Wednesday, September 2, 2015

The Fish That Ate The Whale

Who knew the banana could be so interesting? Well, not the banana itself, but the business conditions surrounding its introduction to the US. Rich Cohen takes us through the story in The Fish That Ate The Whale, with a particular emphasis on one incredible entrepreneur, Sam Zemurray.

Bananas were a luxury product in the US in the late 1800's, as they could not be transported from their warmer growing areas before over-ripening. That changed with the advent of the steam engine, and the race was on among American entrepreneurs to bring the product to grocery store shelves in the most efficient manner. As is the case in most industries from early-phase to mature, hundreds of companies were whittled down (through bankruptcies, buyouts etc) to just a few. One company, United Fruit, came to dominate the market after a couple of decades, keeping the remaining competitors around just to avoid being the subject of anti-trust legislation.

Enter Zemurray, a Russian immigrant with nothing to his name. With meager savings from his blue-collar job, he started buying the bananas at the import docks that United Fruit was discarding. These had arrived too ripe or damaged, and would further damage the rest of the load on the train rides throughout the country. Zemurray would sell them locally, to make good money for himself, but not enough to interest United Fruit.

Soon, he was buying all of the discards and then some. He would order them by their ripeness, load them onto a rented train-car and sell them town-by-town from right on the tracks to store owners looking for bargains. He grew his business from there and eventually went on to compete with United Fruit.

This was an excellent book. I love when books go into details about why one business outperforms another. Often, readers are given some narrative about how employees cared more or how one leader was better...blah blah blah. Cohen actually dives deep into the business details to tell us specifically how Zemurray's business became more efficient than United Fruit's.

But that isn't the only strength of the book. Cohen also dives deep into the political story behind these banana companies. These companies were at war with each other, and often at war with the South American governments which they often had to bribe, pay taxes to, or otherwise overthrow!

There are also some great lessons here for aspiring entrepreneurs. Just because a company is big, doesn't mean you can't compete with it. Zemurray segmented United Fruit's customers by geography. Why would a retailer that's nearby the shipping dock have to pay prices for the bananas as if they had to be shipped to some distribution centre and then shipped all the way back? Segmenting can reveal customers that are not being adequately served by an incumbent.

Zemurray then dominated the niche he segmented, and used the scale from that domination to grow the next beachhead, namely planting his own bananas in Honduras. Becoming the dominant business in a niche leads to its own scale advantages.

I highly recommend the book to anyone interested in business.


juan said...

Thanks for the review, Saj.
Sounds great - I'll read it.

juan said...

I just finished it, and it was quite good. Thanks for the recommendation.