In July 1944, a little over a year before the end of WW2, President Franklin Delano Roosevelt looked tired and sick. Publicly, he was taking month-long rests under the guise of war planning. Privately, he was diagnosed with severe hypertension, heart disease, cardiac failure and acute bronchitis.
The stress of leading a nation at war, rehabilitating a depressed economy and a two pack a day cigarette habit had turned his heart into a time bomb. It wasn’t a question of “if”, but “when” FDR would succumb to a major stroke. Most insiders knew in the upcoming election, a Democratic vote for President was really a vote for the Vice President. It was under these conditions that FDR made a decision that transformed the next fifty years of American history. He removed Vice President Henry Wallace from the Presidential ticket.
Prior to the rise of Bernie Sanders, Henry Wallace was the last true Progressive leader to wield national power. A scientist farmer, and capable administrator, Wallace revolutionized American farming as the Secretary of Agriculture. He spearheaded the New Deal’s most revolutionary and innovative programs, fought concentrations of power, and transformed the Federal Government into a leading incubator of scientific research. He spoke openly about the need to end racial segregation, the benefits of international cooperation, and the importance of economic development. When Norman Borlaug won the Nobel Peace Prize for developing disease-resistant wheat–it’s estimated that the hybrid grain saved over 1 billion lives—he credited Wallace as his inspiration. He was also popular. At the time of FDR’s decision, a Gallop poll showed Wallace was overwhelming backed by Democratic voters. “Nationwide,” wrote biographers, John Culver and John Hyde, “Wallace’s support equaled the next three (Vice-Presidential) candidates’ combined.” The man who ultimately replaced him, Harry Truman, a generic Democratic Party loyalist, earned 2 percent.
The question is, why? Why did FDR drop Henry Wallace from the 1944 Presidential ticket? Why did FDR want Henry Wallace, the consummate New Dealer, with vast popularity, and support among key voting-blocs removed? It’s one of the greatest “what-ifs” in American history. Critics argue that Wallace’s sympathetic view towards the Soviet Union would have weakened American interests. Supporters argue he would have ended the Cold War before it started. I don’t think there will ever be a clear answer to this question, but I wanted to illuminate 8 key drivers.
With a scope wide as it is personal, Isabel Wilkerson’s The Warmth of Other Suns paints a historical picture of one of the largest, but least reported events in the 21st century: the mass northern migration of African Americans.
Despite losing the Civil War, an open caste system remained in the South. Blacks were restricted in both their opportunities and possibilities. Most were relegated to sharecropping—in practice a form of pseudo-slavery. Voting was technically legal but practically unheard of. Lynchings were common. At the turn of the 20th century, 90% of African Americans lived in the south. By the end of the 1960s, roughly half called the North home.
In the thirty-some years since it fell, American analysis of the Soviet Union has been reduced to one sentiment: communism failed because capitalism is superior. Professional people—especially ones employed by media companies—spend an awful lot of time and energy attempting to rationalize its downfall through clichéd ideological arguments. They bring up the work of Hayek, stories about full grocery aisles, or simply argue that people are too self-interested for mass collectivism to work.
And yes, I understand and even agree with many of these arguments, but it’s also lazy. It’s like analyzing the most recent Super Bowl and concluding that the New England Patriots won because they wanted it more. In How Not To Network a Nation Benjamin Peters provides an exhaustive look at one of the functional problems that plagued the Soviet experiment: information.
I read The Most Powerful Idea in the World, William Rosen’s book about the invention of the steam engine, for two reasons, one of which was Bill Gates’ glowing recommendation. In his review, he raved about how Rosen was one of the first people to successfully argue that patent law had a large impact on innovation.
Since I am working on a project that looks at the impact of legal systems on innovation it only seemed natural. But I had a reservation. Not about the time period, I’d read a few books about the industrial revolution this year. It’s the simple fact that most books on innovation suck. They’re filled with bland platitudes and offer generic advice that is obvious to anyone with five years of business experience and a subscription to Harvard Business Review.
The New Deal, a seminal era in American history, saw government take an active role in promoting the welfare of the citizens. In The New Deal, journalist Michael Hiltzik, tells the story of the people, policies, and actions that shaped the nation.
Like many great companies, today the Falk Corporation is forgotten. At its height, it perfected the silicon chips of the industrial era. Falk designed and manufactured fat gears and thin gears, cheap gears and expensive gears, gears that could open the Panama Canal, and gears that fit on a small desk. It made gears for engines, dams, trains, conveyor belts, subway systems—any industry that needed to transfer power probably used Falk Gears.
There’s a good argument to be made that after a century of dominating the industrial era, it fell victim to the innovator’s dilemma. Falk’s corpse was sold for $295 million in 2005. Today it doesn’t even have a proper Wikipedia page.
I began researching the Falk Corporation because I wanted to learn more about the innovation network of Silicon Valley. It may seem odd to research a defunct Milwaukee-based gear manufacturer for this, but it makes sense when you ponder the history. By every conceivable measure Silicon Valley is the epic center of modern innovation. The bulk of the software and algorithms that power the world are designed inside the 20 mile region. Its evolution is also fairly straightforward: government subsidies, elite education system, solid business support and infrastructure, etc. In the early 1900s, as crazy as it sounds, that innovation epic center may have been Milwaukee. The industry was industrial metal fabrication, and in a span of about twenty years 10-15 companies that would dominate the mid 1900s sprouted within few miles. Six came from a 3-4 block radius in what is now known as Walker’s Point: Pawling & Harnischfeger (cranes), Kearney & Trecker (milling), A.O. Smith (car frames), Allis Chambers (everything), Nordberg and Chain Belt (mining equipment).
That’s what set me down the Falk Corporation’s path. I was trying to discover why it came to be, and what it means for today’s world–specifically building an innovation based economy. Here’s a super annotated version of my notes on the early history of the Falk Corporation. They’re primarily derived from the Milwaukee Public Library’s vast resources and the work of Milwaukee historian John Gurda.
In 1946, over a decade before he became the architect of the Vietnam War, Robert McNamara was hired to rehaul the Ford Motor Company. It was in desperate need of help. The iconic corporation was hemorrhaging about $9 million a month. McNamara, an accountant by training who rose to prominence by applying statistical methods to warfare planning, immediately transformed the culture.
Decisions were no longer made from the eye of a designer, or the experience of the line-worker. He immediately developed complex financial metrics to measure a product’s viability. Every penny spent in manufacturing, marketing, design, and engineering had to be justified and rationalized through this analysis. It shifted power from engineers to MBAs. Within three years he doubled the company’s profits. In Makers and Takers, Rana Foroohar argues that this was the end of American global automobile leadership. As crazy as it sounds, the question needs to be asked: Did modern finance destroy innovation?
In Dawn of Innovation Charles Morris argues that America’s economic dominance wasn’t driven by science, technology or ingenuity, but our commitment to mass production (scale). “The dominating American characteristic across all major industries,” he writes, “was the push for scale—adapting the production methods, the use of machinery, and the distribution to suit the product.” Viewing the world through this lenses reveals two myths; applying it to modern times illuminates the biggest issue facing modern governments—How to scale innovation in a knowledge economy.
Bell Labs, the world’s most innovative organization in history, had a simple view on innovation. Whatever improvement came out of their Murray Hill headquarters had to do the job “better, or cheaper, or both” than its predecessor. In thirty years, this philosophy allowed the company to develop semiconductors, lasers, fiber optics, solar panels, the Unix operating system, the C++ programing language, cellular phone networks, and much more. At its peak, America’s monopolistic telephone company was one of the most profitable organizations in the world. In his book The Idea Factory, Jon Gertner makes the case that nearly every single improvement in modern communications can be traced back to one lab, at one company—AT&T. Trillions of dollars in economic growth, millions of jobs, all from one group.
The question is, what can we learn from Bell Labs?
If they gave awards for the most comprehensive business books of the last ten years Factory Man by Beth Macy would be an unlikely–but worthy contender. It isn’t a TED ready think piece about the flattening of the world. Nor is it a feel-good call to revitalize American industry through disruptive innovation. Instead, it is a deeply reported narrative on the rise and fall of the American furniture industry. Told through the viewpoint of the Bassett Furniture Company, Macy explains how a manufacturing empire was created and systematically eroded. At first glance, the culprits of the decline are predictable: globalization and technology. Globalization because cheap Asian imports flooded the market at a fraction of the cost. Technology because advances in communications allowed businesses to build a supply chain that exported lumber from North Carolina to China, and the finished product back to American store shelves.
A lesser author would have ended the analysis there, but Macy peppers Factory Man with background and context allowing the real culprits emerge: systematically narrow management driven by orthodoxy and bad economic policy. The decline didn’t have to happen.