Standard Oil

"When Swedish lawmakers decided to permit banks to invest in industrial companies for the first time, Ivar struck a deal with Oscar Rydbeck, a rising star at Skandinaviska Kredit A.B., known as “The Swedish Credit Bank.”11 When Rydbeck said he would be willing to take Ivar’s Kreuger & Toll shares as collateral for an investment in a new business, Ivar’s thoughts turned to his family - and to matches. Ivar’s father, Ernst August, had methodically saved enough money to buy stakes in two small match factories from their extended family’s consortium, Mönsterås Matchworks. Ivar’s brother Torsten now managed one of those factories in Kalmar, Ivar’s home town. The match business was highly competitive and not very profitable, but Ivar and the newly liberated Swedish banks agreed there was potential. Ivar saw that the match industry was in the same economic position oil, sugar, and steel had been in a few decades earlier. There were too many owners of too many factories. Competition was driving prices down so far that hardly any profit remained. Ivar knew his family, and the numerous other small factory owners, would never make much money this way. However, if these factories could be consolidated, the owner of a Swedish match monopoly could raise prices and make a fortune. Some factories in Sweden recently had combined, to form the Jönköping-Vulcan trust, but the men running the trust were conservative and slow. Ivar was sure he could dominate them. He began using loans from the Swedish Credit Bank to buy match factories throughout Sweden. During the next eight years, Ivar parlayed a few family match factories into a conglomerate. He modernized factories and expanded overseas sales. Production increased from 90,000 cases in 1914 to double that in 1916; his profits more than tripled.12 He reduced costs by purchasing the companies that made his machines, as well as companies that supplied chlorate acid potash for the tips. The hardball tactics Ivar used to take over competitors must have reminded Lee Higg’s partners of John D. Rockefeller, who used a similar approach to acquire competitors of his company Standard Oil. To get the money for these expansions, Ivar turned to Oscar Rydbeck. The Swedish markets were going through their version of a speculative frenzy during 1914-15, and Ivar was able to raise 5 million kronor from Swedish banks. During the war, when exports to Britain closed, Ivar turned to Russia, where he not only exported matches, but purchased aspen wood (the best wood for matches) and paper mills. After the war, he bought up virtually all of his competitors in Sweden, using more cash borrowed with Rydbeck’s help. He never gave up control. When he consolidated his match companies, he kept a majority of the voting shares."

"Ludwig’s father before him pioneered development of underwater mines, designed some of the first steam engines to power Russian ships, and installed the first central heating systems to warm Russian homes. Ludwig’s son after him launched the world’s first diesel-driven tugs and tankers while bargaining with the Rothschilds, struggling against Royal Dutch-Shell, and bartering with Standard Oil in Europe’s second Thirty Years War, a petroleum war for control of world markets."

"Rockefeller devised a more efficient way to accomplish the objec¬ tive he had failed to achieve through collusion. His new solution was to create a monopoly. By acquiring most of the oil refining capacity in the United States, the Standard Oil trust was able to manage supply to its benefit. Unlike monopolists in other industries of his era, Rockefeller did not exploit his position to extract artificially high prices from consumers. Instead, he managed prices with an eye toward reducing the gluts and shortages that formerly made the business so risky. He also kept prices low in order to discourage new competitors from entering the refining in¬ dustry. In the neat, orderly world that resulted, Rockefeller earned excel¬ lent profits through the efficiencies of operating on a vast scale. He further leveraged his market power, and fattened his profit margins, by extracting preferential shipping rates from the railroads. This particular cost saving had to be obtained covertly, through secret rebates to Stan¬ dard Oil."

"D ominating a market is a highly effective strategy for accumulating wealth. It has produced both the first self-made billionaire, John D. Rockefeller Sr., and the first self-made centibillionaire, Bill Gates. In both cases, as well, market dominance has prompted calls to break up the com¬ panies that made them rich, Standard Oil and Microsoft. Developing a thick skin is an especially important principle if you pursue this path to fortune. Market dominance is not synonymous with monopoly. Complete elimination of competition is the ultimate form of dominance, but it is not a realistic objective. Moreover, dominating a particular market does not confer unlimited economic power, given the interdependence of sup¬ pliers, producers, and customers."

"John D. Rockefeller Sr. did not try to fatten the profits of Standard Oil by exploiting workers. At times, he willingly paid his employees more than the going wage. His stated objection to labor unions was that he viewed them as frauds engineered by irresponsible workers: It’s all beautiful at the beginning; they give their organization a fine name and they declare a set of righteous principles. But soon the real object of their organizing shows itself—to do as little as possible for the greatest possible pay.2"

"His increasingly intense wishful thinking also made him want to start building three new laminators according to the same model. However, it wasn’t three new laminators that were needed but more S-50. The problem was that the American military’s need for S-50 plastic meant that it was running out in the market. The Korean War had made S-50 be regarded as a strategic commodity – everything produced went directly to the military. Erik Torudd had to desperately call all the companies that had received samples of S-50 and ask them to send it to Tetra Pak. But the small amount he gathered would not last past August 1953. After that, they would be without viable coating material. Torudd managed to get an audience with the United States Army Quartermaster General to submit a request that Enjay and Tetra Pak be allowed to buy 1,000 tons of S-50 from Standard Oil. The petition was submitted unsuccessfully."