Discover more from The Alchemy of Money
Business History with Gary Hoover
"Nothing that deeply matters in business is new."
“You can’t connect the dots looking forward; you can only connect them looking backwards” – Steve Jobs
Gary Hoover is an entrepreneur, author, and founder of the American Business History Center, a non-profit organization dedicated to education about business and entrepreneurial history. After building a chain of book superstores, Gary co-founded a research publication about companies that became the Hoover’s database and was sold to Dun & Bradstreet.
Last year I picked up a copy of Gary’s Lifetime Learner’s Guide to Reading and Learning and when I saw that he had amassed a personal library of tens of thousands volumes, I just had to reach out (the library seems to be growing still: “An estimated 40% of his 57,000-book personal library is focused on business, industrial, and economic history and reference.”).
The following is a short interview with Gary. I encourage you to visit the American Business History Center where he and his team publish detailed histories, profiles, and charts.
A conversation with Gary Hoover:
Q: With the Internet disrupting one industry after another and software "eating the world," why should one study business history? What lessons endure despite the radical changes in the economy?
The whole history of business and the economy is a story of one technological disruption after the other. Steam, electricity, aviation, the automobile, the telephone, the computer, the microchip, the Internet, and many more in the future. These innovations tend to follow patterns, have similar growth rates, similar obstacles to growth, and so on. Cars at first had no highways and gas stations, the Internet had no broadband, telegraphs had no poles and wires. So there is a tremendous amount to be learned by studying how entrepreneurs and corporations dealt with such challenges, how technologies evolve, and how they die or are replaced with newer ideas.
Q: If one could study only one industry to understand the economic history of America, which would it be? What other companies or industries have most deeply shaped this country?
Understanding American economic history goes beyond business history as ordinarily defined. There are good books on the history of the American economy, in which major roles are played by government, taxes, wars, religion, politics, labor and unions, demographics, territorial expansion and geographical population shifts, and many cultural and other factors.
More strictly considering business history, I do not think any one industry can tell the full story.
A fundamental understanding of how companies grow, survive, and die applies to every era. And to every technology. Each innovation builds on the prior ones.
Almost the only way to get the full picture of the evolution of American business is to read the book The Visible Hand, by Alfred Chandler, which I reviewed here. There are other books on general business history that are good, most of which are listed on our books page or reviewed in posts/newsletters. But nothing compares with the comprehensive and fascinating Chandler book.
The major industries each marched in with the technological of their age. I mean technology broadly defined, as any better way of doing things: any new approach, including cultural innovations like chain stores, fast food, newspapers, and motion pictures.
Steam and the railroads came together.
Electricity and the telephone.
Cars and the oil industry.
Photography and movies/videos.
Semiconductors and the Internet.
If you want to study an old industry that is still going strong, at least compared to so many industries that have died, you can study the railroads, the first big businesses in America. They were THE place to invest, and there were lots of big companies. Prior to the 1910s, there were very few stocks on the stock market that were not railroads (or small mining companies).
You can see the whole of post-Civil War America and its people by studying retailing, but each industry component/segment had or has its own arc over a more limited period of time. Examples include the general store, the mail order catalog, the dime or variety store, the discount store, the catalog showroom, the department store, and the combined convenience store and gasoline station. New formats continually evolve.
Service industries are quite a bit different from manufacturing industries. Services are often more geographically distributed than factories. Toyota dealers are in a lot more places than Toyota factories. Airlines, hotels, banks, restaurants and retail chains, and many other organizations are by definition spread out in many nodes. This requires a whole different relationship with communities and employees. Geographically distributed businesses are also costly to maintain and manage, requiring more travel more often, more communications systems, more logistics, etc. etc.
If you want to think about the future of manufacturing or hard tech (narrow definition: hardware and software), study the great manufacturing companies and great tech companies, starting with General Motors and IBM, respectively. Eastman Kodak is also a great company to study for those interested in the tech industries.
Services have evolved large numbers of very big companies only over the last fifty years or so, so it is hard to judge which company is the best service company ever, as GM and IBM were in their categories.
You really cannot see the arc of an organization until it has clearly peaked or achieved a very long-term sustained plateau (relative to the economy or the company’s markets). If a company rose and then is still strong after 50-70 years or more, like Procter & Gamble or John Deere (both founded 1837), you have a good idea of its trajectory. A company that died, or sold out and gradually wound downward, is the best to study, because you can see the full arc of its history.
Younger companies like Apple and Amazon are harder to judge. And most services companies are not old enough to yet be P&G or Deere.
Overall, there have not been nearly as many books written about most service industries as about big tech and manufacturing companies and industries. The great and well-reported barons like Carnegie, Ford, and Rockefeller were not running hamburger chains or hospitals.
Yet health, education, media, entertainment, travel, and other service industries continue to rise in their economic importance.
Services (broadly defined, including retailing) have made up over half of the American economy for over fifty years. Some of the best service companies, worthy of study, include Home Depot, UPS, FedEx, Hilton, Marriott, Hyatt, Target, Walmart, Costco, Delta Airlines, Southwest Airlines, Walt Disney, USAA, Vanguard Funds, and Amazon.
There are fewer good ones where we can see the full arc, dust to dust. Candidates would include the Great Atlantic and Pacific Tea Company, Montgomery Ward, FW Woolworth, Statler Hotels, Howard Johnson’s, M-G-M, and Pan American Airlines. (Although the airline industry is difficult to learn lessons from, as it was heavily regulated and thus much more politicized, like banking and telecom, than most freer industries).
I should warn you that there are very, very few books that are really good histories of one industry, covering all the major competitors and individuals. I can provide you with names of those that exist. Interestingly, both beer and cosmetics have good industry histories (usually only American business history, but not always).
These same thoughts about speed of rise, persistence at or near the top, and shape of the total arc apply to whole industries and to specific technologies, as well
Q: Is there a book you'd recommend to understand these long innovation cycles, how they created opportunities for entrepreneurs and led to the rise and fall of different businesses?
There are so many books on different modes of success, but I am not sure about one that really deals with the long cycles. A good book on several technologies is Technology in America - 2nd Edition: A History of Individuals and Ideas second edition by Carroll Pursell (Editor). Another good book: New And Improved by Richard S. Tedlow. And of course Christensen’s books contain many examples of disruption.
Q: From what I understand, when you started your chain of bookstores you adopted a concept that had been successful in other areas. How did you find the idea and how did you decide what aspects to adopt and which had to be changed? What was happening in retail that made you confident this was the right time and the right idea?
Retail innovations come in waves and build on each other. In the 1930s, the new supermarket concept took the old grocery store and added self-service, lower prices, bigger stores, and usually parking. The discount store took these ideas and applied them to general merchandise, not just food. The superstore or category killer (first Toys R Us, then Home Depot, Best Buy, Staples, Barnes & Noble, etc.) took that same idea and applied it to specific categories of merchandise once those categories became big enough to support several chains specializing in those categories. Often the segment will start with one innovator, soon see 6-12 or more clones, and then settle down to three or usually two players, and often finally end at one company. We have seen this in department stores as hundreds of original companies are now consolidated into Macy’s.
At Bookstop, my/our steps were:
saw the superstore idea, then only at Toys R Us, run by Charles Lazarus who I credit with the superstore “invention.” A supermarket of toys.
believed that superstores would go well beyond toys, and touch all or almost all merchandise categories.
studied the future spending patterns of the US population, which are indicated by demographics, particularly the age and family structure.
made a list of the categories that would support a growing superstore chain (i.e., growing demand built into the numbers): home improvement, auto parts, books, records, sporting goods.
picked the one I thought I could do best: books. (And where nobody else was looking.)
studied regional geographies to see where the future was.
picked the metro area where the dollar potential of our concept was the highest as a ratio to the cost of opening, advertising, and operating the store. (Where we could prove the concept by instantly becoming #1 in town and achieve our aggressive sales goal of 3-5 times the average bookstore with the lowest total opening day investment.)
put together a team of people with the required talents.
opened the first store six months after incorporation, in 1982.
As to customizing Lazarus’ concept to ours, I learned a lot from their annual reports and still have the copies I studied. His payroll ratios and selected other key numbers were relevant to what we wanted to do.
Otherwise, a different customer (age, income, family structure, and especially education for bookstores) and a different average item size and average ticket required adaptation.
I was once counseling a young entrepreneur with a superstore idea. He said the venture capitalists had told him a superstore had to be 25,000 square feet. I just laughed. The size of the goods is important in knowing how big a superstore should be. Furniture takes more space that jewelry.
Within seven years, our average store was doing 6-8 times the revenue that the average bookstore did, and our stores stretched from Miami to San Diego across the carefully chosen sunbelt. More details on the Bookstop story are here.
Q: Which retail entrepreneurs did you study and what lessons and inspiration were you able to draw from their journeys?
Far too many to mention. Perhaps the best example is Robert Wood. He really understood how his company fit into society and communities, and worked hard to serve all his “constituents,” most of all customers. He built the largest retail company in the world. His story is here.
But they are all interesting and different. Sol Price and Charles Lazarus were the most important innovators of the late 20th century, both are worthy of study. JC Penney and Sam Walton are always inspirational.
Q: Did you find any recurring patterns among the dominant retailers of the past - either in their rise or their decline? Are there examples of retailers who successfully navigated the major business model transitions?
Focusing on the merchandise and on the customer are what work. When you lose either, you go into decline. There are always companies trying to do it more efficiently than you, often with lower prices. You have to adapt. Retailing has had at least three great, successful transitions: Sears from mail order to stores, Kresge to Kmart, and the evolution of Target, which is particularly interesting. Another company that most people don’t realize became one of the biggest companies in the world is CVS, evolved from a shoe store chain. Walmart’s transition from a discount chain to a supercenter chain, going into food and then becoming #1 at it, is also surprising and impressive. See Can Companies Really Reinvent Themselves? The Lessons of Targetand The Corporate Giant Whose History Almost Nobody Knows.
Q: Is there a book you can recommend that covers the history and evolution of retail, from department stores to catalog retailers, malls, big boxes, and ultimately Amazon and e-commerce?
Q: You have been an entrepreneur in multiple industries. What role has an understanding of business history played on your own journey?
The key ideas of business are timeless. Human behavior, the fundamentals of finance, how to lead, strategies in competitive battles, and many other things are the same stories repeated over and over. Nothing that deeply matters in business is new. So my education as to how to be a retailer came from reading the lives of the greats of the 19th and 20th centuries, and those lessons apply more than ever as we go through the 21st century. The same is true of virtually every industry.
Q: What was it like to create a business database like Hoover's? Did the vast collection of business profiles yield any unexpected patterns or insights?
As to insights, I think those just come from studying lots of companies, lots of leaders, and lots of industries, decade after decade. Using all available sources, including Hoovers.
Hoover’s Handbook, our original publication, really was created to meet my own needs for a good, annual, popularly priced ($20) reference book on the biggest companies in the world. I have to say that first 1991 edition was a wonderful book. I wish there was a book like that on the market now. Or even a website which had that quality of information and organization and was that inexpensive ($20/year). Over time, Hoovers morphed from being focused on individual consumers to serving businesses, often big ones, at higher prices.
The creation of the original book, one-page profiles of 542 companies, took massive effort, organization, and innovation. The innovation and effort continued, adding thousands of companies, multiple revenue streams, and better systems after I stepped away from day-to-day management. This was due to my college friend Patrick Spain, who transitioned it to mainly online but still published the books. Patrick and his team made the company a great success and took it public before Dun & Bradstreet bought it. (Three of us who had formed our first little company together on the University of Chicago campus in 1970 were on the Hoovers board at the time of the company’s 1999 IPO, after 29 years!)
Q: On a podcast you said that "reading biographies is the best way to understand business" and that the best entrepreneurs "did not follow a formula." What do you look for when reading a biography? What information, events, or behaviors interest you the most?
I learn how “the greats” thought, how they dealt with obstacles, how they came up with breakthrough ideas, how they convinced investors to invest, workers to work, customers to buy their “crazy” new ideas. I learn that they were human, not all a bunch of geniuses. And that some principles like hard work, persistence, ignoring naysayers, etc., are seen over and over when you study them. Also, people love biographies and studying other people, their lives were so interesting, that they are easy to digest and a lot of fun. The same is true of current leaders and entrepreneurs, but the press and authors cover them all the time, so I stick to focusing on the greats of the past, which provide a wealth of instructions and learnings.
Q: Are there biographies you would recommend that are not well known? Do you have a favorite biography?
There are so many good ones. We recommend many books on the American Business History Center newsletter and website.
I would start with the 20+ short biographies we have on the American Business History website, which can also be found here. I do not have a favorite, they are all diverse and add up to a great education. A man with lessons for every business was Robert Wood. Tech entrepreneurs might start with George Eastman, and every entrepreneur should read about Jim Casey. But the others also add even more good ideas and provoke your thinking. If readers just like a great story, lives that would make great movies, try Sam Insull and Adolph Zukor. For those interested in the auto industry, Chrysler: The Life and Times of an Automotive Geniusby Vincent Curcio is a great, but I also did a shorter version.
Titan, about John Rockefeller, was a best seller and everyone loves it. Author Chernow also wrote the biography of Hamilton that made it to Broadway. I have only read part of Titan.
Also look for people in your industry. We have covered entrepreneurs in a great variety of industries, including cosmetics, hotels, steel, and music. This video is a favorite of mine, covering two great founders of modern media, with lessons for all. Here are some summary lessons from all of them.
In addition, our weekly newsletter has stories on industries and companies, but they are almost always largely biographical, as people underlie every success and every failure.
Q: What key lessons can people learn from George Eastman's story?
I think Eastman was one of the few technology entrepreneurs who really was “the whole package.” He was an inventor, he did creative financing, and he really understood marketing, which many if not most tech people do not. The Watsons at IBM and Jobs at Apple were two of the few who really got it, approaching the level of Eastman. His company was among the most successful in American history, with enormous market shares globally. But he was also a most interesting and diverse person, and led the way in everything from how to treat employees to how to fireproof buildings. I think almost every reader would find his story fascinating.
Q: Is there an industry, a company, or a business leader that you think is completely misunderstood by the public?
Most of them. A dramatic, classic example was Sam Insull.
Q: You have written about being a lifelong learner and studying a variety of subjects. What 'non-business' topics are particularly valuable for entrepreneurs or investors to study and why?
Innovation primarily comes from combinatory thinking. Often from seeing two things everybody else sees every day but putting them together in a new way.
Thus, the more subjects you are interested in, your potential for ideas goes up geometrically. Six interests may seem to be three times as big as two interests. But six interests yield nine times as many possible combinations as two interests.
The viewpoints of the social scientists are critical in business. Engineering is applied physics; business is applied social sciences. Psychology comes first, followed by sociology. Economics is very important, but seldom really understood by many. Political science, anthropology, history, etc. all have something to teach us, a different way of looking at things.
Steve Jobs and others before him have shown the importance of design. A sense of art and architecture, or an appreciation for them, have great value in many businesses, perhaps all.
I believe in travel, music, museums, lots of reading, enthusiasm for life itself and above all else curiosity. Serendipity and accident matter: the best ideas will not come from where you expect to find them.
Q: What is your vision for the American Business History Center?
Get more people interested in business history and learning from it. Not learning from the past, from repeating mistakes, and not seeing how others dreamed up new ideas, costs our society billions of dollars. We’d like to reach more students of business and current business leaders. Our reasoning and goals are here.
Thank you so much for the conversation, Gary!
“The further backward you look, the further forward you can see.” – Winston Churchill
Enjoyed this piece? Let me know by hitting the ❤ like button.👇
Please consider sharing it with friends who would enjoy it as well.