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...
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.
One difference between Insull and Musk is that FDR chose to attack Insull, as a sort of scapegoat for the Depression.
From the American Experience webpage:
In many ways, Sam Insull became a scapegoat for the Great Depression. Franklin Delano Roosevelt in his 1932 campaign compared him with an Ishmael, as a public enemy that had been too selfish, too driven to profit and had harmed everyone else. I think the reason why he becomes a notorious scapegoat and then is indicted later by the federal government for mail fraud, of all things, was because he was such a great business leader in the 1920s. He loved the role of being a great business leader. He, along with people like Henry Ford, Firestone of the tire company, and a few others made themselves into national icons of the success of the American business enterprise. So in this way, Insull kind of set himself up for the big fall.
Why Insull, other than Ford or Firestone? They were manufacturers. They had companies that made something. Insull had had a company, Commonwealth Edison, that made electricity but he also had built up this gigantic empire, a pyramid of stocks that had collapsed and had been blamed, in a sense, for the Depression, the great stock market crash. So I think that's the focus on Insull was because of his manipulation of the stock market, the creation of these holding companies that had built like a pyramid of cars that collapsed with the Depression, and so he became a natural target that everyone knew who he was.
The Depression was rough on highly leveraged operators. When the economy is strong and it's different this time, they can do very well. When times get tough, things fall apart. Musk, unlike Insull, has never been big on financial engineering; his companies are highly valued thanks to the capital glut engineered in the 1980s. While our economy runs on dollars, stocks are traded in quatloos, so there is no intrinsic limit on the price earning ratio. In that episode of Star Trek, all it took was three floating brains to maintain the value of the currency, so it is possible that stock prices might rise indefinitely even as the number of oligarchs who can afford to buy stock drops to that level.
I feel bad that alternating current became the standard for electricity, and direct current never got a chance to develop. What was electricity like before it became deadly AC?
Rural electric had not reached some farm areas in the 1950’s. A lot of people were not totally happy with electricity. I think by the 1960’s the rural areas were electrified.
Did Edison ever say anything about his former worker?
Enjoy reading your stories about J.P. Morgan. Have we any more J.P. Morgan’s type today, or was that type of activity taken over by government.
I remember a program on PBS about the very rich. A woman reporter stated that there are people who have vast sums of money, but choose to remain unknown. The billionaires in the public eye may not be so rich in comparison.
AC isn't more dangerous than DC. The problem with DC is that it works when the power plant is nearby, but power can't be transmitted very far. This was not a problem with for first Pearl Street Station which was in an urban area with the customers near the generator. Longer wires have losses that depend on their length, but you can get more power through with less loss at higher voltages. DC means one has to generate the electricity at the same voltage as it is going to be used. AC means one can generate at one voltage, transmit at another and then provide a lower voltage for use.
New York City started as DC with Pearl Street station, but by the 1930s much of the city had switched over to AC. Appliances sold in the city were often capable of running on either AC or DC, so, like a lot of things in the city, they cost more than elsewhere. By the 1950s, most of the city was AC, but even now the NYC subways still run on DC.
DC power was still sold and distributed well into this century. I know that in San Francisco, DC power was finally phased out some time after 2005. It was still in use, often for elevators. At some point, the utility was distributing AC power and using a solid state converter to produce the desired DC. Then, they pulled the plug.
The Rural Electrification Agency was part of the New Deal in the 1930s. It brought electricity to rural areas, something that would have been extremely challenging - read expensive - to do with DC power. The TVA was a big part of the REA and all those initials were why the New Deal was sometimes called alphabet soup. Those were different times. Nowadays, existing utilities would have grabbed all the REA money and farmhouses would still not have power.
J.P. Morgan was a very effective crisis operator. He may have helped limit the damage in the 1907 crisis, but he made sure that he was able to profit from it. There are lots of crisis operators around nowadays. Some of them even make a point of inducing crises. They just have the good sense to stay relatively anonymous.
There are lots of rich people out there who keep a low profile. A good book, though a bit dated, is The Rich and the Super Rich. It came out in the 1960s. Wealth tends to get handed down and managed through what they now call family offices. The assets are held by corporations and the various heirs are shareholders. They live on the dividends. I am sure that any good accountant come come up with a way for 10% of a billion dollar corporation to be worth perhaps ten million dollars for estate tax purposes.
Bloomberg had a recent article about a neighborhood in Perth full of what look like ordinary suburban houses except that they are all family offices. Perth is full of mining money, lots of it. If you want to get a sense of where these people live, check out the wealthiest zip codes. Some of them are obvious like Bel Air. Some are trickier like the zipcode for 30 Rock or the one around MLB headquarters. Some are in farm country. It's kind of interesting.
There's an old saying that many extremely wealthy people take seriously, "One should only appear in the newspapers when one is born, when one marries and when one dies." Oh yeah, and "Cars, like gloves, should only come in black and white."
Our Host already got overtaken by events. The Trump administration is going to ease the regulatory restraints on self-driving vehicles, which is Musk's latest wheeze.
And it's unfair to compare Insull to Musk. Insull's industries never relied on the government tit, and Insull appeared to be an actual manager, rather than a loudmouth promotor. I will concede that both Insull and Musk are backed by goggle-eyed investors. And Insull's seemed crazier--risk! and growth! naturally draw equity, not debt.
Thanks, good profile of Insull. It's unlikely anyone could resemble Musk in more ways - on drugs or sleepless most of the time and as the father fourteen children by different mothers with a private stockade for his women and a community of his cult. Nor do many industrialists have his background of a formative techno-fascist grandfather and growing up in South Africa or his awe of the crazed Peter Thiel, who was a child in the last town loyal to the memory of Adolf Hitler.
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.
PS.
One difference between Insull and Musk is that FDR chose to attack Insull, as a sort of scapegoat for the Depression.
From the American Experience webpage:
In many ways, Sam Insull became a scapegoat for the Great Depression. Franklin Delano Roosevelt in his 1932 campaign compared him with an Ishmael, as a public enemy that had been too selfish, too driven to profit and had harmed everyone else. I think the reason why he becomes a notorious scapegoat and then is indicted later by the federal government for mail fraud, of all things, was because he was such a great business leader in the 1920s. He loved the role of being a great business leader. He, along with people like Henry Ford, Firestone of the tire company, and a few others made themselves into national icons of the success of the American business enterprise. So in this way, Insull kind of set himself up for the big fall.
Why Insull, other than Ford or Firestone? They were manufacturers. They had companies that made something. Insull had had a company, Commonwealth Edison, that made electricity but he also had built up this gigantic empire, a pyramid of stocks that had collapsed and had been blamed, in a sense, for the Depression, the great stock market crash. So I think that's the focus on Insull was because of his manipulation of the stock market, the creation of these holding companies that had built like a pyramid of cars that collapsed with the Depression, and so he became a natural target that everyone knew who he was.
The Depression was rough on highly leveraged operators. When the economy is strong and it's different this time, they can do very well. When times get tough, things fall apart. Musk, unlike Insull, has never been big on financial engineering; his companies are highly valued thanks to the capital glut engineered in the 1980s. While our economy runs on dollars, stocks are traded in quatloos, so there is no intrinsic limit on the price earning ratio. In that episode of Star Trek, all it took was three floating brains to maintain the value of the currency, so it is possible that stock prices might rise indefinitely even as the number of oligarchs who can afford to buy stock drops to that level.
I feel bad that alternating current became the standard for electricity, and direct current never got a chance to develop. What was electricity like before it became deadly AC?
Rural electric had not reached some farm areas in the 1950’s. A lot of people were not totally happy with electricity. I think by the 1960’s the rural areas were electrified.
Did Edison ever say anything about his former worker?
Enjoy reading your stories about J.P. Morgan. Have we any more J.P. Morgan’s type today, or was that type of activity taken over by government.
I remember a program on PBS about the very rich. A woman reporter stated that there are people who have vast sums of money, but choose to remain unknown. The billionaires in the public eye may not be so rich in comparison.
AC isn't more dangerous than DC. The problem with DC is that it works when the power plant is nearby, but power can't be transmitted very far. This was not a problem with for first Pearl Street Station which was in an urban area with the customers near the generator. Longer wires have losses that depend on their length, but you can get more power through with less loss at higher voltages. DC means one has to generate the electricity at the same voltage as it is going to be used. AC means one can generate at one voltage, transmit at another and then provide a lower voltage for use.
New York City started as DC with Pearl Street station, but by the 1930s much of the city had switched over to AC. Appliances sold in the city were often capable of running on either AC or DC, so, like a lot of things in the city, they cost more than elsewhere. By the 1950s, most of the city was AC, but even now the NYC subways still run on DC.
DC power was still sold and distributed well into this century. I know that in San Francisco, DC power was finally phased out some time after 2005. It was still in use, often for elevators. At some point, the utility was distributing AC power and using a solid state converter to produce the desired DC. Then, they pulled the plug.
The Rural Electrification Agency was part of the New Deal in the 1930s. It brought electricity to rural areas, something that would have been extremely challenging - read expensive - to do with DC power. The TVA was a big part of the REA and all those initials were why the New Deal was sometimes called alphabet soup. Those were different times. Nowadays, existing utilities would have grabbed all the REA money and farmhouses would still not have power.
J.P. Morgan was a very effective crisis operator. He may have helped limit the damage in the 1907 crisis, but he made sure that he was able to profit from it. There are lots of crisis operators around nowadays. Some of them even make a point of inducing crises. They just have the good sense to stay relatively anonymous.
There are lots of rich people out there who keep a low profile. A good book, though a bit dated, is The Rich and the Super Rich. It came out in the 1960s. Wealth tends to get handed down and managed through what they now call family offices. The assets are held by corporations and the various heirs are shareholders. They live on the dividends. I am sure that any good accountant come come up with a way for 10% of a billion dollar corporation to be worth perhaps ten million dollars for estate tax purposes.
Bloomberg had a recent article about a neighborhood in Perth full of what look like ordinary suburban houses except that they are all family offices. Perth is full of mining money, lots of it. If you want to get a sense of where these people live, check out the wealthiest zip codes. Some of them are obvious like Bel Air. Some are trickier like the zipcode for 30 Rock or the one around MLB headquarters. Some are in farm country. It's kind of interesting.
There's an old saying that many extremely wealthy people take seriously, "One should only appear in the newspapers when one is born, when one marries and when one dies." Oh yeah, and "Cars, like gloves, should only come in black and white."
Our Host already got overtaken by events. The Trump administration is going to ease the regulatory restraints on self-driving vehicles, which is Musk's latest wheeze.
And it's unfair to compare Insull to Musk. Insull's industries never relied on the government tit, and Insull appeared to be an actual manager, rather than a loudmouth promotor. I will concede that both Insull and Musk are backed by goggle-eyed investors. And Insull's seemed crazier--risk! and growth! naturally draw equity, not debt.
Thanks, good profile of Insull. It's unlikely anyone could resemble Musk in more ways - on drugs or sleepless most of the time and as the father fourteen children by different mothers with a private stockade for his women and a community of his cult. Nor do many industrialists have his background of a formative techno-fascist grandfather and growing up in South Africa or his awe of the crazed Peter Thiel, who was a child in the last town loyal to the memory of Adolf Hitler.
Elon killed the car company he bought. A decade from now TSLA's collapse will be a cautionary tale in B school...assuming Don Jr. isn't king
Luckily he had a better hand with Twitter
Tesla has been testing the cyber truck in wade mode. https://www.facebook.com/search/top?q=chp%20-%20truckee
Yes Trump is an enemy of charging stations, but Musk has a near monopoly on those that continue to exist and a strong barrier to entry for newcomers.