Sunday, November 4, 2012

Porcelain and a Close Shave: The Wisdom of Crowdfunding

The Battle of the Viaduct in Chicago, part of the
Great Railroad Strike of 1877
In 1894, a traveling salesman for the Crown Cork and Seal company rose to sudden fame with the publication of his book, The Human Drift.  In it, he argued that capital and labor had become irretrievably divided over the last 20 years and “hard times are here to stay.”  The 29-year-old author, like many Americans, had been rattled by a seemingly endless series of economic recessions accompanied by rising discontent in the form of violent strikes and riots.  

The Great Railroad Strike of 1877 against the Baltimore and Ohio railroad, for example, shook the country when it spread from Philadelphia to Chicago and on to San Francisco--America’s first national strike.   The Homestead Strike at Andrew Carnegie’s Pittsburgh steel plant in 1892 left seven Pinkerton detectives and nine steelworkers dead.  The Pullman strike of 1894, in response to the company cutting its workforce from 5,500 to 3,300 and wages by an average of 25%, was yet another unexpected and unsettling milestone in the rise of a strong national labor movement.  

Taken as a whole, more people were injured or killed in labor protests in the U.S. than any other nation in the twenty years after 1876. 

Housing in Metropolis
“The Human Drift” reflected the fact that nobody in America seemed able to explain a generation of discord and hard times.  Some blamed it on political agitation and some on overproduction, poor crop yields, or declining foreign markets.  Our author himself saw enormous companies—in fact, controlling monopolies in oil, sugar, steel, straw, cordage, and leather--developing machinery that had displaced labor.  This was the result of intense competition, a force which he rejected outright as “the motive power of material progress.”

His solution, reflecting America’s growing legion of socialists, communists, utopian reformers and populists, proposed a “united stock company” sufficiently large to gradually absorb and control all production and distribution in the country.  He would do away with professions that did not contribute to a common goal (listing insurance, banking and law), rid the world of money, and allow the only competition among men to be intellectual in nature and pursued for the common good.

“The Human Drift” proposed--in all earnestness--that this new world be housed in a single city of glass towers, called “Metropolis.”   In fact, our author was even more specific, proposing that it be built in a 135 by 45 mile rectangle stretching from Buffalo to Rochester, New York, and use Niagara Falls for its electricity and Lake Erie for its water.  Metropolis would hold 60 million people with room for 30 million more, and be constructed of porcelain for strength and cleanliness—in apparent homage to the “White City” at Chicago’s Columbian Exposition the year before. 

The footprint of Metropolis
Response to the book surprised even the author.  The radical-reformist magazine, Twentieth Century, embraced his idea of Metropolis, formed the Twentieth Century Company naming him as president, and urged it readers (in an early form of crowdfunding) to capitalize the company at $1 billion by each purchasing a share of stock at $5.00. 

Fortunately for everyone involved, the idea proved controversial, lost momentum and eventually died. 

The following year, our star salesman for Crown Cork & Seal decided to do some inventing of his own.  One spring day in 1895, while shaving, he thought, what if “blades could be constructed and made cheap enough to do away with honing and stropping and permit the user to replace dull blades by new ones?”  In 1903, the Gillette Safety Razor Company sold its first 51 razors, and customers were soon singing its praises as the razor that “gives you a clean, smooth shave that makes your face as soft as velvet.”   

Salesman, author and entrepreneur King Camp Gillette (1855-1932) perfectly captured the profound confusion of his era: One of its most aggressive competitors, marketers and technology innovators had argued, in the face of bleak economic times, that innovation and competition were the underlying cause of society’s woes.   His solution was a utopian community of socialism and porcelain. 

Fortunately, the wisdom of crowdfunding prevailed: there was simply not enough support to purchase even the foundation stone for Metropolis.

Some days, it seems, entrepreneurs want to reinvent the world.  Other times they're happy to settle for a close shave.