Selling New England Ice in India, 1833-1880
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Turning a Yankee Liability into an Asset: Selling New England Ice in India, 1833-1880 By Dan Cooper and Brian Grinder "He who gives back at the first repulse and without striking DuRING AN MBA ORAL EXAM this past the second blow, despairs of success, has never been, is not, summer, I (Brian) asked the student under and never will be, a hero in war, love, or business." fire to imagine himself in Boston in 1833 where he meets an individual who wants -Frederic Tudor, 1805 to load a ship with ice cut from local ponds, transport it to Calcutta, India, and sell it. "What advice would you give this The War of 1812 interrupted business other methods and devices that made ice person?" I asked. The student thought for again, but Tudor pressed on in spite of harvesting easier and less costly. However, a moment, surmised that the ship would constant harassment from his creditors. the lure of the West captured Wyeth's have to be wind powered, and asked how After the war, he expanded into Charles- imagination, and in 1831 he embarked on long it would take to travel from Boston to ton, SC; Savannah, GA; and New Orleans, an expedition to the Oregon Territory Calcutta in a ship under sail. "About four LA. The New Orleans expansion was espe- where he hoped to make his fortune in the months," I replied, "and remember, since cially successful. Tudor, hoping to sell an fur trade. there was no Suez Canal in 1833, the ice average of $10 of ice a day during his first Tudor also found a new way to make would have to be transported across the season in New Orleans, was overjoyed money by speculating in coffee. Accord- equator and around the southern tip of when his brother Harry reported daily ing to historians Carl Seaburg and Stanley Africa." The student responded, "I would sales averaging $40 a day. After 15 years of Paterson, "He intended the fling to be advise him not to do it because ilie ice setbacks, disappointments and frustration, short and one time only. He would pur- would melt before it got there." 1 the business had finally reached a turning chase coffee for one week, so he wrote As others in the room listened in aston- point. on July 1, 1831. On June 28 he wrote again ishment, I told the student how Fredric Shortly after receiving the good news in his diary, 'I have nearly completed my Tudor successfully sent New England ice from New Orleans, Tudor suffered a ner- speculation in coffee.' But then he got to India in 1833 on an unrefrigerated sail- vous breakdown. The signs of increasing hooked." ing vessel. The success of his Indian ven- stress were evident in Tudor's daily diary By the end of 1832, his position in coffee ture came at a fortuitous time for Tudor, entries, which often included the word was large enough to supply a year's worth who owed over $20o,ooo to his creditors "ANXIETY" written in bold capital let- of the beverage to a million Americans. and was in danger ofbeing sent to debtor's ters. Fortunately, Tudor's brother-in-law, Tudor was on the verge of giving up the prison again. 2 Robert Gardiner, stepped in and skill- ice business for the easy money of cof- Tudor's first ice trading venture in 1806 fully managed the business while Tudor fee speculation3 when he was approached was met with derision by a reporter from recovered. The ice business also received a by Samuel Austin, a Boston merchant the Boston Gazette, who wrote, "No joke. much-needed shot in the arm when Tudor involved in trade with India, with an offer A vessel with a cargo of 180 tons of ice has hired Nathaniel Jarvis Wyeth in 1826. he couldn't refuse. cleared out from iliis port for Martinique. Wyeth single-handedly changed the Austin wanted to do more business We hope this will not prove to be a slip- production side of the ice industry with in India, but there was a problem; India pery speculation." his invention of a horse-drawn ice plow produced many things New Englanders Although Tudor's ice survived the in 1825. Before the ice plow, ice harvest- wanted, but New England didn't produce trip, poor planning resulted in a loss of ers simply hacked ice out of ponds as best anything that could be traded in India. between $3,000 and $4,ooo. Undaunted, they could. The irregular shapes of ice pro- As a result, ships bound for India from Tudor began experimenting with ice house duced by this inefficient method caused Boston needing ballast were often filled designs, had an ice house built in Havana, problems at sea because the ice would shift wiili rocks that would simply be discarded . Cuba, and sent his first shipment of ice during the voyage. when the ships arrived at their destination. there in January of 1807. In late 1807, he Wyeth's plow produced uniform blocks Austin proposed shipping ice to India, and decided to go to Cuba himself and build of ice that not only stayed put during Tudor eagerly entered into a joint-venture an improved ice house, but before the ice transport but also melted more slowly. with Austin and W.C. Rogers, who would house was completed, the Embargo Act The ice plow also cut harvesting costs accompany the ship to India. of 1807 went into effect putting a halt to dramatically, from 30 cents a ton to 10 Tudor procured ilie services of the Tus Tudor's ice business for the next two years. cents a ton. Wyeth continued to invent cany, and prepared the ship for its frozen 14 FINA NC IAL HISTOR Y I Fall2012 I www.MoAF.org cargo by insulating its hold with shredded to repay them over time from the profits. 1880 when the technology for producing bark and hay. The Tuscany left Boston on It took Tudor 14 years to pay off his credi- artificial ice finally reached a point where May 12, 1833 loaded with 180 tons of ice tors, but by then he was a wealthy man. it was able to produce enough ice to meet and arrived in Calcutta on September 10 Some of his wealth came from ice trading demand. 5 with about 100 tons of ice still intact. The profits , but the lion's share came from As I finished my story, I asked my overheated British residents of Calcutta his investments over the years in seaport harried MBA student if we could learn joyfully celebrated the miraculous arrival properties around the world. By 1847, anything from Frederic Tudor. "Yes," he of ice, and sales were brisk.4 Money was Tudor's real estate investments alone were replied, and as our discussion continued, quickly raised to build an ice house, and valued at over $1 million. we were able to draw a number of useful _lans were made to establish regular ship- The joint-venture with Austin and Rog- lessons from the experiences of Tudor. ments of ice to India. ers did not survive beyond the voyage First, Tudor was passionate about his Tudor received word of the ship's safe of the Tuscany. Rogers stayed in India idea to sell ice in the tropics. It's not arrival in January of 1834. The partners and became a dentist. Austin and Tudor enough to have a good idea; you have to made a profit of $3,300 on the venture, became competitors, but Tudor's long believe in it enough to take action in the but by the end of the year Tudor's losses years of experience allowed him to domi- face of overwhelming opposition. Every- from coffee speculation had reached an nate the market. The Civil War brought one in Boston thought Tudor was off his astounding $210,ooo. However, because sales of northern ice in the South to an rocker when he first proposed selling ice of the success of the India venture, his end, but trade elsewhere in the world in the Caribbean. No one was willing to creditors agreed to let him continue in the continued unabated. Tudor died in 1864 back him financially, but he went ahead ice business unhindered and allowed him at the age of So. Voyages to India ended in and financed the venture by mortgaging some of his own investment properties. Tudor's brother-in-law wrote, "The idea was considered so utterly absurd by the sober minded merchants as to be the vagary of a disordered brain, and few men would have been willing to stand the scoffs and sneers from those whose assistance it was necessary to obtain, to aid him in the enterprise." Second, Tudor had to exercise a great deal of patience. When describing the cash flows of long-term projects, mod- ern finance textbooks typically assume an initial year of cash outflow immediately followed by cash inflows for the remainder of the project's life. While such a pattern of cash flows is desirable, few new busi- nesses ever experience them. Tudor didn't see positive cash flows from his business for several years as he struggled against embargos, wars and various government bureaucracies. Only the patient can sur- vive in such a world. Finally, Tudor persevered. He didn't give up at the first sign of failure, but looked for new and creative ways to operate his busi- ness. Although passion, patience and per- severance receive scant attention in today's finance textbooks, they are qualities that must be developed by anyone who wants to succeed in the world of business and finance.