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The Basics of Business History: Nos. 100 to 81

THE TSC TIMELINE
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100. Hallmark gets its start: Jan. 10, 1910.

Joyce C. Hall, a teenager (and a guy, by the way) from Norfolk, Neb., arrives in Kansas City, Mo., in 1910 and starts building a picture-postcard business into a giant of doggerel and cheer that would reshape American holiday celebrations. Hallmark is instrumental in the commercialization of holidays, which has driven a huge amount of the growth in U.S. retailing (and the growth in bogus holidays like Sweetest Day).

99. The Three Mile Island disaster: March 29, 1979.

So much for alternative energy. Three Mile Island's near-meltdown renders nuclear energy but a Simpsons joke, increasing the country's dependence on oil.

So much for electricity that's "too cheap to meter."
Photo credit: CORBIS/David H. Wells

98. Disneyland opens: July 17, 1955.

With Ronald Reagan hosting a live ABC special, Disneyland opens in Anaheim, Calif. The first major destination theme park spurs growth in travel and tourism nationwide. Today Disney's (DIS) parks alone are a $5 billion annual business, and Walt Disney World in Orlando, Fla., which has more than 50,000 employees, is the largest single-site employer in the U.S.

97. Nike's Revolution ads commodify dissent: 1987.

It's not the first time the ideals of the 1960s -- freedom, individuality, antimaterialism, dissent -- are called upon to push product. But it may stand as the biggest co-optation. Right at the height of the Summer of Love anniversary celebration, Nike (NKE) uses the Beatles song to sell sneakers. Now it's almost impossible to escape ads that sell not just products but breaking the rules, dude.

96. The University of Phoenix, a for-profit university, is accredited: 1978.

The University of Phoenix is accredited in 1978, and few think that without the benefit of a Final Four-bound athletic team or ivy-encrusted heritage it will amount to much. It becomes the nation's largest private university. And unlike its more traditional academic competition, it turns a profit. Phoenix's rise goes hand in hand with the boom in private prisons since 1984, when Corrections Corp. of America takes over the county prison in Hamilton County, Tenn.

Both developments indicate the increased willingness of Americans and their elected representatives to hand over to the private sector functions previously reserved to government. But the move to market incentives hasn't unfolded like a libertarian's dream. Many educators criticize Phoenix and other for-profit education providers, saying they lack comprehensive library and lab facilities and a full-time, dedicated faculty. Prisons, meantime, face new regulations in the wake of violence and inmate escapes at CCA's prison in Youngstown, Ohio.

95. Jaws ushers in the blockbuster era in Hollywood: June 20, 1975.

Before Steven Spielberg's little flick, starring a gape-mawed contraption named Bruce and co-starring Roy Scheider, movies almost invariably opened gradually and tried to build an audience through word-of-mouth and limited advertising. Jaws, which goes on to gross $260 million in the U.S., introduces the concepts of heavy preopening marketing and wide releases -- sound familiar?

94. Frederick Taylor's 'scientific management' theory gains legitimacy: 1910.

Frederick Taylor forms his theory of "scientific management," a patchwork of efficiency and cost-cutting ideas, in the 19th century. But it doesn't gain wide currency until Boston lawyer and future Supreme Court justice Louis Brandeis argues on behalf of consumers that a $27 million rate increase sought by the nation's Eastern railroads should not be approved by the Interstate Commerce Commission. Brandeis contends that the railroads cannot justify their costs. Citing Taylor's ideas, Brandeis maintains that the railroads could save $300 million a year through improved productivity.

93. The U.S. is a giant creditor nation: 1918-1982.

Following World War I, the winners (Allies) and losers (Central Powers) have something in common: They owe lots of money to the U.S., making it the world's biggest creditor nation. The tables turn by 1985, however, as the U.S. becomes a net debtor. And because we like to be No. 1 in everything, we quickly become the world's largest.

92. Harley-Davidson adopts Japanese management techniques: October 1981.

Having just bought the company in a leveraged buyout, Harley-Davidson (HDI) Chairman Vaughn L. Beals Jr. and his management team realize that Japanese motorcycle makers are kicking their butts. To beat them, they join them, adopting such Japanese techniques as "just-in-time" inventory control. Just-in-time eliminates the high and costly inventory levels that require elaborate handling systems. Other U.S. major manufacturers, like General Motors (GM), soon follow, lemminglike.

91. Southwest Airlines begins flying: June 18, 1971.

Southwest Airlines (LUV) begins flying between Houston, Dallas and San Antonio. With its cheeky attitude, wink-and-a-nudge ads and low prices, the new carrier is an immediate success.

In 1978, the U.S. begins deregulating interstate airfares and schedules, enabling Southwest to fly outside Texas. While other discount airlines rush to grow, often destroying themselves in the process, Southwest expands more cautiously, becoming the nation's dominant low-fare carrier by avoiding expensive mistakes.

Today, the company's everyday low fares give millions of Americans the chance to enjoy the speed and convenience of flying, and its good relations with employees and simple but superior customer service make it the most feared competitor in the airline business. Last year, the company earned more than $400 million on revenue of almost $4.2 billion. Not bad for a company that flies only 737s.

90. Lou Gerstner turns IBM around: April 1993 to present.

Big Blue is still big in early 1993, but not big like Mark McGwire -- powerful, potent, popular. Big, instead, like Babe Ruth in the '40s -- unhealthy, and with its best days sadly receding. Along comes Louis V. Gerstner Jr., who replaces Chairman and CEO John F. Akers on April Fools' Day.

Gerstner, a former McKinsey consultant coming off stints at American Express (AXP) and RJR Nabisco (RN), joins an IBM (IBM) hobbled by bloat and bereft of focus.

Gerstner bluntly declares, "The last thing IBM needs now is a vision" and instead quickly seeks to slash costs by more than $8 billion. The skeptical market keeps IBM on a downward course at first. But Gerstner winnows the workforce to 215,000 by mid-1995 from about 300,000, consolidates facilities and otherwise flenses the fat. Wall Street cheers.

A ghoulish management style is born. Gerstner's success is the most dramatic example, with hired-gun CEOs jettisoning staid traditions -- along with thousands of workers -- to upsize the stock price. Of course, it doesn't always work -- see "Chainsaw(ed) Al" Dunlap, late of Sunbeam (SOC).

89. John Bogle launches the First Index Investment Trust: August 1976.

The fund that becomes the mighty Vanguard (VFINX)Index 500 starts with just $11 million in assets under management and can't even buy all of the S&P 500 stocks until 1977. But it starts a revolution in investing, luring billions from investors concerned about the risks and costs of actively managed funds.

88. Thomas Watson becomes president of IBM's predecessor: 1914.

Thomas J. Watson is fired from National Cash Register in 1913, after having been framed for a scheme to create a dummy competitor to the monopolistic NCR. He joins Computing-Tabulating-Recording and quickly rises to lead the company, which is renamed International Business Machines in 1923. All's peachy until Bill Gates.

87. Valium is introduced: 1963.

Mother's little helper
Photo credit: Paula Wood
Feel-good remedies and snake-oil cures have been around forever. Lifestyle drugs, which garner attention in the media, aren't that big a business. But Valium, from the Latin for "to be strong and well," is different.

Introduced by Swiss drug company Roche Labs in 1963, it quickly becomes mother's little helper for millions of housewives throughout the '60s and beyond. The first billion-dollar medicine and one of the first brand-name drugs, Valium launches the era of blockbuster medicines. More prescriptions are written for it than for any other drug between 1969 and 1982. But while the Swiss may have pioneered the blockbuster, the Americans later master it. Valium's descendents range from Eli Lilly's (LLY) Prozac to Pfizer's (PFE) Viagra.

86. The Panama Canal opens: Aug. 15, 1914.

In the late 19th century, the French try to build a canal across the Panama isthmus connecting the Atlantic and Pacific oceans. They fail. Early in the 20th century, the U.S. has the same goal and seeks permission from Colombia, which then rules Panama. No dice.

So the U.S. sends a gunboat down Panama way, the supportive sight of which inspires the Panamanians to overthrow their Colombian overlords. The U.S. then gets a nice rent deal on the Canal Zone (which will revert to Panama on Dec. 31, 1999), and many massive engineering feats and mosquito bites later, the oceans meet. Now ships traveling from New York to San Francisco can save a modest 7,872 miles by not detouring around South America. U.S. and global commerce never look back.

85. The Public Utility Holding Company Act is enacted: 1935.

The law breaks up the powerful trusts that had dominated the nation's electricity and gas utilities. Power companies are rendered a political afterthought throughout the century, unlike, say, oil companies, which continue to wield influence. Sixty years later there would be talk of repealing or reforming PUHCA, which some see as an antiquated impediment to competition among utilities.

84. HBO via satellite accelerates the fragmentation of the TV marketplace: September 1975.

Today a unit of Time Warner (TWX), HBO broadcasts the heavyweight boxing championship match between Muhammad Ali and Joe Frazier live from the Philippines. The "Thrilla in Manila" marks the first time satellites are used to deliver regularly scheduled programming and link together previously isolated cable systems.

HBO's bold move helps create the modern cable business, now the largest single segment of the entertainment industry. Twenty-four years later, U.S. consumers will spend close to $40 billion on cable, more than they spend on music, home videos and movies at theaters -- combined. Live satellite feeds also make it possible to offer national and worldwide broadcasts of everyday sporting events, turning collegiate and pro athletics into an 11-figure annual business. Unfortunately, the massive expansion does little to improve the quality of our entertainment.

83. The surgeon general reports that smoking causes lung cancer in men: Jan. 11, 1964.

Surgeon General Luther Terry, who picked tobacco in Alabama as a boy, startles Americans with the news that deliberately inhaling smoke deep into your lungs dozens of times every day might be bad for you. Cigarette consumption would drop 20% in the three months following the report, and over the next 35 years the tobacco industry would face an ever-increasing torrent of criticism.

In 1971, television and radio ads for cigarettes would be banned; in 1998, the industry would agree to pay $206 billion to settle state lawsuits over the public health costs of smoking, an unprecedented transfer of wealth from a legal private industry to the government. Still, coffin nails would remain a very profitable business. In 1998, industry leader Philip Morris (MO) would earn $5.3 billion, almost as much as Microsoft (MSFT).

82. Michael Milken starts Drexel's junk-bond trading operation: 1971.

Michael Milken, a young punk out of Wharton, convinces his firm that there's gold in junk. After making a killing in "fallen angels" -- once-investment-grade bonds that have fallen in price because of investor worries that their issuers will default -- Milken and the firm then known as Drexel Harriman Ripley begin underwriting high-yield "junk" bonds for entrepreneurs previously cut out of the capital markets. Milken's clients include Turner Broadcasting and Mirage Resorts (MIR), unleashing Ted Turner and Steve Wynn on an unsuspecting American public. Would-be corporate raiders soon turn to junk as a source of financing. A little insider trading later, the 1980s are in full swing.

81. The first U.S. supermarket, King Kullen, opens: Aug. 4, 1930.

The Piggly Wiggly chain popular in the South lays claim to being the first self-service grocery store (and the even older A&P (GAP) sold a lot of tea and stuff), but Michael J. Cullen's King Kullen store in Queens, N.Y., is the first to bring together the high volume and low cost that are the hallmarks of the U.S. supermarket.

It's the King, not the Pig.
Photo credit: Dino Scopaz




In Part 2, entries 80 through 61, Rosie rivets, FedEx flies and stocks have a minor little crashlike thing.

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