> Duke’s true “innovation” came not in the 1880s, when the cigarette machine transformed the production process, but in the 1890s, when business corporations shed the fetters of state regulation and radically redefined themselves.
This article runs off of this huge premise that there was no actual innovation, just clever and malicious rent-seeking. But do we really buy that inventing a cigarette rolling machine didn't actually radically reduce the cost of cigarettes?
Let's not throw the baby out with the bathwater - innovation is obviously an important part of the economy. We should not confuse it with rent-seeking behavior. Even in this case, it was a simple Patent that allowed Duke to establish his corporate dominance.
The premise is that 20th century historians rewrote history to fit their political-economic theories, not that innovation is not real.
>None of these points is accurate. Duke was not the first to use the cigarette machine; in fact, all of the major producers used it by 1887. Nor did he have the best royalty deal for the most efficient machine; that was held by the Lone Jack Tobacco Company. Duke was not the first U.S. entrepreneur to make a success with cigarettes or to find a foreign market for them; Lewis Ginter of Richmond, Virginia, achieved as much before Duke even began making cigarettes. Duke did not force his competitors to merge into the ATC, and he was not its first president. The five major producers formed the corporation in order to gain clout in negotiations for the foreign rights to the best cigarette machine, and Ginter was the first president. No one checked the story against primary sources. Even a look at New York Times articles from the 1880s would have revealed telling inconsistencies and errors.
The real insight of this article is not the role of innovation, but the unintended power given to one particular company structure, the corporation, to be shielded from obligations to act as a public entity for the good of society as a condition of existence. Remember, there are other company forms like a partnership that are not considered ‘legal persons’. This status as an individual person meant corporations could use public goods and accumulate property on a scale that no one person could (because a Corp can pool resources of many people and out bid others) while also being shielded from regulations in ways partnerships were not.
The way I think of innovation in this context is this. It may give an initial advantage, but it doesn’t last and isn’t as big of a contributing factor in creating lasting monopolies as is the corporate form and the shield it provides against regulation, public obligations, and even the competition that future innovation might bring.
I think it's important, in this particular case, to note that Duke's "innovation" was clever and malicious rent-seeking. While there was some technical innovation in terms of the forming of the corporation in order to secure exclusive rights to the best cigarette rolling machine, this innovation was not Duke's but in fact his predecessor.
I, too, am strongly against the throwing out of babies. But in this case is seems clear that the celebrated entrepreneur is being misrepresented.
In my opinion, innovation is an important part of the economy. It is also my feeling that this innovation is all to often mistakenly paired with a fabled "entrepreneur", one who is taking a lot of credit for others people work. In this sense, this story about Duke seems like just another example of this common (and erroneous) trope.
Linux is the first thing that comes to my mind when I think innovation. Not necessarily because it is the top of class, but because of what it's technology and licensing allowed in the rest of the world. Or, I think of NIH and all of the medical technology that it produces.
I don't think that corporations are particularly innovative, nor can they necessarily be, as they are actually hamstrung by the profit requirement, and by the fact that we externalize far too much when it comes to economics: for example, we would probably innovate far more with battery technology, nuclear tech and renewable energy if the true ecological costs of burning fossil fuels were born by the industry.
I simply think that true innovation arises from the scientific method, and that we should start applying that to the administrative and management structures that run our corporations, as I think that people in those spaces are overpaid to guess about how to run a company. Corporate innovations that arise primarily from marketing and a shiny exterior are anything but, and are a dark pattern for me.
All of Google is built on Linux. Without Linux Google would not exist. Neither would Facebook. They would all run Microsoft stack, pay Microsoft billions for licensing... and then probably be bought by Microsoft.
Linux is innovative and shows how all innovation doesn't have to come from capitalism.
That being said the iPhone is arguably just as innovative if not more so and that has been proven nearly impossible to compete with outside of capitalism due to the need for massive coordinated investment to create the whole thing.
Also, Linux is Unix for commodity hardware. That hardware definitely was not created via open source or free collaboration. It was created at a scale only possible by corporations or possibly nation states (chip fabs...).
In this excruciatingly long and boring article we are meant to learn that since James B. Duke gamed the regulatory system for cigarettes over a hundred years ago, Joseph Schumpeter's concept of "creative destruction" is wrong.
I'll leave that standing as it is, but it's worth noting that "libertarian" economist Schumpeter predicted the demise of capitalism in unison with the concept of "creative destruction":
> Business schools fetishize entrepreneurial innovation, but their most prominent heroes succeeded because they manipulated corporate law, not because of personal brilliance.
Another week, another swipe at successful people. It’s really interesting to see academics who have never built a business, hired employees, etc deflate and downplay the value of hard work.
How many reports like this until everybody is ready to give the wealthy a bath? Or better yet, hand over economic independence to our loving, caring government? Time will tell.
> Duke’s American Tobacco Company (ATC) moved to the cutting edge of this process when it repelled legal challenges to its monopoly by drawing on new notions of corporate personhood in the wake of the Fourteenth Amendment [...] Though the amendment referred to “persons born or naturalized in the United States,” which suggests human persons, lawyers attempted to use the amendment to shield corporate “persons” from state regulations. With the ATC’s win in court, the corporation claimed an enhanced legal personhood, protection from states, and status as a private rather than public entity. Unrestrained, the ATC rapidly gobbled up companies across the United States and the globe, catapulting Duke to spectacular wealth and power
To be fair, this is corporate legal shenanigans, not scrappy, innovative, hard work.
Yeah...no. Increasingly fewer people are buying this narrative anymore. Hard work is something everyone can get behind, but cheating is just cheating even if it has a veneer of legality behind it we all now know how easy it is for people of means to make the laws that work best for them.
> academics who have never built a business, hired employees,
You don't seem to know much about what academics do. A large part of their work consists of project planning, obtaining funding, hiring people to do the research work, advertise the results to get other people to contribute and so on. Only junior academics can really focus on the research. From a certain level of seniority, many academics are really research managers. It's very much building a business.
It's unfortunate to see how deep this myth of entrepreneurship runs, and I think this sentiment really highlights the issue.
In the statement above, successful people are literally conflated with the stories being told by these business schools. In my opinion, the majority of successful people (and, surely, some of those are entrepreneurs) do not fit into the mold fetishized by the business schools in this piece. Indeed, that type of alleged "super entrepreneur" strikes me as very rare.
I believe successful people in general have no need to feel attacked by this article. It's those who have accrued bizarrely large amounts of wealth by leveraging someone else's innovation through legal cleverness and rent-seeking that should be (somewhat) concerned.
>> Another week, another swipe at successful people.
I don't remember ever seeing "swipes" at successful scientists, doctors, nurses, midwives, school teachers, etc etc whose hard work has tangible benefits for the entire community. It is obvious that the article is targeting people who are successful at being "egotistical assholes" that "succeed" by harming everyone else's prospects.
I don't find anything strange in that. I find it strange that this is not a more widely adopted attitude.
> Business schools fetishize entrepreneurial innovation, but their most prominent heroes succeeded because they manipulated corporate law, not because of personal brilliance.
You come across as completely dismissing the existing relationships between corporations and government (revolving door appointments, lobbying, being chosen to craft legislation, pre-drafted pro-business legislation ALEC, etc) and the role those relationships play in choosing the winners and losers in the market.
If in reality hard work was the only measure of whether or not a business will succeed then it would be fine to claim that this article is attempting to "donwplay the value of hard work". But that's not at all the reality of how systems interact in our quasi-capitalist country.
Anecdotally, numerous friends who are ideologically conservative lament the state of corporate influence over government regulation. They believe that a handing over of economic independence to our loving, caring government has already happened but it's a proxy for the corporations who have the most influence. Which removes the ability of the free market to choose the winners and losers.
Let me propose a third option: there is a top tier of success, whether in business, government or academia, which often, if not always, requires one to be a corrupt and/or cutthroat PoS. The universe usually rewards this behavior, at least materially.
It's certainly possible to be significantly successful in any of those areas by being a hard working and ethical human being. But the kind of person who is hellbent on being in the top 0.01% (a Fortune 500 CEO, a top-level bureaucrat, the head of a prestigious academic department/institution) is someone who, to some degree, values their personal success over the suffering of others.
This is how you get Monsanto, Communism and $100k+ in debt for a BA in English.
What dogmatically anti-academic, anti-government and anti-capitalism arguments miss is that the fault is in sociopathic behavior, and not the arena that a given sociopathic individual excels in.
Understanding why people succeed, and how the rules of society contribute to such success is a valid criticism not a “swipe at successful people”. And all members of society have a right to examine the consequences of the rules we mutually create; business owners are not a special class of citizen that has superior right to examine society. I say that as a business owner with 500 employees.
If the rules of society have been used in unexpected ways and created unintended consequences, why not examine them and evaluate a better alternative. If some one is talented they will successful under different rules.
Your last sentence ignores so much reality. China has lots of large successful businesses and clearly ignored “economic independence”. Commerce is merely one arm of multiple vectors of state objectives.
Time will tell if America, with its libertarian, government hands off ideal will prove to be the most effective system.
Let’s be clear. There is nothing free about a market dominated by monopolies. There will be less successful people, less new business formation, less innovation, and less wealth creation over time if monopolies and dualopolies stifle competition.
I generally tend towards Hayek in thinking that the market is an amazingly useful creation, and one that we tinker with at our peril. But on the other hand, there are some that become successful whist contributing nothing to the greater good - no innovation, no efficiency - and just succeed at being better hoarders of wealth.
> academics who have never built a business, hired employees
When I see this type of argument made I often think a. as if someone else wouldn't have come along and created/serviced the market sooner or later, yet we heap praise upon the person that happened to get there first and b. the wider benefits are really just happy side-effects - if a business's costs could be lowered by automating all tasks and employing zero staff, wouldn't it be compelled by capitalism to do so?
If it's employment we want, we can just follow Keynes and employ people to bury money and dig it up again..
Why did you quote that line, of all the lines in the article?
What does "swipe" mean to you?
Who is subsumed by this weird monolith of "successful people", and how is it that academics avoided being included?
Why is "downplaying hard work" something you think this article does?
Do you seriously think that claiming many "prominent heroes" did not succeed because of personal brilliance is the same as the claim that personal brilliance is never a factor in [business] success?
Whatever "economic independence" means to you, why do you think you have it? Do you think everyone has it?
Personally, I find it highly interesting that some of the major, truly changing innovations in my field (The common architecture standard for a PC, the internet, the web, and the various open POSIX-ish OSs, and arguably free software/open source) all came about because normal company controls WEREN'T applied.
IBM did what would be considered a massive business mistake and allowed cheap clones to be made without licensing restrictions. IBM loses, and the world gains. But had IBM followed modern practices, the resulting surge likely wouldn't have happened.
The Internet was a govt enterprise, but is definitely not JUST a govt enterprise. I honestly don't know enough about the underpinnings to say much, but it's clearly not a corporate effort looking to profit.
The Web exploded because of it's open-ness. Back when I started in the late 90s, you just hit View Source on a site and got all the info on the UI. For all that it's cool on HN to mock know-nothing web developers, the fact that someone with a text editor, an FTP client (!), and some persistence can still publish a page is a huge deal. Dropping in CGI for some interactivity that can be as complex as PRINTING TO STDOUT is remarkably accessible. I also remember what corporate networks were like then - sysadmins HATED that you could open up port 80 and a vast amount of basically unrestricted traffic to/from EVERYONE would come through. (In terms of security, they were right, but in terms of functionality, this allowed things to blossom in ways nothing before it could). Heck, MS had locked down the browser market (I recall when they declared that IE6 would be the last version of IE) - while other browsers existed, none got any real traction before Firefox, and Firefox itself was built on the decision of the defunct Netscape to open source their code.
Linux has undoubtedly changed everything - and it (arguably) only got the chance to do so because BSD was locked down in lawsuits. And BSD only came about because AT&T was prevented from doing what a corporation would normally do. And BSD and Linux only prospered because the various Unix vendors all couldn't make anything work that wasn't a nightmare of licensing restrictions. I remember what Microsoft was like in the 90s - I believe they held back innovation then, not that they spurred it. Where would we be if they only had commercial Unix vendors to compete with? Or just AT&T?
I won't have to defend the impact of free/open software to this crowd, and while there are debates as to the sustainability model for extremely large packages without corporate sponsorship, and we do have packages nowadays being born from corporate efforts, I think it's fair to say that the current situation would never have come about from pure corporate efforts alone.
I think capitalism has a lot of good points when it comes to incentives...but every time I hear someone trash a different economic system by saying that it fails to take into account human nature, I think they are doing the same with capitalism. Just because greed exists and can be used as an incentive doesn't mean that's the only element to consider, nor does using greed in one way mean that you've removed it as a concern. (See Wall Street incentives to abuse the market)
Ugh, let's please not. I value a marketplace of ideas, in which those with totalitarian personalities know they shouldn't attempt to badger us all into "thinking the right thoughts".
Do you genuinely think you "work harder" than a migrant laborer who spends 14 hours a day picking fruit in the hot sun? "Hard work" is not closely linked to success.
[+] [-] legitster|7 years ago|reply
This article runs off of this huge premise that there was no actual innovation, just clever and malicious rent-seeking. But do we really buy that inventing a cigarette rolling machine didn't actually radically reduce the cost of cigarettes?
Let's not throw the baby out with the bathwater - innovation is obviously an important part of the economy. We should not confuse it with rent-seeking behavior. Even in this case, it was a simple Patent that allowed Duke to establish his corporate dominance.
[+] [-] shadofx|7 years ago|reply
>None of these points is accurate. Duke was not the first to use the cigarette machine; in fact, all of the major producers used it by 1887. Nor did he have the best royalty deal for the most efficient machine; that was held by the Lone Jack Tobacco Company. Duke was not the first U.S. entrepreneur to make a success with cigarettes or to find a foreign market for them; Lewis Ginter of Richmond, Virginia, achieved as much before Duke even began making cigarettes. Duke did not force his competitors to merge into the ATC, and he was not its first president. The five major producers formed the corporation in order to gain clout in negotiations for the foreign rights to the best cigarette machine, and Ginter was the first president. No one checked the story against primary sources. Even a look at New York Times articles from the 1880s would have revealed telling inconsistencies and errors.
[+] [-] digitaltrees|7 years ago|reply
The way I think of innovation in this context is this. It may give an initial advantage, but it doesn’t last and isn’t as big of a contributing factor in creating lasting monopolies as is the corporate form and the shield it provides against regulation, public obligations, and even the competition that future innovation might bring.
[+] [-] cmiles74|7 years ago|reply
I, too, am strongly against the throwing out of babies. But in this case is seems clear that the celebrated entrepreneur is being misrepresented.
In my opinion, innovation is an important part of the economy. It is also my feeling that this innovation is all to often mistakenly paired with a fabled "entrepreneur", one who is taking a lot of credit for others people work. In this sense, this story about Duke seems like just another example of this common (and erroneous) trope.
[+] [-] gridlockd|7 years ago|reply
However, to get to point where you can seek rent, you have to be genuinely innovative first. Rent-seeking is a competitive field!
[+] [-] 908087|7 years ago|reply
> Duke was not the first to use the cigarette machine; in fact, all of the major producers used it by 1887.
He was not the inventor (that was James Albert Bonsack) or even the first to use them.
[+] [-] moosey|7 years ago|reply
I don't think that corporations are particularly innovative, nor can they necessarily be, as they are actually hamstrung by the profit requirement, and by the fact that we externalize far too much when it comes to economics: for example, we would probably innovate far more with battery technology, nuclear tech and renewable energy if the true ecological costs of burning fossil fuels were born by the industry.
I simply think that true innovation arises from the scientific method, and that we should start applying that to the administrative and management structures that run our corporations, as I think that people in those spaces are overpaid to guess about how to run a company. Corporate innovations that arise primarily from marketing and a shiny exterior are anything but, and are a dark pattern for me.
[+] [-] devoply|7 years ago|reply
[+] [-] malvosenior|7 years ago|reply
That being said the iPhone is arguably just as innovative if not more so and that has been proven nearly impossible to compete with outside of capitalism due to the need for massive coordinated investment to create the whole thing.
Also, Linux is Unix for commodity hardware. That hardware definitely was not created via open source or free collaboration. It was created at a scale only possible by corporations or possibly nation states (chip fabs...).
[+] [-] digitaltrees|7 years ago|reply
[+] [-] gridlockd|7 years ago|reply
I'll leave that standing as it is, but it's worth noting that "libertarian" economist Schumpeter predicted the demise of capitalism in unison with the concept of "creative destruction":
https://en.wikipedia.org/wiki/Capitalism,_Socialism_and_Demo...?
[+] [-] dev_dull|7 years ago|reply
Another week, another swipe at successful people. It’s really interesting to see academics who have never built a business, hired employees, etc deflate and downplay the value of hard work.
How many reports like this until everybody is ready to give the wealthy a bath? Or better yet, hand over economic independence to our loving, caring government? Time will tell.
[+] [-] claudiulodro|7 years ago|reply
To be fair, this is corporate legal shenanigans, not scrappy, innovative, hard work.
[+] [-] OldSchoolJohnny|7 years ago|reply
[+] [-] lower|7 years ago|reply
You don't seem to know much about what academics do. A large part of their work consists of project planning, obtaining funding, hiring people to do the research work, advertise the results to get other people to contribute and so on. Only junior academics can really focus on the research. From a certain level of seniority, many academics are really research managers. It's very much building a business.
[+] [-] cmiles74|7 years ago|reply
In the statement above, successful people are literally conflated with the stories being told by these business schools. In my opinion, the majority of successful people (and, surely, some of those are entrepreneurs) do not fit into the mold fetishized by the business schools in this piece. Indeed, that type of alleged "super entrepreneur" strikes me as very rare.
I believe successful people in general have no need to feel attacked by this article. It's those who have accrued bizarrely large amounts of wealth by leveraging someone else's innovation through legal cleverness and rent-seeking that should be (somewhat) concerned.
[+] [-] YeGoblynQueenne|7 years ago|reply
I don't remember ever seeing "swipes" at successful scientists, doctors, nurses, midwives, school teachers, etc etc whose hard work has tangible benefits for the entire community. It is obvious that the article is targeting people who are successful at being "egotistical assholes" that "succeed" by harming everyone else's prospects.
I don't find anything strange in that. I find it strange that this is not a more widely adopted attitude.
[+] [-] creaghpatr|7 years ago|reply
Sounds pretty innovative to me.
[+] [-] knightofmars|7 years ago|reply
If in reality hard work was the only measure of whether or not a business will succeed then it would be fine to claim that this article is attempting to "donwplay the value of hard work". But that's not at all the reality of how systems interact in our quasi-capitalist country.
Anecdotally, numerous friends who are ideologically conservative lament the state of corporate influence over government regulation. They believe that a handing over of economic independence to our loving, caring government has already happened but it's a proxy for the corporations who have the most influence. Which removes the ability of the free market to choose the winners and losers.
[+] [-] 5trokerac3|7 years ago|reply
It's certainly possible to be significantly successful in any of those areas by being a hard working and ethical human being. But the kind of person who is hellbent on being in the top 0.01% (a Fortune 500 CEO, a top-level bureaucrat, the head of a prestigious academic department/institution) is someone who, to some degree, values their personal success over the suffering of others.
This is how you get Monsanto, Communism and $100k+ in debt for a BA in English.
What dogmatically anti-academic, anti-government and anti-capitalism arguments miss is that the fault is in sociopathic behavior, and not the arena that a given sociopathic individual excels in.
[+] [-] digitaltrees|7 years ago|reply
If the rules of society have been used in unexpected ways and created unintended consequences, why not examine them and evaluate a better alternative. If some one is talented they will successful under different rules.
Your last sentence ignores so much reality. China has lots of large successful businesses and clearly ignored “economic independence”. Commerce is merely one arm of multiple vectors of state objectives.
Time will tell if America, with its libertarian, government hands off ideal will prove to be the most effective system.
Let’s be clear. There is nothing free about a market dominated by monopolies. There will be less successful people, less new business formation, less innovation, and less wealth creation over time if monopolies and dualopolies stifle competition.
[+] [-] growlist|7 years ago|reply
> academics who have never built a business, hired employees
When I see this type of argument made I often think a. as if someone else wouldn't have come along and created/serviced the market sooner or later, yet we heap praise upon the person that happened to get there first and b. the wider benefits are really just happy side-effects - if a business's costs could be lowered by automating all tasks and employing zero staff, wouldn't it be compelled by capitalism to do so?
If it's employment we want, we can just follow Keynes and employ people to bury money and dig it up again..
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] sedeki|7 years ago|reply
[+] [-] normal_man|7 years ago|reply
[deleted]
[+] [-] minikites|7 years ago|reply
[+] [-] kirkules|7 years ago|reply
What does "swipe" mean to you?
Who is subsumed by this weird monolith of "successful people", and how is it that academics avoided being included?
Why is "downplaying hard work" something you think this article does?
Do you seriously think that claiming many "prominent heroes" did not succeed because of personal brilliance is the same as the claim that personal brilliance is never a factor in [business] success?
Whatever "economic independence" means to you, why do you think you have it? Do you think everyone has it?
[+] [-] ergothus|7 years ago|reply
IBM did what would be considered a massive business mistake and allowed cheap clones to be made without licensing restrictions. IBM loses, and the world gains. But had IBM followed modern practices, the resulting surge likely wouldn't have happened.
The Internet was a govt enterprise, but is definitely not JUST a govt enterprise. I honestly don't know enough about the underpinnings to say much, but it's clearly not a corporate effort looking to profit.
The Web exploded because of it's open-ness. Back when I started in the late 90s, you just hit View Source on a site and got all the info on the UI. For all that it's cool on HN to mock know-nothing web developers, the fact that someone with a text editor, an FTP client (!), and some persistence can still publish a page is a huge deal. Dropping in CGI for some interactivity that can be as complex as PRINTING TO STDOUT is remarkably accessible. I also remember what corporate networks were like then - sysadmins HATED that you could open up port 80 and a vast amount of basically unrestricted traffic to/from EVERYONE would come through. (In terms of security, they were right, but in terms of functionality, this allowed things to blossom in ways nothing before it could). Heck, MS had locked down the browser market (I recall when they declared that IE6 would be the last version of IE) - while other browsers existed, none got any real traction before Firefox, and Firefox itself was built on the decision of the defunct Netscape to open source their code.
Linux has undoubtedly changed everything - and it (arguably) only got the chance to do so because BSD was locked down in lawsuits. And BSD only came about because AT&T was prevented from doing what a corporation would normally do. And BSD and Linux only prospered because the various Unix vendors all couldn't make anything work that wasn't a nightmare of licensing restrictions. I remember what Microsoft was like in the 90s - I believe they held back innovation then, not that they spurred it. Where would we be if they only had commercial Unix vendors to compete with? Or just AT&T?
I won't have to defend the impact of free/open software to this crowd, and while there are debates as to the sustainability model for extremely large packages without corporate sponsorship, and we do have packages nowadays being born from corporate efforts, I think it's fair to say that the current situation would never have come about from pure corporate efforts alone.
I think capitalism has a lot of good points when it comes to incentives...but every time I hear someone trash a different economic system by saying that it fails to take into account human nature, I think they are doing the same with capitalism. Just because greed exists and can be used as an incentive doesn't mean that's the only element to consider, nor does using greed in one way mean that you've removed it as a concern. (See Wall Street incentives to abuse the market)
[+] [-] fictionfuture|7 years ago|reply
Imagine a world where meritocracy is demolished; in favor of 'equality.' Being 'good' or making customers happy doesn't matter anymore.
Can we please unite behind things like hard-work, quality and discipline to fight off this thinking?
[+] [-] Brotkrumen|7 years ago|reply
The prime predictor of financial success in life isn't merit or hard work, but still is what it always was: who your parents are.
[+] [-] jessaustin|7 years ago|reply
Ugh, let's please not. I value a marketplace of ideas, in which those with totalitarian personalities know they shouldn't attempt to badger us all into "thinking the right thoughts".
[+] [-] minikites|7 years ago|reply
[+] [-] fictionfuture|7 years ago|reply
[deleted]