DRAFT: Turn-of-the-1900s Techbro Samuel Insull & His Meme-Stock "Electrifying America" Utility Empire
Behind the paywall because I am not yet sure to what extent history is rhyming here… The Ghosts of TechBros Past, Present, and Future: From Middle West Utilities to Tesla: how boom-time visions hav...
The Ghosts of TechBros Past, Present, and Future: From Middle West Utilities to Tesla: how boom-time visions have fragile foundations, or techbro dreams and financial nightmares: Samuel Insull, and to what extent his history is echoing in the career of the person Donald Trump would sometimes call “Elon Tesla”…
Behind the paywall because I am not yet sure to what extent history is rhyming here…
Born in 1859 to a London temperance hotelkeeper, by the age of 21 Samuel Insull was at the center of the Silicon Valley of the 1880s: he had gained a life-altering position in Menlo Park, New Jersey as the private secretary of Thomas Alva Edison, where he caught the Unwoke Mind Virus that was Edison's vision of a future of Electrified Humanity.
Moreover, Insull had a genius for organization and management that his then-mentor lacked. In the mid-1880s Edison’s manufacturing operations in Schenectady, New York were foundering. Edison sent Insull at the age of 26 to take charge. Through production and scale economies driven by vertical integration and through very aggressive marketing, by 1992 Insull had successfully transformed a zero-profit enterprise with 200 workers into a massively profitable 6,000-worker industrial juggernaut. And he had had enough of working for others. He left the Edison enpire to lead the then-modest Chicago Edison Electric Company.
Thereafter Insull followed a strategy of technological audacity in the service of pragmatic expansion with the goal of creating and maintaining natural monopolies. Recognizing that electricity’s value lay in ubiquity, he was early to break with Edison's direct-current approach to champion Tesla and Westinghouse's alternating-current alternative.
Transformers meant that alternating-current electricity was made for long-distance transmission: produce once, in an immense power plant with mammoth economies of scale, and distribute everywhere via high-voltage long-distance transmission lines. By 1903 Insull's generating stations were the largest in the world. By 1907 he had a monopoly over electricity in Chicago. And he kept expanding. By 1929 his electicity empire supplied 14% of America's electricity. His empire encompassed 85 companies across 32 states. His Middle West Utilities alone served 4.5 million customers through 60 subsidiaries.
As time passed, Insull shifted from technological engineering to financial and meme-stock engineering. To fund fund rural electrification via the acquisition of then-struggling too small-scale inefficient utilities, he constructed a Byzantine network of holding companies: not only Middle West Utilities (1912), but Insull Utility Investments (1928), Corporation Securities (1929), and others in a leveraged pyramid: a 20-to-1 ratio of assets to equity. Operating companies like Insull's ComEd fed dividends to leveraged intermediate holding firms, which issued stock to fund further acquisitions. In the consolidated accounting, practically all of the system's operating cash flow was earmarked for debt amortization. Dividends were paid from stock issues. And sky-high stock prices were sustained by promises of indefinite expansion: “We are not building for today, but for the year 2000” Insull told his fans to whom he sold all the new stock issues. There was no risk, said Insull. It was a sure thing, said Insull. Demand for electric power could only grow, said Insull. And each of his operating companies was a local monopoly with an uncrossable moat created by its own efficient scale and the ability of the rest of the system to subsidize any subsidiary facing a foolish entrant-competitor.
Samuel Insull was right on the technology: we did become an electrified America, serviced by power plants producing with enormous economies of scale delivering energy through a grid to locations thousands of miles apart via high-voltage power lines. I somehow doubt that Elon Musk is right on his technological dreams of ubiquitous Optimus humanoid robots and Tesla robotaxis, at least not in this lifetime.
But, in the end, being right on the technology was not enough for Insull.
Insull had not counted on the Great Depression that began in 1929. By 1933 manufacturing production was down by 40%. Households were economizing on their electricity use—and many households that weren't were in arrears, heading for default. The bondholders and the banks were annoyed: the operating cash flows were too small to cover their demands, and in the Great Depression nobody was issuing any stock. Insull's empire needed a recapitalization, and a workout. But somehow Insull had made an enemy of J.P. Morgan, which demanded he cede control. The workout never happened. Middle West Utilities’ stock, once trading at $570, fell to $1.25. Cross-default clauses triggered a cascade: Chicago Rapid Transit’s bankruptcy in June 1932 dragged down 65 affiliates within months. His corporation bankrupt, and personally bankrupt as well, Insull fled first to Greece and then to France.
He was extradited in 1934 to face fraud charges, to answer for padded payrolls, “cross-loaned” collateral between Insull entities, what was then seen as an excessive $500,000 salary, $4.5 million in secret profits paid out to more than 1000 friends, special stock offerings to friendly members of politicians' affinities at $12 a share that they could rapidly flip to $145, or hang on to if they trusted Insull, and more. Although acquitted of fraud, Insull became one of the Great Depression's most reviled personalities before his 1938 death in a Paris subway station.
Elon Musk and Tesla do not face a Great Depression. But they do face ferocious competition. BYD makes better batteries. BMW has a better, more reliable, and more mature EV drive train. Other producers—mostly in China—are flooding the zone with different takes on what an EV can be and do, while Tesla no longer innovates in automobile products but stays with the same Models S, 3, X, and Y, perhaps because nobody can figure out how to continue the acronym S3XY in an intelligible way.
Elon Musk does not have enemies in the form of a JP Morgan eager to block recapitalization. But Musk is making enemies of the liberals whose Tesla purchases were pledges of allegiance to the fight against global warming and to a liberal future more generally. The market for Dukes of Hazzard-themed cybertrucks named "General Robert E. Lee" exists, but is not large.
And what was the million-strong demand for the cybertruck has shrunk to only 50 thousand.
And Musk's political master Donald Trump is—except for an occasional sales-promotion event on the White House lawn—an enemy of ever financial underpinning of Tesla: an enemy of its carbon credits, an enemy of charging stations, an enemy of its cross-borders value chain, an enemy of the world trade network, and an enemy of the very idea of a vehicle not powered by a gasoline engine.
Middle West Utilities earnings in 1929 were $2 a share with a stock price high of $600, at a P/E of 300. Tesla's most current earnings per share are, annualized, $1. Tesla's stock price high in 2025 was $500, making it a $1.5 trillion company, at a P/E of 500. MWU at its value peak was not quite in Tesla territory, but it was close.
There’s another piece of the Insull fraud that has some current resonances, namely his use of “stock dividends” to create phantom income and make his companies look profitable and boost further stock sales. The technique allowed him to multiply earnings at least 150x, maybe more. Current resonances with things like crypto, but also because the stock dividend fraud was made possible by a Supreme Court case from 1920 (Eisner v. Macomber) that was also used by wealthy interests to try to gut the income tax last year (Moore v. U.S.).
More here (https://papers.ssrn.com/abstract=5126189). The mis-use of stock dividends was widespread but Insull was the worst. But the wider practice is probably part of the story of the 1929 bubble (see De Long & Shleifer, 1991).
This was enjoyable. I trust that you've seen the American Experience episode, "Electric Nation". Part 2 is about Insull. The great Thomas Hughes helps to tell the story. I hope your readers realize that J. P. Morgan died in 1913. You are referring to the firm, not the man.