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Lessons From Vanderbilt And Rockefeller: Know Your "One Big Thing"

Jan 9 2014, 12:16pm CST | by

Lessons From Vanderbilt And Rockefeller: Know Your "One Big Thing"

Photo Credit: Forbes
 
 

With all of the media coverage about Elon Musk, Steve Jobs, Mark Zuckerberg, and Jeff Bezos, it’s easy to forget that many of the gutsiest moves in business history happened long before Bill Gates was even a twinkle in his mother’s eye.

In learning about the tycoons who built America (there’s a great series on the History Channel about this), it is clear that what turned out to be some of the gutsiest moves in business history could easily have been disastrous mistakes. Were they incredible strokes of luck? Or evidence that some of the business principles we cling to today have truly stood the test of time? Either way, the lessons that the early capitalists teach us are surprising — and just as relevant today as they were 150 years ago.

Take Cornelius Vanderbilt. Vanderbilt was a scrappy and pugnacious man who started his career ferrying cargo around the New York harbor. He borrowed $100 from his parents to invest in his own boats. In 1817, at the age of 23, he began working for a steamboat captain and learned everything he could about the burgeoning technology of steamships. He started building ships to support his own commercial ferry service. By charging lower fares (among other, some say more ruthless, tactics), he wiped out his competition and amassed a fortune.

And then, after beating the competition to open the fastest steamship route from New York to San Francisco during the Gold Rush (his line cut through Nicaragua; everyone else sailed through Panama), he pivoted. He saw that trains, not ships, were the next big thing in transportation. So Vanderbilt started selling his stake in the steamship industry and investing in railroads. Within five years of his switch to rail, he reportedly made $25 million and eventually became the richest man in America.

How was Vanderbilt able to make such a gutsy move, abandoning shipping and betting his entire fortune on railroads? Because he never saw himself in the shipping business. Vanderbilt saw himself as being in the transportation business. Shipping was just the best technology around at the time; when something better came along, he was ready to adapt.

Then there’s John Rockefeller, one of the most successful businesspeople in American history. Rockefeller made his fortune in the oil business, but not like we think of it today. When Rockefeller came of age, the world’s productivity was literally constrained by darkness. Affordable indoor lighting was rare, so once the sun went down, people pretty much had to go to sleep. Rockefeller processed petroleum for kerosene used in lamps, helping to make indoor lighting affordable for the average family. He founded Standard Oil, which quickly achieved a monopoly in the kerosene industry. But just as his fortunes started to swell, a new technology — electricity — started to sunset demand for kerosene.

Based on Vanderbilt’s story, you’d think that the logical move would have been for Rockefeller to get into the electricity business, but that’s not what happened.

“The person who starts out simply with the idea of getting rich won’t succeed,” Rockefeller once said. “You must have a larger ambition.” Rockefeller’s ambition was vested in oil, not the idea of indoor lighting. Accordingly, when the technology changed, he embraced a different kind of pivot: He looked for new markets for the product he knew so well.

Rockefeller bet on cars and began refining oil for gasoline — and the bet paid off. Despite an onslaught of lawsuits and Standard Oil’s eventual breakup into dozens of companies, including Exxon, the man who never aimed to be rich gave away $550,000,000 — more money than any man before him ever even earned.

They pivoted in different ways, but both Rockefeller and Vanderbilt seemed driven by a business principle we find familiar: They both knew what their One Big Thing was. For Rockefeller, it was oil, whether for lamps or for cars. For Vanderbilt, it was transportation, whether ships or trains. When confronted with new technologies, each focused on the one thing he knew best.

So, fellow entrepreneurs, what is your One Big Thing? If you don’t know what it is, take a lesson from the tycoons and figure it out. It’s the best compass you can have for navigating rapidly changing markets and technologies.

—————–

What are some other gutsy moves in business history that prove — or belie — the modern principles we so frequently embrace as we look to make our own history? Shoot me your ideas in the comments section below; I hope to make this a running theme for future posts.

Source: Forbes

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