When Business History Was Business News

UTAH, 1859: East meets West and America opens for business.

Henry Guttmann/Getty Images

Newspapers, so the saying goes, write the first draft of history. In her new book, The Story of American Business from the Pages of the New York Times (Harvard Business Press), HBS professor and business historian Nancy Koehn selects contemporaneous news accounts from America’s paper of record to complement her essays on the rise of business in the United States and the influence of business on the country’s evolution. In ten chapters on major trends and forces in American enterprise, Koehn includes more than 100 Times news articles, dating from 1869 to 2003, while developing and analyzing three major themes: The Corporation, The Changing Nature of Work, and Defining Moments in Technology. Excerpts from the book follow.

From Chapter 6

“The Fruits of Our Labor”

The choices available to consumers in the postwar boom transformed societal norms and expectations. With the advent of fast food, for example, millions of men, women, and children began to break bread — or hamburgers, chicken wings, and pizza slices — at chains like McDonald’s or Dairy Queen. At the same time, American families flocked to locations such as Walt Disney’s Disneyland to experience new forms of leisure. Shopping itself became another form of entertainment, as the number of shopping malls skyrocketed: In 1945, there were 8 malls in the United States; in 1960, there were 3,840. For many households, the most important symbol of their place and economic possibilities was where they lived. Before World War II, about 40 percent of families owned their own home. In 1970, a firm majority — 62 percent — did.

By the late 1990s, getting and spending played ever more visible roles in American life. New technologies, such as the cell phone and BlackBerry, came to be viewed as necessities. Firms selling small luxuries, such as Starbucks, which created an enormous market for specialty coffee, grew to rival the size of more standard fast-food chains. Most Americans enjoyed a range of goods and services — from a second or third vehicle to health clubs to text messaging — that their great-grandparents could hardly have dreamed of. At the same time, the underlying sources for all this consumption — our wealth and income — shifted significantly. In the late twentieth and early twenty-first century, the distribution of both wealth and income became increasingly unequal. The top 5 percent of the income distribution saw their fortunes rise as both their livelihoods and assets grew. At the same time, real wages for middle- and lower-income households stagnated and, in some cases, declined.

As the twenty-first century unfolded, many families found themselves caught between the rock of expanded consumption and the hard place of seemingly static incomes. And to make matters thornier, the costs of some of the most important goods that American families bought — goods such as health care, higher education, and housing — climbed steeply. To finance what they needed and wanted, growing numbers of households turned to various forms of credit. By 2001, almost three-quarters of all American families owned at least one credit card, and 41 percent owned three or more. By 2006, the average cardholder owned 4.6 credit cards. On some of these cards, interest rates were as high as 30 percent. The use of consumer credit, while by no means new, reached unprecedented levels in the early twenty-first century….

HOLIDAYMAKERS ON A CARAVAN TRIP, 1937: By 1929, Americans’ per-capita income, adjusted for inflation, was 300 percent higher than in 1869. Combined with the early 20th century’s rise in leisure time, the use of installment credit, and advertising, Americans acquired a taste for consumer goods and recreation. Even the Great Depression couldn’t dampen the fun-seeking: In the 1930s, for example, per-person movie ticket sales were seven times higher than at the end of the 1990s.

Fox Photos/Getty Images

In the sweep of U.S. history, consumption had been a force for great change. Much of this change played out in the standard of living enjoyed by countless men, women, and children. But part of the transition, which continues into our own time, has been political and social. From the Boston Tea Party to the civil rights boycotts, consumers have used their buying power to express dissatisfaction with the status quo. In the late nineteenth century, the workers who manufactured consumer goods first used the union label as a way to show solidarity through their purchases. One hundred years later, men and women, and even teenagers, organized to protest sweatshop production in various countries around the world and to demand environmentally friendly goods. Entire industries, such as organic agriculture, grew up to serve these and other demands. And individual business leaders, experimenting with forms of social entrepreneurship, developed product offerings and built firms that were intended to both create value and spur social change through the things people bought and how they spent their money.

From the New York Times

“How We Spend Our Time”

(April 24, 1937)

LOS ANGELES SKYLINE, 2008: The post–World War II boom years were followed by “deceptively subtle” upheavals in the American business landscape in the late 20th century, Koehn writes. After increased workplace opportunities for blacks and women, and heightened job security and compensation for workers generally, things began to unravel in the 1970s. As the manufacturing sector declined and the country transitioned to a “service economy,” Americans saw steel mills and auto plants close and fast-food joints proliferate. Globalization and downsizing affected blue- and white-collar workers alike. “Layoff” used to mean “temporary unemployment”; now it meant “loss of job.”

David McNew/Getty Images

If we worked only four hours a day — enough in a properly organized world according to some efficiency engineers — how would we spend our leisure? The problem has bothered social scientists/statesmen, ministers, newspaper editors, and reformers, even though we are not yet even in sight of Utopia. It is supposed, at least by moralists, that if we had much leisure we would devote it to reading, listening to uplifting music, contemplating beauty, doing good works, enjoying healthful recreation. Alas! for this innocence. Professor Edward L. Thorndike, one of our leading experimental psychologists, brings us face to face with reality in The Scientific Monthly — or is it the joy of life? If his analysis of our low-mindedness is right — and right it seems to be in the light of such statistics as he can muster — our craving for entertainment is so insatiable that most of us give ourselves up wholeheartedly to joy-riding, dancing, games, sports, listening to the radio, going to the movies, and other forms of amusement and recreation, no matter how much leisure we may have.

After men and women have spent respectively an estimated five and eight hours a week on the care of the body and personal appearance, after routine eating which consumes about ten hours of a man’s time and eight of a woman’s, some forty hours a week are left for self-improvement. Try as he will to put the best face on our leisure activities, Professor Thorndike finds that twenty-five of these forty hours are spent for entertainment, and other large fractions of time in gratifying a desire for companionship (another form of entertainment) and in games and sports. Edison’s electric lamp, brighter and better than gas, oil, or candles, which was supposed to lead men and women to the library, merely lures human moths to Main Street.

From Chapter 8

“The Transportation Revolution”

HENRY FORD AT THE WHEEL, 1905: Today, with products transported cheaply and easily around the globe, we forget, Koehn writes, that “for most of our country’s history, distance was both time and money.” Beginning with oxcarts and stagecoaches on crude roadways, then barges on canals and steamboats on rivers, transportation steadily improved. Railroads were the big breakthrough, but by 1939, 10 percent of all intercity freight was shipped by motor vehicles.

Getty Images

For nineteenth-century passengers, riding the rails was a heady experience marked by the thrill of high speed and, at times, real danger. Falls from bridges, collisions with other trains, loose rails, and fires in wooden cars occurred with some frequency in the first decades of the railroads. But the industry soon grew more organized and invested in extensive track and bridge construction. Road managers pressured the government to adopt standard time zones so that traffic could be run more safely and efficiently. The first rudimentary boxcars and (open-air) wooden passenger benches were also transformed. By the 1870s, prosperous travelers slept and dined in Pullman Palace Cars surrounded by luxurious, plush furnishings and elaborate decor. For the less well-to-do, there were enclosed cars with large, glass windows and upholstered seats. Regardless of means, early train passengers were struck by the speed at which they moved. Laura Ingalls Wilder, author of the Little House books, was 12 when in 1879 she took her first train ride, traveling west to Dakota Territory. She remembered trying to count the telegraph poles outside her window. But the poles and farmhouses and fields “went so fast that she could not really look at them before they were gone. In one hour that train would go twenty miles — as far as the horses traveled in a whole day.” The speed, reliability, and sheer novelty of the rails called Americans from all walks of life to climb aboard. And they did. In 1890, nearly 500 million people embarked on train journeys, each for an average trip of 24 miles. Small wonder then that by the late 1800s, railroads had become what Walt Whitman termed “the pulse of the continent.”

As the century drew to a close, railroads dominated both freight and passenger traffic over long distances. But in densely populated cities, horse-drawn streetcars were still the most common form of carriage as late as the 1880s. The advent of the steam-powered cable car in San Francisco in the 1870s inaugurated the era of street railways in urban areas (it also spared horses the burden of pulling heavy loads up and down the city’s steep roads). Within a decade, cable cars were pulling millions of passengers through the California city and other urban centers. Then in 1888, Julian Sprague, a young inventor who had worked with Thomas Edison, convinced the West End Street Railway Company of Boston to equip its city with streetcars powered by electricity. Electric trolleys quickly became a common feature of the changing city landscape, along with tall buildings and department stores. By 1902, electric trolleys were transporting 5 billion passengers a year. Investors in the new technology began to build longer electric lines, called interurbans, to serve traffic between cities and compete directly with the mighty railroads.

Outside the cities, the state of the dirt roads had scarcely changed. But as the new century dawned, pressure for improvement began to mount from several sources. The bicycle had been an immediate hit with the American public since its introduction at the 1867 Paris Exposition, and bicyclists needed smooth paths to pedal. In 1893, the roads became a cause of concern for the federal government as the U.S. Post Office Department instituted a system of rural free delivery (RFD). Members of the National Grange of the Patrons of Husbandry — an association of farmers known as the Grange — organized a grassroots campaign to curtail the power of the railroads and usher in a system of free roads. And perhaps most important, the automobile and its makers began to take the stage as a force big enough to rival the rails.

In 1900, motor vehicles were still the plaything of the elite, who donned goggles as they drove — without speed limit or license — wherever the dusty, rugged roads would allow. Within ten years, however, the ranks of automobile owners had increased to the hundreds of thousands, and scores of (mostly small) manufacturers had emerged to serve this nascent but growing demand. Road improvements lagged well behind automobile production, stalled by conflicts over where they should be built, who should control them, and how they should be funded. Finally, in 1916, responding to the petitions of car-owning citizens and the young auto industry, Congress passed the Federal Aid Road Act, appropriating $25 million annually to the states for the construction of better roads. In 1921, the U.S. government set aside some of these funds for the creation of a nationwide highway system. Road construction continued apace during the Depression. As employment in the private sector plummeted, both Herbert Hoover and Franklin Roosevelt authorized public road projects on a massive scale.

The cooperation between the government and the budding automobile industry helped make motor transport the dominant mode of the twentieth century.

From the New York Times

“Ocean Air Travel Seen at New High”

(January 26, 1958)

THE QUEEN ELIZABETH, 1958: A staple of long-distance passenger travel as recently as fifty years ago, ocean liners were rendered obsolete by an exciting new development: air travel. But commercial shipping, in an increasingly global economy, became ever more important for the transport of all kinds of cargo. As air travel expanded enormously, its glamour soon faded. It remained essential, however, for business’s road warriors and for shipping freight as well.

Andreas feininger/Time & Life Pictures/Getty Images

If air traffic exceeds ship traffic between the United States and Canada and Europe in 1958, does this portend a decline in ocean passenger trade? Not at all, say transport officials. Ships have carried more passengers each year since 1947. Last year’s passenger figure was a twenty-seven-year high. The demands for ship accommodations still exceed available space in the heavy travel season.

Ship fares are set differently from air rates, and comparisons are difficult. The steamship conference agrees on certain minimums that may be exceeded by individual lines. Tourist rates in the summer season for a one-way passage from New York to British ports may be as low as $180.

A blue-ribbon ship such as the Cunard Line’s Queen Elizabeth will cost at least $197 for tourist and a minimum of $395 for first-class, according to current published rates.

The gains that the airlines have made since they began extensive long-range overseas flying just after World War II have apparently not been greatly injurious to the steamships. Both forms of transport have prospered. Air transport has developed a separate travel market among passengers with only limited time. Though the airlines do siphon off traffic that cannot book steamship passage during the heavy seasons, they apparently do not look solely to the wooing of ocean travelers for the large gains they expect to make in the future.

—Edited by Garry Emmons

Nancy F. Koehn

Nancy Koehn is an authority on the social and economic impact of entrepreneurship and on leadership in turbulent times and demanding situations. The author of Brand New: How Entrepreneurs Earned Consumers’ Trust from Wedgwood to Dell and The Power of Commerce: Economy and Governance in the First British Empire, she has also contributed to many other books and written and supervised numerous cases on entrepreneurs, leaders, and organizations. She currently is working on a book about leadership lessons from Abraham Lincoln.

Professor Nancy Koehn on The Story of American Business

Post a Comment