American Business Since 1920 How It Worked

Thomas K. McCraw is the Straus Professor of Business History Emeritus at Harvard Business School. Among the many books he has written or co-authored are Prophet of Innovation: Joseph Schumpeter and Creative Destruction, which in 2008 was awarded the Hagley Prize for Business History, the Spengler Prize in the History of Economics and the biennial award given by the International Schumpeter Society; Creating Modern capitalism: How Entrepeneurs, Companies, and Countries Triumphed in Three Industrial Revolutions (1997); Management Past and Present: A Casebook in American Business History (1996); American Versus Japan: A Comparative Study of Business-Government Relations (1986), and Prophets of Regulation, which won the Pulitzer Prize in History in 1985 and the triennial Thomas Newcomen Book Award in 1986.
He has served as editor of the Business History Review, as associate editor of The Encyclopedia of the United States in the Twentieth Century, and as president and trustee of the Business History Conference. He has been a member of the Board of Syndics of Harvard University Press, the Council of the Massachusetts Historical Society, the advisory board of Nomura School of Advanced Management (Tokyo), and the editorial boards of Reviews in American History and Harvard Business Review.

Foreword VII

Introduction 1

Themes 1

The Story Told Here 3

Past and Present 4

American Business and the World 6

A Matter of Size 7

The Key Internal Problem 9

The American Business Achievement 10

Chapter One: Decentralization in the 1920s: GM Defeats Ford 13

Cars and Trucks 13

Henry Ford (1863-1947) 15

Alfred P. Sloan, Jr. (1875-1966) 19

General Motors versus the Ford Motor Company 22

The Lessons of the Car Wars 25

Chapter Two: Brand Management in the 1930s: Decentralization at Procter & Gamble 32

The Great Depression 32

The Types of Firms That Prospered 33

Procter & Gamble 35

The Character of the Firm 38

Building the Market 41

Soap Operas 42

Neil McElroy’s Epiphany about Brands 44

Doc Smelser and the Market Research Department 46

The Phenomenon of Brands 49

People as Brands 52

Updating P&G’s Corporate Culture 53

Chapter Three: The New Deal and World War II, 1933-1945: Decentralizing Regulation and War Mobilization 57

Roosevelt, the New Deal, and Regulation 57

The World Conflict, 1939-1945 62

The U.S. Production Miracle 64

The Struggle to Manage Mobilization 65

Decentralization through the Controlled Materials Plan 67

Paying for the War 73

Employment and the Growth of the Workforce 74

Decentralized Rationing and Conscription 75

Big and Small Business 78

Aviation 78

Boeing Airplane 81

Ups and Downs 84

Postscript: The Scourge of Scandal 85

Chapter Four: Science and R&D: Color TV, Chemicals, and Pharmaceutical Strengthen Postwar Prosperity 88

Economic Background 88

Social Trends 90

R&D and the Cold War 92

Television and David Sarnoff 93

Sarnoff’s Talents 94

The Birth of Broadcasting 96

RCA’s Continuous Rise 98

Television Flourishes 101

Color TV 102

Progress and Missteps 105

Disasters 107

RCA’s Management Report Card 110

The Perils of High-Tech Markets 112

R&D Done Right: The Chemical Industry 115

Polymers and Science 116

The Companies 117

Pharmaceuticals 120

Chapter Five: Franchising and McDonald’s 126

Economic and Social Trends after 1973 126

Franchising: An Overview 129

The Champion Franchiser 130

Early History: The McDonald Brothers 131

Ray Kroc (1902-1984) 132

Kroc the Crusader 133

Recruiting Franchisees 135

June and Lou Martino 136

The Financial Wizard 137

The Big Leagues 140

Operational training 141

Decentralized Decision Making 143

The Importance of Good Franchisees 144

Marketing: Into the Mouths of Babes 146

The U.S. Workforce 147

The Negative Side 148

Internationalization 153

Past and Future 154

Prologue to Part II 157

Chapter Six: The Empowerment of Women and Minorities 161

Overview 161

Women in Business 162

Entrepreneurship 164

Highly Compensated Women 166

African Americans 169

Entrepreneurs 172

Highly Compensated African Women 174

Hispanics 176

Aggregates 178

Highly compensated Hispanics 180

Chapter Seven: The Financial System 184

The Background 184

The Functions of Finance 185

A Deluge of Data 186

Wall Street and the Stock Market 189

The Rising Importance of Finance 194

The Social Fallout 201

A Problem of Business, or of Government? 205

Widening Gaps in Wealth and Income 208

Chapter Eight: Information Technology 212

IT as “It” 212

Computers 213

The Changing Role of Government 217

How the Valley Developed 218

Organizational Innovation 221

The Internet 223

Companies and Personalities 227

Epilogue 245

Centralization and Decentralization 246

Other Themes since 1920 248

Bibliographical Essay 256

Acknowledgements 294

Index 295

Photos follow pages 55 and 156 and 243

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