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Dynamic Economic Decision Making: Strategies for Financial Risk, Capital Markets, and Monetary Policy by JOHN E. SILVIA

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Chapter 8

Strategy, Risk, Uncertainty, and the Role of Information

The builders of the Transcontinental Railroad in the 1860s faced a trio of strategy challenges that can serve as a framework for thinking about strategy today. First, there was the immediate problem of planning and provisioning for the next day to be sure the men, horses, and supplies are all ready to lay down track. Second, alternative paths needed to be explored by the scouts and surveyors who would decide the path for the railroad over the vast Western landscape. Finally, there was the strategic vision of the California Big Four, Abraham Lincoln, Doc Durant, Grenville Dodge, and Theodore Judah.

The day-by-day decisions of how the railroad was built fell to the workers, many of who were Chinese who spoke very little English, and to the road bosses. Their job was extending the end of the line by another mile each day, and often by several miles each day. When they finished at the end of the day, surveyors and construction and supply managers came into camp each night, and looked over the horizon and planned the road for the next day. For the Union Pacific, the team work bosses were men like Jack and Dan Casement, each a general during the Civil War and now the heads of the construction crews on the line. Financial support came from Doc Durant, a financier from Wall Street, and Oakes and Oliver Ames: Oakes a congressman from Massachusetts and Oliver the acting president of Union Pacific. Grenville Dodge, a former ...

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