This Day in Business History (Birth of Sumner Redstone, ‘Relentless' Media Empire-Builder)

May 27, 1923— Sumner Redstone, who used his brilliant intellect and self-described “passion to win” to become an envied, feared, often toxic media-entertainment mogul, was born in humble origins in Boston.

Just as Orson Welles and co-screenwriter Herman Mankiewicz interspersed episodes in the lives of Samuel Insull and Joseph Pulitzer to augment their thinly veiled portrayal of William Randolph Hearst in Citizen Kane, so have the creators of Succession used tales surrounding Redstone and Donald Trump to bolster their Rupert Murdoch-based depiction of Logan Roy.

Unlike Murdoch or Trump, but like Logan Roy, Redstone not only grew up in a lower-class neighborhood but briefly lived in a house with no inside bathroom.

Like Murdoch and the fictional Roy, Redstone had seemingly groomed younger people (including his children) to take over from him, only, in his 70s and even 80s, to dismiss them with little to no warning.

Far more than Trump and even Murdoch, he left rivals alternately worried and fuming about his next negotiating gambit, leading Barry Reardon, a distribution executive at rival studio Warner Brothers, to moan to Premiere Magazine in 1994: "Being a competitor of Sumner Redstone’s is a fate worse than death. He never lets up. He’s relentless.”

Redstone's corporate buccaneering amassed a fortune that enabled him to control, at one time or another, CBS, the Paramount film and television studios, the publisher Simon & Schuster, the video retail giant Blockbuster and a host of cable channels, including MTV, Comedy Central and Nickelodeon.

And, in a way it has not yet become painfully obvious for Trump or Murdoch, debility at the end of his life exposed Redstone’s troubled relationship with a daughter he had teased with the prospect of succeeding him.

The driving force behind Succession might be the same joke used by Murdoch and Redstone as octogenarians: that they had no intention of ever dying. That disbelief in the iron law of mortality underlies the power struggle in both the series and the lives of Sumner and Shari Redstone.

In his appearance and conversation, Redstone worked overtime to counter any impression that the years had diminished his faculties. He dyed his hair red, bragged to talk-show host Larry King in 2009 that he had “the vital statistics of a 20-year-old,” and even lied about his age (lopping off 20 years).

Perhaps as much to persuade himself as King’s millions of viewers, Redstone continued: “Even 20-year-old men get older. Not me. My doctor says I’m the only man who’s reversed it. I eat and drink every antioxidant known to man. I exercise 50 minutes every day.”

At the time of the King interview, it was already apparent to Daily Beast editor at large Lloyd Grove, that Redstone was less like a 20-year-old than like King Lear: “With his empire crumbling, his family fractured, his legacy in doubt, and his grasp of the true nature of his predicament not immediately evident, Redstone resembles a modern-day version of Shakespeare’s tragic hero.”

By the middle of the next decade, charges that Redstone was no longer competent to run his affairs—let alone his company’s—had burst into public view, courtesy of litigation by Shari—though Sumner would hang on, a hideous husk of his former self, until he was 97.

At the time of Redstone’s death in August 2020, his story as a self-made man led many, even among the overwhelmingly liberal reading audience of The New York Times, to overlook the gamier aspects of his life.

And indeed, there is much to admire in a man who took the modest perch provided by his father (who himself rose from linoleum peddler to owner of a small chain of drive-in theaters) and graduated first in his class at Boston Latin, the city’s leading public school; went to Harvard on a scholarship; cracked Japanese military and diplomatic codes as part of a team of cryptographers in WWII; became partner in a leading DC law firm after the war; then abandoned all that to begin building a series of holdings that would eventually be valued at more than $80 billion.

But the window that began to open up in the last decade of Redstone’s life revealed after his death “an astonishing saga of sex, lies, and betrayal,” according to Unscripted: The Epic Battle for a Media Empire and the Redstone Family Legacy, by New York Times journalists James Stewart and Rachel Abrams.

According to this account, Redstone:

* spent $500,000 promoting the Electric Barbarellas, a talentless all-girl band;

* amended his trust more than 40 times to add or remove beneficiaries;

* dated women who became increasingly younger as he aged;

* sent a flight attendant he was pursuing a crystal‑encrusted handbag in the shape of a panther, along with the (surely redundant) note, “I’m a panther and I’m going to pounce”;

* reportedly tried to date grandson Brandon Korff’s girlfriends, annoying the 25-year-old so much that he sought out TV’s “Millionaire Matchmaker” Patti Stanger to find a companion for the lecherous old man—a move that backfired when that companion, Sydney Holland, and another Redstone girlfriend siphoned off $150 million from the increasingly senile businessman before being ushered out of his life at last;

* badmouthed Shari for so long that she was ignored when she warned about the perilous course set by Viacom CEO Phillipe Dauman, and wrestled with CBS CEO Leslie Moonves for control of National Amusements, the entity owned by Sumner and Shari.

If Sumner Redstone’s empire had been built by his personal tenacity (he survived a Boston hotel fire by hanging off a window ledge, leaving a hand maimed for the remaining 40 years of his life), it teetered at the end of his long life because of his toxicity. 

His wealth and position couldn’t disguise the fact that he had degenerated into a dirty old man, endangering the sprawling conglomerate he had built over a lifetime through his personal caprice and the maddeningly complex corporate structure that had allowed him to operate for so long without contradiction by those who worked for him.

(That structure was analyzed in 2018, at the height of the Redstone family litigation over CBS and Viacom, by Eduardo Gentil, on the Website of Cambridge Family Enterprise Group.)

The attached image of Sumner Redstone is from Kingkongphoto & www.celebrity-photos.com from Laurel Maryland, USA; © copyright John Mathew Smith 2001.

This Day in Business History (James Rouse, Mall Pioneer and Urban Advocate, Dies)

Apr. 8, 1996—James W. Rouse, a developer who experimented with food uses, emerging tenants and community-based design to transform how Americans shopped and lived, died at age 81 of Lou Gehrig’s disease in Columbia, MD, a city he had helped bring into being.

Starting the company he would lead for four decades as a small mortgage banking concern in 1939, Rouse returned from WWII service to broaden his operations to include single-family dwellings, then apartment complexes and open-air (originally called “strip”) shopping centers, and finally, with Harundale Mall, enclosed, climate-controlled regional centers.

Part of that first postwar generation of mall developers, he differentiated himself from most because of his intense civic activism, particularly in evangelizing against suburban sprawl and for urban spaces born of a centralized operating vision.

Among other honors, Rouse made the cover of Time in 1981 and was awarded the Presidential Medal of Freedom. How many others who influenced urban planning could make a similar claim?

Film fans might recognize Rouse for a piece of trivia: as the grandfather of actor Edward Norton. But his impact on modern life was significant. Particularly in a commercial real estate industry centered on the present, it is worthwhile to recall how his methods might help shopping centers deal with their current substantial challenges.

Lessons to be drawn from these methods are simple:

*Try something out first on a small scale, locally;

*Figure out why this experiment worked or didn’t;

*See how that experiment might be adapted to other unique settings; and

*The private sector can  produce projects for the public good.

Rouse thought long and hard not just about how to lure people to malls but also how to bring them together in small groups once they got there. A great example was Paramus Park, not far from where I live in Bergen County, NJ.

It’s hard to convey to later generations who grew up with malls the impact of this project when it opened in 1974. Start with its food court, which allowed families weary from shopping to pause, recharge over a meal, and extend their stay, perhaps visiting more stores where they might spend more money.

That innovation was the product of trial and error at another Rouse mall, Plymouth Meeting Mall in Pennsylvania. According to an Edmund Mander article in the May 2004 issue of Shopping Centers Today, that attempt at open food areas failed because it was “deemed too small and insufficiently varied.”

Those mistakes were fixed in the New Jersey project. And locating the food upstairs meant that shoppers would have to notice a whole new set of stores on this second level.

Moreover, these shoppers also gazed raptly at what appeared on either side of the escalator—live trees and terraced gardens—and the sound of the piece de resistance, a waterfall that provided a natural acoustic backdrop to what was actually an artificial indoor setting.

The features of Paramus Park were widely incorporated in malls from coast to coast. Food courts particularly became a teen hangout, reaching a cultural apotheosis of sorts in the 1982 film Fast Times at Ridgemont Hall, whose characters worked and congregated there, in effect treating it as an adult-free zone.

As with Paramus Park, Faneuil Hall Marketplace in Boston resulted from improvisation. When it opened in August 1976, only half its tenants had been signed and an even smaller number—one-quarter—of its stalls were occupied.

What could have been a ruinous first impression for shoppers was obscured by numerous carts featuring unusual merchandise. The merchants behind these carts might have been reluctant to sign long-term leases but were more willing to try short-term rental agreements.

These pushcarts—incubators of the small businesses Rouse desired in his project—formed the foundation of temporary tenant (or, as they were later called, specialty leasing) programs at malls.

The distinction of Faneuil Hall didn’t stop there. It is regarded as the first of the “festival marketplaces” that would soon be built around the country—European-style retail emporiums built in urban areas (often near waterways) and catering to tourists. Rouse would import the concept to Baltimore (Harborplace), New York City (South Street Seaport), Norfolk (Waterside), and Miami (Bayside Marketplace).

Like Victor Gruen, the architect of Southdale, America’s first enclosed, climate-controlled mall, Rouse quickly became concerned by what he saw as the problems emanating from the new commercial behemoths following in its wake, noting:

"Our cities grow by sheer chance--by accident….A farm is sold and begins raising houses instead of potatoes--then another farm. Forests are cut; valleys are filled; streams are buried in storm sewers....Thus, bits and pieces of a city are splattered across the landscape. By this irrational process, non-communities are born--formless places without order, beauty or reason, places with no visible respect for people or the land. Thousands of small, separate decisions made with little or no relationship to one another, nor to their composite impact, produce a major decision about the future of our cities and our civilization--a decision we have come to label 'suburban sprawl.' What nonsense this is! What reckless, irresponsible dissipation of nature's endowment and of man's hope for dignity, beauty, growth!”

Though blunt about this increasing reality, Rouse was also ultimately optimistic about what could be done to counteract it, as seen in the title of the October 1967 speech in San Juan, Puerto Rico, from which this quote is taken: “Cities That Work for Man–Victory Ahead.”

Just as the specialty leasing program at Faneuil Hall served as a kind of laboratory for new retail concepts, Columbia, MD became a petri dish for Rouse’s ideas on urban revitalization. Opened the summer before his San Juan address, it represented his attempt, as noted in Jimmy Stamp’s 2014 Smithsonian Magazine article on Rouse, to create “a culturally diverse, integrated city where kids walked to school and the office was just a quick bus ride away.”

By the early 1990s, many developers recognized that malls were becoming increasingly homogeneous. Much of that had to do with how quickly the industry adopted Rouse’s innovations.

But Rouse was so restlessly intelligent—so able to improvise a solution to a problem—that I suspect that, had he continued to stay active in retail real estate instead of stepping down as CEO of The Rouse Company in 1984, he would have come up with more ideas that would have broken the increasingly cookie-cutter mold into which malls had settled.

Since the 1950s, The Rouse Company had been publicly traded, and for that reason its founder often told employees, “We're for sale every day."

But two years after his death, when the company formed a real estate investment trust (REIT), it opened itself up to the competitive pressures that hastened consolidation of ownership among the nation’s regional and superregional malls around the millennium. It ended up being sold in 2004 to Chicago-based General Growth Properties (which itself would be acquired by Brookfield Property Partners 14 years later).

No matter how malls emerge from the crisis hastened by the current pandemic and recession, they will undoubtedly move away from the commodity-centric markets of the postwar development boom to James Rouse’s vision of thriving civic anchors filled with enticing food fare, entertaining, experiential spaces and community institutions such as libraries, post offices, fountains, and churches. They will embody his simple, consistent message: avoid sterility and promote vitality.

This Day in Business History (Apple’s Jobs Launches iPhone)

Jan. 9, 2007—In what is often considered the biggest keynote presentation in his legendary career, Apple CEO Steve Jobs introduced to the world the iPhone, a product that not only outsold competitive products but, by obliterating the assumptions behind those rival items, made his own company the trendsetter for years to come.

At the same time, in announcing that the company he had co-founded was changing its name from Apple Computers to Apple Inc., he was signaling its transition from a computer company to a consumer products behemoth.

The momentum from the iPhone also catapulted Apple into position as the most valuable company in the world, including twice reporting the largest quarterly profits of all time. (That streak of growth ended, of course, with the news last week that the company had missed its internal sales and profit targets for the first time in a decade.)

Jobs disdained competitive products, complaining to associates about how bad they were and thinking out loud about favorite features they would like to see in phones of their own. Moreover, the Apple head scorned the stylus used, for instance, in the BlackBerry. When the iPhone made its debut, it decimated these products and features, in much the way that the digital revolution (including Apple’s iPod and iTunes) brought about the decline of the compact disk.

“I actually started on the tablet first,” Jobs recalled at the D8 Conference in June 2010. “I had this idea of being able to get rid of the keyboard, type on a multi-touch glass display. And I asked our folks, could we come up with a multi-touch display that I could rest my hands on, and actually type on. And about six months later, they called me in and showed me this prototype display. And it was amazing. This is in the early 2000s. And I gave it to one of our other, really brilliant UI [user interface] folks, and he called me back a few weeks later and he had inertial scrolling working and a few other things. I thought, My God, we could build a phone out of this. And I put the tablet project on the shelf, because the phone was more important. And we took the next several years, and did the iPhone.”

With a showman’s flair in San Francisco, Jobs alluded to two earlier revolutionary products produced by Apple, the Macintosh and the iPod, then rolled out the company’s current item—or items: “Today, we’re introducing three revolutionary products of this class. The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. And the third is a breakthrough Internet communications device….These are not three separate devices, this is one device, and we are calling it iPhone.”

As great as the effect of the iPhone was on the business world, it might have been even greater on society as a whole, not all of it welcome. Consider the following:

*Greater mobility and cross-use. The work that Apple was doing in creating the iPad fed into the iPhone. A user did not have to be at a desktop computer to access all the power of a conventional computer; he or she could be elsewhere.

*The rise of “the app.” “There’s an app for that” became a catchphrase. In the process, it spurred the development of an entire mini-industry.

*Smartphone addiction.  One of the major communications devices before the iPhone, the BlackBerry, had been nicknamed “the Crackberry” for how indispensable some found this combination of phone, personal digital assistant, and e-mail appliance. The iPhone was all this, and more—especially with its popular built-in camera. Users not only couldn’t dream of life without the smartphone, but would come close to heart attacks if anything happened to it.

*Superficial relationships. The ability to stay on top of everything all the time—to “multitask”—also fed into a culture of distraction. Rather than allowing people to concentrate on individual relationships,  the iPhone encouraged minds occupied with something else.

*Environmental waste. Older iPhones contained beryllium, benzene and n-hexene (linked to leukemia and nerve damage, respectively). Furthermore, the planned obsolescence of iPhones (a new version every year) works against its two-year carrier contracts. (For a more in-depth discussion of this range of issues, see this blog post from last year by Cody Medwechuk of Get Orchard.)

(The photo accompanying this post, taken by Matthew Yohe on June 8, 2010, shows Steve Jobs holding the iPhone 4 at the 2010 Worldwide Developers Conference.)

This Day in Business History (Death of Elizabeth Coleman White, Blueberry Lady of NJ)

November 27, 1954—Elizabeth Coleman White, who created an indelible but perfectly edible part of the Garden State by introducing the nation’s first cultivated blueberry, died at age 83 of cancer, on Whitesbog, the 3,000-acre family plantation in New Jersey’s Pinelands where she collaborated on her great boon for the state.

By 2007, New Jersey had harvested 54 million pounds of blueberries. But the multibillion-dollar industry would not have taken off without her dogged pursuit of what many believed impossible.

Today, blueberries come in two varieties, wild lowbush and highbush, with highbush outnumbering lowbush by more than 3 to 1. Before Ms. White began her research, however, no highbush blueberries were cultivated at all in the United States.

Long familiar with cranberry cultivation from helping father at Whitesbog, she turned her attention seriously to blueberries when she came across a 1911 U.S. Department of Agriculture report outlining botanist Frederick Coville’s theories on this.

Coville and White each possessed something the other lacked: he, a formal, extensive scientific and horticultural background; she, financing and a kind of field laboratory--the family plantation--where hypotheses could be formulated and experiments conducted. Soon, he accepted her invitation to come to Whitesbog to study the blueberry problem more intensively.

White’s tall figure became a familiar sight in the swampy areas around her home as she stopped to quiz woodsmen about everything they knew about the blueberry: plant vigor, resistance to cold and disease, flavor, texture, productivity and the time of ripening.

But "Miss Lizzie" didn’t stop there:

* She asked people to list wild bushes that contained the best berries in a 20-mile radius around Whitesbog.
* She provided incentives for reporting information to her by a) offering bounties from $1 to $3 each for marking the largest berry on each bush, and b) naming new varieties after these finders.
* She documented in detail the growth and character of each berry variety.

Coville used White’s field work to cross-fertilize varieties until he came up with a commercially viable blueberry in 1916.

Nor did White’s contribution to horticulture end there:

* She introduced cellophane to package blueberries for shipment to stores for sale.
* She helped establish the New Jersey Blueberry Cooperative in 1927.
* She rescued the native American holly—and where would we be in the holiday season without that?

Nancy O’Mallon has directed a 45-minute documentary on Ms. White, available on DVD, called The Mighty Humble Blueberry. You can see a portion of this on YouTube here.

This Day in Business History (Wall Street Experiences “The Great Crash”)

October 29, 1929—With a shuddering fall, the New York Stock Exchange concluded months of speculative frenzy—and strong signals that an abrupt correction was about to ensue—with a full-scale panic. With a record 16 million shares of stock sold, “The Street’s” tickers couldn’t keep pace with the ferocious trading volume.

More than two decades ago, in his memorable novel about a later “Master of the Universe” brought to heel, The Bonfire of the Vanities, Tom Wolfe caught the mania of 1980s speculation at its height with one telling sentence: “It was the sound of well-educated young white men baying for money on the bond market.”

Nearly 60 years before, that same almost animalistic scene was enacted, in a far more frightening fashion, by the disappearance of money. A security guard at the time, quoted in Robin Santos Doak’s Black Tuesday: Prelude to the Great Depression, recalled that traders "hollered and screamed, they clawed at one another's collars. It was like a bunch of crazy men. Every once in a while, when Radio or Steel or Auburn would take another tumble, you'd see some poor devil collapse and fall to the floor."

Black Tuesday brought America face to face with a decade of financial and moral carelessness. Payment was now due on the bill.

In the fall of 2008, the American media were awash with stories about similarities between the Crash of 1929 and the Crash of ’08. What’s remarkable in each instance is how few people who were supposed to know better—including Ben Bernanke of the Federal Reserve, supposedly an expert on the Great Depression—only realized the gravity of the situation when the crisis was upon them.

On March 25, 1929—exactly three weeks after the inauguration of Herbert Hoover as President—what the New York Daily News called a “selling avalanche” occurred, as margin calls wiped out the holdings of many investors, including neophytes to the markets. That should have been a yellow light that something was wrong with the economy. But two days later, the market’s decline was arrested, lowering people’s guards again.

In March 2008, the collapse of Bear Stearns should have served as a warning that major Wall Street institutions were shakier than thought. Again, however, many ignored the signs of the time.

In some respects, the months leading up to Black Tuesday were darkly comic. In what other light can you think of the following events:

* Early in 1929, an astrologer—a confidant not only to Hollywood stars like Charlie Chaplin but also financial types like J. P. Morgan—predicted a rising stock market.

* In August, a brokerage firm run by Michael Meehan opened an office aboard ocean liners, the better to allow passengers on their week-long cruises to Europe to buy and sell shares.(Just think: If sudden lurches on the ocean didn’t make them seasick, the convulsions of the stock market would do the job.)

* Even after the Great Crash, the need for illusion remained great. One post-Crash headline read, “Brokers Believe Worst is Over and Recommend Buying of Real Bargains.”

Did you catch Ron Chernow’s op-ed in The New York Times last week on The Great Crash? He notes that “the blatant stock market abuses were comprehensible to ordinary citizens, quite unlike the exotic credit derivatives and mortgage-backed securities that baffle us today.”

Well, I don’t know about that. If the Great Crash were so simple, why are economists still arguing over its causes? And why did it take so long (a full decade, until the start-up to World War II) to right the economic ship?

In recent years, it has become something of an intellectual fad to decry the “myth” of stockbrokers throwing themselves from buildings upon learning about the Great Crash. But it may be that there’s an underlying layer of truth to these persistent stories.

In this week’s American Experience special on The Crash of 1929, Craig Mitchell, son of National City Bank head Charles E. Mitchell, noted that “By noon on Black Thursday there had been eleven suicides of fairly prominent investors.”

Chernow’s article points out that financial reform of Wall Street following the ’08 crash has not started in earnest. True, but it even took awhile for the supposedly more clear-cut villains of the 1930s to be brought to justice. It should not surprise us that something similar could happen now.

This Day in Business History (“Empire Builder” Hill Forms Great Northern Railway)

September 16, 1889—On his 51st birthday, James J. Hill organized what he called “the great adventure” of his career, the Great Northern Railway—a mammoth enterprise that involved leasing the property of the St. Paul, Minneapolis and Manitoba for 999 years and taking over 2,700 miles of road. Meeting in New York, the directors of the Manitoba got the ball rolling with a $40 million stock issue.

Remarkably for the Gilded Age—or, indeed, our own—the building of this transcontinental railway was free of governmental subsidy, bankruptcy or scandal. It was not, however, as we shall see, free of controversy.

Hill liked to do things on a grand scale, brooking no deviation from his vision—something I found out several years ago on a visit to his mansion in St. Paul, Minn.

Though Lexuses rather than surreys pass down Summit Avenue these days, the Victorian boulevard remains the premiere address in Minnesota’s capital. Stately elms, leaded glass windows, and sturdy stone facades line both sides of its four-mile ascent.

And then your eye is caught—no, seized—by the James J. Hill House.

Perched on a bluff across the street from the Cathedral of St. Paul, the red sandstone mansion doesn’t startle or even awe so much as confront. Its several chimneys thrust imperiously skyward, and with 22 bedrooms it is still, more than a century after its construction, the largest residence in the state.

In spirit, the mansion embodies the boast about the transcontinental railroad its owner willed into being: “I’ve made my mark on the surface of the earth, and they can’t wipe it out.”

In American memory, James J. Hill has taken a back seat to other turn-of-the-century robber barons: Rockefeller, Carnegie, Morgan, and Frick. Yet Hill deserves to be better remembered—if not, perhaps, in the fashion he would have liked.

A Tycoon for Fitzgerald
His legacy is summed up in a vignette from The Great Gatsby, by F. Scott Fitzgerald—who, in his youth, lived down the street from Hill in a handsome if decidedly inferior brownstone. The novel’s Henry C. Gatz, “from a town in Minnesota,” mourns that his son James (who had shed his given name to assume the alias Jay Gatsby), had he not been murdered, would have “been a great man. A man like James J. Hill. He’d of helped build up the country.”

Fitzgerald’s contemporaries would have caught the paradoxical nature of his allusion. Indeed, if Fitzgerald’s novel is a fictional manifestation of the American Dream, then Hill’s life is a real-life version.

A penniless Canadian immigrant whose first job was as a “mudclerk” on the Mississippi, Hill lived to earn the nickname, “The Empire Builder of the Northwest.” The Great Northern Railway extended from St. Paul to Puget Sound, opening up thousands of acres in the West for settlement.

Hill angered many with his iron-fisted methods. A St. Paul paper’s support of a Populist-Democrat brought Hill to such a pitch of anger that he bought the paper just to change its policies. He ensured his company’s survival in the Panic of 1893 by laying off thousands of workers and cutting the pay of the survivors.

Not only hauling freight and people but selling rights to land adjoining the Great Northern, Hill maintained a virtual chokehold on rail traffic from Chicago to Seattle and provoked bitterness among his agricultural tenants. His creation, with archrival E.H. Harriman, of the Northern Securities holding company made him the first target for Theodore Roosevelt’s enormously popular foray into “trust-busting.”

The magnate’s iron will can be glimpsed in a painting in the house’s parlor. Though his right hand rests on a leg, his left hand clutches the chair, the better to propel himself toward his listener. A short beard and droopy moustache soften the expression of his mouth, and one eye is curiously vacant, the result of a childhood accident with a bow and arrow.

But a bright, unyielding flame emits from his one good eye—one that carefully measured the value of people, resources, and the finer things in life.

At a time when most homes on Summit Avenue were built for between $15,000 and $40,000, the final tally for Hill’s came to $931,275. Two years in construction, the site attracted hundreds of curious onlookers every day. When completed, the house comprised 36,000 square feet of interior space, 42 rooms, 13 bathrooms, and 22 fireplaces.

Nothing But “Good, Simple Louis XV” Style
Although he loved to show off his house (his magnificent art collection was open to the public in fair weather, by prior appointment with his secretary), Hill constantly feared that others would do him harm. His home’s “annunciator” system consisted of electrical contact alarms attached to basement doors and windows, as well as a collection of nearly 500 locks and keys. (Naturally, the keys for Hill’s room were labeled “1”.)

More than a century after its construction, Hill’s mansion continues to attract thousands of gawkers every year. For 53 years after the death of his wife Mary, the building was owned by the Roman Catholic Archdiocese of St. Paul. (Four Hill daughters bought the home back from the estate after their mother’s death, then willed it to the archdiocese—something, they believed, that would have appealed to their devout parent, who, like her husband, died without making out a will.)

In 1978, the archdiocese, no longer able to cope with the home’s high maintenance expenses, sold it to the Minnesota Historical Society, which continues to operate it. In 1961, the house was designated a National Historic Landmark.

The Summit Avenue estate was not the first Hill family residence in St. Paul, nor even necessarily the best architecturally. In their first years in St. Paul, the Hills had moved frequently, their size swelling in tandem with James’ fortunes.

From 1878 to 1891, it appeared that they had finally settled in at Ninth and Canadian Streets, in the Lowertown section of the city—a cheerful, Italianate structure with a mansard roof. But with typical lack of sentimentality, Hill had this home demolished after the move to Summit.

Hill proved equally impervious to the builders of his new trophy home. A Philadelphia firm’s plans for the mansion’s interiors set his teeth on edge. (“What I desired was good, simple Louis XV style (but) your design seems to be a hybrid between half a dozen styles,” he scoffed in a letter.) A famous Boston architectural firm, Peabody & Stearns, suffered an even greater indignity: dismissal for disregarding Hill’s orders.

Still, Hill yielded again to the advice of business associates to look eastward for a firm that would create a home befitting a captain of industry such as himself. Irving and Casson, another Boston firm, replaced Peabody and Stearns and hewed to Hill’s demands.

The result was a structure with comparatively subdued family rooms, but public space that piled on detail after detail. The first-floor entertainment room, for instance, contains lavish carving, rococo floral scrolls, neoclassical columns and pilasters, Islamic motifs, and Renaissance paneling.

The Master of the Universe, At Work and (Occasionally) At Ease
Although its grandiosity alternately evokes a fortress and a museum, Hill’s mansion also served as a family abode. The rise of Hill’s wife from humble origins was as marked as her husband’s, and she played a distinct role in running the house.

Like her husband, she was orphaned at age 14. Serving as a waitress in a St. Paul hotel, the pretty 17-year-old Mary Mahegan caught the eye of Hill, who was already earning a reputation as a young man to watch in St. Paul business circles. Before marrying him, however, Mary spent three years in a Milwaukee convent that served as a finishing school for Catholic girls, learning the etiquette necessary to assume the status she expected after matrimony.

The Hills children remained close to their parents into adulthood, with five eventually owning homes on Summit Avenue. Their father particularly respected the oldest, Lou, who succeeded him as president and chairman of the board of the Great Northern.

“If I had Lou to make over, I wouldn’t change a thing,” James once remarked. When Lou married and started a family, he built his home right next door.

The World Beyond His Doors
After his 70th birthday, with the Great Northern now run by Lou, Hill looked beyond the great enterprise of his life and toward affairs of the wider world.

Though not Catholic himself, he donated a half million dollars to build St. Paul Theological Seminary. (Typically, when his friend Archbishop John Ireland thought that two rooms per student were excessive, Hill snapped: “Two rooms or none, Archbishop. The choice is yours.”)

As World War I heated up, Hill helped President Woodrow Wilson arrange a loan to enable England and France to buy food, clothing, and provisions. The most visible monument to his philanthropy was the James J. Hill Reference Library in downtown St. Paul.

While his vision of a transcontinental railroad was achieved, Hill did not live to see the fulfillment of another dream. His lobbying for a free trade pact passed in Congress but stalled in the Canadian Parliament. It would take another 80 years for the North American Free Trade Agreement to be ratified in the U.S., Canada and Mexico—and even now, its effects, like its great advocate, remain a matter of contention.

Since Hill’s death in 1916, other business magnates have reaped millions, left much of their fortune to charity, or excited distrust. But few have left a more enduring imprint than Hill’s “mark upon the surface of the earth.”

This Day in Business History (Special Libraries Association Formed)

July 2, 1909—One of the unsung generators of the spectacular growth of American business in the 20th century, the Special Libraries Association, was established. The new organization elected as its president John Cotton Dana, who already had his hands full that year as director of the Newark Public Library and founding director of the Newark Museum.

When I tell people unfamiliar with the profession that I work in a special library, quizzical looks come over their faces. The best way to describe it—one conforming to the general outlines laid out by Dana a century ago—is that, unlike public and academic libraries, it exists for specialized audiences—businesses, associations, and legislatures, for instance.

If you want an idea of the kind of work that I and thousands of my colleagues perform every day, then rent from Blockbuster or Netflix the sparkling 1957 romantic comedy Desk Set, starring Spencer Tracy and Katharine Hepburn.

Sure, there’s one big difference between then and now—instead of gigantic electronic monstrosities that fill a huge part of a room and threaten to replace knowledge workers, there are now far smaller desktops or, God help us, laptops that are the essential part of our work.

But on the other hand, the situation has changed far less than one might think.

Librarians (I’m old-fashioned enough to prefer this term rather than “cybrarian” or “information scientist”) are still, like Hepburn and colleagues Joan Blondell, Dina Merrill and Sue Randall (all in the still accompanying this post), a bright, vivacious lot who are mentally agile enough to field a bewildering variety of crazy requests, often under the most stressful deadlines. They’re the best answer to the “Marian the Librarian” stereotype that has existed in the public mind for far too long.

Unfortunately, far too many still must contend with bosses outside the information science profession who may not always appreciate what their work involves day to day and, thus, blithely create situations that badly serve librarians and even their own companies.

Most economists and politicians, when asked what the phrase “Bretton Woods” means, will tell you that it refers to the postwar system of international free trade that took its cue from the U.S. That system took its name from the conference of economic aides of the Allied Powers in this small New Hampshire community in 1944.

But 35 years earlier, this same rural New England community had a similar large impact on information science. There, Dana and 25 other librarians gathered on the veranda of the Mt. Washington Hotel to exchange ideas about their jobs.

Carol Duncan, a professor emeritus of art history at Ramapo College in New Jersey, has a new book out called "How to Have A Museum With Brains": John Cotton Dana and the Making of A Democratic Culture in America (Periscope, 2009). The subject matter—how Dana’s life work figured into the larger meaning of the Progressive Era—sounds fascinating, and I hope to get around to the book before long.

A news release discussing a speaking appearance by Duncan indicates that, at least on some points, she regards Dana as an “ideologue who advanced upper-class agendas.”

That may well be so. Yet for the first three decades of the 20th century, Dana was also instrumental in opening up libraries in a way they never had before to swelling immigrant populations. Moreover, in ways the larger public can barely appreciate even now, he made libraries essential in advancing the worldwide spread of American business in the first half of the 20th century.

How? Because 20th-century businesses, in ways only dimly understood by much of the public, came to rely as much on information as much as on ready capital to size up changing demographic conditions, to create new processes to meet these demands, and to gather competitive intelligence that would allow it to stay ahead of rivals.

For instance, let’s say you’re investigating where to open a new unit of your business. You need maps to help you find nearby highways that have the traffic you need, transportation routes, water supply lines, even sewage equipment. You’d also want statistics to help you determine if the area you’re studying is growing or declining, as well as what kind of products consumers are buying.

Information has become as much the coin of the realm in business as the dollar. To persuade multiple actors who are pivotal in moving an enterprise forward—corporate executives, town leaders, the community—you need facts, amply and persuasively documented. That’s where special libraries come in.

The central importance of librarians in this process would have immensely pleased Dana. One of his quotes is one that I and so many others in my field aspire to daily, despite never-ending challenges: "For over twenty years I have found that I leave my library with regret, however long the day has been, and return to it always with delight."

This Day in Business History (Nicholas Biddle, Prototype of the Reviled Central Banker, Dies)

February 27, 1844—Nicholas Biddle, who, as head of the Second Bank of the United States, was once the most important financial official in the antebellum republic, died in disgrace at age 58, his fortune lost and saved from jail by a technicality.

I touched briefly on the Second Bank in my post on Henry Clay’s censure resolution against Andrew Jackson, which had been prompted by the President’s war against that financial institution. But Biddle’s story deserves further exploration.

The go-go years of Wall Street that have so recently and painfully ended didn’t begin with the Reagan Revolution, nor even with the bull market that ended with the Great Depression.

If you want a prototype of the wunderkinds who long ruled The Street before they fell to earth, look no further than to this scion of a famous Philadelphia family, who for a decade bestrode America’s business and political landscape before running into a figure with a will that exceeded his own—Jackson.

Nowadays, Biddle is far less well-known than the mastermind behind the First Bank of the United States, Alexander Hamilton. I don’t think that is because of the precedents set by Hamilton, his part in founding the republic, his epic clash with Thomas Jefferson, or even his tragic duel with Aaron Burr.

More important, Hamilton left behind institutions and a philosophy that have endured. As Gordon S. Wood, the colonial historian, noted in Revolutionary Characters: What Made the Founders Different, the republic we live in today—one with a powerful military, backed by high finance—is preeminently the one envisioned by Hamilton. 

On the other hand, Biddle was so utterly crushed, both by Jackson and his own folly, that, for all his manifest gifts, he left no historical footprint like Washington’s great Secretary of the Treasury.

To be sure, the two men possessed an enormous amount in common. That propelled both men to the top, where they encountered a host of enemies.

But it’s the difference between them—integrity—that has made the difference in how they are remembered. In history as in life, character counts.

Through much of his career, Biddle matched Hamilton in precocity, intellect, ambition, literary flair—and, finally, political recklessness. Consider the following similarities:

* Promise at a young age—Hamilton came to the attention of elders through his work as a sharp-eyed shipping clerk in the West Indies; Biddle enrolled at the University of Pennsylvania at age 10, then, when that school balked at graduating him quickly, he moved on to the College of New Jersey (now Princeton University), where he spoke as valedictorian of the class of 1801, at age 15.

* Son-in-laws of wealthy men—Hamilton married a daughter of wealthy upstate aristocrat and Revolutionary War General Philip Schuyler; Biddle, who, coming from a prominent old Philadelphia Quaker family, did not need the social connections as much as the up-from-nowhere Hamilton, still managed to do well by wedding the daughter of a wealthy Philadelphia merchant named John Craig.

* Personal magnetism—Neither man was particularly tall but struck all who met them with their conviviality and good looks. Hamilton had such an eye for the ladies as a dashing young officer that Martha Washington called her tomcat “Alexander Hamilton”; Biddle made his own vivid impression with his chestnut hair, flashing eyes and fair complexion.

* Writing talent—Though he died before his 50th birthday, Hamilton wrote so much that his collected papers number 27 volumes. Biddle’s public life began with a well-received history of the Lewis and Clark expedition, and he served as an editor of the literary journal Portfolio.

* Protégé of a President—At least partly through their writing skill, both men came to the attention of influential mentors. Hamilton served on the staff of General George Washington in the American Revolution, then kept his chief’s loyalty when his plans as Secretary of the Treasury came under attack by Thomas Jefferson. James Monroe, who as American envoy to Great Britain became impressed by Biddle’s skill as his secretary, saw in him someone who could keep a steady hand on the Second Bank of the United States, nominating him as a director. (Having destroyed Hamilton’s bank, the Democratic-Republicans rued their folly when they had no major financial institution with which to fund the War of 1812.)

* Legal backgrounds—Hamilton and Biddle were lawyers before they became masters of finance—and, in certain ways, what they learned about the importance of contracts stood them in good stead as they built their mighty financial institutions.

As head of the Second Bank, Biddle presided over a revival of American commerce after the War of 1812. By issuing uniform currency, it ensured stability. By issuing interregional loans, it helped expand the republic to the limits of the frontier.

Had John Quincy Adams won reelection in 1828, all would have been well for Biddle and the imposing Greek Revival building on Philadelphia’s Walnut Street from which he directed the nation’s financial activities. 

Adams and Secretary of State Henry Clay both believed in the “American System” of protective tariffs and federally sponsored internal improvements, which called for the kind of strong central financial direction that Biddle’s bank could have provided.

But Jackson won that hotly contested race, and Biddle’s refusal to take seriously well-substantiated charges that several bank branches had shown favoritism toward Adams supporters put him on the radar screen of a new President already disposed to view bankers with suspicion. (Involvement with a Philadelphia speculator in 1795 nearly ruined Jackson.) 

It didn’t help that Biddle kept "on retainer"—i.e., bribed—such major politicians as Senator Daniel Webster.

Here is another way in which Biddle resembled Alexander Hamilton: an astonishing capacity for political miscalculation. Hamilton’s hotheaded denunciation of President John Adams for pursuing a peace overture from France opened the way toward victory by the Democratic-Republicans, and his own increasing political marginalization before his death. 

Likewise, Biddle’s decision to seek early renewal of the Second Bank’s charter (Jackson would never reject the charter during an election year, he guessed wrongly) spelled doom for him and the bank.

We need not go into the long, circuitous fight over "The Bank War" (which, if you want more detail, is recounted in this excellent episode of the NPR series "Planet Money.") 

What concerns us here is what it meant for Biddle. He thought he could prove the indispensability of the Bank by curtailing credit. All this did was provoke a downturn and prove Jackson’s point that the financial institution was dangerous.

By the end of 1834, Biddle’s credit-curtailment policy had proved so calamitous that he had to duck angry mobs in the city where he and his family had once been hailed.

After Jackson crushed the Second Bank, Biddle attempted to kept it going as a commercial institution, the U.S. Bank of Pennsylvania. But his old financial wizardry failed him, when—in a forerunner of our recent financial disaster—he authorized a series of risky loans.

One Biddle scheme—using bank funds to corner the market on cotton—led to utter catastrophe, as he and other directors were indicted for fraud and theft. He got off with the help of his lawyers, but investors lost faith in the bank, and Biddle's reputation was ruined. 

He spent his last years on Andalusia, the estate his father-in-law had built. In the acid words of poet-editor William Cullen Bryant, Biddle lived out his life “in elegant retirement, which, if justice had taken place, would have been spent in the penitentiary.”

It’s a short, perilous path from power brokering to white-collar indictment—one repeated years later by another purported Pennsylvania financial wizard, Andrew Mellon. 

Charges were also dismissed against Mellon, posthumously (though his recent biographer David Cannadine has argued convincingly that the real offense of the longtime Republican Secretary of the Treasury was conflict of interest rather than tax fraud).

Biddle was right that the nation needed central financial direction. But his career demonstrated the charges of opponents such as Jackson that such an institution was also a breeding ground for corruption that endangered the republic. 

The eventual structure of the Federal Reserve—12 independent regional banks with a central board—sought to recover the strengths of the institution that Biddle created but with crucial checks on its authority.

And here, a final word on Biddle's crucial difference with Hamilton. 

Though his involvement with Maria Reynolds ignited America’s first political sex scandal, Hamilton never benefited financially from any of the financial schemes he proposed. (It’s instructive to compare his private legal practice with that of Burr. Once, working on the same case, Hamilton charged a client considerably less for the same work amount of work put in by Burr.) 

Honor was so central to the man dubbed “the bastard son of a Scotch pedlar” by John Adams that he risked his life for it.

In contrast, Biddle became so intoxicated by his power that he used his office to maintain his control at all costs—and he lost everything in the process, including his good name.

This Day in Business History (Ford’s Model T Goes on Sale)

October 1, 1908—Henry Ford’s Model T went on sale, creating the automobile industry as we know it, launching a revolution in American mores and culture, and leaving the nation a far different place.

Paul Ingrassia’s Wall Street Journal article this weekend sums up the impact of this bit of technology very well. But there is one aspect that he did not comment on: how the popularity of his machine made Ford, at least for awhile, the prototype of the businessman-folk hero that became increasingly prominent in the last century, and even into our own.

At one point, Ford’s star had risen so highly that he was even talked about as a possible Presidential candidate. Never mind that, for all his technical prowess and business know-how, that Ford’s social beliefs (including anti-Semitism) were positively antediluvian, or that in later years he would even be willing to hire thugs to break the unions he detested.

Probably until the rise of Dwight Eisenhower, success on the battlefield was the best means for a non-career politician to move upward politically. As wars became less popular and winnable, the vogue of the soldier-politician waned. His place was filled by the businessman-politician.

The belief, evidently, was that a success running a big corporation would translate into success running the big enterprise of government. This year, attention has focused on Republicans Mitt Romney and Mike Bloomberg (okay, Bloomberg is now an independent) as examples of this, but Democrats have also had Senate examples of this phenomenon, including Herbert Kohl of Wisconsin and the late Sen. Howard Metzenbaum of Ohio.

This Day in Business History (The Panic of 1873)

September 18, 1873—In an increasingly globalized economy, a major financial institution, long driven by overoptimism, suddenly came a cropper, sending shivers through Wall Street. A Republican U.S. President, unwilling to withdraw troops in an occupied region even after a number of years, was blamed for misplaced priorities. But it’s not just 2008—this all happened in the Panic of 1873, too.

This major economic setback began at 11 am in the fifth year of the Grant administration, as H.C. Fahnestock, the New York partner of Jay Cooke, cleared his throat and informed dumbfounded observers that the office was closed.

Though this week’s bankrupt financial institution, Lehman Bros., might be more familiar to Americans, Jay Cooke & Co. might in its time have cut a longer shadow, as the financier of the Union Army during the Civil War and as underwriter of construction of the Northern Pacific Railroad. It was Cooke’s attempt to back a second transcontinental railroad, at a time when the demand didn’t exist, that effectively ruined the firm and threatened to bring others down with it.

By day’s end, 37 other banks and two brokerage houses would, like Cooke, close their doors. Suddenly European lenders began to call in their loans (for an idea of the foreign version of speculative mania, see Anthony Trollope’s masterful The Way We Live Now).

The economic effects of this massive bubble and its correction have been much remarked upon over the years—notably the tension building between management and labor that flared up in earnest for the next 60 years.

But I learned of an equally significant consequence in Columbia University historian Eric Foner’s Reconstruction: America’s Unfinished Revolution: the unraveling of the Northern attempt to create a more equitable, racially just South.

The nation’s economic pain came at a particularly bad time for Ulysses S. Grant. In a lecture I saw him deliver at the Chautauqua Institution several years ago, Foner referred to the Ku Klux Klan as an agent of “domestic terrorism.” Grant ordered the arrest of hundreds of Klansmen, but it was an uphill battle to make the indictments stick. In the North, support was eroding for an open-ended commitment to keeping federal troops in the South, where they were still viewed as the enemy.

In the South, the “Bourbon Democrats” or “Redeemers” were looking for a way to undercut activist government. The Panic gave them a perfect excuse. The results were, to say the least, all they could ask for:

1) A clamor rose to cut state budgets and lower tax rates;
2) Private contractors leased convicts—the beginning of the “Chain gang” system;
3) Racially integrated state legislatures had, for the first time in the South’s history, funded public schools—but now aid for those schools, and particularly anything associated with blacks, was cut.

As part of the deal to end the impasse over the election of 1876, Democrats allowed the Republican Rutherford B. Hayes to win on condition that federal troops be withdrawn from the South’s capital cities. Reconstruction finally received its coup de grace from the Supreme Court’s in Plessy v. Ferguson. But the Panic of 1873 laid the necessary groundwork for all of this.

This Day in Business History (“Avon” Founder Born)

July 18, 1858—You probably haven’t heard of David Hall McConnell, but you’ve surely heard of his company: Avon Products Inc., one of the great brand names in American enterprise and an employer of choice for thousands of women over the years.

The story of Avon is quintessentially American in that it was (and is) polyglot: The brainchild of the son of a Famine-era Irish emigrant (County Cavan), with a product line probably heavily influenced by French perfume manufacturers then peddling their wares in the States, and with a name taken from the English hometown of William Shakespeare, which reminded McConnell of the American town where his company was based.

As a salesman in charge of the southern territory for the Union Publishing Co. of Chicago, the twentysomething McConnell chafed in a business that was “not congenial” to him. Although they didn’t have a name for the concept then, he made the same dismaying discovery that the book publishing industry keeps having to learn over and over: unless you’re a bestselling “brand” author who give readers more or less the same experience from book to book, such as Danielle Steel, Mary Higgins Clark and Tom Clancy, publishing is a total crapshoots that resists efforts to market books as if they were bars of soap.

It surely irked McConnell that female customers were more likely to buy the products he used as inducements—perfumes—than the major objects of his quests, books. Then he had a brainstorm: while books were really one-offs, perfumes were consumed, so they had to be bought continually. So McConnell sensibly decided to leave the first industry for the second, and in 1886 founded the California Perfume Co. (The name was suggested by a then-business partner, who associated the state with a wild profusion of flowers.)

Know the old line, “Behind every successful man stands a woman”? Well, in McConnell’s case, he started out with two important women and ended up with a veritable army of them. In fact, I think it’s inconceivable that he would have succeeded without them.

The first woman was McConnell’s wife Lucy, who helped him operate a combination of office, laboratory and shipping room in downtown New York, at 126 Chambers Street. This would have tested the patience of anyone, for they operated from a room only 20 x 25 ft. (McConnell’s instincts as a farmboy had been to do things on the cheap so as not to fall in debit.) Her participation was critical, since the business did not have its first $500 day until 1897, more than a decade after California Perfume’s establishment.

The second woman was Mrs. Persus Foster Eames (P.F.E.) Albee of Winchester, N.Y., a 50-year-old woman who had been one of McConnell’s best employees at Union Publishing. It was Mrs. Albee who came up with the company’s business model of “depot agents” selling products door to door in their own neighborhood.

It’s hard to understand what a radical break that concept was from then-current practice. Direct selling in those days depended on commercial travelers arriving by rail in small towns throughout rural America. Coming from nowhere with little but a wave and a smile, these males created a great deal of understandable suspicion.

Now, a woman, working in her own neighborhood with people who knew her—that was someone who could be trusted. At the same time, women—whose only financial options at the time were housework, sewing, teaching, nursing, or working in sweatshops—found an entirely new avenue where they could make money and develop business acumen. Twenty years after its founding, 10,000 representatives and district managers were selling 117 different articles in 600 styles.

By 1897, attracted by country living, McConnell built a wooden lab in Suffern, N.Y., three floors high and 3000 sq. ft.—quite a bit roomier than his initial New York address. By 1971, the Suffern facility was 10 times its original size.

In 1928, after his inspirational vacation to Stratford-on-Avon, McConnell offered his first products under the Avon name – a toothbrush, a talcum, and a vanity set. Amazingly, the company doubled during the next decade—yes, the heart of the Great Depression. By the time of McConnell’s death in 1937, thanks to a nationwide print campaign and the sponsorship of a radio show called Friends (now, not that one, silly!), the company had doubled in sales. So prominent had the Avon name become that two years later, California Perfume became Avon Products Co.

Today, Avon is by far the world’s largest direct seller with 5.4 million Avon Representatives in
over 100 countries. For the full year 2007, according to the company’s latest annual report, it posted revenues of $9.9 billion. It’s a long way from its start as a dream of escape by a harried, annoyed book salesman who learned that it paid to listen to women.