Let There Be Light

 

photograph of  vintage lightbulbs
These five lightbulbs and one socket, used as court exhibits in patent infringement lawsuits filed by the Edison Electric Light Company in the late 19th century, sold for $30,000 in a December 2016 Heritage auction.

By Jim O’Neal

The Gilded Age was an exciting time in American history and roughly spans the period following the Civil War and extending to the start of the 19th century. The powerful combination of technical advances in manufacturing, communications and transportation marked the transformation of America from an agrarian society to a major industrial pioneer.

In the brief time between 1870 and the beginning of the first World War in Europe, the American economy grew faster, became more diversified and changed more profoundly than at any earlier 50-year period in the nation’s history. In the process, the United States created the largest and most modern industrial economy on earth. In 1890, the Census Bureau declared that the frontier, a hallmark of “The American Story,” had quietly ceased to exist. Newspaperman Horace Greeley’s advice to “Go West, young man” had become apocryphal.

However, it is still possible to trace the roots back to 1830, when men with vision and courage began pushing the fantastical idea that railroads (which barely existed) should be flung across the entire American continent. President Lincoln, agile enough to plan on how to win a war and also consider the nation’s future, was a railroad supporter. In 1862 he had the Pacific Railway Act attached to the important Homestead Act. Two companies, one in the San Francisco area and one in the East, started laying tracks.

On May 10, 1869, they met in Utah and celebrated by driving a golden spike. A telegraph was sent to both coasts with a single word: “DONE!” By 1876 it took just 88 hours and 33 minutes to travel from San Francisco to New York City. Also on board was the United States mail (the telegraph had killed the Pony Express 10 years earlier), fresh vegetables, real beef instead of bison, and gold deposits. Businessmen used it to cut down on travel time, and pioneers abandoned their prairie schooners.

Cities flourished as the rapid growth of factories accelerated urbanization and waves of migrants were attracted to the promise of better jobs. As America raced to become the largest economy, by the 1870s it became clear what was needed most: light. Light for the factories now running 24 hours a day. Light for the streets and homes and even for the library where people congregated to improve their English or hone their skills. The problem was how to get it. Whale oil was out, kerosene too smoky and gaslight too dim and dangerous. The magic elixir was electricity! It had been known since Ben Franklin and had been appropriated to invent the telegraph, telephone and phonograph – three world-changing devices in which Thomas Edison had played a role.

In April 1881, Scientific American dedicated an issue to the enhancement of electricity. On the cover was a sketch of the lights on NYC sidewalks. Seeing the cityscape glow with faces and objects at night suggested a new immense opportunity. Broadway owed the credit to a young inventor from Cleveland named Charles Brush. For a brief time, Brush’s system dominated the field. Not surprisingly, Edison – aka “The Wizard of Menlo Park” – would overtake him.

On New Year’s Eve 1879, using 1 million lightbulbs, there was a demonstration of what would become “The Great White Way.” The Wizard, always looking to the future, thought of the superb potential for expansion, and soon Hollywood was involved and Edison invented moving pictures. In time he would boldly predict, “We will make electricity so cheap that only the rich will burn candles.” And so it was with oil, transportation, publishing, retail and steel. When Andrew Carnegie sold his steel interests to J.P Morgan for $480 million ($300 billion today), it was the largest personal sale in world history.

In 1873, a few years before we met Tom Sawyer, Mark Twain published his novel The Gilded Age: A Tale of Today. He had spotted the irony of the situation and how the splendor of a gold patina was masking the workers’ low wages and the dangerous and unhealthy conditions – a glittering surface obscuring the corruption underneath.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

J.P. Morgan was Crucial to the Financial Development of the United States

5-brown-back-bears-signature-of-new-york-financier-j-pierpont-morgan-a
An 1882 $5 Brown Back, National Bank of Commerce in New York note, bearing the signature of J.P. Morgan as vice president (lower right), went to auction in September 2007.

By Jim O’Neal

John Pierpont “J.P.” Morgan may have been the preeminent U.S. banker in the last half of the 19th century. He was born in 1837, avoided serving in the Civil War by paying a substitute the traditional $300 to take his place, and started his banking career … first in London with his father and then in New York City. In addition to becoming a famous financier, he accumulated a world-class art and precious gem collection.

It is his role in helping finance the development of the United States that provides the most interest. In fact, throughout the entire span of his lengthy financial career, there was a chronic lack of capital in the United States to fund economic development. This was primarily due to the lack of a strong national bank or a system to monitor monetary policy and ensure adequate liquidity … without triggering runaway inflation.

This situation was exacerbated by a series of “financial panics” that seemed to occur with regularity every 15 to 20 years due to myriad factors (e.g. bank failures, speculative bubbles, asset-liability mismatches, over-leverage, economic recessions, depressions, etc.). The United States had several in the 19th and 20th centuries and we almost collapsed the entire financial system in 2007-08 after the bursting of the housing bubble and too much bank leverage using exotic products. Central bankers around the world are still struggling with economic development while sovereign governments abdicate their fiscal responsibility.

morgan
J.P. Morgan

During Morgan’s career, there was also the issue associated with European investors being skittish about investments in America that were hard to monitor from 3,000 miles away. This was especially true for railroads that were enormously capital intensive. This void created a perfect role for Morgan in New York and his father in London. They could match up sound investments in the United States with eager foreign investors by taking “moral responsibility” (their term) for overseeing their clients’ investment through their bank.

If a railroad went bankrupt, J.P. would personally step in and take charge by managing the bankruptcy, replacing top management, restructuring the financing, installing a new board (often including himself) and staying until the company’s health was restored. This reorganization of railroads came to be called “Morganization.”

Once the essential railroad structure of America had been knitted together into a sound economic and geographic sector, he then turned his talent to industrial organizations. He put together the first billion-dollar corporation by combining several small steel companies with Carnegie Steel and creating U.S. Steel. Next was Edison Electric and Thomson-Houston to form General Electric, one of the original 12 Dow Jones companies.

He and his partners put together International Harvester, financed AT&T, bailed out the U.S. Treasury when they were about to run out of gold during the 1893 Panic, and almost single-handily stopped the Panic of 1907. In this case, he was a national hero, but within a short period many Americans were horrified that one private citizen had so much power. This led to a national monetary commission and eventually the Federal Reserve System of today.

When J.P. Morgan died in 1913 and billionaire John D. Rockefeller read in The New York Times that his estate was only worth $80 million, Rockefeller reportedly shook his head and said, “And to think, he wasn’t even a rich man!”

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].