I have moved on to another book, though since it is 773 pages of rather dense reading material I am not sure how long it will take me to finish it. It's called The Prize: The Epic Quest for Oil, Money & Power.
I picked it up because I've heard over and over again about how the war in Iraq was over oil. I was always rather skeptical of the claim, but I figured I ought to read up on the industry before deciding whether it's true or not.
It starts with a history of the oil industry, Standard Oil, Rockefeller, the Rothschilds, etc. It brings up mixed feelings for me, so I'm blogging to sort it all out.
First of all, what I'm bringing to the table. I heard about the trust busters in American history. How monopoly was bad and stifled competition. (This wasn't about oil, specifically, but I knew there was an era of legislation aimed at monopolies. Broke up the telephone industry, as well as Standard Oil.)
Then, in some of my public policy classes, I heard the argument that monopolies weren't all that bad. That trying to break them up may not be such a big deal. Good or bad? I'm not entirely sure, that's part of what I wanted to think about when reading this book.
I also bring my own prejudice in favor of nested hierarchies, i.e. I think the best form of organization is layered so that the lowest levels make the decisions appropriate to their level, but within a coordinated whole. Decentralized to an extent, but not to the point that there's wasted effort and gaps.
I also know that uncertainty is painful, and systems to reduce uncertain are good. Up to a point. They can also become so rigid and limiting that it becomes harder for anyone to make change (like China around the time of Empress Cixi). It's like you may reduce variation in order to prevent some of the worst downturns, but you also generally level things out so that nobody has as much of an upturn, either. (And you can open yourself up to those 'Black Swans' of the financial crisis fame, where you reduce uncertainty 99% of the time, but that 1% is a total disaster.)
In short, I have some inclinations and frameworks for reading this, but my mind is not entirely made up on what's 'right' or 'wrong'.
So anyways. I sympathized with Rockefeller's aims initially. This whole crazy boom/bust cycle was insane, and inefficient. People would find oil, rush to develop it, destroy the golden goose in the process, glut the market, then go out of business as they were unable to turn a profit. I can see why that would be hell on anyone trying to build a business, and why Rockefeller would see to stabilize the industry. I can even, kind of, see why he would fight so hard to create Standard Oil.
But at what point has he succeeded at the original goal (i.e. reducing the uncertainty and wild craziness in order to build a profitable business) and started fighting to control the entire market out of more selfish and greedy reasons? Did Standard Oil really have to own 90% or more of the market in order to achieve his goal? Didn't he get what he wanted when they had 65% of the market?
(These questions, btw, are less about oil and more about our modern complaints against big business, and the way it crowds out small and more local businesses. And it ties in with the modern economy, where most of us are dependent on wages paid by others. Less freedom to do our own thing. Which makes it harder to speak with an independent voice.)
Then there is the question of tactics. At what point did Standard Oil cross the line from a reasonable pursuit of profit, and into (for lack of a better term) bad sportsmanship. In sports, you want to see teams play their best. Want to see them win by giving it their all, playing well, and maybe catching a lucky break here and there. You don't want to see a team win by cheating, by injuring other players when the referee isn't looking, or paying someone off to lose, or paying someone to break the leg of a competitor. Then winning is no longer about who is the better team, it's about who is better at cheating.
In the same way, businesses sell a product. And the company that can make the better widget, faster, and at a lower price is the company that is playing a good game. The one that isn't making a better widget, but decides to flood the market with widgets because they know they can survive the profit loss and hope it will drive the competition out of business is not actually a better business. It's not winning by making better widgets. It's winning by manipulating the game in order to drive out competition.
This was the rise of big business, where they had the big budget that allowed it to survive cutthroat competition. (On a certain level, it reminds me of biological eco systems. There was a void in the eco-system for large predators, and it got filled. Yet just because we now had wolves in the business eco-system, doesn't mean we stopped having foxes and other smaller predators. And perhaps it's not about good or bad so much as what makes for a healthy and viable system.)
All of this is even more interesting given the recent drop in oil prices, and Saudi Arabia's claim that they will not reduce production. Essentially it's their bid to maintain market share, just like what I am reading about from over 100 years ago.
I don't have any real conclusions right now, I just wanted to get some of this out of my head.
Two more things. First - it was kind of shocking to realize that 'Big Oil' got its start not with the combustion engine, but with the drive to get better illumination. We use electric light bulbs everywhere now, and it's hard to imagine how valuable kerosene was before electricity.
Second - so far the history of Big Oil is pretty much capitalism at it's worst.
I picked it up because I've heard over and over again about how the war in Iraq was over oil. I was always rather skeptical of the claim, but I figured I ought to read up on the industry before deciding whether it's true or not.
It starts with a history of the oil industry, Standard Oil, Rockefeller, the Rothschilds, etc. It brings up mixed feelings for me, so I'm blogging to sort it all out.
First of all, what I'm bringing to the table. I heard about the trust busters in American history. How monopoly was bad and stifled competition. (This wasn't about oil, specifically, but I knew there was an era of legislation aimed at monopolies. Broke up the telephone industry, as well as Standard Oil.)
Then, in some of my public policy classes, I heard the argument that monopolies weren't all that bad. That trying to break them up may not be such a big deal. Good or bad? I'm not entirely sure, that's part of what I wanted to think about when reading this book.
I also bring my own prejudice in favor of nested hierarchies, i.e. I think the best form of organization is layered so that the lowest levels make the decisions appropriate to their level, but within a coordinated whole. Decentralized to an extent, but not to the point that there's wasted effort and gaps.
I also know that uncertainty is painful, and systems to reduce uncertain are good. Up to a point. They can also become so rigid and limiting that it becomes harder for anyone to make change (like China around the time of Empress Cixi). It's like you may reduce variation in order to prevent some of the worst downturns, but you also generally level things out so that nobody has as much of an upturn, either. (And you can open yourself up to those 'Black Swans' of the financial crisis fame, where you reduce uncertainty 99% of the time, but that 1% is a total disaster.)
In short, I have some inclinations and frameworks for reading this, but my mind is not entirely made up on what's 'right' or 'wrong'.
So anyways. I sympathized with Rockefeller's aims initially. This whole crazy boom/bust cycle was insane, and inefficient. People would find oil, rush to develop it, destroy the golden goose in the process, glut the market, then go out of business as they were unable to turn a profit. I can see why that would be hell on anyone trying to build a business, and why Rockefeller would see to stabilize the industry. I can even, kind of, see why he would fight so hard to create Standard Oil.
But at what point has he succeeded at the original goal (i.e. reducing the uncertainty and wild craziness in order to build a profitable business) and started fighting to control the entire market out of more selfish and greedy reasons? Did Standard Oil really have to own 90% or more of the market in order to achieve his goal? Didn't he get what he wanted when they had 65% of the market?
(These questions, btw, are less about oil and more about our modern complaints against big business, and the way it crowds out small and more local businesses. And it ties in with the modern economy, where most of us are dependent on wages paid by others. Less freedom to do our own thing. Which makes it harder to speak with an independent voice.)
Then there is the question of tactics. At what point did Standard Oil cross the line from a reasonable pursuit of profit, and into (for lack of a better term) bad sportsmanship. In sports, you want to see teams play their best. Want to see them win by giving it their all, playing well, and maybe catching a lucky break here and there. You don't want to see a team win by cheating, by injuring other players when the referee isn't looking, or paying someone off to lose, or paying someone to break the leg of a competitor. Then winning is no longer about who is the better team, it's about who is better at cheating.
In the same way, businesses sell a product. And the company that can make the better widget, faster, and at a lower price is the company that is playing a good game. The one that isn't making a better widget, but decides to flood the market with widgets because they know they can survive the profit loss and hope it will drive the competition out of business is not actually a better business. It's not winning by making better widgets. It's winning by manipulating the game in order to drive out competition.
This was the rise of big business, where they had the big budget that allowed it to survive cutthroat competition. (On a certain level, it reminds me of biological eco systems. There was a void in the eco-system for large predators, and it got filled. Yet just because we now had wolves in the business eco-system, doesn't mean we stopped having foxes and other smaller predators. And perhaps it's not about good or bad so much as what makes for a healthy and viable system.)
All of this is even more interesting given the recent drop in oil prices, and Saudi Arabia's claim that they will not reduce production. Essentially it's their bid to maintain market share, just like what I am reading about from over 100 years ago.
I don't have any real conclusions right now, I just wanted to get some of this out of my head.
Two more things. First - it was kind of shocking to realize that 'Big Oil' got its start not with the combustion engine, but with the drive to get better illumination. We use electric light bulbs everywhere now, and it's hard to imagine how valuable kerosene was before electricity.
Second - so far the history of Big Oil is pretty much capitalism at it's worst.
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