HP: In 1909, Sam Insull could say that he had achieved his dreams. He had achieved tremendous success. His whole idea of unifying the city of Chicago as one, unified network of power had worked; he had brought the price of electricity down to the point where many of the middle class and even some of the better-off working class could now afford electric lighting. He had consolidated his empire within the city, and with that went the trappings of success as well, becoming one of Chicago's most notable figures at the time. He had obtained an apartment on the Lakeshore Drive in Benjamin Marshall's very first luxury, high-rise, private apartment building. He was noted for driving around in a huge limousine, chauffeur driven limousine around town and being very much now the country gentleman on an English model, as the English immigrant would want to be.
This included not only the fancy apartment downtown but buying a big country estate in Lake County out on the North Shore to have his country estate like a proper English gentleman. And this was called Hawthorn Farms, and he and other of the big rich of Chicago on the North Shore had these farms to raise horses and fancy cows and other things like that.
Insull was quite an iconoclast and he liked to prove other people wrong. One of the maxims in the electric industry was that you could not serve farm areas, because it was too expensive to run the wires out to their farms and to just scatter small farm area. Once Insull established his big country estate in Lake County, just to the north of the city he decided to prove that it was economical to serve even farm areas with electricity. I think he wired up about 300 of farms around his own estate and wrote a few papers that somehow by juggling the books, I think proved that rural electrification really worked. Of course this really only worked in this kind of hothouse environment of very rich country estates in Lake County, Illinois. And it takes really until the New Deal and rural electrification of FDR to bring electricity to the farm.
HP: By 1909, the basic plan that Insull had worked out about ten years earlier for the massing of production had really been fulfilled. He was serving the entire city of Chicago, he had brought the wires out to the neighborhoods and he faced the problem of what to do next to expand his empire. One of the ways he was able to do that was essentially to buy his best customers. And that included the electric street railways in particular as his best customer. He also then went into the business of building electric trucks, which he thought could at least serve large commercial interests like the department stores dairies other places that made short deliveries around the city. He started the company and then of course sold department stores and so forth that this was a good idea and built a whole network of garages around the city where they could recharge their batteries and receive service. He was also involved for a little while in what was called the Lead Trust which was an idea to provide battery operated taxi cabs in the city and in a sense monopolize the taxi service that way. He gets into building electric appliances as well, and sending up all kinds of appliance stores, again not only downtown, like a fancy department store, but in the neighborhoods as well, to get people more familiar with electric appliances, and of course to help Insull build the load on his system with more and more and more electric appliances.
HP: Sam Insull basically had an urban vision of an electric power grid, and it was really his associates that tried to convince him that he could expand his service into the suburbs and that this would be worthwhile, using this formula of getting the big street railway companies or other big consumers online, building a network of stations out and then getting everybody else to use the power. By the early 1900s the building of inter-urban railways into the suburban areas, especially along the North Shore and along west of Chicago, was already providing the kind of massive electrical use, all the way up and down the line already.
There were many little fledgling companies up and down these electric street railway, inter-urban lines, and he was finally convinced by his friends to buy up the Highland Park electric company, the Evanston electric company on the North Shore, and the Waukegan company. And this begins then to string together these suburbs into a more regional or metropolitan network of power. I think the real key here is 1908, 1909, when he actually connects up the grid from Chicago to the grid of the suburbs, and hence brings all power users, whether suburban or urban, into one massive network of power.
HP: One of the great problems that all electrical utility providers faced was the short range of the electrical units that they could provide service--only about a half-mile radius. The way that Insull gets around that is building a system of sub-stations. In other words, the power is generated here, it's sent to the neighborhood and then is broken down and changed ... into the ways that were needed in the neighborhood. That might be supplying direct current to the street railway. It might be providing 220 lines to a business, and it might also provide the 110, the normal electricity that we need for our homes and offices. So by that way he was able to have very large central stations that could produce electricity very economically and then send it out to the neighborhoods and break it down into the kinds of power that people needed for their various appliances.
HP: In 1912, Samuel Insull sets up his first holding company, Midwest Utilities. I think there were two reasons why he did this. For one, the utility industry had grown so large by then that no one person really could personally control or have a controlling financial interest in all of them. So one reason I think Sam Insull goes to utility companies is, through this pyramid of holding companies, very few people with very small shareholdings could actually control the entire pyramid of companies from the top down to the operating companies at the bottom. The second reason was that there were some economies, there was some efficiency by having centralized financial services… engineering services that a central office could provide to all the local utility companies that were operating down at the local level.
I think with the formation of the first holding companies, Sam Insull began to see no end to growth. He had been successful on a local level; he had then been successful on a metropolitan level. He then even expands with Northern Illinois Electric Utilities company to the whole northern Illinois region. And in a sense there seemed to be no stopping him in this roll of success that he had. And so I think he sees that he can do no wrong - that electric utilities were clearly the wave of the present and the future. He could see that use would just get larger and larger and larger, so why not control more and more and more of this economic growth and have it under his own control? He felt he was the leader of the industry, he felt he was the man who personally could sort of marshal and sort of see this process through, so that everyone would be using electricity in the entire country and it would all be under his supervision and in a sense his control as well.
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