Saturday, April 30, 2005
Affordable electricity didn't come cheap
A tribute? That's right. Someday Chicago should recognize the compassionate genius Samuel Insull was. He gave us cheap electricity. Born in London, he was the first operator of Thomas Edison's telephone exchange there, when Edison sent for him in 1881. A very circumspect, stiff Jewish son of lower-class parents, at 22 Insull became Edison's top assistant. The only man who worked harder than Edison, he had mastered shorthand by taking down sermons at Westminster Abbey. Laboring until 4 each morning with Edison's chaotic finances, he mastered them and persuaded J.P. Morgan to fund three factories to build dynamos, lamps and underground conductors for the world's first central power station in New York.
Soon Insull was controlling the entire Edison empire while the great man invented in seclusion. Armed with power of attorney, he organized the credit to build more than a thousand "Baby Edison" power plants in hotels, factories and department stores. As America grew with electric power, Insull was the baton-waving orchestra conductor; he insisted on learning all there was to know about the infant electric industry. He never took a drink, wore natty clothes and kept his formal manner with pince-nez. This non-engineer, non-scientist built a complex that supported 6,000 workers in five years: the acorn for General Electric.
At 25, when he perceived the Morgan interests were conning Edison, Insull gathered enough proxies to force Morgan out and keep the company for his boss. That was a mistake. The Morgans vowed to even the score -- with Edison and particularly the little Jewish dandy with the cockney accent and pince-nez.
At 37 Insull came here as head of a small generating company, Chicago Edison, serving only 5,000 customers in a city of more than 1 million, determined to make power cheap. In those days electricity was so expensive it was turned on only for guests in parlors, in posh restaurants and hotels. He floated a $250,000 bond to finance a new power station, and built it in an unused rail yard on Harrison Street along the river, accessible to coal barges. At his beckoning, the shoreline of Lake Michigan came ablaze with 93,000 incandescent lights, and by the time of the World's Fair, electricity was a major component of the statement this city made after the fire that had decimated it only 22 years earlier. Between 1893 and 1898, Insull bought up all the competing central stations in the Loop, cutting a deal with GE for exclusive rights to electrical equipment.
Insull's radical step was to cut rates below the estimated cost of production. Build it and they'll come, he told the Morgans with a touch of arrogance. He was right, and they hated him for it. He installed meters showing peaks and valleys of consumption: Chicagoans asleep from midnight to 6 a.m. (using only 10,000 kilowatts), rising and rushing to work on the streetcars from 8 to 9 a.m. (46,000), slackening off at lunch (36,000) and going home (46,000). His goal was to find customers whose demand cycles would fill the valleys: The higher the diversity, the greater the profit.
His generosity was legend. He paid his workers for their 46-hour weeks more than most companies paid for 60 to 70 hours, and his personal phone number was available to all. Insull cut household electricity rates by 32 percent in 1898; hired black workers and shamed business to do the same; gave workers free medical insurance and free education benefits. He bypassed -- and angered -- the big banks by selling bonds locally when there were few stockholders. By 1929 Insull was supplying an eighth of all electricity and gas power in 32 states.
The 1929 stock market crash didn't faze Insull. He opened an $80 million pipeline in Texas; he raised $100 million to help Chicago pay its teachers, police officers and firefighters, and built the Civic Opera building. But every time the stock market fell, the New York banks got more of his empire. When the Morgans turned him down for a $10 million loan, they evened the score from long ago: In a single day Insull was forced out of 60 presidencies and directorships. Tried unjustly for fraud, Insull was exonerated but died a pauper. Summarized the old Chicago Times: ''Insull: not guilty; the old order: guilty.''
Read his story in They Made America (Little Brown & Co., 2004) by Harold Evans. Did anti-Semitism play a role? Of course. Insull needs at least a statue. Out of guilt alone for a genius who brought us cheap power and was persecuted unjustly, we should build it.