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


Professor Chandler’s Revolution

The Long View of the Short Run
Alfred D. Chandler Jr. on the economic issues of the moment.

The Microsoft Antitrust Suit
“The reason there was a lawsuit at all goes back to the original franchise that IBM granted Microsoft in 1982 for the IBM PC software. This generated the highest economies of scale and scope in the history of business. It was Microsoft’s lucky break, and they played it brilliantly. Today, they can undersell anybody. Gates was a master at using his products to improve each other and drive out competitors.

“Compared to the breakup of AT&T, breaking up Microsoft would not be a tragedy, but the question is how to do it. How can the government mandate an agreement to create competing operating systems? The only way is for someone else to develop an operating system that competes with Windows, and the only real candidate is Unix. It’s inevitable that Apple would adopt Unix. They should have done it 10 years ago.”

“This is a double whammy — the Internet bubble collapse and the scandals. The last time that sort of combination occurred was 1929. On the surface, the economy was booming; two years later, in 1931–32, the unemployment rate was 25 percent. That was the only time in the 20th century when there were net losses of $2 billion to $3 billion in market capitalization. Why did it happen then? Because of the scandals: The head of the stock exchange went to Sing Sing. That can happen again, and I think it may. One major weakness at Enron was a board of directors composed exclusively of outside people.”

Japan’s Economic Problems
“Japan’s long recession reminds me of America after 1929. We never recovered until World War II, and I see Japan in the same boat. Their situation may even be worse because their market is Europe and the U.S. They don’t have a home market. The most successful Japanese electronics companies, like Sony, are focused on customers in the U.S. and Europe.”

The Chemical Industry
“Outside of biotechnology, I don’t see a new technology coming along to transform the industry. All but two of the top 50 chemical companies were established by the 1920s. The technology hasn’t changed much since the 1950s, with the coming of polymers and the petrochemical revolution. Today, the biggest firms are almost all moving into pharmaceuticals. Out of seven major U.S. chemical companies in 1970, only DuPont and Dow are left.”

— A.K.

Reprint No. 02209

Art Kleiner,

[email protected] is the “Culture & Change” columnist and a regular contributor of “The Creative Mind” profiles for strategy+business. He teaches at New York University’s Interactive Telecommunications Program. His Web site is Mr. Kleiner is the author of The Age of Heretics (Doubleday, 1996); his next book, Who Really Matters: The Core Group Theory of Power, Privilege, and Business Success, will be published by Doubleday Currency in August 2003.




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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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