#336 How To Lose A Few Billion Dollars: Samuel Insull

**David Senra** (0:00)
Do you remember Sam Insull, the billionaire utility tycoon from Chicago? Do you remember how his empire collapsed and how he lost two or three billion dollars? How the newspapers at the time called it the biggest business failure in the history of the world? You may remember the battle that the United States government had to extradite Insull from Greece.
But chances are, you don't remember that Insull had been in the electric business as long as there had been an electric business.
That he had started as Thomas Edison's private secretary in 1881 That he, more than any other man, was responsible for founding the business of centralized electric supply.
That he organized the Edison General Electric Company, now known as GE. And that he worked out a model of nationwide product distribution that virtually all other American industry copied. That he practiced and popularized mass production and selling at the lowest possible cost long before these ideas were attributed to Henry Ford. That he was the first to successfully apply on a large scale the concepts of the load and diversity factors on which all utility rates are based today. That he brought into effect the natural monopoly principle of utility companies. That he helped create the open end mortgage that's used in financing expansion of many businesses outside of the electric industry today. That he was the father of effective government regulation of public utilities and the creator of rural electrification. That he pioneered successful welfare programs years before most of business, labor or government took any significant steps in that direction. That he helped develop the idea and techniques of modern public relations, and he was the crucial link between PT. Barnum and Madison Avenue. And that he devised methods of marketing securities that made possible gigantic modern corporations. Next to Thomas Edison, Sam Insull is the name that you should remember as the most important and perhaps the most notorious person in the electricity business.
That was an excerpt from the book I'm going to talk to you about today, which is Insull, The Rise and Fall of a Billionaire Utility Tycoon, and it was written by Forrest McDonald. This is a very old book. It was first published in 1962 And what the book lays out is that Insull was not just a company builder, but he was actually an industry builder. So you can think of what Rockefeller was to oil, what Henry Ford was to the automobile, what JP Morgan was to finance, and what Carnegie was to steal. Sam Insull was to electricity. But unlike Rockefeller, Ford, Morgan and Carnegie, Insull made terrible, drastic mistakes at the end of his career, and he dies broke.
And so for you and I, this is going to be one of the scariest books that we could talk about because the idea that you can be wildly successful, maybe the most successful businessman in the 1920s, have an amazing 53 year career and still be over leveraged and risk everything and die with no money is absolutely terrifying. So I'm going to start with the relationship that he had with his father. Insull is born and raised in England. And what is most interesting is that he had all of his dad's positive traits and none of the negative ones. So his dad was described as imaginative, clever and enthusiastic. What his dad did not have was energy, practical sense and fortitude. Sam's father was idealistic, impractical and intellectual. That is not how you would describe Sam. Sam was very smart, but he was pragmatic, very much like Thomas Edison. And another way Sam differs from his dad is, there's a line in the book where it says his dad was not interested in earning a living. Sam was the exact opposite. He loved operating companies. He was a workaholic. It says when he was, his standard workday was 16 hours a day from the very beginning of his career and all the way up until when he was in the 70s, he was still working 16 hours a day. He loved operating companies and he was, as we'll see, he's very, very gifted at operating companies. And after finishing the book and then rereading all my highlights before I sat down to talk to you, I think maybe his most important trait is that he had, the author says that he had near demonic energy. I'm gonna read this paragraph to you. This is incredible. And this starts out when he was really young and he had incredible energy and work ethic up until the very end. He was small, but his physical endurance was boundless and his energy was inexhaustible. He had a peculiar metabolic makeup. He awoke early, abruptly, completely bursting with energy. Think about that. He opens his eye and jumps out of bed with a burning desire to achieve mission success is the way I would put that. So he'd be bursting with energy, yet he gained momentum as the day wore on and he would work long into the night. Later on, much later on as a matter of fact, as an adult, he learned to relax, but relaxation was a learned thing to be resorted to only when he was on the verge of physical collapse. This sounds like Thomas Edison too.