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 / Second Quarter 2002 / Issue 27(originally published by Booz & Company)


Professor Chandler’s Revolution

According to family legend, Alfred Chandler had announced his decision to become a historian by age 6; and by his teens, he had already developed his analytical curiosity. “I asked Alfred once,” recalls his sister Sophie, “why in all northern Delaware, with all this money, there wasn’t one good painting on anyone’s wall. ‘That’s easy,’ he said. ‘J.P. Morgan and the other American industrialists all have their headquarters in New York. They compete for the best paintings; the DuPont headquarters is isolated in Delaware, without any peers to compete with.’ That was typical of the way he thought, even when we were children.”

From the standpoint of the Great Epic, however, his most important relative was someone he never met. In 1945, after five years in the Navy, Alfred returned to graduate school at Harvard at age 26 with a wife, three small children, and a graduate study stipend. That year, an elderly great-aunt who lived in the Boston suburb of Brookline died. The Chandlers moved into her Brookline home, where Alfred discovered, in a storeroom, a collection of old papers belonging to his great-grandfather Henry Varnum Poor, the original Poor of Standard & Poor’s. Mr. Poor was the first modern industry analyst; for 30 years, he gathered comparative data on the expansion of American railroads, which were more complex in their mix of new technologies, customers, rates, and multiple divisions than any business that had existed before. As Professor Chandler later noted, he was writing “the Wall Street Journal of his day. His major customers became investors, so you watch the beginnings of modern management, modern finance, modern labor relations, modern accounting. They all came out of the railroads.”

Fortunately for the young Alfred Chandler, there was a small institute at Harvard Business School where such issues could be discussed, and where he was welcomed as a research associate. The Research Center in Entrepreneurial History had been founded by Joseph Schumpeter, the economist who championed innovation and entrepreneurship as the drivers of capitalist  prosperity. “Schumpeter had been dead for a few years,” recalls Peter Mathias, an Oxford University historian and long-time friend of Professor Chandler. “But the atmosphere was such that he might have just gone out to tea and would reappear at any moment.” Al Chandler became immersed in debates about, for instance, why there had been an 18th-century industrial revolution in Britain, but not in France. This set the tone for his own interest in large corporations: not as villainous trusts or economic saviors, but as creative forces that were shaping the economy in ways most people did not recognize.

Over the next 30 years, he produced a series of books on this theme. He based them first on the records of his great-grandfather, and then on corporate papers from DuPont (where family connections helped him gain access, and where he researched a biography of early-20th-century CEO Pierre du Pont) and other large companies. Three books in particular were groundbreaking. First, in 1962’s Strategy and Structure: Chapters in the History of the American Industrial Enterprise, he described four large managerial corporations: General Motors, Standard Oil, DuPont, and Sears, Roebuck and Company. In all four companies, he argued, the multidivisional line-and-staff form was not an arbitrary copy of the military. It was an inevitable, natural response to the unprecedented complexity of the business. For example, GM naturally succeeded with its strategy of different cars for every price range, and that, in turn, dictated the company’s structure.

Photography by Neil Selkirk
The Visible Hand described how a century ago customers suddenly found goods more plentiful and cheap than they had ever been. The book showed the dramatic impact the railroads had on the modern economy. Although the transition started in the 1840s, its most visible changes occurred between 1880 and 1920. Mass manufacturers of everything from typewriters to canned goods learned to bypass or swallow up the networks of jobbers, factors, merchants, and other independent middlemen who had controlled the flow of commerce throughout history. One of the fascinating aspects of
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  1. Richard R. John, “Elaborations, Revisions, Dissents: Alfred D. Chandler Jr.’s The Visible Hand after Twenty Years,” Business History Review, Summer 1997
  2. Alfred D. Chandler Jr., Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries (Simon & Schuster Inc., Free Press, 2001)
  3. Alfred D. Chandler Jr. and Stephen Salsbury, Pierre S. du Pont and the Making of the Modern Corporation (Harper & Row, 1971)
  4. Alfred D. Chandler Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Harvard University Press, Belknap Press, 1990)
  5. Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Harvard University Press, Belknap Press, 1977)
  6. Andrea Gabor, The Capitalist Philosophers: The Geniuses of Modern Business — Their Lives, Times, and Ideas (Times Books, 2000)
  7. Thomas K. McCraw, ed., The Essential Alfred Chandler: Essays Toward a Historical Theory of Big Business (Harvard Business School Press, 1988)
  8. Richard Tedlow, Giants of Enterprise: Seven Business Innovators and the Empires They Built (HarperCollins, HarperBusiness, 2001)
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