11 December, 2016 Copenhagen
Carl Frederik Tietgen was probably the most important person in the industrialisation of Denmark. He was born in Odense in the middle of Denmark in 1829. As a young man he travelled to Manchester at a time when Britain was more industrialised than any other country, and Manchester was at the heart of the Second Industrial Revolution – The Technological Revolution. It had a richly developed railway system, it had several modern banks, and the Manchester School called for liberalism and free trade. The saying went: “What Manchester does today, the rest of the world does tomorrow”. For Tietgen (and Denmark) this was certainly the case, since he took a lot of inspiration with him home.
A few years after Tietgen came back to Denmark and settled in Copenhagen he became in 1857 at the age of 28 the managing director (CEO) of Privatbanken – the first privately run modern bank in Denmark. This was the year that liberalism was victorious in Denmark with the abolishment of the Sound Toll and with the introduction of a law which prohibited the old guilds. Since there was little regulation capitalism could rule almost without limitations. Tietgen took advantage of that.
Having impressed the supervisory board of Privatbanken with his skills, he quickly changed the bank from being a conservative deposit bank to a modern investment bank. Most of in the investments was made in companies that Tietgen founded. Tietgen did not bring the Technological Revolution to Denmark, but he made sure that the new technology became good business. The way he did this was with mergers and by creating the first modern share holding companies in Denmark.
One of his first companies was DFDS (Det Forenede Damskibs-Selskab/The United Steamship Company). Steam power was one of the important factors of the Industrial Revolution. And the steamships revolutionised shipping. Speed and regularity was greatly improved. This was enhanced with the arrival of the screw propeller in the middle of the 19th century. The two great steamship pioneers in Denmark were H.P. Prior and C.P.A. Koch. While Prior’s ships sailed to and from Danish harbours, Koch’s ships went abroad. Both were in need of capital, and this point Tietgen (and Privatbanken) saw his chance. The result was the establishment of the share holding company DFDS. Tietgen himself became chairman of the board, while Prior became director of the domestic traffic and Koch became director of the foreign traffic which went to most of Northern Europe. Later most of the other steamship companies joined DFDS which almost had a monopoly in the steamship business in Denmark.
This was a very typical way Tietgen acted. By merging similar companies he took advantage of economies of scale. In the beginning most of his companies were in infrastructure and communications. He founded or reorganised Copenhagen Tram Company, Svitzers Salvaging Company, Thingvalla Line (later incorporated in DFDS), The Great Northern Telegraph Company (GN Store Nord), and Copenhagen Telephone Company (KTAS). Most of them established by mergers and as shareholding companies with him as a chairman of the board.
Tietgen was a networker who took advantage of his network of powerful and influential people. Most of the board members of the new companies where people he knew very well, a lot of them sat in several of the boards, and some of them were even members of the board at Privatbanken. At the same time he had the necessary capital as he was the managing director of Privatbanken. When Tietgen approached the companies he wanted to merge, it was difficult resist.
In general the members of the boards were established and experienced people. However to run the companies he employed experts who knew how to take advantage of the new technology. Almost all of his companies were results of the technological revolution.
He was in many ways a modern business leader combining horizontal and vertical integration. The horizontal integration he achieved by merging companies creating monopoly-like companies. Tietgen called them rings. Looking at the companies he founded, the vertical integration, where he controlled most of the supply chain, is also clear. For example he reorganised the machine and shipbuilding company Burmeister & Wain (B&W), to be able build the ships needed for his shipping companies. Besides people, the ships also brought something else with them - food. And after the infrastructure companies he founded foodstuff companies – sugar, beer, and alcohol.
Tietgen was admired, envied, and feared. He was in his own time called the Great Mogul. There was a saying: "When Tietgen speaks, the country listens". He is widely considered to be the most important person of the industrialisation of Denmark, of the development of modern banking, and introduction of shareholding companies.