Jp Morgan and Berkshire Hathaway

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Submitted By Alix
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J. P. Morgan and Berkshire Hathaway

From 1820 to 1870, the Industrial Revolution brought innovations and growth to America’s economy. Of those breakthroughs rose the railroad and textile industries. With the railways falling into debt, John Pierpont Morgan was asked to intervene. Multiple railroads fell under his control due to his reorganization of the industry and his actions came to be known as “morganization.” Founded in 1889 as Berkshire Cotton Manufacturing Company, Berkshire Fine Spinning Associates became one of the largest textile industries in the world. It was later recognized by Warren Buffett who seized control of the company and used it for further investments. This essay focuses on the question of: what can be learned by examining Morgan’s consolidation of the railroad industry and Berkshire’s astonishing growth?

This era marked a shift to powered, special-purpose machinery, factories and mass production. Industrialization in America involved three important developments: the harnessing of electricity, improvements to the industrial process including the acceleration of production, and lastly the expansion of transportation. An improved transportation system was crucial for raw materials to reach the factories and manufactured goods to reach consumers. Morgan was fixated on the restructuring of railways and began by proposing agreements between major lines. “Oppressed by debt and overbuilding, more than a third of the country’s railway trackage fell into receivership, and English investors exhorted Pierpont to bring order to the industry.” He was involved in the “management of the reorganized railroads by [implementing] voting trusts, interlocking control” and for organizing “gentleman’s agreements designed to secure co-operation.” First to fall under morganization were the New York Central Railroad and the Pennsylvania Railroad. “The…...

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