Midnight Ride, Industrial Dawn
Page 35
Even after the Democratic-Republicans lifted the embargo in 1809, Revere’s relationship with the government, James Madison’s administration by this time, did not improve. In September 1810 Revere offered Philadelphia merchant Joseph Carson a commission if he could iron out any contracts with the federal government to produce bolts, spikes, or sheeting. In Revere’s own words, “We are not favorites of Washington.” In spite of political differences, he desperately wanted to renew his ties with the Democratic-Republican government to help him receive more contracts of exceptional size. Revere realized by this point that large volumes of business offered the best solution to capital shortages, and no client could match the purchasing power of the federal government.
Revere amassed plenty of managerial experience from his prior business endeavors, but it could only take him so far. In the first decade of the nineteenth century, amid great political and economic volatility, he struggled to perfect his new copper-rolling technology while juggling his other operations. Strategies for his company’s organization, labor relations, raw material procurement, accounting, and operational practices included a mix of familiar traditions and new techniques. Revere also had to adopt new external policies, as the increasing scale of his operations brought him into contact or competition with other organizations. In particular, he had more conflicts and litigation with other manufacturers in his area and he spent more effort lobbying the federal government for direct and indirect aid.
Revere left clues about his managerial priorities in his surviving record books. Although he did not radically alter his accounting methods during his copper mill career, he continued evolving the procedures he had begun forty years earlier. For most of his life, Revere led his countrymen in terms of his advanced bookkeeping methods. William Mitchell published the first American bookkeeping text in Philadelphia in 1796, explaining double entry accounting, periodic balancing, and profit and loss calculation.25 Revere had been using these methods since the 1780s. However, by the time he included the Canton mill in his list of operations, some of his older strategies led to confusion and omissions.
Revere’s records reflect the priority he assigned to the different elements of his business, as he spent the most effort documenting issues he deemed valuable or pressing. His most rigidly recorded transactions, understandably, were the sales he made to customers and the payments or barter he received in exchange. From an early period he used the double entry system to keep track of these changing totals, and he continued the system throughout his life. Wastebooks allowed him to record sales and payments as they took place, and ledgers allowed him to compute the amount a client owed him (or vice versa) at any point. General operating expenses, in contrast, occupied a much lower priority in his mind. If an expense such as fuel could not be directly attributed to a specific client, Revere’s system lacked a consistent place to record it. Occasional receipts or records of contracts describe specific payments or contractual agreements, but the very existence of these tidbits further illustrates the lack of a methodology to track such practices. Furthermore, Revere either did not understand or chose not to estimate intangible costs such as depreciation allowances upon his equipment or buildings. Most businessmen remained unaware of these abstract costs, and even someone with the experience of Eli Whitney only began estimating and billing intangible expenses for his Mill Rock armory in 1812, shortly after Revere’s retirement.26
In general, Revere took a pragmatic view of his business and recorded any information he believed would help him in the future. Sales and cash receipts had an immediate practical value because they helped him collect debts, but lists of his overhead expenses did not serve an obvious purpose. Revere preferred to deal with employees and suppliers on a personal basis, using his best judgment to determine how much of a certain good to order or what salary he should pay. The unpredictability of the nation’s economy and international trade conditions might have contributed to Revere’s lack of long-term planning: because prices, raw material quantity, and consumer demand changed radically from year to year, predictive recordkeeping might have seemed pointless. One result of this policy was the fairly common raw material shortages he experienced, although external conditions certainly had a greater impact than any recordkeeping oversight on his part.
Revere continued changing the credit and payment practices he had used since the start of his foundry. As of 1805 he offered sixty days’ credit on all sales, although when he produced material for a ship he expected the payment by the time the ship launched. He also adopted a new policy to account for the interchangeability of many of his products: Revere and Son would buy back any bolts or spikes not used. This served as both a warrantee on the quality and standardized nature of his output as well as a testament to the volume of sales he experienced: unused bolts would soon find a new buyer in the Boston market, and bolts or spikes made for one ship could serve the needs of another. He offered a more explicit warrantee on all his composition copper and tin, offering to provide a full refund if requested.27
In 1808 Revere implemented a new payment policy: customers now had four months of credit before their bill came due, but received a 5 percent discount for paying immediately. By this time he was willing to offer significant discounts that awarded his customers a fee in exchange for faster payments. This reflected the new business climate, in which quick access to cash produced great benefits. In addition, Revere hoped to avoid the hassle of chasing down late payments, a task he now subcontracted to a professional. He hired Attorney Thomas Selfridge in February 1806 to collect some of his outstanding debts. Selfridge received a commission of $6.40 per debt collected, and immediately brought in 4 debts ranging from $23 to $501.28
Many of Revere’s new concerns and policies arose from the increasing scale of operations at Canton. Until this point he had conducted most business interactions personally, soliciting new orders in person or via letters to friends or contacts. He also relied upon intermediaries to spread the word of his product line or to tip him off to a potential new client or contract, but these men were usually friends such as Joshua Humphreys. This system sufficed when he ran a smaller workshop but did not adequately connect his larger business to the growing markets of the early nineteenth century. Revere recognized his problem and sought the help of an expert located in America’s largest manufacturing center. Joseph Carson was a Philadelphia factor, a merchant intermediary who received commissions for arranging transactions between distant suppliers and producers. He first wrote Revere on June 6, 1809, with good news: the Philadelphia braziers he met with “all seem disposed to purchase your copper instead of English and seemed to regret not knowing of the establishment before.” Carson’s letter seethed with enthusiasm, as he described all of his contacts among the industrial centers in the Philadelphia area.29 A prolific correspondence followed, and many contracts and raw material purchases resulted from Carson’s work.
Revere forged another advantageous partnership with New York merchant Harmon Hendricks relating to raw material procurement. Hendricks was one of many suppliers who sold copper to Revere, but beginning in 1803 the two men became close associates who visited each other’s works. Their constant stream of letters included news about local events such as the fever raging through New York and pleasantries such as “I pray my best respects to the Ladies.” Hendricks procured many large shipments of copper, tin, and other materials for Revere, and clearly appreciated Revere’s value as a continuing customer, writing in 1803, “I am induced to offer you the very longest Credit with the very lowest price . . . I have sold last week for 2 ships considerably higher price & shorter Credit.” Hendricks usually gave Revere between four and six months of credit before bills came due, and offered other customers only two to four months. In 1805 Revere and Hendricks agreed to jointly purchase copper in the Boston and New York ports and to equalize the quantity and price between them. By 1806, the relationship between Revere and Hendricks had evolved further, as they occasionally exchanged Hendricks�
�s imported copper for Revere’s finished copper at the going market rates—a throwback to barter practices. Hendricks also sent Revere information about the prices of different finished copper products in New York and Philadelphia, information that undoubtedly helped Revere set his own prices at competitive and profitable levels. Revere reciprocated with information about his own business, and in 1813 Hendricks and his brother-in-law purchased and revitalized the Soho copper-rolling works in Belleville New Jersey, adding their own rolling mill.30 Long accustomed to recruiting technical specialists to augment his own expertise, Revere had finally made the step toward subcontracting some administrative aspects of his work, such as debt collection, purchasing, and marketing, to experts such as Selfridge, Carson, and Hendricks.
Revere’s managerial innovations and success in raising sufficient quantities of operating capital helped him maintain profitability, which inspired him to continue improving his practices. Revere’s sheet copper sales, expenses, and profits over two one-year periods, from June 1804 to June 1805 and again from June 1806 to June 1807 (see Table 7.1), offer a representative sample of “typical” production quantities for Revere’s mill.31
During the two years of analysis listed in Table 7.1, Revere’s $10,642 in sheet copper sales constituted only 17 percent of his $62,600 sales of all goods. This illustrates the diversity of his operations: in addition to sheet rolling he continued casting cannon and bells while producing enormous quantities of bolts, spikes, nails, and other items. When one product faltered he depended on continued income from others. Because Revere did not present any details about how he allocated labor and other resources between the different aspects of his business, these figures assume that 17 percent of Revere’s total costs apply to sheet copper production, and the estimates ignore all costs other than labor, transportation, fuel, and copper purchases. Although many hidden costs such as advertising were negligible in comparison to the listed ones, others—like equipment purchase, repair, and insurance—were larger. The profit listed in Table 7.1 is most likely a minor overestimation, but even if we adjust it downward we still see the lucrative nature of Revere’s rolling business, as he pocketed around 32 cents of every dollar of sales that he made. The categories and relative sizes of these operating costs mirror Revere’s earlier experiences: metal purchases resoundingly dominate the balance sheet, followed by labor and fuel costs.
Table 7.1. Revere’s Sheet Copper Profits, 1804–1805 and 1806–1807
An October 21, 1810 letter to army paymaster Josiah Snelling catalogued Revere’s output three years later, near the end of his involvement in the business: “We have manufactured in one year 122976 lbs of copper Bolts & Spikes at 50 cents—27659 pounds [of sheeting] at 50 cents 12976 pounds of brass cannon at 55 cents—10845 pounds bells and 16547 pounds composition casting at 42 cents amount including stock $93959.16 the works are now capable of extending the mark to three times the amount that has ever been done.”32 According to these figures, he sold almost $94,000 in merchandise in one year, approximately 15 percent of which came from sheeting—consistent with the earlier period when 17 percent of his sales came from copper sheets. Revere’s total sheeting sales of $13,830 for this year dwarf his earlier sales volume. This increase resulted from many factors, including the removal of all embargo and non-importation restrictions, renewed naval armament, increasing prosperity, and, of course, Revere’s increasing skill at producing and marketing copper.
Revere’s growing business and large federal contracts made him more aware of the ways America’s commercial and foreign policies affected him. Tariff law had its history in the earliest years of the new government, when Britain’s immediate imposition of tariff duties against American vessels clobbered the new nation’s fledgling economy. Under the new Constitution America equalized matters somewhat by imposing duties on goods from British ships. These duties usually hovered around 5 percent, enough of a tariff to raise revenue and soothe American merchants hurt by Britain’s tariff without angering the many consumers who depended upon cheap foreign imports.
As with most policy issues facing the earliest administrations, the question of protectionist tariffs, free trade, and federal revenue sparked intense ideological debates between merchants and manufacturers, northerners and southerners, Federalists and Democratic-Republicans. Tariffs polarized society. Merchant importers hated them because they raised the price of their cargo while protecting domestic products. Southerners hated them because they helped the North’s commercial interests while raising the prices of much-needed merchandise. Artisans came close to hating them because they increased the price of tools and imported items, revealing their growing consumer mentality. But manufacturers and their investors strongly supported tariffs as a weapon to free America from the shackles of economic colonialism.33
Revere cared about tariffs for more than ideological reasons, since his business depended upon his ability to successfully compete with high-tech foreign metal products. Revere had good company on this issue: countless other groups, including general mechanic societies and specific trade associations, lobbied state and the federal government for protective measures. Congress initially resisted such requests because a high tariff hurt agricultural interests by raising the price of goods they wished to purchase while making it harder for them to sell their produce to other countries. Congress relented in June 1794, raising the tariff on many imported manufactured items, including copper and brass products, from 5 to 15 percent, and then raising it again in 1804 to 17.5 percent.34 Unfortunately, a small loophole led to large problems.
In April 1806 Revere wrote a short letter to Treasury Secretary Albert Gallatin by way of his congressman Josiah Quincy, pointing out two related problems. First, the tariff duty on “old” copper raised his raw material costs considerably. And second, the lack of a tariff on imported sheet copper failed to protect him from low-cost foreign competition. According to the existing law, imported manufactured items such as copper sheets and bolts should receive a 17.5 percent tariff to protect American manufacturers by making imports more expensive. Raw materials such as imported copper plates, bars, and pigs remained duty free. This law was misinterpreted at most customs stations because inspectors often classified raw material copper as “sheets” and added the import duty, while classifying imported copper sheeting, a manufactured item, as duty-free “plates.”35 At the heart of Revere’s request lay the misunderstanding of terminology: when words like plates and sheets could alternately relate to raw or finished products, customs inspectors understandably had a difficult time making the proper call. This misunderstanding injured his operations by raising the cost of his raw materials while allowing imported British sheets to be sold at extremely low prices.
Unfortunately, powerful interests stood to benefit from the continuation of the status quo. Merchants purchased more copper sheets than any other client, and did not care about the competitive disadvantages faced by Revere’s rolling mill. They wanted sheeting as cheaply as they could get it, and for the most part they preferred to stick with high-quality British products wherever possible. Many other copper workers purchased sheet copper for the manufacture of utensils or stills and also hoped for low tariffs and cheap prices. The combined actions of a subtle moneyed interest and a blunt popular one proved formidable.
Several drafts of a letter to Josiah Quincy reveal Revere’s serious concern about tariffs. Quincy was Revere’s congressional representative, and Revere asked him to deliver a petition on his behalf to officially clarify American policy. He explained the confusion of terminology in great detail, but then tied his argument to his own efforts: “for Instance the duty on Bolts, Spikes, +c, makes them come so high that no person presumes to import them, and we sell Cheaper (and of equal quality) . . . in Boston no person for several years have imported Sheet Copper for sail but Inglish merchants. We sell for the same prices they do; if they had the duty to pay it would give us a sufficient profit.”36 Revere clearly imagined his business to be large a
nd important and directly tied his company’s welfare to that of the nation. In particular, he implied that he could provide all sheeting needs for the country if he had sufficient federal encouragement, beginning with tariff protection.
This was exactly the wrong approach to take. On January 21, 1808, the Committee of Commerce and Manufactures submitted their report. They agreed with Revere that no duty should be collected on “old” copper, because raw materials should be duty free. So far so good. The committee then dismissed his request for a protective tariff on sheeting, citing contrary petitions from “Sundry Copper Smiths” from Philadelphia and “Sundry Manufacturers of Copper” from New York City. Both of these groups as well as the Congressional Committee took offense at Revere’s contentions. According to the final report:
To induce the national legislature to impose the aforementioned duty on copper in sheets, the petitioners state that they have at considerable expense erected works which will enable them to supply copper in sheets commensurate to the demand of the United States . . . [should Congress take this action] and the quantity of copper in sheets furnished by them prove to be insufficient for the demand, the copper-smiths and braziers, a respectable class of manufacturers, would sustain injuries . . . The committee have had no satisfactory evidence offered to them that copper in sheets, in quantity sufficient for the use and consumption of the United States, can be supplied for the petitioners, or that the quality of the same is equal to that which is imported.37
Throughout this petition the language reveals the committee’s Jeffersonian viewpoint: they sought to avoid “hasty legislative acts” and “legislative interference” that might “fasten on the community oppressive monopolies” as has been done “too often” in the past. In contrast, the committee praised the confident assertions in the petition from large groups of “respectable” manufacturers. The committee made one factual error in describing “the flourishing state of manufactures, which have supplanted foreign articles of the same kind.” Without a doubt, imported copper sheets and other fasteners were more plentiful than domestic ones.