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The Basics of Business History: Nos. 20 to 1

THE TSC TIMELINE
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20. President Johnson signs Medicare into law: July 30, 1965.

Between assignations, President John F. Kennedy in 1963 sends a bill to Congress to create Medicare, a medical-hospital insurance plan financed through Social Security. First envisioned by President Harry S. Truman, the plan provides for low-cost hospitalization and medical insurance for the elderly. It isn't passed till the middle of 1965, when it becomes a pillar of President Lyndon Johnson's Great Society. By 1998, Medicare would cover 37 million people and spend over $200 billion annually, providing one-fifth of all the money spent on U.S. health care.

In the early '80s, Medicare would be "reformed" with the institution of a fixed-price system under which diseases are put into payment categories. The new system is supposed to reduce hospital stays and cut down on extraneous tests and treatments. The changes would bring about the overhaul of the heretofore mom-and-pop health-care system, spurring the for-profit health-care industry (see No. 48): hospital chains, new forms of insurance concerns under the managed care umbrella, groups of physicians banding together to increase their pricing power, health-care information services concerns.

These industries only partially succeed in consistently making money, but they would turn the routine check-up into an adventure in cajoling the generalist into allowing you to see the specialist, completing convoluted paperwork and navigating eye-popping billing.

19. The Depression-era securities laws: 1932-34.

After President Franklin Roosevelt makes stock- and bond-market reform one of his election promises, he and Congress unleash a flurry of legislation designed to make sure everyone in the market sandbox plays fair. The Glass-Steagall Act of 1932 lets the Treasury Department balance its books, while the Bank Act of 1933 -- since then confusingly known as Glass-Steagall, which even more confusingly should actually be pronounced to rhyme with (Steven) Seagal, not "seagull" -- says bankers are bankers, brokers are brokers, and ne'er the twain shall meet. The law is intended to prevent banks from speculating with their depositors' money, but it would eventually be considered a barrier to the one-stop financial shopping malls that companies like Citigroup (C) are panting to provide. Congress would swear to change it every term then get preoccupied with more important things, like impeachment.

The Securities Act of 1933 and the Securities Exchange Act of 1934 introduce the term "full disclosure" into the lexicon (requiring publicly owned companies to register their shares and reveal every financial wart and mole at least once a quarter), and ban insider trading. The 1934 legislation also creates the Securities and Exchange Commission to enforce the whole mess of new laws, though the complaint would be heard that SEC regulators are more archaeologists than detectives.

18. Netscape goes public: Aug. 9, 1995.

The World Wide Web takes a great leap forward with Netscape's IPO, just 16 months after the company's founding. Morgan Stanley prices the young browser maker's stock at $28 a share, having boosted its expected range to $21 to $24 from $12 to $14. Netscape soars to 75 intraday and closes at 58 1/4, leaving goggled-eyed brokers babbling, "They think it's the next Microsoft (MSFT)!"

Netscape itself (today part of America Online (AOL)) wouldn't quite live up to that label, but its startling debut would blast the Web into the forefront of public -- and corporate -- consciousness. The years that follow would spawn a tornado of business and technology development, forming billion-dollar companies (and multimillion-dollar failures) in the hyper-compressed span known as Internet time.

The Web would have major effects on commerce, communications, education and public discourse, yet still the massive industry would be built almost entirely on dreams. But those dreams are so vast that they promise to forever alter business and daily life if they come just a little bit true.

17. Bakelite is introduced: 1909.

Belgian-born Leo Baekeland spends three years early in the century trying to invent a versatile, synthetic material with multiple industrial uses. In 1907 he creates polyoxybenzylmethylenglycolanhydride, phenol-formaldehyde for short, Bakelite for even shorter. Baekeland formally introduces his invention, the world's first 100% synthetic plastic (as opposed to the partly organic celluloid), at a 1909 meeting of the New York chapter of the American Chemical Society. And now? It's a staple of antique fairs. And those of you who've spent a week of your lives without touching plastic (and aren't the Unabomber) can write to TSC for a shiny new credit card, with a fat credit line (just kidding, you hermits).

16. Hewlett and Packard put Silicon in the Valley: 1939.

Like any great rock 'n' roll band should, it all started with a couple of college kids banging around in a garage. Bill Hewlett and David Packard, blustering with Stanford swagger, take to an old shed at 367 Addison Ave. in Palo Alto, Calif., to build an electronic measuring device called an audio oscillator, "Model 200A."

In this 45-mile, hilly strip of land between San Francisco and San Jose, Hewlett-Packard (HWP) begins a tradition of cutting-edge technology companies that have a couple of things in common -- screw-the-rules ideas, a Stanford connection and entrepreneurial, irreverent inventors too young or too stupid to think that it couldn't be done. Years later, when Steve Jobs and Stephen Wozniak take to a Los Altos garage to invent a personal computer, Apple (AAPL) already has its role models. So do Jerry Yang and David Filo, who start a computer list in their Stanford dorm room that becomes Yahoo! (YHOO).

But these ventures have more in common than shared climate and fecund garages. Advances in technology become a cause for community pride. A culture develops in this burgeoning "Silicon Valley" to reward dedication to craft, not company. People are encouraged to start new ventures. Co-workers quickly become clients, and a competitive, cooperative network is born to encourage entrepreneurs. "Do lunch," says Stanford alum and Sun Microsystems (SUNW) head Scott McNealy. "Or be lunch."

Today $5 billion -- or a third of all venture capital raised in the world -- is invested in Silicon Valley, and much of that funding is local. As grows the valley, so grows the valley.

15. Kroc buys McDonald's: 1961.

While hawking food mixers in 1954, Ray Kroc is entranced by two of his customers: the McDonald brothers, whose San Bernardino, Calif., restaurant serves cheap burgers, fries and shakes. (And unlike the burger joints du jour, McDonald's (MCD) isn't a drive-through). Kroc sees an expanded McDonald's as a great way to sell more of his mixers, and when the Brothers McD. wonder who's going to handle all these new restaurant openings, he offers his services. He buys them out in 1961, for $2.7 million, which ranks right up there with the sweet deal the Dutch scored for Manhattan, and kicks off an massive expansion. Though not the first modern entrepreneur to make his fortune by franchising (that nod goes to Isaac Singer, of sewing machine fame), he's certainly among the most notable successes, paving the way for businesses from Domino's to Century 21.

By 1963, Ronald McDonald would don his stripy socks, and just two years later, he'd be recognized by 96% of American children, giving an early glimpse of the company's gargantuan brand power. Of course, its ubiquity would turn the "Mc" prefix into shorthand for mass produced, cookie-cutter products. Eventually, McDonald's would take its formula abroad, attracting job- and burger-seeking crowds in the good times (post-Communist Moscow) and rocks through its windows in bad (China -- right now).

The food seems beside the point, though nutritionists would blame the fast-food revolution for America's increasingly porky populace. Taste would take the back seat to familiarity. McDonald's would become the ultimate safe haven; in every corner of the globe, the sight of the Golden Arches would signal a known culinary quantity for suburban families with screaming kids, Eurailpass-toting grads sick of escargot and frazzled workers on 15-minute lunch breaks. But even fast food palates have some degree of discrimination. Witness the career arc of the Arch Deluxe.

14. The United Auto Workers stage their first sit-down strikes: 1936-37.





Send in the goons.
Photo credit: Corbis/Bettman
Following the Wagner Act of 1935, which requires U.S. employers to recognize their workers' collective bargaining efforts, the United Auto Workers' new muscle results in sit-down strikes in Flint, Mich. It forces General Motors (GM) to recognize the upstart union. Union power, measured by the percentage of the population represented by a union, would grow for two decades. Its peak: 1955, when the American Federation of Labor and the Congress of Industrial Organizations join forces and one-third of all American workers are union members.

The rise of unions would give unskilled and semiskilled industrial workers a chance to reach America's middle class, but their increasing power would come at a price. By the late 1970s, the web of work rules and high wages they created would hamper smokestack industries facing competitors from low-wage countries like Mexico and more efficient producers like Japan. Union leaders would stonewall necessary changes, destroying millions of jobs in order to save them. The resulting backlash -- fed by business leaders and their willing political handmaidens -- would erode labor's power. By 1999, just 1 in 10 private sector workers would be unionized (No. 42).

13. Kennan's 'X' letter gives birth to the peacetime military-industrial complex: 1947.

Before Malcolm X, or the X Games, there was Mr. X, the coolest X of 'em all. In the aftermath of World War II, Americans slowly begin to realize that Joe Stalin has more in common with Adolf than with Winston. The right wing is hot to nuke Moscow while we have the chance, while the left decides that maybe purges and mock trials aren't so bad after all. It falls to Mr. X, a.k.a. George Kennan, writing anonymously, to offer a plan that ultimately would become the U.S. blueprint for the Cold War.

In the July 1947 issue of Foreign Affairs, Kennan, the head of the policy planning staff of the State Department, advocates the "containment" of the Soviet Union. He argues that the Communist system would ultimately collapse under its own weight if the U.S. and its democratic allies barred Moscow's further expansion.

Events would prove Kennan right, though the process took more than four decades, far longer than he expected. In the interim, the U.S. would spend trillions of dollars on the Cold War, conscripting tens of millions of American men into the military and employing millions more indirectly at the companies that built the weapons to support the war machine. Along the way, the military-industrial complex would arm much of the Third World, including some countries that would remain distinctly unfriendly to the U.S. well after the fall of the Soviet Union.

Added Cold War bonus: the Internet, which was strongly supported in its early days by your friends at the Pentagon (when Al Gore Jr. is still smoking dope).

12. Keynes publishes The General Theory of Employment, Interest and Money: 1936.

The greatest business catastrophe of the 20th century, the Great Depression, is in full swing when British economist John Maynard Keynes gives government policymakers worldwide a tip: When demand is collapsing, when one in four able-bodied adults is unemployed, when farmers are destroying their crops because no one can afford to buy them, balancing the budget should be the last thing on your minds. Unfortunately, this advice sails right by, and it takes an unplanned event (that would be World War II) to provide the extraordinary government-led stimulus needed to get the U.S. economy out of the Depression.

In his seminal 1936 work, The General Theory of Employment, Interest and Money, Keynes envisions government as a counter-cyclical force, increasing spending and running deficits when the economy is slowing, while cutting back and paying off its debts when times are good. Keynesian theory would spark a fiery response from conservative economists, who argue that government spending is inherently more wasteful than private investment, though plenty of real-world examples suggest otherwise. (Compare, say, the Golden Gate Bridge to the phat wood-paneled Gulfstreams that fill corporate jet fleets.)

But Keynes' theory would suffer from a serious real-world problem of its own. After the war, while Western governments would prove all too ready to stimulate their economies by running deficits and ratcheting up spending, they wouldn't be as willing to follow the second half of Keynes' advice by cutting back in boom times. As a result, they would run chronic deficits, eventually causing huge government debts, driving up inflation and interest rates, and crowding out private investment. Only in the early 1990s, as debts reached crisis proportions in the U.S. and Western Europe, would politicians finally step away from the trough of deficit spending.

Even so, Keynes would remain the century's most influential economist.

11. Reagan is elected: 1980.

Are you better off today than you were 19 years ago?

Whatever your answer, Ronald Reagan deserves some of the credit.

For four decades following the Great Depression and FDR's election in 1932, the majority of Americans view Washington as a necessary counterweight to the free market's excesses. But that perception sours in the 1970s, thanks to Vietnam, Watergate, rising inflation and a stagnant economy. Once the solution, government is increasingly perceived as the problem.

Reagan's landslide 1980 win over Jimmy Carter crystallizes that dissatisfaction, marking a revolution in the way Americans see government. The ramifications would touch just about every aspect of Washington's relationship with the economy. Under Reagan, Congress would make the tax code simpler and less progressive, largely deregulate the transportation and communication industries and cut domestic spending while increasing spending on the military.

The Reagan election also would lend strength to a new Federalist movement, in which power would devolve to the states. States and municipalities start competing against one another for businesses, doling out handsome tax breaks and other fancy corporate welfare.

But the biggest change of all came from the massive deficits Reagan would run during his administration. The deficit spending, combined with the Federal Reserve's tight-money policies, would make the 1980s a time of great glee for lenders, who would watch real interest rates soar after being depressed by the inflation of the '70s. Meanwhile, labor would suffer, with unions under siege and the minimum wage falling in real terms to the lowest levels since the 1940s.

The impact of the Gipper's deficits would outlast his reign, as President Clinton would learn to his dismay. Hoping to unveil a big new "economic stimulus" package in 1993, the Big Creep would find instead that his first duty would be satisfying the bondholders who held trillions of dollars of U.S. debt. "Do you mean to tell me the success of my program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?" Clinton asked his aides, according to Bob Woodward.

The answer: Yes. Thanks to Reagan, we're all Republicans now.

10. Carrier Engineering is founded, beginning the commercialization of air conditioning: 1915.

Willis Carrier and six others found Carrier Engineering Co. 13 years after first testing his "apparatus for treating air" in a Brooklyn printing plant and nine years after patenting it. The company's product: a guarantee to achieve not only the temperature but the humidity levels required by customers. In 1922, Carrier would patent the centrifugal chiller, making it possible to cool off large spaces like stores and movie theaters.

Without air conditioning (the term was actually coined in 1906, by textile engineer Stuart Cramer) the growth of temperature-sensitive industries like film, tobacco and textiles would have been difficult, if not impossible. The South and the Southwest would have been far less attractive to settle and develop. There'd be no such thing as a "summer blockbuster" in the movie business. And the deodorant industry would be even bigger than it is now.

The business of cool wouldn't stop there. In 1924, Clarence Birdseye would found Birdseye Seafoods after being inspired by the flash-freezing food storage techniques of Inuits in the Arctic. TV dinners would follow.

9. The current bull market begins: August 1982.

It would be hard to imagine in the crisp, thin air of the late-1990s bull market (elev. 11,000), but stocks in the late '70s and early '80s remain mired in a muggy, swamplike bear market just above sea level. Business Week sums it up in its legendary Aug. 13, 1979, cover story, "The Death of Equities: How inflation is killing the stock market." Major foreign currencies, high-grade corporate bonds, gold, houses, farmland, postage stamps -- common stocks have underperformed them all since 1972.

Business Week looks right for exactly three more years. The Dow Jones Industrial Average bottoms at 776.92 on Aug. 12, 1982. But a steady decline in interest rates, with yields on 13-week Treasuries having eased to 8.6% from nearly 13% in the previous month and a half, finally gets the stock market's attention as banks starting cutting their lending rates. On Aug. 17, stocks break out of the bear market once and for all as the Dow leaps a then-record 38.81, or 4.9%, to 831.24.

A supernova of wealth creation the likes of which the U.S. and the world had never seen would follow. The frightening crash of 1987 (see No. 78) ultimately would look like nothing but a buying opportunity, as the best would be yet to come. Companies tapping the gushing public well for financing, individual investors gaining more financial security than they ever thought possible, Wall Street's brokerages becoming globe-spanning giants of capital movement, the federal deficit disappearing in a flood of tax revenue -- the bull market's effects would touch almost every aspect of American life. Supernovas end as dead stars, sure, but the blinding glow of wealth would keep the focus well away from that unhappy truth.

8. The first Wal-Mart opens: 1962.

Now offering close-out specials on small businesses.
Ben Franklin variety store proprietor Sam Walton feels the heat from discount merchandisers, so he creates one of his own. Walton opens Wal-Mart Discount City in Rogers, Ark., in 1962. That same year, S.S. Kresge Co. launches Kmart, F.W. Woolworth starts Woolco and Dayton Hudson (DH) begins its Target chain. That sound you hear is theU.S. becoming a service economy.

Wal-Mart (WMT) bests them all. Starting expansion in 1963, Walton puts his stores on the outskirts of small towns, where there's little competition and he can undercut the stores on Main Street. He rips off other discounters' ideas, is obsessively miserly and studiously red-necked, and in 1992, he would die America's richest man. In the 1990s, Wal-Mart would become the country's biggest retailer and, after the Manpower (MAN) temp agency, the biggest private employer, surpassing General Motors (GM).

Customers love the everyday low prices, self-service, broad selection and mammoth stores. Sam himself would become a cult-like figure, having instituted a bizarre culture wherein the employees are "associates," the company has a "Wal-Mart" cheer (which begins "Give us a 'W'" and has the cheerers gyrating their hips when they come to the hyphen), and customers are met at the front door by "People Greeters."

Oh, yeah: Sam doesn't like union workers belonging to his club, pays the "associates" paltry wages, gets out of doling out generous benefits packages by limiting his full-time staff and promotes "buying American" while doing a little importing on the side. And Wal-Mart fosters homogeneity and the destruction of the downtown in small towns across the U.S. But at least those TVs and hunting rifles are cheap.

7. Kaiser's World War II shipyards surpass all expectations of production: 1942.

In a note to his boss in 1944, German armaments minister Albert Speer describes the ongoing war as "a contest between two systems of organization." The German style of production seeks variety and perfection; the Americans build generic product at high volume, sometimes at the expense of quality. The Germans early on were the innovators in technology, engineering and metallurgy while the Americans made strides in plant layout, economies of scale and production organization. The American economic revelation was that if you built something to 90% of specifications, not 100%, the boost in output is greater than 10%.

No product is a better symbol of the American wartime "production miracle" than the "Liberty Ship," the Model T of the seas. The thing was 440 feet long and crept along at 10 knots. It could hold 440 tanks, 2,840 jeeps, 230 million rounds of rifle ammo, or 300 freight cars.

And no one builds them better -- er, faster -- than Henry J. Kaiser, the dynamic dabbler of California who creates the factories that are part of the extraordinary production effort that wins the war and brings the country out of the Great Depression. The strides in industrialization would go on to power the economic boom of the '50s.

In 1941, it takes about a year for the East Coast shipyards to build a 10,000-ton Liberty Ship. In 1942, Kaiser's shipyards in Portland, Ore., Vancouver, British Columbia, and Richmond, Calif., get that down to two months. By '43, "Sir Launchalot," as he became known, would build them in two weeks. In November 1942, as a publicity stunt, he has the Robert E. Peary built in four days, 15 hours and 26 minutes. His shipyards (which build a variety of warships) account for about one-third of all the merchant ships launched during the war.

Kaiser ultimately would employ around a quarter of a million in the war years. Kaiser manages to get such extraordinary productivity by paying relatively high wages and giving benefits, like good health care (he invents the nonprofit health maintenance organization) and child care. At the same time, his paternalistic policies antagonize unions, who are jealous of the loyalty he commands.

And to sailors, Kaiser ships could be a nightmare, as they occasionally split down the middle while at sea. But at least we wouldn't be speaking German 50 years later.

6. Ford introduces the assembly line: 1913.

When the Model T comes out in 1908, it costs $850. After 1913, when Ford's (F) Highland Park, Mich., plant begins to use conveyor belts to move parts from worker to worker, the price is cut by more than half.

Marx has predicted the alienation wrought by having the worker make a mere part of the product rather than the whole. But Communism's father doesn't foresee the sneaky genius that is the capitalist mind. When bored workers start leaving the plant, Ford doubles the prevailing wage to $5 a day, shocking the moneyed elite.

The jewel of Ford's new model would be the River Rouge plant in Dearborn, Mich. The giant complex takes in coal, iron ore, rubber and other raw materials and turns out finished automobiles. (Later it is the site of the "Battle of the Overpass," where a 29-year old Walter Reuther and an associate try to distribute United Auto Workers literature and are badly beaten by a Ford goon squad.)

While Ford's methods would revolutionize modern industrial production, his marketing efforts would be less successful. The buying public would reject his imposed conformity, demanding models other than T and colors other than black. In the coming decades, Ford would lose its leading position to innovators like Alfred Sloan's General Motors (See No. 66). And while Henry's business model -- centered on affordable, mass-marketed, mass-produced product -- would dominate American industry throughout the century, almost 90 years later, consumers would learn to love status symbols and niche marketing and services.

5. Equal pay for equal work: June 10, 1963.

"Help Wanted -- Male."

Until John F. Kennedy signs the Equal Pay Act in 1963, classified ads are full of that perfectly legal prerequisite. Not surprisingly, the job market for women isn't too great; they earn just 59 cents for every dollar earned by men. But the new legislation reverses the practice of paying women less than men for the same job, simply because of their gender. By the first quarter of 1998, women would be earning more than 76 cents for every male dollar -- not perfect, but an improvement.

The law would be only part of the larger cultural phenomenon of second-wave feminism. The same year that Kennedy signs the act, Betty Friedan publishes The Feminine Mystique, her landmark work on the state of the stay-at-home wife and mother. But the Equal Pay Act wouldn't just bring into the labor force women suffering from Friedan's "problem that has no name." It also improves the plight of the women already working not by choice, but because they must. For them, the Equal Pay Act does more than just assuage the boredom of suburban middle class life; it helps support their families.

4. The Great Crash: Oct. 24-29, 1929.

The satirical newspaper The Onion, in its recent book presenting made-up front pages from throughout the 20th century, wasn't too far off from reality in whipping up this gem for Oct. 22, 1929: "Stock Market Invincible; 'Buy, Buy, Buy!' Experts Advise." Here's economist Irving Fisher on Oct. 16 of that year:

Stock prices have reached what looks like a permanently high plateau. I do not feel that there will soon, if ever, be a 50- or 60-point break below present levels. ... I expect to see the stock market a good deal higher than it is today within a few months.

The 1920s bull market that's produced rip-roaring if ephemeral prosperity in the U.S. is showing its age well before the fateful October. Levels of margin buying have soared, leaving many Wall Street players and ordinary Americans alike deeply in debt on shares that are serving as collateral for themselves. That's not a recipe for disaster; it's a detailed schematic blueprint for disaster.

The final break begins in earnest on Black Thursday, Oct. 24, with New York Stock Exchange stocks plummeting on a record 12.9 million shares. There's a modest recovery on Friday, a short session on Saturday and a 9.3 million-share selloff on Monday, setting the stage for a crescendo of panic selling on Black Tuesday, Oct. 29. NYSE volume hits 16.4 million shares, and the collapse leaves the Dow Jones Industrial Average down 39.6% from its Sept. 3 high. Scores of brokers, speculators and margin investors are ruined; runs on banks begin. By the July 1932 bottom, in the depths of the Great Depression, the Dow is off 89% from its high. It would get back to that 1929 high in due course -- by November 1954.

There would come arguments over whether the Great Crash caused the Depression or just dramatically its signaled its arrival. But indisputably, the debacle all but destroyed Americans' faith in the stock market, leaving it in rubble for decades to come.

3. The Federal Reserve is formed: 1913.

J.P. Morgan dies, and the country needs a replacement. So the U.S. creates an actual central bank.

Congress first considers chartering a privately controlled network of regional reserve banks that would be given governmental powers: control over money flow to local banks in times of crisis and an "elastic" national currency that would expand and contract to meet shifting demand. But the nation is unwilling to cede that much power to a private institution, so President Woodrow Wilson adds a publicly appointed board to supervise the Fed's policy, creating a secretive hybrid of public and private control that would exist in essentially the same form almost 90 years later.

The populists think that the Wilson compromise doesn't go far enough; bankers fear it more. The New York Sun, Wall Street's house organ, attacks the plan as "covered all over with the slime of Bryanism," speaking of populist and anti-gold standard bearer William Jennings Bryan. The bankers think that the government is going to start mucking around in their business. It takes a bit of getting used to for them, but they eventually embrace the system wholeheartedly.

At first, the Fed is not great at controlling the expansion and contractions of the economy. (See the Great Depression.) But the creation of the Fed -- along with Progressive political reforms -- heralds the end of the wild and woolly laissez-faire policies of the 19th century. The federal government now has a direct role in managing the private economy. At the same time that it attempts to protect the public interest, it safeguards the profit motive, the peculiar institution that makes the modern liberal state.

The Fed is supposed to be disinterested and above politics; whether it is would be a great debate throughout the century. By forever removing the power to print money from Congress and the White House, the creation of the Fed would save the U.S. from the bouts of currency-induced hyperinflation that would cripple economies from Germany to Brazil throughout the century.

But that stability would come at a price. In a literal sense, the Fed arguably would become above politics. Toward the end of the century, central bankers and fellow-traveling wonks, more than elected political leaders, would begin to dominate economic policy and come to shape the country and the world.

2. Intel invents the single-chip microprocessor: 1971.





Intel's 4004 Microprocessor: "I'm sorry, Dave. I'm afraid I can't do that."
Source: Intel
In 1971, Intel (INTC) develops the 4004, the first chip to contain all the components of a central processing unit. With just 2,300 transistors, the basic on/off switches of computing, the 4004 is pretty primitive, incapable of much more than simple arithmetic. But things would change fast.

In 1965, Intel co-founder Gordon Moore noted that the number of transistors on a single chip appeared to be doubling every two years or so, and that the trend was likely to continue for the foreseeable future. Since computing power increases about as fast as transistor density, Moore's Law, as the prediction became known, posited that chips would get twice as quick every other year.

Moore was right. Within three years, computing speeds would advance enough to make possible the first personal computer, the build-your-own Altair. By the early 1980s, Intel's 80286 chip would offer enough performance to interest people outside the computer industry in PCs, though knowledge of DOS would remain a must. And by the mid-'90s, PCs featuring the so-called "Wintel" operating system (See No. 21) would be essential for businesses and homes worldwide.

Meanwhile, cheap microprocessors would become ubiquitous outside the PC, from coffeemakers to car engines to cell phones to traffic lights. With chips ever faster and cost-per-instruction ever lower, technology would turn into a trillion-dollar industry and the engine of U.S. economic growth. Optimists would predict a future filled with smart products, while pessimists would wonder whether humanity had opened a Pandora's box of soulless artificial intelligence. But the chip would be here to stay, and it would do more to change human existence than any invention since the controlled production of electricity.

1. Eisenhower creates the interstates: June 29, 1956.

Gas is cheap in America, and it's cheap for a reason.

The freedom to move thousands of miles to find a better job or start a new company. The chance to create products for a single vast market, with a single currency, a single language, a single set of laws. As Americans, we take those opportunities for granted. But together, they give the U.S. economy a resilience that Europe and Japan have been unable to match.

For 200 years, America's uncanny ability to reinvent itself, from agrarian nation to industrial powerhouse to leader in technology and medicine, has done more to keep U.S. business vibrant than anything else. And more than any other event in this century, the building of the interstate highway system has enabled that reinvention to continue. The new highways diminish railroads, fertilize the suburbs and cement the elevation of the automobile, with its attendant anonymity and individualism, to the center of American culture and business.

Conceived by President Dwight D. Eisenhower as he rode over the German autobahns as supreme allied commander at the end of World War II, signed into law on June 29, 1956 and built over four decades at a cost of $130 billion, the interstates bind us together even as they free us to move and dream. The frontier hasn't closed; it runs everywhere now, on those quiet, essential lanes of blacktop.

And so in a century filled with big inventions, flashy takeover battles, and fortunes made and lost, the creation of the interstate highway system tops our list as the most important business event of the American century.

In our rearview mirror, it's No. 1.

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