Did Mr. Monopoly Die Penniless on a Paris Subway? And Why Should You Be Thankful?
Many people may not realize that our current lifestyles are much in part due to a man who died penniless on a Paris subway. He is one of the biggest business magnates in US history, who traveled in the same circles of JP Morgan, his resume includes: vastly improving the Chicago “L” transit system, creating the modern regulated monopoly, and fathering the electric grid in the US.
Orson Welles even admitted that part of Citizen Kane’s persona was not only William Randolph Hearst, but also this man. His name was Samuel Insull. Working alongside Thomas Edison and other like-minded pioneers, he founded General Electric. He became exceedingly wealthy by purchasing competing utility companies using his holding company, CommonWealth Edison. He hated the waste of competing power producers, and worked to build economies of scale to keep rates as low as possible for the consumers. His empire reached upwards of $500 Million (in 1920’s), but was based only on $27 million of equity.
Early in his career, after visiting Europe and seeing shops with their lights on, he was intrigued as to why when the shop was closed, the light was still on. There he learned about demand charges, and charging customers different rates when demand was high and when it was low. After working on his formulas for Chicago, he introduced two tiered rates, instead of one flat rate, which lowered some Chicago utility bills by up to 32%. This made electricity more affordable to the consumers, and thereby made his company more profitable.
Having owned several different types of companies inside his holding company, Insull was a strong advocate for regulation. He realized that if utilities could be recognized as natural monopolies, they could grow without competition and offer electricity to an even broader segment of society. He was then able to use his economies of scale to mass produce large amounts of electricity, and was able to deliver it to more and more residential homes. He strongly argued for regulation and is considered the father of the regulated monopoly system still in use in the US.
The Great Depression brought his empire crashing to the ground. Having such little equity in his holding company, the Great Depression caused his companies to go bankrupt, and over 600,000 people lost their investments and life savings which led to the passage of the Public Utility Company Holding Act of 1935. Insull fled the country to France, then Greece, and was ultimately arrested in Turkey and extradited back to the US to face anti-trust charges. Insull was found not guilty on all charges.
In 1938, Samuel Insull died of a heart attack on a Paris subway at the age of 78. He had 84 cents in his pocket and his body was only identified by a laundry receipt in his pocket. At his death, his estate was valued at $1,000 and he had over $14 Million in debt.
The Parker Brother’s famous board game Monopoly’s main character, Mr. Monopoly, is rumored to be based on Samuel Insull. The early game editions and many photographs of Insull bear an extremely similar likeness.
Without Samuel Insull, you would not have the modern conveniences in your home today. Inexpensive electricity delivered to every home, to power gadget after gadget of convenience. So you can say that your lifestyle is because of Mr. Monopoly, who died penniless on a Paris subway.
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