Business Model of American Whaling Industry

choi

The first venture capitalists | Fin-Tech; Before there were tech startups, there was whaling. Economist, Jan 2, 2015.
http://www.economist.com/news/fi ... as-whaling-fin-tech

Note:
(1) fin-tech = financial technology  (where the fin is pronounced the same as the organ of fish)

(2) "The last voyage of the Essex, which inspired Herman Melville’s classic, 'Moby Dick' * * * The ship left Nantucket in 1819 and sailed for over a year before being destroyed by a whale it was hunting. The 20 crew members survived the sinking, but found themselves adrift in the Pacific in three longboats, with little food and no water. Three opted to stay on a desert island, from which they were rescued three months later, on the verge of starvation."
(a) Essex (whaleship)
https://en.wikipedia.org/wiki/Essex_(whaleship)
("First mate Owen Chase and cabin boy Thomas Nickerson wrote accounts of their ordeal. Their accounts of the incident inspired Herman Melville to write his famous 1851 novel Moby-Dick")
(b) Herman Melville (1819-1891; Best known for his sea adventure Typee (1846) and his whaling novel Moby-Dick (1851))  en.wikipedia.org
(c) The Origin of the Name "Moby Dick."
http://www.melville.org/mobyname.htm
("The name of Melville's most famous creation was suggested by an article by Jeremiah Reynolds, published in the New York Knickerbocker Magazine in May 1839. Mocha Dick: or The White Whale of the Pacific recounted the capture of a giant white sperm whale that had become infamous among whalers for its violent attacks on ships and their crews. The meaning of the name itself is quite simple: the whale was often sighted in the vicinity of the island of Mocha, and 'Dick' was merely a generic name like 'Jack' or 'Tom' -- names of other deadly whales cited by Melville in Chapter 45 of Moby-Dick. * * * The transformation of 'Mocha' to 'Moby,' however, presents a greater mystery. Melville himself never explained the origin of the latter word")
(i)
(A) Mocha Island
https://en.wikipedia.org/wiki/Mocha_Island
(Spanish: Isla Mocha; The island is noted as the location of numerous historic shipwrecks)

Being Spanish, the "ch" in Mocha Island is pronounced the same as "ch" in church of English noun.
(B) Not to be confused with
Mocha coffee bean originally from Mocha, Yemen (where "ch" is pronounced "k").
(ii)
(A) knickerbockers (clothing)
https://en.wikipedia.org/wiki/Knickerbockers_(clothing)
(section 1 History: The name "Knickerbocker" first acquired meaning with Washington Irving's History of New York)
(B) knickerbockers (n; etymology: see Knickerbocker)
www.collinsdictionary.com/dictionary/english/knickerbockers
(C) The surname Knickerbocker: "Americanized spelling of the Dutch occupational name Knickerbacker ‘marble baker,’ ie, a baker of children’s clay marbles. This lowly occupation became synonymous with the patrician class in NYC through Washington Irving’s attribution of his History of New York (1809) to a fictitious author named Diedrich Knickerbocker. By the late 1850s the term had also come to denote a type of loose breeches gathered below the knee, evidently because of the resemblance of the garment to the breeches of the Dutchmen in Cruikshank’s illustrations to Irving’s book."
Dictionary of American Family Names, by Oxford University Press.

choi

(3) "The only reason that anyone could be induced to take part in such a dangerous business was the fabulous profit that could be made. Gideon Allen & Sons, a whaling syndicate based in New Bedford, Massachusetts, made returns of 60% a year during much of the 19th century by financing whaling voyages—perhaps the best performance of any firm in American history."
(a) New Bedford, Massachusetts
https://en.wikipedia.org/wiki/New_Bedford,_Massachusetts
("officially incorporated as the town of New Bedford in 1787. The name was suggested by the Russell family who were prominent citizens of the community. It comes from the fact that the Dukes of Bedford, a leading English aristocratic house, also bore the surname Russell. (Bedford, Massachusetts had already been incorporated by 1787; hence 'New' Bedford")
(b) The original Bedford:

Bedford
https://en.wikipedia.org/wiki/Bedford
(the county town of Bedfordshire)

(4) "The town’s [New Bedford's] whalers came to dominate the industry, and reap immense profits, thanks to a novel technology that remains relevant to this day. * * * they developed a new business model that was extremely effective at marshalling capital and skilled workers despite the immense risks involved for both. Whaling all but disappeared as an industry after mineral oil supplanted whale oil as a fuel."

whale oil
https://en.wikipedia.org/wiki/Whale_oil
(Early industrial societies used whale oil widely in oil lamps and to make soap and margarine)

Quote: "Whale oil was used as a cheap illuminant, though it gave off a strong odor when burnt and was not very popular. It was replaced in the late 19th century by cheaper, more efficient and longer lasting kerosene.

(5) "Most historians trace the origins of the modern company back to outfits like the Dutch East India Company and its British equivalent [East India Company (1600-1874)]. These were given national monopolies on trade in certain goods or with certain places. This legally buttressed status allowed them to fund themselves by selling shares to the public, helping to get stockmarkets off the ground.

Dutch East India Company (1602-1799; "the first multinational corporation in the world and it was the first company to issue stock")  en.wikipedia.org
(6) "The whaling industry involved a radically different approach [than East India Company]. It was one of the first to grapple with the difficulty of aligning incentives among owners, managers and employees, according to Tom Nicholas and Jonas Peter Akins of Harvard Business School. In this model, there was no state backing. * * * everyone was, financially at least, on board for the entire voyage."

Tom Nicholas and Jonas Peter Akins, Whaling Ventures, HBS Case Collection, October 2012 (revised December 2013).
www.hbs.edu/faculty/Pages/item.aspx?num=43322

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(7) "It also helped that they were open-minded: they readily employed anyone who could contribute to their ventures. Perhaps the single most important technological innovation used by New Bedford’s whaling fleet was the 'Temple Toggle,' a harpoon tip devised by Lewis Temple, a former slave from Virginia."

" 'Temple Toggle,' a harpoon tip devised by Lewis Temple"
(a) Immersion Camp 57 The Toggling Harpoon Head. YouTube.com, published by Madi Sussmann on Nov 11, 2013.
https://www.youtube.com/watch?v=QZu9AOvB5pc
("Roger Topp and Abel Hopson
2004 Immersion Camp: 57. The Toggling Harpoon Head Alaska's Digital Archives, University of Alaska Museum of the North, Fairbanks, Alaska
http://vilda.alaska.edu/cdm/sing ... cdmg3/id/322/rec/43
")
(b) toggle (n; "mid 18th century (originally in nautical use): of unknown origin"): (definition 1 with an illustration)
www.oxforddictionaries.com/definition/english/toggle
(c)
(i) Lewis Temple
https://en.wikipedia.org/wiki/Lewis_Temple
(1800-1854)
(ii) Toggle Irons. Whalecraft.net, undated (written and owned by Thomas G Lytle)
www.whalecraft.net/Toggle_Irons.html
("In 1848 Lewis Temple * * * made an improved toggle iron, and is generally given credit for the invention of the toggle iron. * * * One very early version of the Temple iron * * * [had] rear barb * * * [that]  was made with a sharpened top edge that would cut the grommet)

Quote: "Very soon Temple replaced the grommet by a small wood shear pin placed through holes drilled through the head and shaft. This wood pin held the head streamlined to the shaft for darting, and would not allow early toggling. After complete penetration when force of the running whale was applied to the whale line, the rear barb caught in the flesh or blubber and forced the toggle head open. The wood pin holding the head iTemple Iron Toggledn place sheared allowing the head to toggle open. This final design is the one for which Lewis Temple is famous. It was known as Temple's gig, or more commonly as the Temple iron. It retained the feature of the front barb and rear barb. In fact, later improvements [by other people] retained the double barb configuration and the wood shear pin. This became the industry standard for whaling harpoons.
(iii) Lewis Temple’s Real Innovation. New Bedford Whaling Museum, undated
http://www.whalingmuseum.org/learn/lewis-temple
("Blubber is excessively tough material filled with interlocking tendons and if the toggle iron opened under the blubber layer the harpoon could not pull free, it was locked in place.  By the 1850s blacksmiths all over New Bedford were replicating these Temple toggle irons")

There is no need to read the rest of (iii) and the next, which is (iv).
(iv) Temple Toggle Iron. Smithsonian Institution, undated (under the heading “on the Water”)
http://americanhistory.si.edu/on ... ion/TR_330535A.html
(ID Number:TR*330535A, Date: ca 1859: "Unfortunately, Temple never patented his idea, which swiftly achieved widespread application throughout the world's whale fisheries. He died in May 1854, unrecognized and in debt")

(8) "But the whalers’ main asset was their business model. In the 1830s, the legislatures of six American states approved charters for whaling corporations giving them the right to raise capital by selling shares to the public—much the same corporate structure as the Dutch and British East India Companies. None of the six survived the 1840s. 'The diffuse ownership structure of the corporations, and the reduced stakes held by their managers, likely diminished the incentives for the managers to perform their role diligently,' concludes Eric Hilt of Wellesley College. Given the expense of buying, outfitting and launching a boat into the perilous ocean, the link between risk and reward needed, it seems, to be tighter."

In scientific experiments, one needs a control, and this paragraph serves that purpose.