts by individual shareholders), hostile takeovers (takeover attempts without board / management approval) and poison pills (a protection against hostile takeovers – often via the articles of association) were new words used extensively in the financial press. The activist investments of the decade were to a large degree made possible by cheap capital from Michael Milken. He was the “father of junk bonds” (high-yield bonds with little security) and through this built up a fortune. After a too long time in the grey zone, the happy 1980s resulted in 10 years in prison and a $600m fine for Milken. In the end, however, he came out after only two years.    

THE TOWN-HANGINGS OF THE 2000S. In the late 1990s and early 2000s, hedge fund manager Daniel Loeb introduced a new type of activism – public shaming. Loeb’s approach was to take a position of power in problem companies and replace inefficient management to reverse the negative development. To get the attention of key people, he sent out open letters in which he clearly expressed how management exploited the shareholders through passivity, dishonesty, or laziness. The open letters contained everything from personal attacks to curse words and proved to be highly effective. Loeb had found the key point of key people – if there is one thing CEOs and board members care about, it is their reputation.

”Sometimes a town hanging is useful to establish my reputation for future dealings with unscrupulous CEOs”
– Daniel Loeb

ACTIVISM IS NOT ALWAYS A GOOD THING. Studies have shown that activism is generally value-creating. However, not all outcomes will be good. Gramm takes up the example of BKF Capital, where activists ran a marginally profitable fund company into non-existence. The activists felt that earnings were burdened by unusually high staff costs and saw potential for quick gains if wage levels were trimmed. But when wages were reduced, the staff disappeared and with the staff, the investors disappeared. The fund company’s AUM fell rapidly and after only a few years the business was wound up.

ACTIVISM AS AN ASSET CLASS. According to Gramm, activism entered the institutional world in the late 1980s after GM, through greenmail, bought out major owner Ross Perot. The purchase took place at a large premium and Perot’s billion profit was financed at the expense of other shareholders. Thereafter, the major institutional shareholders increasingly began to side with the activists. It was also in connection with this that greenmail was banned. Nowadays, even normally passive institutions are open to follow successful activists.


American Experience: Walt Disney

No Comments

Documentary in two episodes from 2015. An unprecedented look at the life and legacy of one of America’s most enduring and influential storytellers — Walt Disney. Available on Amazon Prime and PBS.


The Food That Built America

No Comments

Through reenactments, the filmmaker tells rarely-heard stories about the most renowned food tycoons in America who managed to carve their brands in the country’s history. Food will tell the unknown stories of innovation and rivalries behind food industry tycoons Milton Hershey, John and Will Kellogg, Henry Heinz, C.W. Post, the McDonald brothers and more. Imdb link.


Ford v Ferrari

No Comments

Based on the remarkable true story of the visionary American car designer Carroll Shelby (Damon) and the fearless British-born driver Ken Miles (Bale), who together battled corporate interference, the laws of physics, and their own personal demons to build a revolutionary race car for Ford Motor Company and take on the dominating race cars of Enzo Ferrari at the 24 Hours of Le Mans in France in 1966.


Only the Paranoid Survive | Andrew S. Grove

No Comments

Published in: 1999

Amazon Goodreads

Andrew Grove emigrated to the United States from communist Hungary in 1956, co-founded Intel in 1968, where he became president in 1979 and CEO in 1987. Grove and his co-founders became pioneers in two of the most important building blocks of modern technology: memory chips and microprocessors. When the book was published in 1996, he taught at the Stanford University. Below are some of Grove’s lessons.

EXTRAPOLATION IS DIFFICULT. When the microprocessor became fundamental to the industry, the mass production economy kicked in. Manufacturing computers became cost-effective, which made the computer an attractive tool both at home and at work. In the 1980s, the old computer companies were vital and growing. IBM predicted annual sales of $100 billion at the end of the decade. But in the late 1980s, several large vertical computer companies were in the midst of layoffs and restructuring. The calculation basis had not only changed, but the competition base had also changed.

”INFLECTION POINTS” ARE CHANGEABLE. Strategic inflection points are fundamental changes in an industry, whether technical or not. It is when the force balances from the old structure to the new (in physical terms when a curve changes from convex to concave, or vice versa). A leader must plan for this as the fire brigade: it is not possible to predict where the next fire will take place, but it is possible to have an energetic and efficient team that can respond to the unforeseen. It requires objectivity, the willingness to act on beliefs and the passion to mobilize people. Getting through the process requires clarity in the direction, including what to invest in and what not to invest in.

DATA IS ABOUT THE PAST. Grove describes an episode in which he waved away concerns from a subsidiary manager in Asia, in hindsight because he felt much safer in California than the subsidiary manager in “enemy territory.” Data is about the past, and strategic turning points are about the future. When data showed that Japanese memory manufacturers were becoming an important factor, Intel was in the midst of a struggle for survival. You need to know when to question data and when to trust it. To understand which of your competitors can change your business fundamentally: think if you only had one bullet in a figurative gun, which competitor would you save it for?

”10x CHANGE” – MANAGEMENT DETERMINES SURVIVAL. There are competitive forces and there are super competitive forces. A major change in any of Porter’s six forces (strength and competence of existing competitors, suppliers, customers, complementary, potential competitors and the ability to run the business in a different way) is what Grove calls a “10x” change. Eventually, the industry finds a whole new balance. Most market analysis is too static and do not include these events. Have a broad and intense debate instead. The way IBM and Intel responded to the X-ray technology threat showed that one company saw a “signal”, while the other classified it as “noise”. Competent people can have different conclusions with the same set of facts.

“But in capitalist reality, as distinguished from its textbook picture, it is not (price) competition which counts but the competition from the new commodity, the new technology, the source of supply, the new type of organization… competition which.. strikes not at the margins… of the existing firms but at their foundations and their very lives” – Joseph A. Schumpeter, Capitalism, Socialism and Democracy, 1942

IT CAN HAPPEN TO ANYONE, NOT JUST IN TECHNOLOGY. When Wal-Mart establishes itself in a small town, the environment changes for every retailer in the city. A “10X” factor has arrived. However, most changes happen gradually. Typewriters are getting better, cars are getting better, computers are getting better. A change in the customer base can create a subtle change in attitude, but still have a “10x” force. What is a demographic time bomb for consumer companies is good news for the computer industry (young people are growing up with computers). The privatization in the 1990s was in many countries “the mother of all inflection points”.

FIRST-MOVER-ADVANTAGE. Time advantage in the technology industry is the safest way to gain market share (and it’s harder to be best in class in several areas). Intel had almost 100% of the memory chip market segment. In the early 1970s, other companies joined, but Intel defended a large share. But when the Japanese pushed down the price, it became tough. Intel continued to spend a lot on R&D, but at the same time a small team worked with microprocessors, which the company had invented in 1970. Leaving the core business was difficult. But Grove asked himself: if the board brought in a new CEO, what do you think he would do? Why not go out the door, come back and do it yourself. Going through the entire strategic inflection point took Intel a total of three years.

DO WHAT IS HARD, WHEN IT IS EASY. Chaos is inefficient and burdens all participants. But the old order will not make room for the new without a phase of experimentation and chaos in between. Act while the driving force in your existing business is strong, cash flow is good, and the organization is intact. Grove has never made a tough change, either in terms of resource shifting or staff relocation, which he did not wish he had done a year earlier.


The Current War

No Comments

The dramatic story of the cutthroat race between electricity titans Thomas Edison and George Westinghouse to determine whose electrical system would power the modern world.