Aspire | Action | Acquire
Aspire | Action | Acquire

Changing the Guard

The first Waldorf-Astoria, upon which the two Astor mansions had sat side-by-side, faced the wrecking ball in 1930 to make way for the Empire State Building. Built at the onset of the Great Depression, the Empire State Building became known as the “Empty State Building”. The du Pont family cousins, Pierre S and T Coleman, led a consortium of investors to finance its building.

The Empire State Building did not become profitable until it was acquired by Henry Crown (1896-1990) twenty years after construction. On land purchased from Vanderbilt’s New York Central Railroad the gregarious Coleman du Pont would also own and co-manage the second Waldorf-Astoria from 1931-1947 up until its purchase by Conrad Hilton. When Hilton purchased the hotel, with funding from Henry Crown, the link between two branches of the Astor families was further severed by removing the hyphen between the two names.

Conrad Hilton went on to establish a chain of hotels across the US and across the world. The emergence of hotel chains, as well as drive-thru restaurants, drive-in movies and the like are examples of intra-cycle waves of economic activity that arise from major transformative stimuli. In the early twentieth century the major transformative stimuli were the automobile and electricity followed by telephony. Ironically, hotel chains replaced the very style of home lodging accommodation that Airbnb has, after several unsuccessful attempts, has popularised.

Six years before buying into the Waldorf-Astoria in 1943, Conrad Hilton purchased the management rights to the famous Plaza Hotel.  There was concern amongst the old wealth, who frequented the Plaza that their decaying hotel, constructed in 1890, would go the way of their decaying world. The old wealth included generations of Astors and Vanderbilts.[1] It wasn’t only hotel patronage that was coming under pressure of new entrants.

In the 1930s chain stores began displacing traditional family owned stores along the Main Street. These chains, which accounted for around one-fifth of retail business across America, owed their allegiance “not to any citizen of the town, but to an office in a city hundreds or even thousands of miles away.”[2] In turn, an ambitious retailer, Sam Walton, took the same concept to smaller towns in which the larger chain stores thought too small to open.

Told by Sam Walton, long established storekeepers closed their doors, unable to compete, causing critics to bemoan the vanishing character of America’s small towns[3]. Victory was not readily won. Walton wrote of arrogant big vendors (gatekeepers) unwilling to call on his stores. As a consequence of their ignorance, Wal-Mart built their own competitor beating distribution system[4]. In short, Walmart became the American retail industry’s biggest gatekeeper. Today, online retailer, Amazon, competes with Walmart’s distribution efficiency.

Similar to the demise of “five and dime” chains, the emergence of fast food retailing displaced incumbents. In his autobiography, the late co-founder of Burger King, Jim McLamore, described the failure of old players to adapt. The car-oriented food chains swept them away. The Howard Johnson Company, which had commanded over 800 full-service restaurants across America in the late 1960s, is one example cited. “What had worked so well for them in the thirties, forties, and fifties, was no longer acceptable in a changing market.”[5]

Today’s gatekeepers, first coined the “frightful five[6]” by a journalist at The New York Times, are Amazon, Apple, Facebook, Google, and Microsoft. To these we could add Twitter and specialist industry gatekeepers like Airbnb, eBay, Expedia, LinkedIn, Netflix, PayPal, Spotify, and Uber. As gatekeepers they own the customer-to-supplier routes to information, products, services, and payment facilitation.

[1] J. Randy Taraborrelli, The Hiltons: The True Story of an American Dynasty (New York: Grand Central Publishing, 2015), 80.

[2] Stiles, T. J. The First Tycoon: The Epic Life of Cornelius Vanderbilt. New York: Vintage Books, (2010), 326.

[3] Martin S. Fridson, How to be a Billionaire: Proven Strategies From the Titans of Wealth (New York: Wiley, 2001), 64.

[4] Sam Walton, and John Huey, Made in America: My Story (New York: Bantam Books, 1992), 235.

[5] Jim W. McLamore, The Burger King: Jim McLamore and the Building of an Empire (New York: McGraw-Hill, 1998), 109.

[6] Farhood Manjoo, “Tech’s Frightful Five Will Dominate Digital Life for Foreseeable Future,” New York Times. (2016),