What is the shrewdest pivot in business history?

I don’t know if it’s true…

But my brother told me about a business move when I was a teenager and I’ve always remembered the gist of it.

A guy inherited a small railroad that was broken down and doomed to fail. A short line from Chicago to New York. It was on the verge of bankruptcy and the smart thing would be to sell out to the highest bidder, or break up the company and sell it off in pieces.

Instead the new owner patched what he could together to make it run and cut his rates for shipping cattle from the Chicago stockyards to the New York slaughter houses. If I remember correctly cattle shipped for around $27 a carload, and this guy slashed the price to twenty bucks a carload.

The major competitor considered the little rail line nothing more than a bug to be squashed, sure that if they competed on price the small line would go out of business in a hurry. They cut their price to $15.

The small line cut their price to $10.

The owners of the big competitor shook their heads and cut their price to $5.

The small line cut… the big line cut… the small line cut… the big line cut… and soon the price on a carload of cattle shipped to New York was twenty-five cents a car.

And the owners of the big competitor couldn’t believe it, but the small line raised their shipping rates and began to spend money in improvements.

It took them a while… but the big line finally noticed that only their rail line was carrying cattle. That the new owner of the small line had the big line under contract to ship his own cattle, of which he had contracted to buy pretty much the entire content of the Chicago stockyards meant for New York, for the term of the shipping contract, and that since their cars were filled with cattle they had no room to ship anything that was profitable… and in the meantime the cattle were being sold for the same price in New York as if they had been shipped for $27 a carload.

I don’t remember the name of the small rail line owner, but it had to be Getty or Rockefeller or Morgan.

The robber barons could have taught Trump how to stay solvent instead of relying on bankruptcy to save his bacon.

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