Samuel Insull in 1920
November 11, 1859|
London, England, United Kingdom
|Died||July 16, 1938
|Resting place||Putney Vale Cemetery, London|
|Known for||Chicago utilities empire|
Samuel Insull (November 11, 1859 – July 16, 1938) was a British-born American business magnate whose vast Midwest holding company empire collapsed in the 1930s. He was an innovator and investor based in Chicago who greatly contributed to creating an integrated electrical infrastructure in the United States. Insull was notable for purchasing utilities and railroads using holding companies. After his business enterprises collapsed during the Great Depression he was accused of profiting personally by selling worthless stock to unsuspecting investors who trusted him because of his position and reputation. He was acquitted at trial. He was also responsible for the building of the Chicago Civic Opera House in 1929.
Insull was born in London on 11 November 1859, the son of Samuel Insull, a tradesman and lay preacher who was active in the Temperance movement, and Emma Short. He had a brother, Martin Insull. His career began as an apprentice clerk for various local businesses at age 14. He went on to become a stenographer at Vanity Fair. Through a newspaper ad, the 19-year-old became the switchboard operator for the London office of Edison's telephone companies. When he learned of a job with Edison in the US, Insull indicated he would be glad to have it, provided it was as Thomas Edison's personal secretary.
In 1881, at the age of 21, Insull emigrated to the US, complete with side whiskers to make him appear older than his years. In the decade that followed, Insull took on increasing responsibilities in Edison's business endeavors, building electrical power stations throughout the US. With several other Edison Pioneers, he founded Edison General Electric, which later became the publicly held company now known as General Electric. Insull rose to become vice-president of General Electric in 1889, but was unhappy at not being named its president. When the presidency went to someone else, Insull moved to Chicago as head of the Chicago Edison Company. Another consideration is that he was caught between opposing factions when J. P. Morgan combined the Thomson-Houston Electric Company and Edison General Electric to form the new company in April 1892. Those loyal to Edison accused Insull of selling out, and in fact he did welcome the infusion of capital from Vanderbilt, J. P. Morgan and others as necessary for the company's future development. Edison quickly forgave him, but others did not, and it seemed a good idea to get out of town.
Life in Chicago
|This section requires expansion with: the development of 'holding companies,' and Insull's part. See Talk. (November 2010)|
The Western Edison Light Co. was founded in Chicago in 1882, three years after Edison developed a practical light bulb. In 1887, Western Edison became the Chicago Edison Co. Insull left General Electric and moved to Chicago in 1892, where he became president of Chicago Edison that year. Chicago Edison was struggling, losing money, until Insull discovered a way to make it profitable during a Christmas visit to Brighton, England in 1894. To his surprise, he saw that the shops were closed, but every light in them was burning; something that never happened in the US. Finding the head of the town's electric company, he asked him how this could happen and was told the secret to it was not a flat rate bill, but use of a demand metered billing system, measuring not only total power consumption, but a set of rates for low-demand and high-demand electric use times. By 1897, Insull had worked out his formulas enough to offer Chicago electric customers two-tiered electric rates. With the new system, many homeowners found their bills lowered by 32 percent within a year.
In 1897, he incorporated another electric utility, the Commonwealth Electric Light & Power Co. In 1907, Insull's two companies formally merged to create the Commonwealth Edison Co. As more people became connected to the electric grid, Insull's company, which had an exclusive franchise from the city, grew steadily. By 1920, when it used more than two million tons of coal annually, the company's 6,000 employees served about 500,000 customers; annual revenues reached nearly $40 million. During the 1920s, its largest generating stations included one on Fisk Street and West 22nd and one on Crawford Avenue and the Sanitary Canal.
Insull began purchasing portions of the utility infrastructure of the city. When it became clear that Westinghouse's support of alternating current was to win out over Edison's direct current, Insull switched his support to AC in the War of Currents.
His Chicago area holdings came to include what is now Federal Signal Corporation, Commonwealth Edison, Peoples Gas, and the Northern Indiana Public Service Company, and held shares of many more utilities. Insull also owned significant portions of many railroads, mainly electric interurban lines, including the Chicago North Shore and Milwaukee Railroad, Chicago Rapid Transit Company, Chicago Aurora and Elgin Railroad, Gary Railways, and Chicago South Shore and South Bend Railroad. He helped modernize these railroads and others.
As a result of owning these diverse companies, Insull is credited with being one of the early proponents for regulation of industry. He saw that federal and state regulation would recognize electric utilities as natural monopolies, allowing them to grow with little competition and to sell electricity to broader segments of the market. He used economies of scale to overcome market barriers by cheaply producing electricity with large steam turbines, such as the installations in the 1929 State Line Generating Plant in Hammond, Indiana. This made it easier to put electricity into homes.
Samuel Insull also had interests in broadcasting. Through his long association with Chicago's Civic Opera, he thought the new medium of radio broadcasting would be a way to bring opera performances into people's homes. On hearing of the work of Westinghouse to establish a radio station in Chicago, he contacted the company. Together the two companies arranged for a radio station to be built in Chicago which would be operated jointly by Commonwealth Edison and Westinghouse. KYW's first home was the roof of the Edison Company building at 72 West Adams Street in Chicago, and it went on the air November 11, 1921. It was Chicago's first radio station.
Though the partnership came to an end in 1926, with Westinghouse buying out Edison's interest in KYW, Insull's interest in broadcasting did not stop there. He formed the Great Lakes Broadcasting Company in 1927 and purchased Chicago radio stations WENR and WCBN; the two stations were merged on June 1, 1927, with Insull paying a million dollars for WENR alone. Insull moved the stations first into the Strauss Building, then into the Chicago Civic Opera House, where WENR became an affiliate of the NBC Blue Network. Insull's Great Lakes Broadcasting Company also included a mechanical television station, W9XR, which began in 1929 after the company installed the first 50,000 watt radio transmitter in Chicago for its two radio stations.
When Insull's fortune started to fade, he sold both WENR and WCBN along with W9XR, to the National Broadcasting Company in March 1931. Two years after its purchase of the radio stations and the mechanical television station, NBC shut W9XR just as it had done with W9XAP, which came with its purchase of WMAQ (AM).
On May 22, 1899, Samuel Insull married a "tiny, exquisitely beautiful and clever" Broadway ingénue actress whose stage name was (Alis) Gladys Wallis (1875–September 23, 1953). Her real name was Margaret Anna Bird. Gladys Wallis was popular with New York audiences and appeared in W. H. Crane's company first in the play For Money in 1892 and in his subsequent productions. Gladys played the role of Maggie Rolan in Brother John (1893); a New York Times reviewer listed her as one of the most popular players, one who "deserved quite all the applause [she] received." Prior to her marriage to Insull, Gladys also appeared on the New York stage in On Probation and Worth a Million. At the height of her fame she was interviewed (rather unsuccessfully) by Frank Norris.
At the time of their marriage, Insull was 41 and Gladys was 24. She had been on the stage from childhood. The Insulls lived outside Libertyville, Illinois, in a Spanish Revival mansion with extensive grounds now known as the Cuneo Museum, in Vernon Hills. They also had an apartment at 1100 North Lake Shore Drive in the city and a furnished suite at the Civic Opera House. The Insulls had one son, Samuel Jr.
Both husband and wife were patrons of the Arts; because of this Insull was instrumental in the building of Chicago's Civic Opera House, which opened November 4, 1929 with Aida; the opera and its cast were chosen by Insull himself. Samuel Insull was also known for his charitable works in other areas; donating large sums of money to local hospitals and then calling on others with similar resources to do the same. He donated freely to African-American charities in Chicago, asking the wealthy to follow his example. At the time the US entered World War I, Insull was named head of the Illinois Defense Council by President Woodrow Wilson; his efforts sold over a million dollars of War Bonds.
In Illinois, Insull had long battled with Harold L. Ickes over concerns that Insull was exploiting his customers. Upon the promotion of Ickes to Interior Secretary in 1933, Insull had a powerful foe in the Roosevelt administration.
Insull controlled an empire of $500 million with only $27 million in equity. (Due to the highly leveraged structure of Insull's holdings, he is sometimes wrongly credited with the invention of the holding company.) His holding company collapsed during the Great Depression, wiping out the life savings of 600,000 shareholders. This led to the enactment of the Public Utility Holding Company Act of 1935.
Insull fled the country initially to France. When the United States asked French authorities that he be extradited, Insull moved on to Greece, where there was not yet an extradition treaty with the US. He was later arrested and extradited back to the United States by Turkey in 1934 to face federal prosecution on mail fraud and antitrust charges. He was defended by famous Chicago lawyer Floyd Thompson and found not guilty on all counts.
In July 1938, the Insulls visited Paris to see the Bastille Day festivities. Insull suffered from a heart ailment, and his wife Gladys had asked him not to take the Métro because it was bad for his heart. Nevertheless, Insull had made frequent declarations that he was "now a poor man" and on July 16, 1938, he descended a long flight of stairs at the Place de la Concorde station. He died of a heart attack just as he stepped toward the ticket taker. He had 30 francs — 84 cents — in his pocket at the time and was identified by a hotel laundry bill in his pocket. Insull was receiving an annual pension totaling $21,000 from three of his former companies when he died.
Insull was buried near his parents on July 23, 1938, in Putney Vale Cemetery, London, the city of his birth. His estate was found to be worth about $1,000 and his debts totaled $14,000,000, according to his will.
Everyone thought Edison and Insull were making a big mistake and that generators should be like furnaces, with one in every building, especially since these realized a quick return on investment. But Edison wired up Manhattan and Insull went West and wired up Chicago.
Insull also invented the regulated monopoly, a uniquely American institution that included utility companies and later, AT&T. This came from a combination of his business persona and his political one. On the one hand, he abhorred the waste of competing power producers, whose inefficiency would often double the cost of production. On the other hand, he believed in the citizen's right to fair treatment. So while he bought up rival companies and created a monopoly, he kept his prices low and campaigned vigorously for regulation.
"It was a real man who built an opera house for the soprano of his choice, and much in the movie was borrowed from that story," Welles wrote. Welles gave Maurice Seiderman a photograph of Insull, with mustache, to use as a model for the makeup design of the old Charles Foster Kane.:42, 46
Welles denied that the character of Susan Alexander was based on Gladys Wallis, but co-writer Herman J. Mankiewicz did incorporate a related experience into the script. In June 1925, after a 26-year absence, Gladys Wallis Insull returned to the stage in a charity revival of The School for Scandal that ran two weeks in Chicago. When the performance was repeated on Broadway in October 1925, Herman J. Mankiewicz — then the third-string theatre critic for The New York Times — was assigned to review the production. After her opening-night performance in the role of Lady Teazle, drama critic Mankiewicz returned to the press room "full of fury and too many drinks," wrote biographer Richard Meryman:
He was outraged by the spectacle of a 56-year-old millionairess playing a gleeful 18-year-old, the whole production bought for her like a trinket by a man Herman knew to be an unscrupulous manipulator. Herman began to write: "Miss Gladys Wallis, an aging, hopelessly incompetent amateur, opened last night in…" Then Herman passed out, slumped over the top of his typewriter.
Mankiewicz resurrected the experience in writing the screenplay for Citizen Kane, incorporating it into the narrative of drama critic Jedediah Leland. After Kane's second wife makes her catastrophic opera debut, Leland returns to the press room drunk and passes out over the top of his typewriter after writing the first sentence of his review: "Miss Susan Alexander, a pretty but hopelessly incompetent amateur…" 
- List of people on the cover of Time Magazine: 1920s - 29 Nov. 1926
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- Welles, Orson, and Peter Bogdanovich, This is Orson Welles. New York: HarperCollins Publishers 1992 ISBN 0-06-016616-9 page 49. Welles states, "There's all that stuff about McCormick and the opera. I drew a lot from that from my Chicago days. And Samuel Insull."
- Davies, Marion (1975). Pfau, Pamela; Marx, Kenneth S., eds. The Times We Had: Life with William Randolph Hearst. Foreword by Orson Welles (two pages preceding unpaginated chapter index). Indianapolis and New York: Bobbs-Merrill Company, Inc. ISBN 978-0-672-52112-6.
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- Insull, Samuel (1992). Plachno, Larry, ed. Memoirs of Samuel Insull: An Autobiography by Samuel Insull. New York: Transportation Trails. ISBN 978-0-933449-17-6.
- McDonald , Forrest (1962). Insull: The Rise and Fall of a Billionaire Utility Tycoon. Chicago: University of Chicago Press. ISBN 1-58798-243-9.
- Wasik, John F. (2006). The Merchant of Power: Sam Insull, Thomas Edison, and the Creation of the Modern Metropolis. New York: Palgrave Macmillan. ISBN 978-1-4039-6884-5.
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- Samuel Insull Papers, 1799–1970 (Bulk 1932–1935), Loyola University Chicago Archives
- TIME magazine cover photo of Samuel Insull, May 14, 1934
- PBS: Photo of Samuel Insull with Thomas Edison
- Encyclopædia Britannica Concise: Photo of Samuel Insull