14 ms·
"No inventions; no innovations" A History of US Steel
- erehweb 3y agoReminiscent of the business school joke - What does US Steel make? The answer is not "steel", but "money", that being the point of any company.
- pjscott 3y agoAlthough it's true, that's a hazardous way of thinking. If they had put more of their focus on making steel, keeping up with the technological advances rather than being dragged along grudgingly, perhaps they'd be making more money these days.
- sgt101 3y agoIt's a very successful strategy in any corporate. Focus on the books, produce results, take the bonus and then jump. When things go pear shaped do not be found holding the bag. If later questioned: "it was all great when I was there, it's so sad that it went south - it was a great place and there was a lot of value on the table." Strangely the big investors don't seem to ever cotton on to this - the big pension funds and sovereign wealth seem to respond by getting out of the equity markets and investing in things like property.
- hef19898 3y agoThe oposite is true as well so: don't focus on the books, bottom line and so on and the company goes bust as well. Any successful company has to do both.
- sgt101 3y agoyou are quite correct - it becomes a plague when one is addressed to the exclusion of the other. As they say "don't run out of cash".
- swexbe 3y agoThis comment reads like it was written in the 70s. Even with the interest rate hike, this is still the age of VCs with infinite pockets, companies that don’t plan on going profitable for decades, every company in sp500 throwing money in the AI money hole, etc.
- sgt101 3y agoYes, let us exclude tax scams and money laundering and address the real economy where things get made and real people get paid.
- atrus 3y agoIt reminds me of that old quote that democracies die when the citizens realize they can vote themselves money. It's the same with these companies, the upper managements realizing they can just give themselves more money and coast on their companies momentum. It's not the innovators dilemma, it's the c-suite lines their pockets while the company burns dilemma.
- nradov 3y agoIt's the eternal principal/agent problem. Those things go in cycles. When management goes too far off the rails then corporate raiders and private equity eventually take over to replace management and unlock latent value. Unfortunately, the managers who caused the problem still often end up fabulously wealthy while regular employees get screwed. This problem can be somewhat ameliorated by compensating executives primarily using equity with long vesting or lock-up periods. That keeps their interests aligned with long-term shareholders.
- scotty79 3y agoIt doesn't really fit the modern collapse. Democracies seem to decline when oligarchs extract so much wealth that the entire economy suffers and common people flock to strong political figures to bring back order and prosperity. > citizens realize they can vote themselves money Although this certainly sounds true if you consider just the richest citizens and by "vote" you mean inflence the votes.
- PM_me_your_math 3y ago[dead]
- feoren 3y agoAs other replies have pointed out, your problem is with the word "they". There is no "they" at a publicly traded corporation. The key decision-makers are only there for 2 to 5 years, however long it takes them to suck out the blood of the company before they scurry off to parasitize a juicier host. Nobody with decision-making power ever gave two shits whether US Steel was going to make lots of money in N decades.
- latency-guy2 3y agoNot a hazardous way of thinking.
- araes 3y agoHad a thought the other day, that the natural course of many businesses is towards becoming a bank and eventually a casino. If it were Pokemon, all corporations final form would be casinos with executives gambling investors money. It fits the economy surprisingly well. Harvard, arguably a bank not a school. US Steel, joke is they produce money not steel. Airlines are trying to avoid flying airplanes, and operate air miles banks. Hasbro no longer produces toys, only money. Article today where the main commentary on Intel was the finance bros took over a long time ago.
- feoren 3y agoCar companies making their money off of financial instruments only loosely related to the cars people drive off their lots ...
- deleted 3y ago[deleted]
- cafard 3y agoMany years ago, I read some that some executive of General Motors had said that GM was not in business to make cars but to make money. At the time, that seemed acute. Since then, I have wondered whether it was where GM lost its way.
- davidthewatson 3y agoI'm happy to see the link here as I was curious about the subject given that my career started in US Steel's data center in Pittsburgh. I'm saddened by the fact that this retelling seems mostly negative and ignores a large part of US Steel's evolution into USX. The retelling is subtractive whether you view Marathon Oil's involvement as a positive complementary asset play at the time or a negative given the history of its divestiture. I can say that there was innovation in the data center where I worked in the evolution from manual human mainframe era data center operations to token ring networks of PC API's along with abstraction and automation via glue code. The minimization of manual human labor as people retired is likely lost to the history books unless one of my old technical collaborators decides to write a book in retirement. The CMU kids I worked with at US Steel's data center in Pittsburgh were just as smart as the ones I worked with in the software industry from Boston to Seattle.
- WhitneyLand 3y agoI don’t doubt you at all, but what kind of innovation was there? Did it tend to be strategic or tactical? How closely was tied to their core competencies? How many innovations were industry firsts? What percent impact did they have on profits / growth / market share? From the article it sounds like innovation and investment were consistently blocked by short term financial goals. I can easily believe there were lots of very smart people, with transformative ideas, that were never given a chance to thrive.
- davidthewatson 3y agoThanks for your response. There was plenty of innovation clear to anyone with the proximity and education to recognize it, but your questions raise intractable issues of the proprietary information of any large corporation. From my naive college kid's vantage point, the majority of innovation was tactical and not tied to core competencies owing to the siloed nature of communication between management and technical layers; i.e. it's difficult, if not impossible, for innovation to pass through that gated silo without a catalyst to nurture and support its transformation from tactical to strategic. This is a fundamental problem of complementary assets and the need for interdisciplinary culture that accrues to their composition, complexity, and collaborative community. We could certainly debate whether this is the crux of "The Corporation" over the last twenty years of acquisitions seemingly aimed at silencing competition. Of the two companies I worked with in that time period thirty years ago, both of their nail-in-the-coffin, final acquisitions approached $20 billion. Innovation has a way of disappearing in the dark subtext of large corporate acquisitions. The "never given a chance to thrive" is insightful beyond US Steel. That is, well into modern tech startups that are managed by the same kinds of people who managed GM in the 1970's.
- deleted 3y ago[deleted]
- a1o 3y agoWasn't US Steel who commissioned the books from a SciFi illustrator to ensure that lots of reference drawing illustrations would have steel in the future and got these books for free available to anyone who called, and they ended up getting famous in the film industry so people ended up always designing futuristic movies with things made of steel like ships and vehicles?
- aresant 3y agoYes you are thinking of Syd Mead - here’s the series https://sydmead.com/category/gallery/us-steel/ https://sydmead.com/category/gallery/us-steel/
- BasilPH 3y agoSyd Mead did the designs for Blade Runner and Tron, and absolute legend.
- hn_throwaway_99 3y agoGotta say, I'd live in that steel modular house in a heartbeat.
- csours 3y agoThere's a reason that house isn't pictured in the snow.
- genman 3y agoI can be insulated. People have built small houses from marine containers for long time.
- hn_throwaway_99 3y agoDon't build it where it snows then. I love Eichler homes, but there is a good reason all of them (as far as I know) were built in California. With big walls of glass and thin, flat roofs, their insulation is pretty horrible. But their design actually probably saves energy given how they encourage indoor/outdoor living in temperate climates.
- deleted 3y ago[deleted]
- cturner 3y agoClayton Christensen talk about the steel industry, and how businesses resist change - https://www.youtube.com/watch?v=rpkoCZ4vBSI&ab_channel=Sa%C3%AFdBusinessSchool%2CUniversityofOxford https://www.youtube.com/watch?v=rpkoCZ4vBSI&ab_channel=Sa%C3...
- legitster 3y agoMy grandfather worked in a metal shop for 30 years after he served in Korea. I remember him telling me they switched to Chinese made steel in the 70s because of the quality problems they were having with American made steel. Being out West, they were somewhat more free from the political/social/union pressure to use American commodities.
- PM_me_your_math 3y ago[dead]
- SoftTalker 3y agoProbably meant Japanese, I don't think China had much of a steel industry in the 1970s and given the politics of the time I don't think it would have been imported in the USA even if available.
- margalabargala 3y agoChina started pushing for a large domestic steel industry in the late 50s. It did not go well. https://en.wikipedia.org/wiki/Backyard_furnace https://en.wikipedia.org/wiki/Backyard_furnace
- legitster 3y agoHe specifically said Chinese. But given the era it might have well been conflated.
- altairTF 3y agoThe paradox of rights(don't quote me, i just made this up). In wealthier societies, demands for greater worker rights from the government increase. This can lead to more bureaucracy and higher labor costs, potentially making third-world countries with lower regulations more attractive for importing goods or outsourcing production. Countries already operates in a libertarian interaction with each others. I find these global economics aspects fascinating
- 3y ago
- hammock 3y agoPlenty of innovation by US Steel. Just in operations, not in materials.
- darth_avocado 3y agoSo in other words, short term value for the shareholders?
- hammock 3y agoDefine short term. 120 years? US Steel’s vertical integration practices changed the game and influence goes all the way to Apple and Tesla today. Their way of standardizing manufacturing processes inspired Henry Fords assembly line. Their Research Lab paved the way for the establishment of similar, famous labs at IBM, Bell, Xerox and others. Their corporate structure set a precedent for large-scale corporations, influencing the development of conglomerates like GE to diversify various industries under a single corporate umbrella
- ganzuul 3y agoSteel remains a technology with huge potential for future development. Some keywords: eutectic solution, bulk metallic glass, and boron steel. It seems crazy to me that any first world nation would let it's steel production fall into foreign hands. As a machinist for 5 years in my country I would have been excempt from military service even in total war. If US steel is unable to innovate and foreign ownership is somehow not a problem, this development is probably a good thing. The Zaibatsu system is a good fit for what steel is.
- araes 3y agoAmerica has started to have the appearance of griefing their own enlisted. I'm not sure if America actually cares about those types of war and military considerations any longer. Have you looked at ship construction times lately? On the materials side. Totally agree. However the issue there, is that's not what corporations tend to optimize. The story itself really spells it out pretty clearly (it may be biased, never worked at US Steel personally). However, the article's description is: US Steel became a monopoly, and immediately acted like a monopoly. Innovation ceased. Money extraction began. Commanding obedience was the norm. Convincing themselves all competitors would fail was the norm. And US Steel did not want to invest in anything outside its own sunk costs.
- vGPU 3y agoWhich they are likely sorely regretting as tensions flare higher with China and our navy is struggling to protect shipping around Israel.
- stjohnswarts 3y agoThey really aren't struggling. But yeah, China will soon outstrip our naval numbers by a large amount within the end out of the decade. We still have better tech but what do we do when they launch, at the same time, 200 "good enough" cruise missiles at each aircraft carrier sitting in the Taiwan Straight?
- 3y ago
- hyperthesis 3y agoAt that propitious 1900 banquet, perhaps pricing power was discussed? People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
- WhereIsTheTruth 3y agoI wasn't too far off https://news.ycombinator.com/item?id=38689019 https://news.ycombinator.com/item?id=38689019
- WhitneyLand 3y agoWell written, informative, worth reading. It’s fascinating how so many business mistakes from the last 100 years continue to be relevant and continue to be repeated.
- hyperthesis 3y agoReminds me of the Wright Brothers. After their incredible invention of controlled heavier-than-air flight (using a wind-tunnel - did they invent that too?), the focus was on patent royalties, while others innovated.
- pomian 3y agoOne of the ideas that seems to be missed from the study of history and economy, was the effect on the total destruction of the Japanese and German industrial base - during WWII. Britain and USA, were left with their archaic industrial systems. After WWII, the Japanese and the German steel industry had to be completely reborn. (At the cost of primarily USA financing.) Those two countries had no more relics of the past, and started over, necessarily, with the most modern technology and science. North American industry was in a slow evolution from the 1900's, but Germany and Japan, had a hot start from the 1950-60's. No wonder everyone was impressed by their modern approach to construction, design, manufacturing, which more or less started to out perform USA and Britain in the 70's. China, started it's industrial rebirth even later.
- mitthrowaway2 3y agoSolution for the future of American industry: Bomb US Steel? Maybe this would also be an effective way of clearing out NIMBYs blocking the routes for high-speed rail lines?
- JumpCrisscross 3y ago> Solution for the future of American industry: Bomb US Steel? Plenty of places are bombed into oblivion. What makes the rebirth is the rebuilding. The marshalling of public resources. You can replicate that without the bombs with a public-spending initiative.
- ApolloFortyNine 3y agoI'm not sure innovation is really the issue, this article never actually goes into the alloys US Steel developed (of which there are many), and alloys are what makes steel steel really. It's always been fascinating to me how the just a tiny percent of another element in a metal can have an absolutely dramatic affect on the strength/resilience of the material. And they tried more complicated alloys, for instance they developed Corten steel, the biggest example of which is probably the US Steel building in Pittsburgh, [1]. It's a steel where it's 'rust' essentially works as a protective layer. More than anything this article shows US Steel simply couldn't compete with foreign suppliers. It's interesting to me that they don't even mention the Steel Workers Union, which was/is one of the largest and most powerful unions in the U.S. I'm not saying the cause, but if you need 5% more steel to cover the deficiencies in foreign steel in strength, but it's 20% cheaper, than it's simply cheaper to import more foreign steel. [1] https://en.wikipedia.org/wiki/Weathering_steel https://en.wikipedia.org/wiki/Weathering_steel
- rhapsodic 3y ago>And they tried more complicated alloys, for instance they developed Corten steel, the biggest example of which is probably the US Steel building in Pittsburgh. It's a steel where it's 'rust' essentially works as a protective layer. Also worthy of mention is the New River Gorge Bridge. [1] And the recently-collapsed Fern Hollow Bridge in Pittsburgh. [2] [1] https://en.wikipedia.org/wiki/New_River_Gorge_Bridge https://en.wikipedia.org/wiki/New_River_Gorge_Bridge [2] https://www.carboline.com/solution-spot/posts/pittsburgh-bridge-coating-corten-steel/ https://www.carboline.com/solution-spot/posts/pittsburgh-bri...
- steveklabnik 3y agoOr… the US Steel Tower https://en.wikipedia.org/wiki/U.S._Steel_Tower https://en.wikipedia.org/wiki/U.S._Steel_Tower
- shrubble 3y agoIs Corten used in shipping containers (I seem to recall that it is)?
- tmm 3y agoSeems fitting to leave this here: https://youtu.be/1D2Q9-1EmB4?si=gXwIO3FzpSKkp3VV https://youtu.be/1D2Q9-1EmB4?si=gXwIO3FzpSKkp3VV US Steel, Tom Russell
- pfdietz 3y agoSomething like 70% of US steel production is now from scrap. Part of this was moderation of growth. In steady state, nearly all steel could come from scrap (limited by contaminants, I guess.) I expect aluminum to displace more steel in the future. Witness what's happening with "gigacasting" at Tesla and elsewhere.
- kube-system 3y agoWhether or not an application can use aluminum or remelted scrap depends on how picky an application is for the material.
- bluGill 3y agosteel has many useful properties hard to get out of aluminum. And vise versa, consult a metraligost to see what is right for you.
- pfdietz 3y agoHence "displace more" not "replace all". Substituting aluminum for copper (in wires, for example) may end up making steel more recyclable. Aluminum doesn't contaminate molten steel (it's used as a deoxygenating agent when making steel, in fact), while copper does.
- deleted 3y ago[deleted]
- KMag 3y agoIt would have been interesting to get the take from my dad's cousin, who did early powdered metallurgy work research as an MIT undergrad in the 1940s, and later became a VP at US Steel. Unfortunately, he's no longer with us.
- Animats 3y agoFor an overview of how Nucor became #1 in the US steel industry, see "American Steel" (1992) by Richard Preston. The author was present for the building and startup of Nucor's first continuous thin sheet casting mini-mill. Nucor bought a new experimental continuous caster from a German company, after trying to build their own, and built a mill around it. This plant could turn scrap metal into sheet steel. "You could punch garbage cans out of it all day." Gradually, the quality improved, and soon they were making steel for auto parts. Previously, steel recycling just produced lower grade steel - cars in, rebar out. So this closed the recycling cycle. The amount of steel in use per capita in developed countries seems to have reached a constant level. About 69% of steel produced in the US is the same steel going round and round. If you ignore rebar, low-grade steel stuck inside concrete, it's even higher. It's the developing countries that are still making and using new steel. They don't have enough steel infrastructure yet. "Mini-mill", in this context, means "smaller than a square mile". Here's Nucor's Crawfordsville plant.[1] It's not small. Compare with US Steel's Gary Works.[2] That century old plant is just about their last remaining big plant in the US. US Steel somehow missed this change. [1] https://earth.google.com/web/@39.97805108,-86.8271336,264.41983829a,2868.09590117d,35y,-0h,0t,0r https://earth.google.com/web/@39.97805108,-86.8271336,264.41... [2] https://earth.google.com/web/@41.62932676,-87.36187513,174.70115736a,13642.48925326d,35y,0h,0t,0r https://earth.google.com/web/@41.62932676,-87.36187513,174.7...
- pfdietz 3y agoA very good book, although being 31 years old some of the characters are dead now (like the then-head of Nucor.) The chapter describing the accident (where a ladle of molten steel fell and the steel drained into a depressed area with standing water) is horrific. It's fortunate the body count wasn't higher.
- newsclues 3y agoSpeaking of Gary... https://en.wikipedia.org/wiki/Magnitogorsk https://en.wikipedia.org/wiki/Magnitogorsk "In 1928 a Soviet delegation arrived in Cleveland, Ohio, to discuss with American consulting company Arthur G. McKee a plan to set up in Magnitogorsk a copy of the US Steel steel-mill in Gary."
- 3y ago
- deleted 3y ago[deleted]
- pseudolus 3y agoFor individuals interested in the steel industry who are visiting or living in the Northeast of the United States, the National Museum of Industrial History (affiliated with the Smithsonian) situated in Bethlehem, PA is a great place to visit [0]. It's located in one of the repair shops of the now defunct Bethlehem Steel plant and offers a wide ranging introduction to the production of steel in the US as well as various types of industrial machinery. As a bonus visitors can stroll the grounds of a largely intact, but derelict, steel plant. Interestingly, that particular area of Pennsylvania was also a center for the production of silk and more women were employed in the production of silk in that region then men were employed by steel plants. [0] https://www.nmih.org/ https://www.nmih.org/
- petermcneeley 3y agoThis analysis does not seem properly include wage/labor costs. "By 1958 some steelmakers in Germany and Japan were able to compete on price with US producers, and by the mid-1970s input costs for Japanese steel (ore, labor, coking coal, etc.) were nearly half those of US costs." So the input costs were half almost certainly all due to labor either directly or indirectly. Viewed in this light the fall of US Steel is no different than any other manufacturing process in the USA.
- 0xDEADFED5 3y agopage 17 of http://www.sfu.ca/~kawasaki/Elbaum.pdf http://www.sfu.ca/~kawasaki/Elbaum.pdf : In Japan between 1956 and 1976 the real cost of steel fell by some 39%. Although wages increased more than 10-fold, gains in labor productivity more than compensated, so that real unit labor costs fell by 16.3%, accounting for about 5 of the 39% drop in real costs. The rest of the 39% was due to a decline in unit materials and energy costs.
- petermcneeley 3y agoThis does not tell us what the wages were compared to Americans at that time. It is very easy to have a 10 fold increase in wages if people are making $2 a day.
- 0xDEADFED5 3y agoit's a pretty interesting paper, it probably answers your questions. paragraph preceding my last quote: In the US between 1956 and 1976, while the dollar depreciated by 17.8%, the real domestic cost of producing steel grew by 37%. Although steel had historically been a materials-intensive sector, by 1956 in the US, labor and materials each accounted for about the same share of unit input costs. Each also grew in real terms by roughly the same rate from 1956 to 1976: unit labor costs by 35% and unit material costs by 38%. Each therefore made like contributions to a loss in US comparative advantage in steelmaking. The main reason for the rise in unit material costs was a 48% increase of the real price of iron ore and (with our 1976 end date falling in the aftermath of the 1973 oil price shock) a near dou- bling of the real price of coke.
- jmclnx 3y ago>The American steel industry responded to the rise of foreign producers not by trying to improve their operations, but by demanding government protection from “unfair” foreign trade practices I remember this happening in school. Plus the teacher of a class (70s) I was in blamed the Steel Problems on the Marshall Plan. Until I saw this article I believed that. Now I know it seems to point to the usual US trend of profits before anything else.
- aslgbb 3y agoTicker symbol is "X". I wonder who gets that when US Steel is no longer traded . . .
- yreg 3y agoI jokingly discussed with friends that we have to buy some when Elon renamed Twitter with the idea that people are going to invest thinking it's Elon's X. Not sure if that happened but the stock went up quite a bit since then.
- daniel-cussen 3y ago[dead]