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Nancy Koehn Interview

Nancy Koehn is an Associate Professor at the Harvard Business School, where her specialty is business history. 

She is the author of Brand New: How Entrepreneurs Earned Consumers’ Trust from Wedgewood to Dell; and The Power of Commerce: Economy and Governance in the First British Empire.

Nancy Koehn

New River Media Interview with: Nancy Koehn 
Business Historian, Harvard Business School 
Author, Brand New 

QUESTION: Describe the scope of the spread of consumer goods in the 1920's and some of the contributing factors. 

NANCY KOEHN: The 1920s were a very important decade in the lives of consumer society in America. Many of those goods, from hoop skirts to candy bars to cereal, had been around for several decades by the 1920s. Some of them, like watches, calico hand-made men's shirts, even factory-made men's shirts, had been around for much longer. But they had not always been accessible to most people or to the majority of Americans. On the supply side, we see in the 1920s the continuation and the taking hold of a variety of technological and organizational transitions and innovations that had begun really in the decades after the Civil War. We most commonly think of those as mass production and mass distribution - from plow blades to belt buckles to electric hand-warmers and toothbrushes - coming out of American factories in greater numbers, at lower costs, and traveling much more efficiently across the country. 

But also important on the supply side in understanding the burgeoning of consumption, the growth of Americans into modern consumers that's so obvious and so important to defining the 1920s, also important is a range of innovations in terms of marketing such as advertising. Advertising is a very old phenomenon [but] like mass production and distribution, it really gets moved into third or fourth gear by the 1920s, and we have the birth of companies like J. Walter Thompson [who] at the turn of the century that, by the 1920s, had figured out how to effectively reach millions of consumers. 

A third important supply-side phenomenon, it seems to me, in terms of understanding the 1920s as a pivotal decade in American consumerism is the rise of installment credit. Now, credit has existed, again, for centuries, [but] beginning in the second decade of the twentieth century and taking hold with greater force in the 1920s is the rise of a range of mechanisms for issuing credit to consumers. The most important of which in terms of dollar figures is credit concerning automobile sales. The automobile in the 1920s becomes an extraordinarily important consumer good. Less than one in a quarter families had an automobile at the beginning of the decade. More than half, 60 percent, do at the end. So it becomes a permanent fixture, and it's almost an essential fixture for a majority of households. 

Most of those cars, three out of four of those, are paid for on time, in an organized, administered way through companies like General Motors' credit arm. Pianos are also bought on credit. Radios are bought on credit. So to understand how Americans suddenly came to have a lot of things, some brand new, some established, that their parents and grandparents and great-grandparents didn't have in a single decade, we have to understand that the payment of those goods became easier and more affordable for millions of families through innovations in the financial markets through consumer credit or installment buying. 

A fourth important supply-side phenomenon I think we have to also understand is the advent of market research, like advertising but separate from advertising, because market research is conducted not just by advertising companies like J. Walter Thompson. It's also conducted by producers, manufacturers. The advent, increasing, again, its sophistication and efficiency and spread of market research is critical to understanding why consumers and how consumers chose to buy a variety of goods from canned soup or Heinz ketchup to Singer sewing machines, and again, their grandmothers or grandfathers wouldn't necessarily have even thought about buying. 

So market research, the rise of consumer credit, advertising, and, perhaps most importantly, the very mass production and mass distribution of all those goods and services, because of recreational goods like movie theaters or amusement parks, which grow in a large number in the 1920s, or baseball games, are another important form of consumption that takes rise in this period. And all those goods and services and their acceptance and interest and use by consumers can't be understood without understanding the supply-side phenomenon. 

QUESTION: What would have been the demand side of all this? 

NANCY KOEHN: Since the late eighteenth century, observers of the American scene and on the American soil have commented how much stuff Americans had. And, you know, people like Alexis de Tocqueville and Charles Dickens, who came to America in the middle of the nineteenth century, are struck by just the plenty of America, of how much stuff Americans had, particularly how much food, but also even, relative to Europe, how big farmhouses were, even dirt-floored farmhouses. 

I think we have to start with some kind of sense that, relative to many countries, Americans at all ranks have often had a lot of stuff. Now, that is clearly true in the 1920s. It's less obvious in those decades that farmers, even farmers barely scraping by in the Great Plains, can order Christmas presents, dinner china, a communion dress for their daughter from Montgomery Wards. It's less obvious that the spoils and rewards of capitalism go to large numbers of Americans, all the way or almost all the way down the economic ladder. But by the 1920s there's good evidence that a broad range of Americans can share in these new and established goods that are suddenly more widely available. 

Think about movie sales in the 1920s, movie ticket sales. There's good examples that huge numbers of Americans from almost every socioeconomic class participated in the movies, went to the movies, went to the vaudeville, went to the Nickelodeon, went to boxing or baseball matches. So consumption of new and established goods was not something that was in some kind of social ether, happening as it did in ancient regime societies at the court. It was happening all over America and that's really what struck firsthand observers again from other countries. 

In understanding the full flowering of consumption on a large-scale, we have to understand the demand side. The most important was the growth in national income that happened beginning about 1922. There had been a recession following World War I that was important and broad reaching, but it was also short-lived. And beginning about 1922 the gross national product, what we also call national income began to grew steadily and swiftly and that growth continued until the end of the decade, growing at about 3 percent a year. 

In per capita terms, dividing that by the number of people in the economy, in the American economy, that meant that every American on average had about $140 more, adjusted for inflation, for price changes, at the end of the decade than he or she had at beginning. So per capita income goes from about $715 a person to well over $850 a person over the decade. 

A second important factor is urbanization. In the decade of the 1920s about fifteen million more Americans - of a population that by 1930 would be about 120 million, so almost more than 10 percent - move into the cities, move into urban areas. That's a big increase and it continues on a long steady increase, migration of Americans off the farm and into the city. 

Why does that matter for consumption? It matters because it in cities much more than in rural, small rural towns or on a farm, Americans of all ranks, of all ages have more access to new goods. Where are the new stores? Where are department stores? Where are chain stores found in their largest number? They're in cities. New goods, new advertising vehicles, new fashions; cities are always little seedbeds for fashion fires. So people see new goods, new ads, new fashions and many more of themselves. They see more of each other, not just what other people look like, but what other people are wearing, what are they carrying, what are they driving, what kind of umbrella do they have, what are they reading. All that exposure happening in close quarters has a very significant effect on consumption. 

I think one final thing that we have to understand on the demand side that's really important is women's growing role in the household economy. Throughout the first half of the nineteenth century, as best we can recollect from diaries and store keepers accounts and newspaper articles, men were the principal - the primary and principal decision-makers in household consumption. So Farmer Jones went to a general store to buy crackers or flour or salt pork or tin cups or perhaps glass windowpanes if they were available. That begins to change very significantly in the middle and later decades of the nineteenth century with the rise of department stores, places like Marshall Fields or Macy's that cater specifically to female clientele. By the end of the nineteenth century and the beginning of the twentieth century, women are playing a much greater role in consumption than their grandmothers had played. 

And by the 1920s again women's role as the primary or very important decision-makers in most households is firmly established. So it's no surprise that a lot of market research and advertising initiatives are directed at women, because by the 1920s most businesspeople understand that women are making a huge number of the decisions or playing a role, a very important role in virtually all household decision-making. 

QUESTION: How were changes in manufacturing and infrastructure contributing to these transitions? 

NANCY KOEHN: If we think about the revolution in mass production and distribution, we think about the manufacturing of steel, the refining of oil, the production by the end of the nineteenth century of electricity and telephony and laying gas lines to initially urban households; a lot of the early high-tech industries of the second Industrial Revolution are these network or infrastructure industries. They are unfolding. Those changes are happening in the 1870s, the 1880s and the 1890s. 

Consumer goods, bottled pickles by Henry Heinz, Singer sewing machines by Isaac Singer, Cadbury Schweppes chocolate - Cadbury Chocolate, Coca-Cola; those industries - Pillsbury flower, Kellogg's cereals, Quaker Oats oatmeal, which was a brand new product produced by Quaker Oats as a way partly to stimulate Americans to eat a different kind of breakfast food; those products are invented and patented really quite a bit earlier in the nineteenth century than we realize, really as early as the 1860s, but they don't begin again to take hold, to find their way into America's households on a large number really until the early twentieth century. 

So the revolution in mass production and mass distribution that we often call or file under a larger subhead "The Second Industrial Revolution" really is divided into chapters. And the early chapters are in large part about creating infrastructure, network industries that are critically important. You can't have a skyscraper until you have steel girders. You can't have Otis elevators until you have skyscrapers, don't need an elevator until you have, you know, multi-floor buildings. Laying the cables and lines of the second Industrial Revolution enables then a whole profusion, a cornucopia of goods to pour out of American factories, and more importantly to pour into American household. 

So, now lots of Americans are eating ketchup, bottled ketchup from Heinz in the 1870s. There are a lot more thinking of them as part of their daily life in the 1920s. There are several million Americans with electricity by the turn-of-the-century. There are tens of millions with electricity by the end of the 1920s. 

QUESTION: How were women contributing with their decisions and purchases of things used in the home? 

NANCY KOEHN: A great range and a great number of the products pouring out of American factories after the turn-of-the-century are household goods. Some of them are appliances: vacuum cleaners, irons, ice boxes. A lot of them are food products. The food industry, the processed food industry is the biggest single advertiser by industry in the early twentieth century. No surprise. You know, there are new possibilities for eating, new possibilities for preserving food. The Food and Drug Act is passed in 1906, so new governmentally sanctioned standards of quality and freshness and health are now in place by the 1920s. 

There's a wonderful statistic from the Lynd study about Muncie, Indiana and how in that town, consumers have stopped buying in large measure, fabric, so that the consumption of calico and wool to make one's clothes at home has declined very significantly. It's still there. There are still wonderful contradictions, people buying Heinz baked beans and still sewing their own, you know, mothers sewing jackets for their children, but the trend is unmistakable that increasingly people are buying their clothes ready made, and people at various income classes. So all those goods from ready made clothing to irons to canned soup, all those goods are household goods. 

QUESTION: Some of these kinds of consumer goods that are spreading across economic levels, what does that mean in terms of daily life? 

NANCY KOEHN: Well, let's start with the food processing industry, because it's such a basic industry. I mean, that's one of the reasons it's so much better developed as a marketing phenomenon by the early twentieth century and some of the other consumer goods industries. 

Time saving appliances like stoves or vacuum cleaners or canned baked beans or Kellogg cereal. Howard Heinz, the son of Henry Heinz said one of his proudest accomplishments in taking over the stewardship of the Heinz company after his father died in 1919 was that he could offer a real time-saving service to women, because making soup or baked beans or ketchup or horseradish was time consuming, and often difficult, and in the case of horseradish, you know, darn unpleasant at lots of points. And processed foods relieved women of a lot of those kinds of chores, and still made possible varied eating, quick eating and fairly easy cleanup eating relative to Americans' living standards and eating habits forty [or] fifty years ago. 

If we look at consumer appliance, household appliances we can also see a similar phenomenon, where a single good that on its, you know, on its surface doesn't look so revolutionary actually involves a whole range of very important changes for individuals and upstream, closer to the factory, for new and existing industries. Think about vacuum cleaners or irons or washing machines, all of which begin to be diffused into the population, purchased by the population in much larger numbers in the 1920s than they had before. Now, those really change American women's days. They really change how they spend their time. 

Washing, as best we can reconstruct, again from diaries and the few scattered time budgets for the nineteenth century, was really a weekly activity. It consumed the better part of a woman and probably her daughter's day one day a week in the nineteenth century. And, you know, it was weather permitting, right, and water permitting and soap permitting it was done. But by the 1920s we were still using mostly wringer washing machines, so we're a far cry from the way we think of throwing a load of laundry into our, you know, our household laundry or household machines at the beginning of the twenty-first century, but by the 1920s women can wash clothes and lay them out to dry in several hours rather than over an entire day using the labor of several women. 

Women are still working very hard. Make no mistake about it. Women have worked hard since time immemorial and they're working very hard at the beginning of the twenty-first century, but they're spending their time in a different way because single tasks, vacuuming a rug takes a lot less time than beating a rug. It takes less time often than sweeping a rug. Washing a load of laundry in a ringer washing machine takes a couple of hours rather than an entire day, and it takes one person rather than several people. 

QUESTION: What were some of the effects of the spread of the automobile? 

NANCY KOEHN: I think one of the most important and immediate effects of the spread of the automobile in the 1920s must have been a sense of liberation on the part of most Americans, that is - especially rural Americans who could now drive, now drive to a place where they could see other people, see new things, escape, although I'm sure that verb wouldn't have occurred to people until the automobile was available, escape any kind of isolationism that they may - that they may have felt at times on the farm. You could also just drive to a neighbor's house, so you didn't need to wait for a very special occasion and a huge long window of time to see other people. 

On the flip side there must also have been a sense, as indeed we see very clearly with the railroad, that this new, brand new consumer good that had the potential to change our lives very significantly, was also really largely untested and unknown. One of the first things that Americans write about when the railroad first starts spreading across the continent in the 1870s is how fast and how loud it was, and Americans embrace the automobile with similar skepticisms. You know, it's fast. It's loud. Is it too fast? Is it dangerous? 

But to understand the liberation I think we also have to understand some of the healthy wariness that families felt about this brand-new, very powerful and very - and relatively expensive consumer product, because it cost more than any other single thing that Americans bought in the 1920s, save a home, and the majority of Americans didn't own their home in the 1920s, so this was a big consumer item, a big decision. 

So the automobile wasn't just a sense of, you know, wasn't just a source of liberation. It wasn't just a fashion item. It was also figuratively and literally the road to all kinds of new consumer goods and services, goods like the amusement park, which no longer has to be something that's located strictly in a city, but can be available to consumers in less densely populated areas. It would become by the - by the late 1920s the road to the suburban department store. 

The supermarket is something that can't be explained without the automobile; the supermarket, meaning a dedicated, large grocery store. Large by the standards of the time would have been over 3,000 square feet. So we're not talking super stores with 100,000 square feet like Wal-Mart today. We're talking about the average chain store being somewhere between 1,200 and 2,500 square feet at the beginning of the 1920s and then by the end of the decade we see the pioneering of grocery stores that are maybe twice as large as that, with parking lots and shopping carts. 

And so all those, all those kind of distribution mechanisms, the supermarket, the suburban department store, the amusement park, all are directly traceable to the rise of the automobile, not the invention of the automobile, the rise of the automobile as a mass consumer product. 

The automobile is also important because it becomes such a powerful symbol in American households. Perhaps for some of those reasons, but for other reasons as well it becomes a symbol of a social legitimacy, a symbol of possibility, of social possibility for Americans, a symbol even of, you know, a family's aspirations. 

And those values take hold quickly and very, very firmly, and they begin to take hold with again great clarity in the 1920s so that an automobile, which is something that Laura Ingalls Wilder couldn't have imagined owning in 1870 has by 1930, by the eve of the Great Depression become a necessity for millions of households, part of what they plan for and save for and dream about and that's true not just for very wealthy Americans, not just for F. Scott Fitzgerald's characters in The Great Gatsby, but by the end of the 1920s for millions of other households as well, not for the very, very poorest segments of American society, but for many, many people in all the rungs above those very lowest rungs. I think it's really quite difficult to overstate the importance of the automobile culturally, economically, socially, perceptually in American life. And we see those changes come into prominence really in that decade of the 1920s. 

QUESTION: What are some of the other devices that really take hold in American life? 

NANCY KOEHN: The automobile isn't the only product that insinuates itself, and that is embraced by consumers increasingly as an essential item rather than an unavailable or unheard of luxury. Radios, trips to the Nickelodeon, trips to the vaudeville, and especially trips to the movies become much more important parts of Americans' daily lives in the 1920s. 

In 1920, no one owns a radio. In 1930, 40 percent of American households own radios. Now, that changes not just our evenings and, you know, how we spend our time after dinner, and, you know, whether the family is together doing something rather than reading separately or knitting separately or making popcorn over an open fire. It doesn't just change how we spend our time collectively and individually. 

It also changes our connections to other people, because the radio links us - Franklin Delano Roosevelt would understand this - with extraordinary force in the 1930s, and he would use the radio as a critical political instrument to tie society, American society together at a time of great trial. But it links us together with other Americans. It links us to other products, products we hadn't heard about, products that we didn't know other Americans also embraced. It links us together as consumers, as voters, as neighbors. Forty percent of American households own literally this pipeline into those people, those goods, those events that they didn't own before. 

One of the very interesting ramifications of the movie industry is its effects on the cosmetic business. Most American women didn't wear lipstick at the beginning of the 1920s. They certainly didn't wear eye shadow or mascara. Many used cold cream, but the majority of women had not used lipstick by the end of the 1920s. That's changed. One of the reasons it's changed is because we now watch movies, and millions of Americans go to the movies and we have new standards of beauty that affect our ideas about ourselves, what we want to look like, who we want to be. And you can't disconnect those very personal changes, those perceptual changes from specific consumer goods like trips to the movies. 

QUESTION: Where had consumer society arrived by the end of the 1920's? 

NANCY KOEHN: If we think about the foundations of consumer society as it emerged by the end of the 1920s we can see a number of important changes that are again more clear, much more clear than they've been in any preceding decade. One of the most interesting is the transition from customers into consumers unmistakably it is American consumers operating in mass markets, mostly in impersonal connections, buying goods, often using credit that were made not next door or not on the farm down the road but in distant factories through very - increasingly modern methods of mass production. 

Americans' sense of consumption and what it means is quite distinct I think from two generations earlier. And again it's really broken through the surface by the end of the 1920s. Our expectations of our own material life and what we want have by the end of the 1920s come to be seen at least in some sense in terms of what we buy and what we own in a way that again most Americans in the 1850s, Abraham Lincoln, for example, growing up on the Sagamore River in Illinois at New Salem in the 1840s would have had a hard time imagining and defining himself in terms of what he owned. By the late 1920s some of the way we think about ourselves has to do with what we buy, how we buy it, how we use it and what our household inventory is. And that again is a profound change and an unmistakable one that takes clear hold in the 1920s. 

QUESTION: What are the critiques of this transition? 

NANCY KOEHN: There's a great debate I think that quietly but consistently rages about whether the rise of a consumer society has been on net a good thing for Americans or not. Americans have voted with their feet. I think it's hard to see a lot of commerce as anything but at some core level a set of elections. No one forced Americans to buy movie tickets or mass produced lipstick from Max Factor or baked beans. They chose to do that. And it is important to remember the role of advertising and promotions and marketing and affecting consumers expectations and desires and purchasing decisions. But I think we're doing a great disservice to the American consumer if we say that American buyers have been mislead or manipulated or have just been historically extraordinarily malleable. 

I believe a range of factors and transitions made the consumption of a whole range of new goods attractive to consumers, and they chose to do it. They won a lot of good things out of that: speedier, more efficient, more consistent transportation, cleaner homes often, much more variety in their diets, more variety in how they spent their time, closer connection with others through telephones, living in the city, amusement parks, the movies. All those things were benefits to Americans. I think they probably lost connections to the land and important natural rhythms that are much older than consumer capitalism. But that reduced connection to cooking one's own food or slaughtering one's own cow or one's pig, those connections were lost unconsciously, if you will, and lots of Americans could have chosen to return to some of that. 

Capitalism is very much like an organism, and like organisms it evolves. And one of the stepping stones in that evolution, or one of the important moments in the natural selection of the organism of capitalism is this transition. And it happened in the society at the beginning of the twentieth century to suggest that American consumption was bad or good on net is to imply that it could have been significantly different but for a change in attitude or different actions or different corporate initiatives. I think that's to seriously underestimate the determining agency and power of capitalism as a social, economic, political and cultural force in history. 

QUESTION: What is the future of consumption in our society? 

NANCY KOEHN: Capitalism is going to go on having a very, very important part for consumption. Consumption is going to continue to be a critical fuel, essential fuel that drives the engine of the capitalistic machine. Toward what other ends will that organism or will that engine move, I think that's a very, very interesting and dynamic question. 

It's clear on consumers' parts that two of the things that we value the most at the very beginning of this new century, the twenty-first century, this new millennium will be in extraordinarily short supply fairly quickly, and in industrialized countries those are time and privacy. We want more time. We want more privacy. We believe we have less and less of those precious elements. What will capitalism do about that? Toward what ends will it move if the engine perceives that those are critical elements for the people that spend their dollars and pounds and deutsche marks and yen in the world markets? That question remains very much open. 

If history is any guide, it will respond. It will find the fuel that makes it run fast and efficiently - sometimes too fast. You could argue that the 1990s have really been about turbocharged capitalism in some sense. But it will find its fuel. And it will run.


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