Staying Up and Going Down
Although interspersed by a succession of recessions and recoveries, the rise of capitalist entrepreneurship—or the Industrial Revolution—appears to have been a linear process of evolution. This holistic vision, however, hides from view the life cycles of individual entrepreneurial dynasties, each of which had their own beginning, rise to prominence and, in many cases, decline. All the top ten entrepreneurial dynasties in my sample had a relatively modest start in business—and as such did not stand out from the mass of entrepreneurs of their time—but eventually they went on to achieve impressive success. This kind of distinctiveness was identified with social rise, which gave birth to the dynasty’s heyday that was performed in many different ways, as discussed in the previous chapters. The heyday lasted as long as the family firm prospered in successive generations. But when the business began to falter, so too did the dynasty begin to fade.
How the trajectories of dynasties eventually shaped up depended on the economic forces and governments’ interventions, both of them often unfavourable for family enterprises in particular. Rockefeller’s Standard Oil, once the largest business empire in the world (Chernow 2004, 537-59), is an interesting case in that it highlights the growing influence of the state on business. Standard Oil’s fateful hour came in 1906 when the US federal government filed a suit to dissolve Standard Oil of New Jersey under the Antitrust Act. Standard Oil had 65 companies under its control, and a pantheon of chieftains, including John D. Rockefeller and his brother William Rockefeller, who were charged with monopolizing the oil industry. Significantly, this years-long trial was a court case between the government and industry, a case that the government eventually won. It was a tour de force in which the state delivered a shattering blow to laissez-faire capitalism. The Supreme Court issued its decision in 1911 and dismantled Standard Oil, but John D. Rockefeller continued to hold on to his immense shareholdings, a one-quarter share of the curtailed Standard Oil of New Jersey plus one-quarter of the 33 independent subsidiary companies created by the Supreme Court decision. However, the dynastic tradition of the Rockefeller family was carried on by the Rockefeller Foundation, established in 1913 for charity purposes. John D. Rockefeller’s descendants have been trustees in the foundation until the present time, although their number is limited to one or two members (Wikipedia.org).
The Rockefellers did not then disappear from the scene of entrepreneurial dynasties, unlike some other grand family firms. In their case, fusions following one another finally submerged the original family firm in a massive joint stock corporation. The Warburg family was one such family firm. They (Chernow 1994, 545-722) continued to rule their fortunes dynastically until the 1930s, when the family had to surrender to inflation and the Third Reich, another type of state interference in business which saw the Nazi regime confiscate Jewish properties (see also Ferguson 2000). After this frozen period, the family members were bound by a common desire to restore their former status. This led to the establishment of S.G. Warburg & Company in England, with Siegmund Warburg at its head. The family firm prospered in the 1960s and 1970s, but eventually in 1995 was taken over by the Swiss Bank Corporation, which in turn merged into the Union Bank of Switzerland. These fusions dropped Warburg from the name of this gigantic conglomeration of companies, henceforth known as UBS. It is ranked third on the Forbes list of Swiss companies in 2016 and 73rd worldwide (Forbes 2016; largest companies in the world), but the Warburgs have no operative or other significant roles in UBS. The Warburgs were used to being on the winning side of mergers, but this time the merger brought the dynasty down.
The powers once exercised by the House of Morgan (Chernow 2010, 710-20) are today dispersed among vast global banking conglomerates built by successive purchases and fusions, the most significant of which came in 2000 when JPMorgan & Company merged with Chase Manhattan Bank. In 2016, JPMorgan Chase & Company was ranked sixth on the Forbes worldwide list. However, as usual, the bigger and more dispersed the business conglomeration is, the smaller the role of the original dynasty. In the House of Morgan this was particularly true after the latest fusion: since then the family’s dynastic position has been a mere shadow of what it used to be in the first four generations.
Established in 1789, the Rothschild bank (Ferguson 1999, 2000) had an expansive and perhaps the most impressive dynastic history in my sample. The founder had five sons, each of whom inherited a branch of their own. In the nineteenth century the Rothschild bank was the largest in the world; in 1913, its English branch ranked first in terms of capital in Britain, but in 1918 only third; and today, the bank occupies a relatively small niche in the international financial services market. In France, the bank’s profits slumped in the mid-1970s. State intervention by the leftist government meant that, together with 39 other banks, the French branch of the Rothschild bank was taken over by the state. In the 1980s, the new government reprivatized the banking sector. The Rothschilds’ current strategy for maintaining their dynasticity differs from the approach of most other major financial institutions: group ownership and leadership is shared between key family members.
In Finland, Kone (Simon 2009, 373-89; Michelsen 2013, 547-59) represents a special case among my top ten entrepreneurial dynasties, for its dynastic heyday actually began under the leadership of Pekka Herlin (1932-2003), as in many other cases, following a string of advantageous purchases. In the 1990s Kone’s value on the stock market increased fivefold. The family firm continued to expand ever more rapidly under the leadership of Pekkas son, Antti Herlin (b. 1956), even though Cargotec, a provider of cargo handling solutions, was separated from the Kone group after the latest partition of inheritance. Boosted by extraordinary sales of elevators and escalators particularly in China, Kone is now (2016) the largest family firm in Finland. Forbes ranks it as the fifth largest company in Finland and 819th worldwide. Even though the Swedish SEB (Olsson 2001; Wetterberg 2013b; Thunholm 1996) has been transformed from a bank into a hybrid amalgamation of companies with widely dispersed stockholdings, the Wallenbergs continue to occupy a central position in the company. After the World War II they emerged to a dominant position in the Swedish economy, with 12 per cent of the national industrial labour force employed in Wallenberg enterprises (Wetterberg 2013b, 85-6). Today (2016) it is the third largest company in Sweden and ranked 281st worldwide by Forbes. The Ford Motor Company (Bak 2003; Wikiperdia.org) also remains under the control of the Ford family, with William Clay Ford, Jr. (b. 1957), serving as executive chairman since 2001. In 2016, Ford was 69th on the Forbes worldwide list of companies and 26th in the United States. Fiat has also grown into a large multiindustrial conglomeration. In 2009, it merged with Chrysler to create Fiat Chrysler Automobiles. The Agnelli family still holds the reins of Fiat with John Elkann, Gianni Agnelli’s daughter’s son as chairman (Friedman 1989; Wikipedia.org). However, Fiat was not on the Forbes list in 2016.
The Krupp entrepreneurial dynasty came to an end in the 1960s (Manchester 2003, 796-834). The last ruler of the Krupp dynasty was Alfried, although he had a son, Arndt (1938-86). As late as 1961 Alfried expected that Arndt would one day continue the tradition of the House of Krupp, but he had mostly been absent from Villa Hugel while living with his mother, Anneliese, who divorced Alfried when Arndt was four.
Arndt showed total indifference towards the Krupp concern, preferring instead a celebrity role in the jet set circles and their extravagant parties. At first Alfried turned a blind eye to all this, but then divested himself of all illusions about Arndt, concluding that the life his son lived was unsuitable for anyone expected to run a business. Meanwhile, the outlook for Krupp businesses deteriorated, lending further support to Alfried’s decision to close down the family firm. It was transformed into a stock company and a foundation, and Arndt was forced to give up his right to the Krupp fortune. In the late 1990s, the Krupp Company merged with Thyssen, the Krupps’ former rival in the metal industry, creating a conglomerate known as ThyssenKrupp.
The American Vanderbilt (Vanderbilt II 2013) dynasty also winded down, but in a different way. The railroad business ceased to be profitable (Wolmar 2013, 310-36) in the interwar period when road transport gained the upper hand, and at the same time the dynasty’s decline was hastened by the younger generations’ extravagant way of life and growing disinterest in business. In the early twentieth century they were running out of money. Willie Vanderbilt, the heir in the fourth generation, tired of merely making more money, devoted himself to a life of leisure. After his death one mansion after another were sold off to cover the costs incurred from an excessive lifestyle, heavy drinking and gambling. Reginald Vanderbilt (1880-1925), who had never been employed and who never did a lick of work, squandered his fortune. He had no great house, no yacht, no art collection, nothing. The fate of the Vanderbilts echoes that of the Swedish higher noble family of von Fersen, who were discussed in Chap. 3. A lot of inherited money can persuade people to retire into idle life, especially if one is privileged by birth to belong to high-society circles. We found these socialites in royal and noble dynasties, and we now find them in entrepreneurial dynasties; all of them found each other in fashionable resorts and in the parties they often arranged.