The Merchant of Power: Sam Insull, Thomas Edison and The Creation of the Modern Metropolis, Chasik - B

                                             
                                                This book tells the story of Samuel Insull "the premier financier-entrepreneur of his time". He was one of the richest and most powerful men in America in the 1920's and his fall from  grace was so extreme that he died an outcast in Paris in 1938. It is also a vivid reminder of how quickly the world changed in the three or four decades preceding WWI, when a world lit by fire was introduced to electricity and the great cities of the world blossomed with the majestic skylines we know today.
                                                In 1881, the young Englishman went to work in NY as secretary to Thomas Edison. He had previously worked in Edison's London office. Edison's goal was to build a power plant at Pearl St. to electrify lower Manhattan. A year later, 400 bulbs would bring light to the financial district. Edison's businesses were far-flung, disorganized and uncoordinated. Insull became their CFO, responsible for raising capital and cutting costs. The companies produced and sold power, manufactured light bulbs, wired the buildings, and built the transmission infrastructure. Soon, Edison had 300 plants around the country. Edison utilized DC which was capable of transmitting power for only a few blocks. George Westinghouse and Nikola Tesla fostered AC, which by the end of the century could transmit electricity 100 miles. Edison's visions were doomed for failure. As Edison's businesses floundered, JP Morgan consolidated and refinanced them when he incorporated General Electric in 1892. The Wizard took a 14% share and retreated to his labs. Insull did not wish to work for Morgan's team, moved to Chicago and became the CEO of Chicago Edison. It was one of many small energy producers in the fastest growing city in the world. Soon, he built it into Commonwealth Edison by providing power to the city's elevated subway system, the 'L'. Electrified railways, owned and supplied by Insull, were running throughout the city and deep into the suburbs. The best known were the South and North Shore Lines. They created Chicago's suburbs and Insull built beautiful train stations in each town for his commuters. Insull's empire moved just about everyone who worked in Chicagoland and then built beaches for them to travel to on summer weekends. His companies were enlightened providers of pay and benefits well ahead of their time. There were turkeys at Christmas, work for the coloreds pouring into the north, jobs for the returning WWI vets, pensions, and educational subsidies. He sold electrical appliances to household customers. In 1925, Commonwealth Edison sold appliances that added $1.4 million to their sales income. Irons, hair curlers, electric heaters, radiators and coffeepots were the top sellers. Chicago had the highest per-capita electrical usage in the world.
                                                   In order to fend off a potential greenmail attack on his companies, Insull set up a leveraged holding company that increased significantly in value in the late 20's. Insull rid himself of Cyrus Eaton of Cleveland by paying the greenmail at the top of the market. He lived by an impeccable set of rules, never paid a bribe in Chicago and never touted his stocks. He personally guaranteed the loans for Chicago's new Civic Opera House, which opened 11 days after the market crash in 1929.  As the market swooned, Insull kept buying stock in order to continue to avoid losing control of his companies. He made a second deal with Eaton that left his companies low on cash and heavily in debt. Overly leveraged, but still running profitable companies, Insull's companies were put into receivership and he was asked to resign. He was financially impoverished and lurking on the horizon were the potential consequences of encouraging thousands of his employees and customers to buy the shares of Commonwealth Edison, People's Gas and his other companies. "With more than 600,000 people sitting on worthless stock, surely some legerdemain was involved. Insull, and his brokers, and bankers and directors would be called to account." Insull fled to Paris and on to Athens, while at home he became public enemy #1 as FDR made the utilities the bane of democracy and Insull the chief robber baron. The administration was able to bring him home and he faced a federal trial in Chicago in the same courtroom and before the same judge who had tried Al Capone. The incredibly complex trial took a month-and-a-half. The transcript alone was 9,500 pages. After a 54 day sequestration, the jurors found for all of the defendants in a matter of minutes. Everything that he and his wife owned was auctioned off at the Lyric Opera building he had built. They returned to Paris penniless. He had a heart attack entering the Metro and was buried in London.
                                                      This is a brief well-written and good book. The author is certainly sympathetic to Sam Insull, whose accomplishments were extraordinary. My conclusion, without any further research, is that he was enlightened for the era and succumbed to hubris when disaster struck in the Depression. Thanks Lauren for the gift of the book.