The History of the Standard Oil Company
Standard Oil controlled 90% of US oil refining through systematic dominance
Ida Tarbell's investigative journalism documented how Standard Oil established and maintained industry-wide dominance through systematic hierarchy establishment. Her work revealed the aggressive tactics used during the establishment phase (price wars, exclusive railroad contracts) and the status signals used during maintenance (price leadership, infrastructure dominance).
Tarbell's documentation shifted public opinion from viewing Standard Oil as 'efficient' to 'predatory,' ultimately contributing to the 1911 Supreme Court breakup. Her work demonstrates how hierarchies based on suppression rather than coalition support lose legitimacy over time.
From an organizational perspective, the Standard Oil story illustrates that rising hierarchy maintenance costs (5% of revenue in 1880 → 15% in 1910) predict collapse. When maintaining pecking order costs more than establishing new equilibrium, revolution becomes rational.
Key Findings from Tarbell (1904)
- Standard Oil controlled 90% of US oil refining through systematic dominance
- Establishment phase involved direct combat, coalition building, then crystallization
- Maintenance used status signals: price leadership, infrastructure, financial strength
- Hierarchy maintenance costs rose from 5% to 15% of revenue (1880-1910)
- Public legitimacy loss preceded regulatory action
- Post-breakup oligopoly was cheaper to maintain than monarchy to reconstruct