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100 Events That Changed Business: 1900-2000

30: Toys R Us revives employee stock options: 1978.

Emerging out of the 1978 bankruptcy of Interstate Department Stores, an obscure New Jersey retailer called Toys R Us offers its executives and store managers stock options as an incentive to stick around. Options had been around for decades; Benjamin Graham, of all people (see No. 62), satirically predicted their utility in the '30s. But a stagnant stock market and changes in tax laws have caused them to fall into disuse.

That would change when Toys R Us stock skyrocketed, turning the company's options into a giant windfall for Chairman Charles Lazarus and other top executives. During the 1980s, Lazarus would be the highest-paid CEO in America, earning $156 million, almost twice as much as Warner Communications Chairman Steven Ross, the No. 2. Greedy executives everywhere take notice, making stock options as American as corporate jets. Over the next decade, literally hundreds of billions of dollars in wealth would pass from public shareholders to company executives and managers.

The good news: Over time, options would trickle down the corporate ladder, especially in Silicon Valley, making programmers and secretaries as wildly overpaid as the chieftains for whom they toil. But don't even get us started on repricing.

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29. The Bretton Woods agreement: 1944.

Bretton Woods establishes the postwar New World Order. The accord, reached at a meeting in Bretton Woods, N.H., goes into effect in 1947. It creates a currency agreement that establishes fixed exchange rates for major currencies and sets the price of gold at $35 an ounce. The agreement would control currency relationships for nearly 30 years. The agreement also starts the International Monetary Fund and what would become known as the World Bank, rendering emerging countries dependent on the blessings of Moody's and Standard & Poor's.

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28. Three Bell Labs scientists invent the transistor: 1947.

The transistor, probably the century's biggest " Bell Labs innovation," is made of semiconductor material and can act as both conductor and insulator for electric current. It would replace the larger, unwieldy and less-reliable vacuum tubes in radios, televisions and computers, transforming the electronics industry and making it possible for boombox-wielding teenagers to disturb the peace everywhere.

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27. The first DC-3 flight: Dec. 17, 1935.

The DC-1 isn't bad. The DC-2 is even better. But the DC-3 is da bomb, the plane that revolutionizes commercial air travel. Built by Douglas Commercial, the twin-engined prop can carry 21 passengers more than 1,000 miles at a speedy 170 mph. It becomes an instant success after its first test flight in Santa Monica, Calif.

Within six months, American Airlines is flying the DC-3 commercially, and over the next 10 years, Douglas builds more than 10,000 DC-3s and C-47s (the plane's military version). Famous for its reliability, the plane quickly becomes the linchpin of the U.S. commercial airline fleet, and within three years, the vast majority of all U.S. passenger flights are flown on DC-3s.

With the advent of jet aircraft, the plane would lose its place in the passenger fleet, but some 60 years later more than 1,000 DC-3s would remain in service around the world. The sturdy prop would even outlast its manufacturer, which would become part of Boeing. (Arthur Raymond, the plane's designer, would prove pretty reliable himself. He would die in March 1999 at age 99.)

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26. The first Japanese car, a Toyota, is sold in the U.S.: 1957.

As stylistically different from the behemoth U.S.-made sedans as Oscar De La Hoya is from George Foreman, Japanese cars would gain popularity amid the 1970s concern about energy conservation. Though the U.S. auto industry would first try to combat the flood of Hondas with patriotic bumper stickers, asserting that buying American ranks right up there with loving one's mother and not burning the flag, it would soon figure out that building higher-quality and lower-priced cars would be an even more successful strategy. Eventually, General Motors and its kin would adopt many of the design and production standards originated in Asia.

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25. A Merck scientist synthesizes streptomycin: September 1943.

In late 1943, Selman Waksman, a Ukrainian under contract with Merck, discovers the treatment for tuberculosis from an infected chicken gizzard. It isn't the first antibiotic, but it gives rise to the modern drug industry.

Streptomycin is the first drug deliberately discovered by natural screening processes, the chief manner in which pharmaceuticals are discovered until the biotechnological revolution of the late 1970s and 1980s. Merck owns the exclusive right to streptomycin but gives it up at the urging of Waksman. Two years after World War II, the two big antibiotics commercially developed by Merck, penicillin and streptomycin, account for half the sales of synthesized drugs. But Merck isn't the biggest seller of antibiotics. Merck is the innovator, Pfizer the marketer; it's a pattern that would persist more than 50 years later.

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24. Volcker becomes Fed chairman: August 1979.

"Money matters," Milton Friedman has been saying since the 1950s, pleading the case for the importance of monetary policy in the business cycle and inflation. It takes a while, but people finally listen. In 1976, he wins the Nobel Prize for his work, and in 1979, his ideas get put into practice when Paul Volcker becomes chairman of the Federal Reserve, replacing the ineffective G. William Miller.

Volcker's mission is to squash the double-digit price increases that are crippling the economy. His elegant solution: open up a can of monetary whupass on inflation by raising interest rates. It works, though the painful tradeoff is a 10% unemployment rate and massive recession. Alan Greenspan is appointed Fed chairman in 1987 and continues the inflation fatwah -- though he has his own minirecession in 1990-91.

As the 1990s would progress and the economy would rebound with no signs of higher prices, pundits would begin to talk about the death of inflation, crediting the Fed's vigilance (and its resulting credibility in the financial markets) as well as warm fuzzies like technology-inspired higher productivity rates. Whatever the cause, the facts speak for themselves: The U.S. economy is still humming along, unemployment is at near-record lows and prices aren't climbing. For that, the Friedman-Volcker-Greenspan trifecta deserves a hand.

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23. The first commercial television broadcast: April 20, 1939.

As the age of industrialization dawned in the 19th century, inventors and philosophers alike looked forward to a new era in human history. For the first time, more than a privileged few among us would be released from the toil of striving endlessly to produce life's most basic necessities. The threescore-and-ten we spend on this mortal coil would become a time for leisure and contemplation, a pleasant freedom from work.

Nobody quite realized how bored we'd get.

Fortunately, David Sarnoff, president of Radio Corp. of America (see No. 75) and a huckster for all time, steps up to solve the problem. While Sarnoff doesn't invent television -- that honor goes to Philo Farnsworth, a proto-dork in San Francisco -- he is the first to see its endless commercial possibilities, and through the '30s spent millions of dollars to make television a reality. Finally, after a decade of feverish research, Sarnoff and RCA are ready to offer television to the world. Always a showman, he picks the 1939 World's Fair in New York to make his demonstration.

The response would surpass even Sarnoff's greatest expectations. While World War II would slow the adoption of television, within a decade 7 million sets would be in use in the U.S., and by 1960, the box would be a part of nearly every American home. Broadcast television would become a $40 billion industry, drive the growth of practically every other medium, provide a platform to develop national brands quickly and efficiently, and provide an insatiable demand for vacuous, buff twentysomethings. And, of course, NBC's Manimal.

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22. Bank of America launches the first credit card: September 1958.

Sears has been granting credit since about 1910, and by 1958, many Americans have a variety of individual charge cards. Diners Club exists, but you have to pay that off every month. The credit idea is floating around, but Bank of America is the first to do it and get it right: In September 1958, it mails out the first buy-stuff-at-more-than-one-place or get-a-loan-from-it credit card to its customers in Fresno, Calif. Credit limits are $300 to $500. Loans are offered at a rate of 18% a year.

The ruination of America wouldn't happen. But millions would go deep into debt, pay usurious APRs and suffer bad credit. Then again, Americans' buying habits would be forever altered, leading to massive consumer spending and booming economic growth. Finally, Americans would be able to rent cars, call at midnight for the Tae Bo video and get frequent flier miles simply for buying that new cappuccino maker.

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21. Microsoft is tapped to provide the IBM operating system: 1981.

William H. Gates III, a nice young nerd from a good family, licenses his company's computer operating system, called "Quick and Dirty Operating System" and renamed MS-DOS, to International Business Machines. IBM cedes control of the license for all non-IBM personal computers. This is not a good decision.

Microsoft goes on to "improve" everything Apple ever comes up with and Gates becomes really rich.

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