The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supercompany
Page 22
Technology drove the transition. The stud-frame “balloon house,” pioneered in the lumber-short Midwest in the 1830s, drastically reduced raw material costs and facilitated larger, more flexible designs.* Wood machining was always an American specialty, and furniture factories, many of them around Michigan’s hardwood forests, churned out great quantities of decent, very inexpensive furniture. Even in the 1850s, as British investigators of the “American system” had discovered, a substantial fraction of new doors and windows were mass produced in factory settings. By the 1870s, machine-manufactured complete house kits were available on a mail-order basis: one manufacturer advertised a range from $350 three-room houses to a $5,000 four-hundred-seat spired church. There was a proliferation of design styles—“Romanesque Revival,” “Chateau,” and “Queen Anne” were all popular—and a ready availability of machined ornamentation, like cornices and scrollwork. Power looms drove the cost of decent wool carpets well below $1 a yard. When machinery could grind pigments finely enough to suspend in oil, paint production made the jump from a craft to an industry, with multiple color choices stocked in mass-produced, sealed metal cans. The cost of new homes fell to levels affordable by manual workers, if they could finance them. Mortgages were short, usually five to seven years, and required substantial down payments, but building and loan societies proliferated by the tens of thousands to fill the savings gap.
Home spaces became more formalized and standardized. The middle-class home had an entrance hall, a formal parlor, or “sitting room,” often a second, or less formal, sitting room, a dining room (which was actually used for eating), a kitchen, and a scullery area on the first floor. The “backstairs” in the kitchen was for children or servants, while the front hall stairs were reserved for stylized descents to greet guests. Bedrooms and the bathroom were on the second floor. Children commonly had their own beds, but still shared rooms. As houses grew in size, it became normal to take in boarders, even in middle-class areas; boarding, indeed, became the standard housing for single people in cities, and they were often treated almost as family members. Farmhouses followed similar designs—the farmer complaining that his house was “bigger than the barn” was a stock joke.
Sanitation lagged population growth by several decades. Water-borne diseases like cholera and typhoid remained dangerous killers well into the twentieth century, accounting for a quarter of all infectious disease deaths in 1900. Wives, or servants, were still lugging water from pumps in the 1870s, but by the end of the decade most larger cities were piping (unfiltered and unchlorinated) water into homes in many, if not most, of their residential areas. Privies were not connected to sewage systems. The backyard latrine—or in many working-class areas, the neighborhood latrine—gradually gave way to indoor privies. Water closets, which flushed into a pit, were suitable for less settled areas, while urban designers experimented with a host of “earth closet” contraptions. Many cities had gas lighting, at least in better neighborhoods, and almost everyone had a kerosene lamp. Pierpont Morgan famously wired his house for electricity in 1882—it required a basement generator—but residential electricity would not become standard until the 1920s.
The role of middle-class women was transformed along with their homes—wives became “homemakers,” arbiters of domesticity, society’s officially designated civilizing force. Their men had to be taught to eat with forks, to stop pouring their tea into a saucer to cool, and never, ever, to spit in the house. Harpers noted that wives “legislate for our dress, etiquette, and manners without fear of a veto. . . . It is indeed, the subtlest, and most pervasive influence in our land.” Home economics courses popped up in high schools and land grant colleges. The “educated consumer” was a brand-new role, and there was an outpouring of advice books and instruction manuals on making proper use of the new abundance. Being middle class was suddenly a life strategy, not just an economic category, and one that was mostly managed by women. Tactics included smaller families, greater concentration on child-rearing and child education, careful budgetary management to maintain the required status signals without extravagance, and inculcating children with habits of prudence and respectable deportment.
The nonwealthy upper middle classes lived very well. The Marches, Isabel and Basil, the protagonists of William Dean Howells’s A Hazard of New Fortunes (1890), are in their midforties and making a move from Boston to New York as the story opens. Basil is leaving a boring job at an insurance company for an editorial position that pays $3,500 a year, while Isabel’s inheritance pays $2,000. Their combined income, in today’s dollars, would equate to about $66,000.* They are very nervous about the move, especially about money. They own their Boston home; they have a live-in housemaid, Margaret, and a laundress; they are widely traveled, always going first class with many trunks; they have two daughters and a son, Tom, who is graduating high school. Tom had naturally planned to enter Harvard, and is irritated at the prospect of attending Columbia instead. When they commence house-hunting, Isabel sets out her requirements for a New York flat:
The sine qua non are an elevator and steam heat, not above the third floor, to begin with. Then we each must have a room, and you must have your study and I must have my parlor; and the two girls must each have a room. With the kitchen and dining room, how many does that make? . . . And the kitchen must be sunny. . . . And the rooms must all have outside light. And the rent must not be over eight hundred for the winter. We can only get a thousand for our whole house, and we must save something out of that, so as to cover the expenses of moving. [They later agree on a room for Margaret as well. Tom will live at his college.]
Howells amusingly recounts the Marches’ shock at New York prices and their eventual decision to settle for only six rooms and a bath, at a far higher price than they expected to pay—Margaret can be squeezed in, the girls will share a bedroom, Basil will forgo his study, and they will send the laundry out. New York, of course, was a special case, as it is today. A house design that was popular in Philadelphia “for people of moderate means,” according to the designer, had 3,375 square feet on three floors. It could be built for $3,000 to $3,500, a price that would have been easily within reach of the Marches. Stuart Blumin notes that these were “much larger homes than those of late eighteenth century middling folk.” (Quite likely, it is also larger than Professor Blumin’s house; it’s about 50 percent larger than the median home in America today.) A house that size naturally assumed servants.
Middle-class behavior and values percolated through much of the population. Even in the smaller homes of manual workers, wives selfconsciously added little touches to their front rooms to make them look more like “parlors”—family pictures, carpets, some flowers. Workers’ real wages rose steadily in the 1870s and even faster in the 1880s, and lower-class women began adjusting their income-producing activity to comport with their domestic duties, although they mostly still had to work. In short, poorer women got the worst of both worlds, as so often in lower-income families today. But there were discernible shifts in employment patterns; for example, Irish women began taking in boarders rather than work outside the home. Working-class children did not remain in school as long as middle-class children, but their attendance rates still rose. Urban schools, both public and parochial, and settlement houses catechized the middle-class virtues of hygiene, prudence, thrift, and hard work.
The 1880s and 1890s saw a sharp ratcheting-up of reformist interest in public education, which was sustained well into the twentieth century. Much of it was prompted by the business demand for capable workers, and had a grimly functional tone—as in “the student should be able to quickly adapt to the rigors of the industrial assembly line”—and there was a conscious funneling of immigrant and working-class children into manual training courses. This same period saw the widespread introduction of the graded school—no more one-room schoolhouses—standardized testing, and minimum standards and certifications for teachers. School enrollment rates rose sharply during the 1870s, then fell back af
ter 1880. The slippage probably reflected rising immigration, for secondary school enrollments shot up 150 percent in the decade of the 1890s alone. Commercial training schools offering night classes at low rates sprang up like mushrooms.
Middle-class values spread so fast in part because the status was attainable for almost any young person with energy and ambition. Horatio Alger’s novels flew off the shelves. The rewards of moving ahead were palpable—because there were suddenly so many things to buy.
Things
If you wished to buy a piano in 1895, you could check out the “Windsor” upright in the Montgomery Ward catalog. For $170, they would ship you a new instrument, with ivory keys and an overstrung scale,* done up in “hardwood with highly polished surface and finished in imitation of Rosewood, Ebony or Mahogany.” For $40 more, you got a higher quality action, the new three-pedal design, and mahogany wood. The catalog spelled out how easy and safe it was to order:
We will ship any Windsor Organ or Piano on trial to any railroad shipping point in the United States, subject to the following conditions: Upon receipt of order we will ship the instrument to our own address, send a sight draft with bill of lading attached to your banker’s. When the shipment arrives at destination, the purchaser will be required to deposit with the bank the price of the instrument, but with the understanding that the money is to be held fifteen (15) days. During this time the instrument may be given a thorough trial at your home. . . . If you find that it is not in every way satisfactory you can return it to the station agent at any time before the expiration of the time specified, and by obtaining bill of lading . . . and presenting same at bank, the entire amount deposited will be refunded.
The 1895 catalog filled 623 oversize small-type pages stuffed with woodcuts illustrating every product. There were saddles, tools, and knives and guns galore; page after page of library tables, bedroom “suits,” and bookcases; more than forty styles of ladies’ summer cloaks, men’s shirts from twenty-five cents to $2 each, and ten different kinds of men’s suits from a casual sack style to evening wear; plus a vast array of jewelry, painted perfume bottles, china, kitchenware, stoves, toys and games, baby clothes and carriages, corsets, “high quality pillow shams,” and plumbing gear. The Sears 1897 catalog included arsenic wafers for the complexion (“perfectly harmless when used according to directions”); “Nerve and Brain Pills,” which made Viagra-like claims; laudanum (a mixture of opium and alcohol); and a terrifying “Princess Bust Developer” that looked like an iron toilet plunger, but promised a “round, firm and beautiful” bust with regular usage.
Ward was a young Chicago hardware salesman when he mailed a one-page product list to customers in the Illinois Grange in 1872, listing readymade clothing items that were hard to buy in rural areas. His idea was that he could purchase and ship items from Chicago, and pass on the savings in inventory and the cost of middlemen. It caught on wonderfully, and he issued new product sheets almost every two months until 1874, when he put out his first catalog—eight 3x5-inch bound pages. He added a woodcut picture with each product in 1880, and by 1884 the catalog had ballooned to 240 pages, listing more than 10,000 items.
Ward’s Chicago operation was suddenly a big business, with armies of clerks and shippers, and more than $500,000 in inventory. Many of his products, like the Windsor piano and the Montgomery Ward Sewing Machine, were private label manufacture, taking advantage of his buying power to push prices down. All of his customers had a standing invitation to visit his plant, and 285,000 people took him up on it during Chicago’s 1893 Columbian Exposition. Richard Sears, whose operations outstripped Ward’s by the early 1900s, got his start in 1886 selling watches by mail; Alvah Roebuck joined as the watch repairman. Sears’s main innovation was aggressive advertising, some of it outrageous. By the 1880s almost all department stores had their own mail-order operations: if a lady in California wanted to buy from Bloomingdale’s, she had only to write and request their catalog. When John Wanamaker became postmaster-general in 1889, he ensured that mail-order catalogs had the most favorable rates, since they were “aiding the dissemination of knowledge.”
Left: The first Ivory ads were dense with print and full of cleaning advice. But by the 1890s, Procter & Gamble’s “Miss Blossom” ads were selling “a style of loveliness.”
Below: Bicycle manufacturer and evangelist Albert A. Pope’s posters became a minor art form. This poster advertises Pope’s Columbia “safety” bicycles.
All of these businesses operated below the radar screen of megacapitalists like the Morgans. Their primary capital expenses were for real estate and inventory, which could be financed by traditional mortgages and bank working capital lines. But that was true only because they could “externalize” the cost of all the shipping infrastructure that Morgan, the Barings, and others had already paid for. The 1886 Bloomingdale’s catalog, for instance, instructed its purchasers to send postage with the order, and advised that they should send a follow-up inquiry if they had not received an order confirmation within ten days, or fifteen days if they lived on the Pacific coast. (Not twenty years before, much of Bloomingdale’s marketing area had been reachable only by wagon train.) By the 1890s train speeds were at least as fast as they are now, and there were a host of “express” companies that handled the shipping from a merchant’s loading bay through the rail network to the customer’s front door, through networks of local contractors managed by telegraph. In most parts of the country, people could count on thirty-day or better order turnarounds, a cycle time that changed only marginally until the spread of air freight companies almost a century later.
When railroad men and their investment banks adopted their “if you build it, they will come” strategy, they were not thinking of a consumer revolution: Gould, Vanderbilt, and Scott went to war over grain, iron, and oil freights, not corsets and ribbons. Pennsylvania managers, who took great pride in the high polish of their shipping and scheduling machinery, were unpleasantly surprised in the 1890s to find themselves ensnarled in a thickening maze of short-term hauling and small freights. Consumers were taking over, and there was considerable management foundering until the road learned to adjust.
Julius Rosenwald, who joined Sears in 1895 and assumed operational responsibility from a very in-over-his-head Richard Sears, was arguably the first retail management genius. Sears executed the first retail public share issuance in 1906, through Goldman, Sachs, one of a new breed of Jewish investment banks (Lehmans was another) that focused on the retail and consumer goods businesses overlooked by the Morgans and Kuhn, Loebs of the world. Rosenwald needed the capital infusion to build continuous-processing, mechanized railroad- and roller-line-based goods assembly and distribution systems, much like those Alexander Holley had pioneered in steel.
Rosenwald’s security issuance marked a final stage of business consciousness raising. Ever since the 1870s there had slowly been dawning the stupendous realization that consumer wants are illimitable. The mother in a novel of immigrant life tells how, when she and her two daughters were all working, she replaced old rags with “regular towels,” and began to acquire dishes and tableware,
so we could all sit down at the table at the same time and eat like people. . . . We no sooner got used to regular towels than we began to want toothbrushes. . . . We got the toothbrushes and we began wanting tooth powder to brush our teeth with, instead of ashes. And more and more we wanted more things, and really needed more things, the more we got them.
History had never seen an explosion of new products like that in the America of the 1880s and 1890s. Branded foods followed the lead of the meatpackers, starting in the 1880s. Store shelves offered Cream of Wheat, Aunt Jemima’s Pancakes, Postum, Kellogg’s Shredded Wheat, Juicy Fruit gum, Pabst Blue Ribbon Beer, Durkee’s salad dressings, Uneeda Biscuits, Coca-Cola, and Quaker Oats. Pillsbury and Gold Medal wiped out local flour millers. (Wives started buying cake mixes in the 1890s, but baking one’s own bread was still a badge of honor.) Advertising flourished right alo
ngside. (N.W. Ayer, one of the first of the big advertising companies, got its start with John Wanamaker’s.) So Jell-O was the “quick and easy” dessert; Schlitz beer was made with “filtered water”; Huckin’s soups were “hermetically sealed”; no human hands had touched Stacey’s “Workdipt Chocolates.” H. J. Heinz created a fifty-foot-tall electric pickle—with 1,200 lightbulbs—in Times Square in 1896. The sign blinked Heinz’s “57 Good Things For The Table,” listing each one in lights. You’d “Walk a Mile” for a Camel, and hum the jingle for “Sunny Jim” cereal. The Great Atlantic and Pacific Tea Company, A&P, was the first national grocery chain, and Frank Woolworth’s “nickel-stores” were sweeping through the country.
The speed of the branded-food triumph could have been due to the naïveté of consumers, or perhaps to the execrable quality of local stores’ barrel-food. One suspects it was both; nostalgia buffs too readily assume that consumers were fooled. Packaged brands brought people in large swathes of the country their first access to more varied diets. Many local grocers, moreover, were sinks of poor hygiene, bad storage conditions, adulteration, and outright misrepresentation (hog fat for butter, for example). The packaged food industry had its own scandals, especially in meat, but safety and consistency was probably a great improvement over the general store. As a bit of nineteenth-century doggerel had it:
At the 1893 Chicago Exposition, spectacular engineering talent was at the service of pure entertainment. The famous Ferris wheel rose 264 feet above the ground, each carriage bigger than a Pullman car, and it could carry two thousand people at a time.