The Visible Hand: The Managerial Revolution in American Business

Some books are worth reading because they are grand and insightful, even if the writing is a bit stale and dry. "The Visible Hand" falls into that rare fraternity of non-fiction; a book that is tough to get through, but will forever alter how you perceive a given subject, in this case, the early economic development of the United States.The main themes addressed by Chandler are: 1) the rise of the railroads and the consequent development of modern management; 2) the creation of a national mass communication network, along with the rise of mass production in certain industries thanks to technology and process improvements; and 3) the appearance of mega-corporations, through horizontal (merger) and vertical integration, in those industries best situated to take advantage of combining mass production with rapid national and often global transportation networks.Before the railroads, the author, Alfred Chandler, writes, there were no large organizations in American business, southern slave plantations included. The largest of private enterprises, such as the textile factories of Lowell, Massachusetts, were owner / operated and employed, at most, a hundred workers. The railroad changed everything. Enormous amounts of upfront capital was required to build them, which led to the rise of banks, the growth of the stock market, indeed, the birth of Wall Street. Workforces measured in the thousands were necessary, ushering in the long and steady shift from farms to industrial enterprises that fundamentally altered the national social landscape. And, most critically and wholly new to American business, to ensure that trains and passengers moved efficiently and safely, a network of specialized, salaried managers were vital, who over the years developed modern cost accounting and organizational principles to better manage the sprawling behemoths. In sum, from the development of the railroads and their management structure sprung the greatest economic colossus of recorded history -- the United States.The speed and reliability of transportation and communication brought by railroads and the closely associated telegraph industry radically transformed the distribution of goods, Chandler argues. Beginning with the commodity trade, grain and cotton in particular, highly efficient and above all extremely rapid national transportation and communication networks were created. After the commodity markets came national wholesale operations, which were then trumped by mass retailers, such as department stores, like Macy's and Woolworths, then mail order houses, like Sears Roebuck and Montgomery Ward, and finally chain stores. In all of these operations, "economies of scale and distribution were not those of size but of speed. They did not come from building larger stores; they came from increasing stock turn." Sear Roebuck, in particular, reads like the Amazon.com of the late nineteenth century, suddenly offering unprecedented selection and customer service to a huge, rural and theretofore underserved customer base. The numbers tell the tale: revenue grew from $138,000 in 1891 to $38M in 1905, when they were fulfilling 100,000 orders a day, leveraging a core competence in packaging and shipping.Next, certain industries experienced rapid and massive consolidation, but only those that could profit from capital intensive and energy intensive continuous process manufacturing. In short, speed mattered much more than size. All the revolutionary developments could be tied to the velocity and volume at which materials could flow through the economy. In industries where major increases in speed and volume were not possible for structural reasons, such as apparel, woodworking or leather, there was no revolution in production. These industries could always grow their factories bigger, but not faster -- and faster is all that really mattered. Industries that relied on continuous process manufacturing and/or required a lot of heat -- industries such as steel and other metals, chemicals, distilling and oil -- experienced huge jumps in productivity thanks to new and more reliable sources of energy (coal or electric) and new machinery properly configured in factories that maximized speed and throughput. It call came down to new machines, better raw materials and the intensified application of energy. Those firms that could profit from those innovations ultimately gained an upper hand by increasing volume and speed of production. In these industries, the first mover advantage proved powerful as an effective, national marketing organization -- advertising, sales and, where applicable, servicing -- was difficult to emulate and served as a powerful barrier to entry. Backward integration into raw materials production was often a result of ensuring supply rather than securing a lower price. Finally, Chandler writes that the competitive outcome in these industries was usually oligopoly rather than monopoly, largely because a few large integrated firms emerged simultaneously and/or large, integrated firms in adjacent markets branched out and competed with the entrenched leader (i.e. chemical companies expanding into soap).Chandler's basic thesis is that managerial capitalism -- the growth of business and economic activity owing to salaried, professional managers -- is the primary explanation for the dramatic rise of the industrial enterprise in America and then the rest of the world. He maintains that economists and historians have long preferred to study entrepreneurial capitalism (the role of Robber Barons or creator/innovators, depending on your political viewpoint) and financial capitalism (the role of banks and finance), but that both of these matter much less than managerial capitalism, the expansive, vertically integrated enterprise serving a national or global market with mass production and mass distribution, usually with products that could be produced with continuous production technology. It's a powerful argument.

Covers the transition from small firms run by individuals or partners to large business enterprises. Discusses the role railroads played, how the telegraph and later telephone improved communications, paving the way for large scale operations covering vast areas. Also gives historical information on the rise of several types of business enterprises like department store chains, mail order, cereal companies and others.This is a frequently cited reference for economic history and should be required reading for anyone with interest in that field.

Brand new book with interesting, enjoyable reading subjects.

Helps to understand Capitalism.

Thank you very much, I received the book brand new like you mentioned. I will be recommending my friends and family to buy from you in the future.

An essential read for anyone interested in the pluses and minuses of America's version of market capitalism.

Purchased as a used/good book but as soon as I started to use it, the pages started falling out. May have to reorder as they continue to fall out. Haven't even been able to get through first chapter before this ordeal!

Great book, very detailed and informative analysis of the subject.

Useful book

Good condition.