What Were Robber Barons?
Imagine you are a successful entrepreneur in the middle to late 19th century. These were robber barons. You have been able to discover a method of oil production or transportation that revolutionizes the industry as you know it. It is also making you quite wealthy….
With advances in industries like finance, oil, and transportation, the business landscape was pretty much their oyster.
Not to mention the lack of regulation or legislation. Business owners could figuratively and literally “get away with murder”.
What got me to thinking about this was a TV show called Ghosts. There are two versions for you TV fans out there. (The original UK series and the US one).
A character from the US one (Hetty) was the wife of a robber baron. Listening to her talk about business and treatment of workers got me interested in researching more into Robber Barons. More so than I already knew.
“Hetty” was from the gilded age. It is a term coined by Mark Twain and is used to refer to the period roughly from 1865 to 1904. It was a time of rapid economic growth. especially in the Northern and Western United States.
It reminded me how the business world exploded after the Internet became a viable medium in the early 1990’s. Growth was also rapid and unprecedented. So, I could easily draw some parallels.
The Internet has been around awhile now, and with things like social media, ecommerce, and the sharing economy I think we forget what success looked like before the Internet.
That is what the podcast is about. It is a bit of history, a bit nostalgia and for some perhaps a bit of a revelation! I hope you will enjoy it. So, let’s look at a success story on “Success before the Internet”. There was success before the Internet you know, we just forgot. Let’s get started.
What Is a Robber Baron?
“Robber baron” is term used to describe America’s most successful industrialists. As I mentioned before, this term was primarily used during the era of the late 19th century often known as the Gilded Age. The term robber baron is also used to describe an American capitalist who enriched himself upon the sweat of others, exploited natural resources, or possessed unfair government influence. Basically, their practices were considered unethical or unscrupulous. Examples can include employee or environmental abuse, stock market manipulation, or deliberately restricting output to charge higher prices.
The first known uses of the phrase “robber baron” described feudal lords in medieval Europe who robbed travelers, often merchant ships along the Rhine River as they passed nearby. The term appeared in American newspapers in 1859. Its modern use stems from Matthew Josephson’s The Robber Barons.
Robber barons were widely despised and considered aggressive monopolists during their lifetimes. However, later biographies and historical reviews about the Gilded Age’s American robber barons cast a more complicated and favorable light.
Fear over the robber barons and their monopoly practices increased public support for the Sherman Antitrust Act of 1890.
Economic theory says a monopolist earns premium profits by restricting output and raising prices. This only occurs after the monopolist prices out or legally restricts any competitor firms in the industry. However, there is no historical evidence that natural monopolies formed before the Sherman Antitrust Act.
However, many so-called robber barons became wealthy entrepreneurs through product innovation and business efficiency. Of the goods and services, they provided, supply grew, and prices fell rapidly, greatly boosting Americans’ standards of living. This is the opposite of monopolistic behavior.
Among common criticisms of the early robber barons included poor working conditions for employees, selfishness, and greed.
Some robber barons earned their wealth through political entrepreneurship or someone who seeks to gain profit through subsidies, protectionism, government contracts, or other such favorable arrangements with government(s) through political influence.
Many wealthy railroad tycoons during the 1800s received privileged access and financing from the government via extensive use of lobbyists. They received monopolistic special licenses, per-mile subsidies, huge land grants, and low-interest loans.
Working conditions in 19th century America were challenging, to say the least. While robber barons took advantage of their workers, they sometimes offered better working conditions than the norm of the day.
Listen to my podcast episode on Robber Barons here, where I talk about 3 Classical Robber Baron (JP Morgan, Cornelius Vanderbilt, John D. Rockefeller) and 3 Internet Era Entrepreneurs (Bill Gates, Jeff Bezos and Mark Zuckerberg) and compare them. We can see if there are any similarities. There might be more than you think!