The United States may have bounded ahead of the rest of the world, but other countries were also trying to come to terms with companies. The three most interesting, Britain, Germany, and Japan, illustrated different approaches to the new economic form. Britain, despite its wholehearted enthusiasm for laissez-faire, was a reluctant convert to companies. Germany and Japan embraced the idea much more warmly, but tried to twist it to rather different ends, such as workers’ welfare and the quest for national greatness. Companies in Germany and Japan were there to serve “society,” while their Anglo-Saxon competitors chased profits. The much-ballyhooed gulf between shareholder capitalism and stakeholder capitalism had already opened up.


With Britain, one question predominates: Why didn’t it exploit companies better? After all, Britain led the way in industrialization, and in the development of relatively large firms. In 1795, Sir Robert Peel, the largest cotton manufacturer in the country, owned twenty-three mills in the north, some of which employed as many as five hundred people.1 Britain was also a pioneer in setting companies free from state control. Yet, in the late nineteenth century, it failed to produce the big industrial firms that were then the key to economic success.

In 1902, America’s manufacturing workforce was only marginally bigger than Britain’s, but Britain had few firms to rival America’s leviathans. As we have seen, U.S. Steel was worth $1.4 billion, and the company employed a quarter of a million people. The largest British employer, Fine Cotton Spinners and Doublers, only had thirty thousand workers, and the largest firm on the stock market, Imperial Tobacco, was worth only £17.5 million. Britain’s top hundred firms only accounted for about 15 percent of output in 1900.2

There are plenty of reasons for Britain’s failure to capitalize on its head start. As a pioneer of industrialization, it was tempted to cling to earlier forms of capitalism; as a compact island, it was under less pressure to produce corporate giants (though the empire constituted a “domestic” market as big as America). Two things stand out: the country’s strong preference for family firms and personal management; and the British prejudice against industrial capitalism.

British entrepreneurs clung to the personal approach to management long after their American cousins had embraced professionalism. As late as the Second World War, a remarkable number of British firms were managed by members of the founding families. These founders kept the big decisions firmly within the company, only calling on the help of professional managers in extremis. Family-run firms had no need for the detailed organization charts and manuals that had become commonplace in large American companies. They relied instead on personal relations and family traditions.

This was not necessarily a ticket to the boneyard. The Cadbury family maintained their hold over their chocolate firm while making all the appropriate investments in production, sales, and advertising—indeed, it was better run than its American peer, Hershey Foods. As late as the Second World War, the owners of Cadbury managed and the managers owned. Others were not so wise. For instance, Pilkington, the glassmaking giant, reserved all its top positions for members of the family. But by the end of the 1920s, the assembled Pilkingtons were no match for the sheer complexity of running a modern company. Profits were falling. Austin Pilkington, the chairman, was cracking under the strain, unable to craft a long-term strategy. The family took remedial action, bringing outsiders onto the board and dragging younger Pilkingtons off to management-training courses, but by that time, it had sacrificed much of its lead in the glass industry.3 The firm was saved only because it had the good luck to recruit a talented man who rejoiced in the surname Pilkington but turned out to be no relation whatsoever.

As we shall see, the big British firms that did eventually emerge turned out to be longer-lasting and more profitable than their big American peers. The problem was there were not enough of them. The vast majority of family firms were far too small to thrive in a world dominated by the economies of scale and scope. Britain boasted more than two thousand cotton firms—John Maynard Keynes complained that “there is probably no hall in Manchester large enough to hold all the directors”—but only a handful had anything as sophisticated as a marketing department. The steel industry was dominated by family firms that could barely keep their heads above the waters in their domestic market, let alone swim in foreign seas.

In a famous essay, Donald Coleman argued that the curse of corporate life in Britain was the distinction between “gentlemen” and “players.” Far too many talentless amateurs rose to high positions, and far too many talented professionals were kept in the ranks. This lack of managerial expertise cost them dearly. For instance, at the end of the First World War, British armsmakers such as Vickers regarded the diversifixation into peacetime products as a way to find work for their existing workers and factories, rather than as a chance to modernize the company. Unlike, say, Du Pont, Vickers failed to invest in research and development or to build up its marketing machine.

This reflected a difference in philosophy. For American industrialists, companies were almost an end in themselves. They were to be tended and grown. For British industrialists, they were a means to a higher end: a civilized existence. They were there to be harvested. Before the First World War, for example, the ratio of dividends to earnings in Britain was as high as 80 to 90 percent, far higher than in the United States.

This points to the second British problem with companies: a fatal snobbish distaste for business. The elite public schools steered their most talented students into conspicuously useless subjects like the classics and poured scorn on anything that smacked of commerce. (“He gets degrees in making jam/at Liverpool and Birmingham” went one popular Edwardian rhyme.) The state schools and new universities all did their best to emulate the antiutilitarian bias of Eton and Oxbridge. George Orwell noted that the ideal products of this educational system “owned no land, but … felt that they were landowners in the sight of God and kept up a semi-aristocratic outlook by going into the professional and fighting services rather than into trade.”4

To British intellectuals, particularly between the wars, a career in business was a despicable way of life, pursued only by the stupid and unimaginative. One of C. P. Snow’s characters remarks that “successful business was devastatingly uninteresting.”5 “How I hate that man” was C. S. Lewis’s tart comment on Lord Nuffield, Oxford’s biggest employer and one of the most generous benefactors to Lewis’s beloved university.6 J. B. Priestley dismissed “the shoddy, greedy, profit grabbing, joint-stock company industrial system.”7 Almost everyone blamed industry for polluting the countryside, debasing the culture, and shattering their peace and quiet.

This antiutilitarian bias robbed British companies of both scientific expertise and managerial brainpower. The proportion of students studying science at British universities actually declined between the wars—from 19 percent in 1922 to 16 percent in 1938. Those students who did risk social ostracism by studying science mimicked the antiutilitarian bias of their colleagues in the humanities. In opening a new set of laboratories at Bristol University in 1927, Lord Rutherford made it clear that he would regard it as an “unmitigated disaster” if they were devoted to “research bearing on industry.”8 Only four of the seventy-one new science chairs created between 1925 and 1930 were in technology.9

Still, science was positively revered compared with business education. Britain produced no more than a handful of departments of business and accounting, and those that it did produce studiously avoided any contact with the business world. “Practical courses in salesmanship are conspicuous by their absence,” noted Abraham Flexner, an American observer in 1930. “The teaching staff are not unfamiliar with American developments, but they are out of sympathy with them. They do not pretend to be practical men capable of advising business concerns; no member of the business or commerce faculty at Manchester has any remunerative connection with industry … they have also found that successful businessmen have nothing to tell their students.”

The upshot of all this was that British companies were starved of both able recruits and up-to-date expertise. A survey of Cambridge graduates in 1937–1938 revealed that fewer sons followed their fathers into business than into any other calling: only 23 percent of men from business families went into business themselves.10 Industry had to make do with the runts of the litter—people who had failed to make it into university or the professions. Inevitably, they often justified their own poor training by disparaging “foreign methods,” such as economics, industrial psychology, or accountancy. In the 1930s, no more than a dozen big British manufacturers had management training schemes for university graduates.

The horror of things industrial even manifested itself in the development of British company towns. Embarrassed by the filthy, crowded, and chaotic cities that gave birth to the Industrial Revolution, some of the best British companies embraced Ebenezer Howard’s idea of the “garden city”—a new decentralized social order, in which people would be rural enough to keep in touch with the land but urban enough to support such civic institutions as hospitals, concert halls, and art galleries. George Cadbury (1839–1922) moved his factory to Bourneville, on the fringes of Birmingham, to escape from the “unwholesomeness of city life.” The town was generously supplied with parks; each worker had a large garden, which his lease required him to maintain. Joseph Rowntree (1836–1925), another Quaker chocolate king, built New Earswick, a traditional-looking village that, as one of its architects put it, “gave life just that order, that crystalline structure it had in feudal times.” William Lever, the soap baron, was even keener on giving his model town, Port Sunlight, a preindustrial feel, getting his architects to construct replicas of well-known Tudor and Elizabethan buildings, including Anne Hathaway’s cottage.

Still, no amount of anticorporate activity could keep Britain locked in the Middle Ages. Companies profoundly changed British life. They prompted the development of trade unions (who founded the Labour Party in 1900). They revolutionized working habits. They provided career opportunities for a whole class of people who had been denied it before—women. In the fifty years after 1861, the number of female clerical workers increased five-hundred-fold (compared with a fivefold increase for men). Mostyn Bird’s 1911 novel, Women at Work, showed how city offices were transformed by these new clerical workers: “In the morning, at nightfall and in the luncheon hour women pour in and out of every block of office buildings in numbers that rival men. The City is no longer the man’s domain.”11


The picture was not all so dark. As we shall see in chapter 7, British firms, for all their idiosyncrasies, were still more internationally oriented than American businesses. And there was also an elite of advanced British companies that realized there was far more to be gained from mastering change than resisting it.

A continual prompt for this was the stock market, one area where the British preserved their lead over the Americans. As early as the 1880s, companies in shipping, iron, and steel began to use the London market to raise capital to finance new technology, such as steel ships. In 1886, Guinness was floated as a public company. Companies, spurred on by professional share promoters like Gilbert and Sullivan’s Mr. Goldbury, made it easier for smaller investors to get into the market by issuing lower share denominations. In 1885, only about sixty domestic manufacturers and distributors were listed; by 1907, the figure was almost six hundred.

Interestingly, the few big firms that Britain managed to produce by 1912 proved (over the long term, at least) to be more successful than their American peers.12 Imperial Tobacco, a loose federation of family firms, might have looked far less impressive than James Duke’s huge American Tobacco, but by 1937, it had grown to four times the size: Imperial was more successful at converting smokers to branded cigarettes from other forms of tobacco, and better at promoting internal competition within the company.13 Similarly, British Petroleum outperformed Exxon over the long term, and J&P Coats did better than American Woolen.

Some historians have speculated that the few big firms that Britain did produce by the First World War were hardened by free trade, in a way that American firms were not. Going public was also a stimulus to better performance, as J&P Coats showed. By the end of the First World War, a small sewing-thread firm, based in out-of-the-way Paisley, had become one of Britain’s biggest manufacturers, thanks to the family’s prescient decision in the 1880s to dilute their family ownership by floating their stock. The merger boom that followed the First World War led to a rapid increase in the number of quoted companies: there were 719 of them by 1924 and 1,712 by 1939. By the early 1920s, 57 percent of Britain’s corporate profits came from public firms—a figure that would gradually rise to 71 percent by 1951.

Coats, Shell, and Imperial Tobacco were part of a small elite of modern companies, including Distillers, Courtaulds, Guest Keen & Nettlefold, and Guinness. The two most influential were both the products of mergers: Imperial Chemical Industries and Unilever. ICI, which brought together four British firms in 1926, had impressively multicultural roots. Its main component was Brunner Mond, which had been set up a half century earlier in Cheshire by a German from Cassel (Ludwig Mond) and a Swiss (J. T. Brunner); it also included the explosives business of Alfred Nobel.14 The driving force behind the 1926 merger was Sir Alfred Mond (1868–1930). An early advocate of health insurance and profit-sharing, Mond had even earned the gentle mockery of T. S. Eliot (“I shall not want Capital in Heaven/For I shall meet Sir Alfred Mond./ We two shall lie together, lapt/In a five per cent. Exchequer Bond”). ICI adopted a version of Alfred Sloan’s multidivisional structure (see chapter 6), employed an army of professional managers, developed close links with the country’s universities, and began to take the battle to Du Pont. By 1935, it had around fifty thousand workers, the same number as Guest Keen & Nettlefold, an emerging metals and engineering giant.

Yet, Britain’s biggest manufacturing employer, with sixty thousand workers, was Unilever. Lever Brothers remained firmly under the thumb of William Lever until his death in 1925. Lever’s road to greatness allegedly began in the 1880s, when he heard a customer ask whether the shop had any more of his “stinking soap”: Sunlight soap built the firm, not to mention Port Sunlight. Lever decimated his domestic rivals by doing such ungentlemanly things as advertising his products. But his business decisions became increasingly erratic after the war (he bought the United Africa Company for several million pounds without knowing what it did). After he died, a professional manager, Frances Darcy Cooper, took over, and at the end of the decade, the firm merged with a Dutch rival, Margarine Unie.

The newly created Unilever became a ruthlessly efficient marketing machine, adapting products to tastes (the English liked salted margarine; continental Europeans didn’t) and attacking Procter & Gamble in its home territory. In 1936, it attacked Crisco, P&G’s dominant vegetable oil, by giving away free cans of its new brand, Spry, which it claimed was “extra-creamed”; this made for dubious science, but it sounded good enough to force P&G to claim that Crisco was “double-creamed,” prompting Lever to claim that Spry was triple-creamed. Even though Procter finally trumped that with super-creamed Crisco, Spry’s sales reached half those of Crisco.15

This diversion into vegetable oils is meant to underline a simple point: when Unilever fought against Procter & Gamble or ICI took on Du Pont, it was as equals. Britain’s tragedy was that ICI and Unilever were the exceptions rather than the rule. It was not until after the First World War that Britain belatedly developed big firms in the “second industrial revolution” businesses (steel, chemicals, and machinery). However, such firms could indeed be built outside the United States—as Germany and Japan showed.


Germany was not unified until 1871. Yet, over the next forty years, its great companies enabled it to replace Britain as Europe’s leading industrial power. In the late nineteenth century, the finest examples of the “new economy” in Europe were all in Germany: the vast electrical-equipment producing complex at Siemenstadt, the huge chemical works of Leverkusen, Ludwigshafen, and Frankfurt, the massive machinery works and steel mills in the Ruhr and along the Rhine. When Alfred Krupp died in 1887, his company employed twenty thousand people, and boasted its own hospitals and schools. Britain had nothing comparable to offer.

Germany’s companies were similar to America’s in their focus on the new economy: almost two-thirds of the top two hundred dealt with metals, chemicals, and machinery. But they embodied a rather different sort of capitalism—one that emphasized cooperation rather than competition and that gave a leading role to the state. By 1900, four clear structural differences were apparent between the German corporate model and its Anglo-Saxon equivalent.

The most obvious was Germany’s tolerance of what Anglo-Saxons would regard as anticompetitive practices. German law did not prohibit “combinations in restraint of trade” like British law. Nor did it possess any antimonopoly legislation like America’s Sherman Antitrust Act. In 1897, the year that the American Supreme Court ruled that the Sherman Antitrust Act was constitutional, its German equivalent ruled that contractual agreements regulating prices, output, and market share could be enforced in courts of law, because such agreements benefited the country as a whole. They were, in essence, a form of “cooperative self-help.”

This nationalistic outlook was underpinned by the works of Friedrich List (1789–1846). List, a somewhat eccentric figure who might be caricatured as the Prussian answer to Adam Smith, spent much of his life in exile in the United States. In The National System of Political Economy(1841), he argued that the basic economic unit is not the individual but the nation: the job of businesspeople and politicians is to band together for the national good. His ideas were enthusiastically promoted first by Prussian politicians, and then by leaders of the newly unified Germany. For the Junker aristocracy that ran Imperial Germany, businesses were there to provide power for the great war machine; of course, they were supposed to work together.

The economic downturn of 1873–1893 helped force German companies together: the number of cartels rose from a mere four in 1875 to 385 in 1905.16 Cartels ranged from informal “gentlemen’s agreements” to highly legalistic syndicates. The “model cartel” was the Rhenish-Westphalian Coal Syndicate, which regulated production and prices and which operated, in various guises, from 1893 to 1945, once counting as many as ninety companies among its members. Interessengemeinschaften or “communities of interest” were coalitions of firms that pooled profits and coordinated policies on everything from patents to technical standards. Members of such “IGs” were also frequently tied together by cross-shareholding.

I. G. Farben is a good example. It began as a loose alliance of young chemical firms (including Bayer and Hoescht) that cooperated through cartels, then evolved first into a “community of interest” and finally, in 1925, into a properly integrated company. By the late 1930s, I. G. Farben controlled 98 percent of Germany’s dyestuffs, 60 to 70 percent of its photographic film, and 50 percent of its pharmaceuticals. Yet, company policy was still dictated by a series of committees that looked suspiciously like the boards of its individual constituents. I. G. Farben also had a whole series of cross-shareholdings, joint ventures, and pricing agreements with other German chemical firms.

The second difference from Anglo-Saxon capitalism was the influence of the big banks. Germany’s capital markets were too localized and inefficient to power its industrialization. Germany’s bankers stepped into the breach by forming joint-stock and limited-partnership banks that duly channeled money from savers of all sorts, first into the railways (which were financed by bank debt, not bonds) and then, after the railways were nationalized in 1879, into young industrial companies like Siemens. The biggest were the “universal banks” that managed to be commercial banks, investment banks, and investment trusts all rolled into one. (J. P. Morgan achieved something similar, but only by getting around state laws, rather than being encouraged by them.) Deutsche Bank (formed in 1870) and Dresdner Bank (1872) concentrated on financing large-scale industry, leaving smaller banks to concentrate on the Mittelstand of medium-sized family firms that also powered the country’s success.

In 1913, seventeen of the biggest twenty-five joint-stock companies were banks. Universal banks financed almost half of the country’s net investment. Bankers also sat on the supervisory boards of all Germany’s great industrial companies, providing advice and contacts as well as capital (it was the bankers that organized Siemens’s merger with German Edison in 1883). Their power was magnified by proxy voting rights, which allowed them to vote the shares of all their other investors, an arrangement that made hostile takeovers almost impossible to execute.17

The bankers’ influence was reflected in the third big difference vis-à-vis the Anglo-Saxon world: Germany’s two-level system of corporate control. The 1870 law that introduced free incorporation also obliged joint-stock companies to have two levels of control: management boards, responsible for day-to-day decisions, and supervisory boards, made up of big shareholders and assorted interest groups—not just banks but also local politicians, cartel partners, and, eventually, trade unions. The supervisory board gained even more power in 1884.

All these structural differences—the boards, the bankers, and the legalized collusion—reinforced the fourth distinguishing thing about German companies: the emphasis on their social role. German stakeholder capitalism, as we suppose it must be called, was partly influenced by the German guilds, which had survived much longer than their counterparts in other parts of Europe and had preserved the vital system for apprenticeships (which helps explain the German fascination with training). At first, social responsibility was voluntary. Alfred Krupp introduced pensions and health and life insurance for his workers as early as the 1850s. But from 1883 to 1889 Bismarck imposed a comprehensive “social insurance” system on companies, forcing them to pay pensions; in 1891, he introduced a system of “codetermination,” giving a formal voice to workers on companies.

The result was that German companies were much keener on cooperating with trade unions than their Anglo-Saxon rivals. Individual employers might clash with trade unions, sometimes bitterly so. But there was nevertheless a powerful belief that, in an ideal world, all interests ought to be involved in decision-making. Factory foremen were regularly consulted by managers (a trend that translated into military success in the First World War: the German army gave far more power to noncommissioned officers). In 1920, laws were passed setting up works councils giving workers an even louder voice. The Third Reich (1933–1945) abolished trade union powers. But even under Hitler, Germans clung to their belief in consulting society’s various interest groups, albeit in a perverted form. The Nazi-sponsored German Labor Front helped to improve working conditions in factories and even initiated cheap holiday excursions.18

The interesting question with Germany is how much this markedly different idea of the company helps to explain its undoubted economic success. The huge upheavals of the first half of the twentieth century only increase the suspicion that Germany got something big right: its companies had to endure, among other things, defeat in two world wars, several chronic recessions, Nazism, and partition. Our suspicion is that Germany’s success owed less to stakeholder capitalism than to two rather more practical things.

The first was the cult of education—particularly scientific and vocational education. This was there from the very first.19 Peter Drucker claims that the foundation for Germany’s manufacturing productivity was laid in the 1840s by August Borsig (1804–1854), an early industrialist who pioneered corporate apprenticeships, mixing on-the-job experience and formal classwork.20 Universities—particularly technical universities—happily acted as both research agencies and recruiting grounds for local industries.21 By 1872, the University of Munich alone had more graduate research chemists than the whole of England. The Berlin Institute offered a two-year course in how to establish and manage factories.22 Germany began to found business schools at about the same time as the United States, in 1900. Boring-sounding industry groups such as the Association of German Engineers (1856) actually provided consulting advice and disseminated technical knowledge. German firms also pioneered the development of internal laboratories, and invested heavily in research and development even in such basic industries as coal, iron, and steel.23

The second related area was the respect accorded to managers, who enjoyed the same high status as public-sector bureaucrats. (Lower-level managers were even called “private civil servants.”) In Britain, where even the most senior salaried executives were often referred to as “company servants,” only a few managers were admitted to boards of directors by 1920. In Germany, salaried managers dominated supervisory boards.24 German companies also made a point of giving technicians managerial responsibility rather than just relying on generalists, as Americans tended to.25


Japan’s version of organized capitalism had many similarities to Germany’s. Japan also leaped ahead in the 1870s—and Japan also embraced a conception of the company that combined up-to-date professionalism with a pronounced and sometimes atavistic nationalism.

In 1868, the shogunate that had ruled the country for more than 250 years collapsed, and power reverted to the sixteen-year-old emperor Meiji—or rather to the officials and oligarchs who surrounded him. Some of the samurai who supported the restoration hoped that the emperor would cleanse the country of barbarians. Instead, the ruling oligarchs decided to open the country to the West as part of their “rich country, strong army” policy. They invited more than 2,400 foreigners from twenty-three different countries to provide instruction in Western methods. Employment of foreign experts accounted for about 2 percent of government expenditure.26

The state forced the samurai to shed their feudal ways and wear Western clothes. It also created business opportunities by selling state-owned factories for a song, introducing joint-stock-company laws, abolishing the guilds and other restrictions on occupational choice, and preaching that moneymaking was perfectly compatible with Shinto and Buddhist religious beliefs, as well as being downright patriotic. Many samurai reinvented themselves as businessmen, often starting companies with the compensation money they were given for giving up their military duties.

The young companies had the advantage of being able to learn from their predecessors’ mistakes. The growth was explosive. In 1886, nearly two-thirds of the yarn in Japan was imported; by 1902, it was virtually all home-produced; by the First World War, Japan accounted for a quarter of the world’s cotton-yarn exports. Japanese firms were particularly good at electrification. By 1920, half the power in Japanese factories came from electric motors, compared with less than a third in America and barely a quarter in Britain.

The government undoubtedly played a leading role in Japan’s great leap forward. The Ministry of Industry regarded its role as making up for “Japan’s deficiencies by swiftly seizing upon the strengths of the western industrial arts.” It did so in all sorts of ways—by pouring money into infrastructure, establishing universities, directing business and credit toward companies, and establishing public companies as recipients of Western technology and models of Western business. Government investment usually exceeded private-sector investment until the First World War. It was a government official who introduced a venture capitalist to a university teacher who had the wild dream of building a power station. The result was the Tokyo Electric Light Company, the ancestor of Toshiba. Shibusawa Eiichi, who founded the Dai Ichi bank, which financed many of the original joint-stock companies, worked for a spell in the Ministry of Finance. Mitsui liked to compare itself to the British East India Company. Mitsubishi, Mitsui’s great rival, owed a great deal to government subsidies for shipping. In 1894, the firm repaid the favor by lending its ships to the military to wage war with China.

Mitsubishi was the model for the zaibatsu—the Japanese conglomerates (literally, “financial cliques”) that dominated business in the country until the Second World War (and were subsequently reborn as keiretsu). These conglomerates were a strange mixture of feudal dynasties, old-fashioned trading companies, government agencies, and modern corporations. At the heart of each zaibatsu sat a family-owned holding company that controlled a cluster of other firms through cross-shareholdings and interlocking directorates. Each cluster typically included at least one bank and insurance company as a conduit for public savings. Managers were typically recruited into the holding company from university. Thereafter, they spent the whole of their lives within this extended family of companies.

The companies that made up each zaibatsu operated in a bewildering number of industries, but their lack of focus did not prevent them from being highly competitive. At its best, the zaibatsu structure allowed for great flexibility: businesses could specialize in particular markets, but also summon up economies of scale when they needed them. The groups were also kept in shape by the rivalry between them. By the end of the Second World War, the four biggest ones—Mitsui, Mitsubishi, Sumitomo, and Yasuda—controlled a quarter of the paid-in capital of Japanese firms.27As in Germany, small firms still existed—according to the 1930 census, 30 percent of Japan’s manufacturing output came from factories with fewer than five workers—but the tone was set by the zaibatsu.

The zaibatsu were particularly successful in mixing family ownership with meritocratic management. The founding families were understandably nervous about the joint-stock concept, initially trying to keep control through special classes of shares, and then after those were banned in the 1890s, making arrangements so that groups of descendants could hold shares together (and banning them from selling them). Control of Mitsubishi alternated between two branches of the Iwasaki family. The founder’s brother insisted that “although this enterprise calls itself a company and has a company structure, in reality it is entirely a family enterprise.”28 At Mitsui, ownership was split among five branches of the same family.

Yet, the same families were notably better than, say, the British at handing over day-to-day management to professionals. The tradition of hiring a professional manager (banto) to run the family business dated back to the eighteenth century. Leading Japanese industrial families also proved remarkably adept at transforming feudal loyalty into corporate loyalty: samurai who were willing to die for their masters became loyal company men who were willing to do anything for company success (and who were given lifetime employment in return). By the early 1930s, almost all the zaibatsu had handed over control of their management to well-trained professionals. A 1924 survey of the 181 largest Japanese companies found that 64 percent of top executives held a college degree or equivalent, a higher proportion than in the United States at the time.29

In both Germany and Japan, the government’s habit of steering the economy in pursuit of national greatness reached an ugly zenith in the Second World War. One history nicely describes the Nazi approach to business, where small companies were pushed into a limited number of huge industrial groups in the service of the national business machine, as “Listian economics gone berserk.”30 The zaibatsu looked like feudal relics to Douglas MacArthur, who broke them up after the war. MacArthur had no doubt where to find the best model for the corporation: it was in the United States of Coca-Cola and General Motors.

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