/ News & Press / Video / The Monopoly Myth - The Case of Standard Oil Part 1 of 5
The Monopoly Myth - The Case of Standard Oil Part 1 of 5
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00:00:00.920 imagine there was a quarterback who was 00:00:03.71000:00:03.720 so good and so dominant that for 20 00:00:07.78900:00:07.799 consecutive years his team won the 00:00:11.36000:00:11.370 Superbowl despite no matter how hard the 00:00:16.01000:00:16.020 other teams tried no matter how many 00:00:17.87000:00:17.880 strategies they employ no matter no 00:00:19.84900:00:19.859 matter how many innovative defenses no 00:00:21.98000:00:21.990 matter how many superstars they bought 00:00:23.66000:00:23.670 they could not defeat this quarterback 00:00:25.91000:00:25.920 and his team how do you think America 00:00:29.30000:00:29.310 would react to such a quarterback well I 00:00:33.04900:00:33.059 think if we look at for instance the 00:00:34.81900:00:34.829 response last summer to Michael Phelps 00:00:37.01000:00:37.020 the most dominant Olympic athlete in 00:00:39.65000:00:39.660 history they would react to this 00:00:41.15000:00:41.160 quarterbacks dominance with awe with 00:00:44.09000:00:44.100 reverence they would want more people 00:00:46.27900:00:46.289 like this quarterback but what if 00:00:50.24000:00:50.250 instead of being a quarterback the 00:00:52.67000:00:52.680 person in question was a businessman a 00:00:55.81000:00:55.820 businessman who dominated his field for 00:00:58.81900:00:58.829 20 years who say had a 90% market share 00:01:02.77900:01:02.789 for 20 years how would Americans view 00:01:05.63000:01:05.640 such a person well I think they would be 00:01:10.21900:01:10.229 horrified how can we let such a 00:01:12.80000:01:12.810 monopolist function how can we allow 00:01:15.74000:01:15.750 this guy to engage in such 00:01:17.42000:01:17.430 anti-competitive behavior that for 20 00:01:19.99900:01:20.009 years no one else has a shot that's 00:01:23.17900:01:23.189 anti-competitive that's wrong that's on 00:01:26.24000:01:26.250 American so we have this great disparity 00:01:30.20000:01:30.210 in our view of dominance and sports on 00:01:33.05000:01:33.060 the one hand interview in dominance in 00:01:35.09000:01:35.100 business on the other now what is the 00:01:37.81900:01:37.829 cause of this disparity well one is that 00:01:40.85000:01:40.860 to the extent we learn about the history 00:01:43.37000:01:43.380 of business and capitalism in school a 00:01:45.49900:01:45.509 lesson that's driven home is that in the 00:01:48.41000:01:48.420 dark days of the 19th century when we 00:01:50.99000:01:51.000 didn't have antitrust laws to protect us 00:01:53.42000:01:53.430 against dominant businesses in those 00:01:56.20900:01:56.219 dark days evil monopolist rose to 00:01:59.92900:01:59.939 strangle industries to cut off 00:02:02.45000:02:02.460 competition and give consumers no choice 00:02:05.24000:02:05.250 so they could charge they could jack up 00:02:06.85900:02:06.869 prices as much as they wanted and 00:02:10.66000:02:10.670 therefore unlike the dominant athlete 00:02:13.64000:02:13.650 like a Michael Phelps who earns his 00:02:15.14000:02:15.150 eight gold medals the dominant 00:02:16.82000:02:16.830 businessman gets his success not by 00:02:20.11900:02:20.129 earning it but by illegitimate means and 00:02:22.13000:02:22.140 once he has it 00:02:23.42000:02:23.430 that's the worst because then he's a 00:02:25.52000:02:25.530 monopoly now they never really defined 00:02:27.25900:02:27.269 what a monopoly is and we'll talk about 00:02:28.97000:02:28.980 that later but the basic idea is that 00:02:31.81900:02:31.829 he's got some sort of control some sort 00:02:33.94900:02:33.959 of stranglehold so that nobody can touch 00:02:36.77000:02:36.780 him and that's that's what we're told 00:02:39.11000:02:39.120 and that's why we're taught to fear big 00:02:40.97000:02:40.980 business and therefore every time 00:02:42.41000:02:42.420 there's a really big successful company 00:02:44.21000:02:44.220 that wants to undertake a new move the 00:02:47.86900:02:47.879 government the government comes in and 00:02:49.40000:02:49.410 Americans think that the government 00:02:50.90000:02:50.910 should come in the most obvious example 00:02:52.94000:02:52.950 is Microsoft which had a 90% market 00:02:54.77000:02:54.780 share in the operating system market for 00:02:57.19900:02:57.209 many years every move that Microsoft 00:02:59.14900:02:59.159 makes is scrutinized is this 00:03:00.68000:03:00.690 anti-competitive is this bad is this 00:03:03.14000:03:03.150 going to hurt competition is this going 00:03:04.75900:03:04.769 to hurt the consumer and this is viewed 00:03:07.94000:03:07.950 as a situation that needs to be stopped 00:03:09.97900:03:09.989 so big business dominant business needs 00:03:12.58900:03:12.599 to be reined in and the history we're 00:03:14.86900:03:14.879 told proves that definitively well 00:03:17.83900:03:17.849 tonight I want to challenge that idea I 00:03:20.53000:03:20.540 believe that big businessman that 00:03:23.21000:03:23.220 dominant businessman insofar as they 00:03:25.64000:03:25.650 succeed in a free market are every bit 00:03:27.83000:03:27.840 as admirable and high achieving and as 00:03:31.36900:03:31.379 an produced as many positive benefits in 00:03:35.75000:03:35.760 fact many more than the greatest 00:03:37.87900:03:37.889 athletes that we all admire and I want 00:03:40.69900:03:40.709 to I want to I want to offer this 00:03:43.87900:03:43.889 opinion not with respect to you know 00:03:46.69900:03:46.709 some marginal case of a big businessman 00:03:48.80000:03:48.810 I want to take the most the widely 00:03:51.28900:03:51.299 acknowledged most evil big businessmen 00:03:53.93000:03:53.940 of all time the worst of all the 00:03:56.08900:03:56.099 monopolist the person that nobody will 00:03:57.77000:03:57.780 dispute was an unproductive destructive 00:04:01.30900:04:01.319 influence on American society and that 00:04:03.86000:04:03.870 person is John Davison Rockefeller who 00:04:07.81900:04:07.829 ran the Standard Oil Company now people 00:04:11.93000:04:11.940 have heard various degrees about 00:04:13.28000:04:13.290 Rockefeller but you've probably heard at 00:04:15.17000:04:15.180 least of Rockefeller Center and you 00:04:17.39000:04:17.400 probably in the news hear about some 00:04:19.06900:04:19.079 Rockefeller celebrity or Rockefeller 00:04:21.02000:04:21.030 politician well that all comes from this 00:04:23.39000:04:23.400 one guy he was at one point the richest 00:04:26.27000:04:26.280 man 00:04:26.94000:04:26.950 the planet and some argue that 00:04:28.35000:04:28.360 historically he's the richest man who 00:04:30.72000:04:30.730 ever lived now how did he get there 00:04:33.00000:04:33.010 well what's uncontroversial is that he 00:04:35.64000:04:35.650 was the most dominant person the oil 00:04:37.50000:04:37.510 industry had ever seen for 20 years his 00:04:40.20000:04:40.210 company had had a 90% market share of 00:04:43.05000:04:43.060 the oil refining market and for anyone 00:04:46.44000:04:46.450 who doesn't know exactly what it is 00:04:47.70000:04:47.710 that's the part of the oil market where 00:04:49.98000:04:49.990 they take the black glop that's the 00:04:52.05000:04:52.060 crude oil that by itself is not worth 00:04:53.70000:04:53.710 very much and they turn it into 00:04:55.29000:04:55.300 something valuable and in Rockefellers 00:04:57.18000:04:57.190 time that something valuable was 00:04:58.44000:04:58.450 kerosene which was the way that most 00:05:00.39000:05:00.400 people lit up their homes at night so 00:05:02.91000:05:02.920 that's what Rockefeller took over this 00:05:05.67000:05:05.680 market and he was incredibly dominant 00:05:08.13000:05:08.140 and what people argue is that the way he 00:05:10.41000:05:10.420 got dominant was not by earning it he 00:05:12.84000:05:12.850 didn't get all this money by earning it 00:05:14.31000:05:14.320 he did it by unjust unfair what they 00:05:18.09000:05:18.100 call anti-competitive means and the 00:05:20.61000:05:20.620 primary thing that if you learn about 00:05:22.83000:05:22.840 this in school they focus on is he got 00:05:24.96000:05:24.970 unfair discounts from the railroads the 00:05:27.87000:05:27.880 railroads gave him special treatment 00:05:29.25000:05:29.260 that he didn't deserve and therefore he 00:05:31.83000:05:31.840 could he could transport his oil much 00:05:33.96000:05:33.970 cheaper than everyone else and no 00:05:35.61000:05:35.620 competitor had a chance so he could just 00:05:37.29000:05:37.300 drive him out of business 00:05:38.31000:05:38.320 and once he drove them out of business 00:05:39.69000:05:39.700 he had a complete stranglehold on the 00:05:42.06000:05:42.070 market now just to give you this from a 00:05:46.02000:05:46.030 source who really believes it I decided 00:05:48.45000:05:48.460 well this is this is the story I learned 00:05:50.22000:05:50.230 so I looked it up in my old high school 00:05:51.60000:05:51.610 textbook and I found well how is 00:05:53.55000:05:53.560 rockefeller actually portrayed so here's 00:05:55.20000:05:55.210 here it is from my high school textbook 00:05:57.69000:05:57.700 this is almost a complete explanation of 00:05:59.73000:05:59.740 how Rockefellers succeed from Howard 00:06:02.04000:06:02.050 Zinn's people's history of the United 00:06:03.78000:06:03.790 States if anyone is familiar with that 00:06:05.46000:06:05.470 work of history so to speak 00:06:08.64000:06:08.650 so it says Rockefeller quote made secret 00:06:11.97000:06:11.980 agreements with railroads to ship his 00:06:13.92000:06:13.930 oil with them if they gave him rebates 00:06:15.99000:06:16.000 discounts on their prices and thus drove 00:06:18.72000:06:18.730 competitors out of business so that 00:06:20.91000:06:20.920 according to the book is it that's 00:06:23.25000:06:23.260 that's how Rockefellers succeeded that's 00:06:25.47000:06:25.480 how he dominated and it gets even worse 00:06:27.96000:06:27.970 because once he dominated he had this 00:06:30.06000:06:30.070 stranglehold and what they talk about is 00:06:32.88000:06:32.890 once he had once he had 90% of the 00:06:35.37000:06:35.380 market he could do whatever he wanted 00:06:36.72000:06:36.730 because if a competitor went in he could 00:06:39.18000:06:39.190 engage in what they 00:06:40.18000:06:40.190 predatory pricing which is he they would 00:06:43.63000:06:43.640 come in they would sell their their 00:06:45.61000:06:45.620 refined oil at a certain price and he 00:06:47.65000:06:47.660 would sell his at a super low price 00:06:49.12000:06:49.130 where he was taking a loss but he could 00:06:51.46000:06:51.470 afford it since he had this giant pile 00:06:53.20000:06:53.210 of money and he would just drive in and 00:06:55.36000:06:55.370 out so no one had a chance to compete 00:06:57.10000:06:57.110 with rockefeller for 20 years and that's 00:06:59.56000:06:59.570 how he was so successful and the only 00:07:01.51000:07:01.520 way we got rid of this demon this plague 00:07:04.75000:07:04.760 on the American economy 00:07:06.46000:07:06.470 is that the antitrust laws in the 00:07:09.04000:07:09.050 Supreme Court heroically saved us from 00:07:12.27000:07:12.280 from him and broke up the company into 00:07:15.88000:07:15.890 34 separate pieces and that last part is 00:07:19.12000:07:19.130 is uncontroversially true it was 34 00:07:21.55000:07:21.560 pieces so just and here is just to give 00:07:24.58000:07:24.590 you the idea of Rockefeller now you you 00:07:26.83000:07:26.840 all won't be able to see this that well 00:07:28.36000:07:28.370 you can come look at it after the talk 00:07:30.07000:07:30.080 but I love this picture not because it's 00:07:32.53000:07:32.540 good but because it's so bad and it's 00:07:34.63000:07:34.640 such a representation of Rockefeller so 00:07:36.43000:07:36.440 we have Rockefeller here he is this he's 00:07:39.04000:07:39.050 this King so he's regarded as a king he 00:07:41.32000:07:41.330 controls the market like a king and he's 00:07:43.09000:07:43.100 got all the railroads and all the 00:07:44.59000:07:44.600 companies in his pocket and he just 00:07:46.54000:07:46.550 rules the American economy and this is 00:07:49.51000:07:49.520 how Rockefeller and others were 00:07:51.64000:07:51.650 described by John Sherman who is the one 00:07:53.53000:07:53.540 who came up with the Sherman Antitrust 00:07:55.03000:07:55.040 Act Republican Senator John Sherman by 00:07:57.64000:07:57.650 the way he said if we will not endure a 00:08:00.37000:08:00.380 king as a political power we should not 00:08:02.80000:08:02.810 endure a king over the production 00:08:04.69000:08:04.700 transportation and sale of any of the 00:08:07.09000:08:07.100 necessities of life if we would not 00:08:09.15900:08:09.169 submit to an emperor we should not 00:08:11.68000:08:11.690 submit to an autocrat of trade with 00:08:13.99000:08:14.000 power to prevent competition and to fix 00:08:16.30000:08:16.310 the price of any commodities so 00:08:18.52000:08:18.530 Rockefeller here is really a dictator of 00:08:20.98000:08:20.990 the economy so if we leave the market 00:08:23.56000:08:23.570 free if we if we don't have laws 00:08:26.05000:08:26.060 preventing people from becoming too 00:08:27.52000:08:27.530 successful this is what happens and just 00:08:29.92000:08:29.930 to quote one more historian who's ron 00:08:32.56000:08:32.570 chernow who is much more pro rockefeller 00:08:34.60000:08:34.610 but still agrees with the lesson he says 00:08:36.87000:08:36.880 Standard Oil had taught the American 00:08:39.19000:08:39.200 public an important but paradoxical 00:08:41.23000:08:41.240 lesson free markets if left completely 00:08:44.02000:08:44.030 to their own devices can wind up 00:08:46.15000:08:46.160 terribly unfree unquote 00:08:52.26900:08:52.279 so I'm going to argue tonight that this 00:08:55.43000:08:55.440 story of Rockefeller is exactly false 00:08:58.55000:08:58.560 this is the textbook example of how 00:09:01.46000:09:01.470 capitalism leads to destructive 00:09:03.76900:09:03.779 monopolies and I'm gonna argue tonight 00:09:06.47000:09:06.480 that if we look at the fact that 00:09:07.61000:09:07.620 textbooks need to be rewritten so let's 00:09:10.61000:09:10.620 take a look at the rise of Rockefeller 00:09:13.34000:09:13.350 now to understand how Rockefeller rose 00:09:16.57900:09:16.589 and what impact he had it's important to 00:09:19.31000:09:19.320 look at the market before rockefeller 00:09:21.41000:09:21.420 because what the anti Rockefeller people 00:09:23.26900:09:23.279 are arguing is well Rockefeller 00:09:24.86000:09:24.870 completely mangled this market he 00:09:27.29000:09:27.300 completely destroyed it well we have to 00:09:28.75900:09:28.769 see what what is it exactly that he 00:09:30.88900:09:30.899 mangled that he took over now it's the 00:09:36.74000:09:36.750 way that the market is usually presented 00:09:38.88900:09:38.899 by the historians is it was this 00:09:41.78000:09:41.790 paradise of lots of little small 00:09:44.18000:09:44.190 refiners and they were all living in 00:09:45.98000:09:45.990 harmony they were all producing refining 00:09:48.23000:09:48.240 oil and then Rockefeller came in and he 00:09:50.90000:09:50.910 sort of he took over any more or less 00:09:53.12000:09:53.130 enslave them or drove them out of 00:09:55.22000:09:55.230 business and they were doing really well 00:09:56.48000:09:56.490 now that that is a real distortion of 00:09:59.09000:09:59.100 what happened it is
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