January 2011

Two centuries after the Industrial Revolution got its start in the textile mills of England, the Information Revolution was born with the big mainframe computers that automated routine corporate paperwork. Interest in computers burgeoned in the 1950s because of the successful salesmanship of IBM.

IBM, like U.S. Steel, was a big company that sold to other corporations rather than directly to the general public. Its machines weren’t the most technically advanced, but its product support was unsurpassed. Customer reps showed clients how IBM could help them, and then remained at hand when problems arose.

IBM’s gross revenues leaped from $700 million in 1956 to $2.6 billion in 1962. Other firms tried to compete, but people described the industry as “IBM and the Seven Dwarfs.”

The company maintained its hegemony into the 1980s, when the desktop computer began to do away with the need for mainframes.

—T.A.H.

When the National Foundation of Women Business Owners announced in May 1999 that women own nearly 40 percent of the nation’s businesses, there was little fanfare or surprise. Americans have become increasingly accustomed to female entrepreneurs as an economic force. Since 1987, the number of women-owned small businesses has more than doubled, to 9.1 million firms generating $3.6 trillion in annual sales.

At the conference of Allied leaders in Teheran, in 1943, Josef Stalin offered a toast: “To American production, without which this war would have been lost.” One of the most important fruits of that production was the heavy bomber, and the principal builder of heavy bombers was Boeing.

The company got a good start well before the war began. In 1935 it introduced the B-17 bomber, whose four engines gave it unparalleled speed and range. Boeing built nearly 7,000 of them after Pearl Harbor, and thousands more were made under license. They became a mainstay of the air war in Europe.

The firm subsequently took on the B-29 as a highest-priority project. Far more complex than the B-17, it posed technical problems resulting in a crash that killed Boeing’s director of flight research, but the company fought through to success. The B-29’s long range and heavy bomb load made it ideal for the war against Japan. During 1945 fleets of the aircraft burned Japanese cities; and individual B-29s carried atomic bombs to Hiroshima and Nagasaki.

If the New Deal did not succeed in ending the Great Depression, the Second World War most certainly did. On December 29,1940, FDR gave his famous “Arsenal of Democracy” speech, describing massive aid to Britain and China as the best way for America to stay out of the fight. The United States needed a huge rearmament program anyway, though, because except for our navy, we were a third-rate military power.

With the attack on Pearl Harbor, the United States became in fact the arsenal of democracy. In the four and a half years after Roosevelt’s speech, American industry turned out 296,400 airplanes; 86,330 tanks; 64,546 landing craft; 3,500,000 jeeps, trucks, and personnel carriers; 53,000,000 deadweight tons of cargo vessels; 12,000,000 rifles, carbines, and machine guns; and 47,000,000 tons of shells.

The country that elected Franklin D. Roosevelt President in 1932 was a very different place from the one that had elected Herbert Hoover four years earlier. The severity of the Depression that had engulfed it had overwhelmed the mostly informal social services that were available to deal with poverty. And that poverty was everywhere. The homeless threw up ramshackle collections of huts, known as Hoovervilles, in places as visible as New York’s Central Park. Furthermore, the traditional government fiscal policies of avoiding deficits and paying down the debt had not only been impossible to achieve as the economy spiraled downward, but the pursuit of those policies had greatly worsened the situation.

The twentieth century brought something wholly new to business practice: industrial research, which sought to nourish the inventive impulse with corporate might. General Electric was the first company to make a serious commitment in this area, but DuPont was the first to remake itself. The nineteenth-century explosives maker became in the twentieth century a producer of industrial chemicals, and in the early 1930s its research department discovered a substance stronger than silk and more resistant to abrasion. DuPont invested years in this promising infant, and in 1938 introduced nylon. Two years after the product hit the stores, DuPont had captured more than 30 percent of the market for fullfashioned stockings. After the war, DuPont kept introducing new synthetic fibers, such as Orion and Dacron. The company had reinvented itself by becoming predominantly a manufacturer of synthetics, with industrial chemicals as little more than a sideline.

—T.A.H.

By 1851 the United States had nearly reached the full extent of its contiguous territory. But while the territory east of the Mississippi had all been formed into states, west of the Mississippi only California, Texas, and the states bordering the river had been admitted to the Union. Much of the rest was still unorganized and even unexplored. And most Americans lived in the East. Indeed, the nation’s center of population lay in what is now West Virginia.

The economy of the United States in the middle of the nineteenth century was sharply divided, on a line along which the nation itself would nearly cleave a few years hence. The Northern economy was characterized by agriculture based on the family farm, commerce (America in 1850 had a merchant marine second only to Britain’s), finance, and, increasingly, industry. The most important Northern export, however, odd as it may sound to our ears, was ice. Cut from ponds in winter and stored beneath mounds of sawdust, a byproduct of the lumber industry, ice was shipped as far away as India.

As the bull market in Wall Street increased in intensity, the Federal Reserve moved to dampen it. It raised the discount rate (what it charged member banks to borrow at the Fed) three times in 1928, until it reached a then-high 5 percent. This increase in the cost of money had the effect of slowing down the economy noticeably in early 1929. But Wall Street was by now in a world of its own, and the bull market turned into a classic bubble. The Fed did nothing to intervene, even though banks were borrowing at 5 percent in order to loan money to speculators at 12 percent.

During the boom years between World War I and the Great Depression, the American economy surged ahead on its war-tuned pistons, and the order of the day was production. Factories turned out radios, telephones, and Model A’s, while in the cities, high in the towers of commerce, armies of statisticians and managers, secretaries and speculators, produced the paper evidence of our national prosperity. Business was a matter of faith; business was men like Sinclair Lewis’s cigar-chewing capitalist hero Babbitt, extolling the office and railing against unions and socialism: “The sooner a man learns he isn’t going to be coddled and he needn’t expect a lot of free grub … the sooner he’ll get on the job and produce—produce—produce!”

But Lewis’s fictional boss faced the same problem his real-world counterparts did. Preaching production was one thing; motivating employees to actually produce was something else. It’s a problem as old as management itself: What can you do to keep workers working?