Friday, November 28, 2008

It’s Beginning to Look (A Lot Less) Like Christmas

It’s no secret that consumers hit the brakes hard this fall, forcing U.S. retail sales down sharply and dimming prospects for a merry Christmas for the nation’s merchants.

Then came news that Christmas tree vendors were worried that consumers would do the unthinkable and go without this year. Some vendors, in fact, have put in orders for lower quality trees, hoping to keep their prices down.

(Personally, I think people will forego Christmas in Hawaii and splurge instead on a better tree. Hard times tend to make home, hearth and tradition that much more important. At least that would be my bet.)

In any case, if your tree hooks to the left, leans to the right, and has a big bite taken out of its lower branches, at least you’ll know why.

Now, however, the unthinkable has happened: Even Santa is getting downsized this Christmas. In the face of the worst economy in years, communities around the country are scaling back the lights, shortening the parades and hiring fewer Santas. The WSJ reports that “Santa bookings have dropped so steeply that the Amalgamated Order of Real Bearded Santas, which represents 700 jolly souls in red velvet, held a series of meetings to discuss their economic survival.”

Santas who do get hired are reading stories instead of delivering gifts, just to keep their variable costs to a minimum.

It all makes you long for the kinder, gentler days of Santa when the big guy flew above economic downturns and the crass commercialism of the season. Or did he?

Well, I’ve finally finished Stephen Nissenbaum’s excellent The Battle for Christmas, and I’ve got news for you. Santa—who I always figured was just slightly younger than the Big Bang--was essentially invented in the 1820s and co-opted almost immediately by the rising material tide in the early Republic. He did, Nissenbaum argues, help to soften the season, which was violent and drunken in post-Revolution America. But Santa was and is part and parcel of our economic history, and has been intimately bound to our financial fortunes for two centuries.

Let’s return to the New York City of the early nineteenth century. As the population exploded from 33,000 in 1790 to 270,000 in 1835, the city spread rapidly northward from the very southern tip of Manhattan. Immigrants arrived and a growing, impoverished underclass arose. Nissenbaum writes, “In the second decade of the nineteenth century, New York underwent an explosion of poverty, vagrancy, and homelessness. That was followed in the third decade by serious outbreaks of public violence. In the eye of New York’s respectable citizens, the entire city appeared. . .to be coming apart completely.”

This was the downside to Jeffersonian and Jacksonian democracy. While Thomas Jefferson, surrounded by slaves and farmland, was spending himself into gentlemanly bankruptcy, he was also preaching the virtues of the common man. Unfortunately, a few too many common men didn't realize they were the cornerstones of virtuous democracy and were instead assembling in mobs and creating havoc in urban centers.

(I often think that Jefferson was able to wax eloquent about the common man because he never actually hung out with any. Adams, on the other hand, knew his neighbors well and became a Federalist, arguing against straight-up democracy. Sir Winston Churchill might have echoed Adams fears when he said “The best argument against democracy is a five-minute conversation with the average voter.”)

There was, in the first half of nineteenth-century America, what historians now refer to as “mobocracy”—a kind of violence that emerged as wage-labor developed, social norms were spun on their heads, older and newer immigrants clashed, and the American middle class was ultimately birthed.

Some of the mob violence was engendered less by emerging class warfare and more by alcohol. In 1825, the average American over fifteen years old consumed seven gallons of alcohol a year, mostly as whiskey and hard cider. The comparable number today is two gallons, mostly as beer and wine. Drunkardness was a serious public health issue in the early Republic that would be addressed with a vengeance by the emerging temperance movement.

Violence surfaced over Christmas and New Years in particular, Nissenbaum tells us, as a way for the poor and emerging wage-labor class to let off steam, a kind of escape valve. For wage-earners, the coming winter might mean lay-offs (as the rivers iced up), forced unemployment and want. Christmas could become a season to express dissatisfaction, ethnic or class resentments. It was “something less than a full-fledged radical movement but more than sheer, unfocused rowdiness.”

However defined, by the 1820s Christmas misrule had become an acute social threat. Bands of young street toughs, members of the emerging urban proletariat, had begun to travel freely and menacingly wherever they wanted. 1828 was remarkable for a particularly extensive and violent display, as an army of youth marched from the Bowery to Broadway to the City Hotel to a black neighborhood church to the city’s main commercial district to the Battery, causing destruction and beatings along the way.

As urbanization grew, well-to-do New Yorkers fled north to fenced and hedged estates, but the city was never far behind. In 1811, New York began a plan to construct a regular grid system of numbered streets, the ones we use to navigate by today.

At this point three men, Dutch-tinged “Knickerbockers,” enter our story. John Pintard was a prominent NYC merchant and civic leader, a founder of the New-York Historical Society, and a major player in establishing Washington’s Birthday, the Fourth of July and even Columbus Day as national holidays.

On the evening of Dec 31, 1820, Pintard’s household was awakened “by a band of loud revelers marching down Wall Street and directly outside his house, banging on drums, blowing fifes and whistles.” In a letter written early the next morning Pintard says he roused “mama” (in her kerchief, one wonders) and “threw on his clothes in haste, and down we sallied.” (Did he throw up the sash?)

Santa’s arrival? Not yet. Just a bunch of ruffians celebrating the season, causing havoc, assaulting a few pedestrians, and damaging an occasional shop along the way. Just another holiday night in early nineteenth-century New York City.

Pintard would spend the next day going to church and celebrating the season’s end with a round of visits with friends and acquaintances, followed by an afternoon family dinner of venison, holiday dishes and toasts. That was his kind of holiday—quiet, genial, safe, and domestic. (Nissenbaum does a great job contrasting the two versions of holiday celebration; buy the book!)

As a guy able to help create national holidays, could Pintard avoid taking a run at transforming Christmas?

In fact, from 1810 to 1830 or so Pintard took the responsibility of inventing Christmas rituals to try to create the perfect-remembered holiday. He led the effort to bring St. Nicholas to America as the icon of the New-York Historical Society and the patron saint of NYC. In 1810 Pintard paid for the publication of a broadside, sponsored by the Society, which featured a picture of St. Nicholas bringing gifts to children during the Christmas season.

Now, enter our second Knickerbocker, Washington Irving, a friend of John Pintard. Irving’s The Sketch Book appeared in 1819/20, a smashing success, and one that made him an instant celebrity. Along with "Rip Van Winkle" and "The Legend of Sleepy Hollow," there were also five stories about Christmas. “In these stories Irving used Christmas as the setting for a culture in which all the classes joined together in paternalist harmony.”

Irving’s were lovely, popular stories, but historians now know that he was—like Pintard-- “inventing tradition.” Indeed, he later admitted that he had never actually seen the kind of Christmas he described. (In 1843 Dickens’ A Christmas Carol would round out our view of Christmas—roaring fires, carolers, snow-covered lanes and the assembly of families. Like Irving, Dickens was inventing tradition.)

Now, all it took was the contribution from a third Knickerbocker, Clement Clarke Moore. Moore, friends with Pintard and Irving, was a professor of Oriental and Greek literature at Columbia College, and later compiled a two-volume Hebrew dictionary at General Theological Seminary. But, he was best known as the author of A Visit from St. Nicholas, now known as Twas the Night Before Christmas.

Moore clearly borrowed from Irving, who mentioned St. Nicholas 25 times in his Sketch book, including references to a wagon, Santa’s pipe, and adding a line that read, “laying a finger aside of his nose.” Moore undoubtedly drew from Pintard’s experiences as well—being awakened by an intruder on Christmas Eve. An even greater influence, however, were Pintard’s (and Moore’s) attitudes: conservative, opposed to Jeffersonian and Jacksonian mobocracy, fearful of the working class, and resistant to urbanization.

Interestingly enough, the year Moore wrote St. Nicholas for his children, the New York legislature gave men without property the right to vote; Pintard wrote, men “who had not stake in society.”

Even more pressing, in 1818 Moore’s huge family estate of Chelsea (now the namesake of the neighborhood north of Greenwich Village)—which in Moore’s youth had been pastoral and removed from the urban jungle--was being forever changed. In fact, part of Chelsea had been seized by eminent domain and was being split down the middle by something called “Ninth Avenue.” So, in the 1821 City Directory, Moore is found no longer living at Chelsea, but near the corner of Ninth Avenue and Twenty-first Street. The city had finally caught him.

Moore was upset by these changes to New York City, its loss of beauty and tranquility, given over to a conspiracy of “cartmen, carpenters, masons, pavers, and all their host of attendant laborers.”

These many forces came together in strange and wonderful ways in A Visit From St. Nicholas. Moore would take Pintard’s rude awakening of 1821 and turn it into a moment of magic—the basis for our own Christmas Eve.

First, in Moore’s poem, Santa posed no threat, though he was intentionally modeled as one of the working class. For example, he smoked the “stub of a pipe”-- a clear gesture to the proletariat, as patricians customarily smoked “mighty” long pipes (sometimes two feet long) known as aldermen or church wardens. (In fact, the working class often bought longer pipes and then broke them to a stub.)

In addition, Moore painted Santa as looking like a “peddler just opening his pack,” making him “something between a beggar and petty tradesman”—the veritable bottom of the barrel in the emerging craftsmen class.

Moore was not being subtle: The very kind of person the Knickerbockers feared most had now invaded his poetic home to do nothing more than respectfully deliver gifts to children.

There’s lots more, and Nissenbaum is superb in tracing the transformation of St. Nicholas from Bishop into a proletariat Santa that brought together upper and lower classes peacefully—at least in verse--in nineteenth-century New York. Nissenbaum says, the Knickbockers used their invention of Santa Claus to help forge a “placid ‘folk’ identity that could provide a cultural counterweight to the commercial bustle and democratic ‘misrule’ of early-nineteenth-century New York.”

Oh, and that “finger-aside” thing? Today, we no longer know what “putting a finger aside of his nose” means. But to a nineteenth-century American, the message would be clear. Moore’s Santa was saying to the reader: “I’m only kidding. You know I don’t exist. Let’s keep this between the two of us.” Indeed, Pintard and Irving might have admitted the same to us, that their images and rituals of the holiday were largely inventive longing.

In 1823 A Visit from St. Nicholas was published by a newspaper in Troy, New York. The following year four new almanacs, all published in Philadelphia, printed the poem. By 1828, it was being printed widely around the nation. Not long after that (newly-formed departments of) police in Philadelphia and other American cities began looking for groups of unruly boys at Christmas, ready to throw them in jail. In fact, commercial Christmas presents had their start in the decade of the 1820s, and merchants began to have a vested interest in keeping the streets free of rowdy behavior so that shoppers could navigate their stores.

In 1834, a letter printed by a Boston Unitarian magazine would sound all-to-familiar to modern ears:
All the children are expecting presents, and all aunts and cousins to say nothing of near relatives, are considering what they shall bestow upon the earnest expectations. . .I observe that the shops are preparing themselves with all sorts of things to suit all sorts of tastes; and am amazed at the cunning skill with which the most worthless as well as most valuable articles are set forth to tempt and decoy the bewildered purchaser.

And leading the charge: Santa Claus. By the mid-1820s Santa was hawking goods, and by the early 1840s Santa had become a common commercial icon, a figure used by merchants to attract the attention of children to shops. (He had also, you'll note, regained his long pipe.) Interestingly enough, the depression that set in at the end of 1839—the deepest ever experienced by the United States—was openly countered by merchants who used Christmas as a way to attract shoppers. “Old Hard Times” was being replaced, readers were assured, by “Old Santa Claus.”

Just twenty years after the birth of Santa, and 15 years after taking on a national presence, merchants knew that Christmas was the one time of year that good Jacksonian Americans, committed to frugality and many deeply distrustful of luxury, could be expected to buy and consume things--even if they did not need them and could not afford them. Christmas had become a special ritual time “when the ordinary rules of behavior were upended.”

“By mid-century,” John Steele Gordon wrote in An Empire of Wealth, “Christmas had become the major secular holiday it is today and would grow into the most important engine of the retail business.”

All of which brings us back to our own nagging recession and desperate need for a retail engine.

If only Santa would help us more.

Unfortunately, it’s really not looking very pretty. It turns out the Amalgamated Order of Red Bearded Santas (AORBS) are having internal labor problems of their own. The December issue of Harper’s Magazine reported that the Chapters and Lodges of the Pacific and Rocky Mountain Regions AORBS separated from the parent organization this last April. Their charges, among others: showing a vindictive and persecutory attitude toward its members, and engaging in un-Santa-like dialogue with members of the Order.

Vindictive and persecutory? Un-Santa-like dialogue? (Where have you gone, Joe Dimaggio?) Seriously. Page 26.

I may have to detox with a little Charlie Brown after this.

It’s a reminder that from his creation, Santa—invented as a sign of goodness, comfort and peace in a turbulent world—came from solid, sometimes combative working class stock. Not a bad combination.

Just watch out for that finger-aside thing.

Sunday, November 9, 2008

Smith, Slywotzky and Some Damn Beavers

Not far from where I’m sitting, just up the road apiece and across the state line, Jedediah Smith Sr. and wife Sally Strong farmed land and raised a family that would eventually number 12 children.

The fourth, born in 1799 after the Smiths had move from New Hampshire to New York, was Jedediah Jr. In 1821, Jed Jr. went to work for William H. Ashley’s fur trading company out of St. Louis. After a series of extraordinary adventures, Smith and partners acquired Ashley’s company and successfully took on the Hudson’s Bay Company monopoly in the fur trade. Today, Smith is remembered as one of the most successful explorers and entrepreneurs of the first half of the nineteenth century.

Also not far from where I’m sitting, in the lowlands along our driveway, a family of beaver are hiding out, waiting for sunset to repair their dam in a little culvert that flows under our driveway. These beaver don’t much bother me since our home sits on a rise above the lowlands. But, in a town where everyone has septic and wells, and where some of the wells reach aquifer less than fifty feet below the service, these beavers are bedeviling our neighbors.

It seems their magnificent dam is backing up water from nearby Cedar Pond, flooding acres and acres of well-tended backyard. It’s causing septic systems to overflow, and septic to flow into well water, and nothing that walks on two legs is very happy when that happens.

Finally, not far from where I’m sitting—in fact, on the bookshelf to my left--is a copy of Adrian Slywotzky’s The Art of Profitability, published in 2002. I had the opportunity to work with Slywotzky for a spell last century when a company for which he was consulting grew interested in partnering with our business. The Art of Profitability, which suggests that we’d all be a lot more profitable if we thought about profits on a regular, disciplined basis, is a delight to read and suggests a variety of ways to redefine business to make more money—a good tonic given our current economic straits.

Now, let me tell you how these things all tie together. And let me start with those dx!% beavers.

From about 1750, when they were hunted out of the Commonwealth, until 1928, when one was spotted in West Stockbridge, beavers had been absent from Massachusetts. Folks in Massachusetts were so excited by their reappearance that three more were imported from New York and released in nearby Lenox in 1932.   Fourteen years later, the Massachusetts Department of Fish and Game reported that there were 300 beavers in 45 colonies around the state.

As with every other instance when human beings have messed with the balance of nature, we got it wrong. The well-meaning people of Massachusetts failed to offset their good deed by providing the beaver population with a natural predator. Then, to make matters worse for homeowners, in 1996 the state passed a ballot referendum prohibiting or restricting the use of many types of commonly-used traps.

The result: the beaver population in the state grew from 24,000 in 1996 to 70,000 in 2001.

Now, if I were pitching you on my new “beaver-pelt” business, I would take that annual growth rate of 24% and project it right into 2009, telling you that from one lonely beaver in 1928, the state beaver population is now over 385,000.  And you can bet there are a slew of illegal immigrant beavers and more than a few expired H1-B Visa beavers to add to the organic growth of the population.

Despite the hundreds of thousands of beavers I now estimate reside in Massachusetts, we here in the neighborhood are only worried about the three or four which have set up housekeeping on the premises.

To solve the flooding problem, every morning one of my good neighbors comes by and takes down the allowed two inches of dam, letting the water flow back into Cedar Pond. Every evening the beavers repair their dam, insuring that the floodwater stays in the backyards of my neighbors. The theory is—and I have never seen this to be the case—we will eventually wear the beavers down and they will move away.

It all makes me pine for the 1820s and 1830s, which was the height of the beaver trade in America and across the Atlantic. Back then, one of my neighbors could have taken his gun, shot the beavers, walked to Newburyport or Salem or Boston and sold their pelts for a good price. The pelts would be sent on to Europe to be made into one of the stylish hats for which Europeans were all a-twitter.

And here is where Jedediah Smith comes in. Daniel Howe tells us the following about Smith, taken from Dale Morgan’s 1953 Jedediah Smith and the Opening of the West:
At the the age of twenty-two [Smith] retraced much of Lewis and Clark’s route up the Missouri. During his short life Smith proved himself a natural leader, an intrepid explorer, and a successful businessman. Taking his Bible and a few companions, this sober, religious young man laid out the route of the future Oregon Trail over South Pass in 1824 and explored the regions of the Great Salt Lake.. .Along the thousand of miles that he traveled without maps, he fought some Indians, traded with other, survived hunger, thirst, snowstorms and floods, and got mauled by a grizzly. He successfully challenged the Hudson’s Bay Company in the fur business, and with two partners was able to buy out his employer Ashley in 1826. A rich man when he returned to St. Louis in 1830, Smith had seen more of the Rocky Mountain West than anyone else in his time. . .

If you are not familiar with the Hudson’s Bay Company (HBC), it is the oldest commercial concern in North America, dating from 1670. It now operates retail stores, and is owned by a private equity firm (which seems weird to say), but in the first part of the nineteenth century it was the most powerful private organization in North America and actually ruled most of Canada.

The HBC, for parts of two centuries, was essentially its own sovereign country.

How do you attack a giant? One way is to change the profit model, and that’s what Smith and his partners did. Starting in 1825, the firm of William H. Ashley paid salaries to keep white trapper-traders in the wilderness year round, departing from the depot-based, pay-per-pelt practice of HBC.

I once visited the offices of a very large pharmaceutical customer and, as we were walking down the hall, my guide was saying, “That’s where the VP Marketing is, and that’s where the VP Production is, and that’s where the executive from 3M has his office.”

“3M,” I asked?

“Well,” said my guide, “we do so much business with them that it makes sense they should have an office permanently here to help organize our purchases.”

This was essentially the idea that Smith and his cohorts hit upon: Let’s pay to keep the trappers-traders in the wilderness, living alongside the natives, building up long-term relations and establishing strong interior distribution. It was the Early Republic equivalent of the Application Engineer.

That’s how you take on a giant, then; you change the way profits are made.

All of which leads me back again to Adrian Slywotzky’s The Art of Profitability. In it, Slywotzky suggests that you read only one chapter of the book (i.e.—one profit model) a week and really stew on the material. Imbedded in most chapters is other, recommended reading, like Innumeracy: Mathematical Illiteracy and its Consequences, Asimov on Astronomy, Einstein’s Dreams, Confessions of an Advertising Man, and Ezra Pound’s ABC of Reading. The entire story takes place as a conversation between a mentor and struggling mentee.

Chapters include Pyramid Profit (Mattel developed a barely-profitable $10 Barbie to block low cost knock-offs from establishing a connection to their customers), Multi-Component Profit (Coke makes a different profit per ounce in the supermarket, restaurant and vending machine), and Switchboard Profit (Michael Ovitz packaged talent, story, and critical mass in Hollywood to gain share and profits).

The chapter that struck me, however, was one called Customer Solution Profit. A company, Factset, generated high profits by identifying a potential customer and then sending a team of people to work onsite at the company, sometimes for months, and almost always for free—an extraordinarily costly proposition.

It would be like paying salaries to trappers to stay in the woods year-round.

If Factset won the account, however, they would have built such great relations with their customer, and such a tailored solution, that their profits soared, easily making up in the longer term for what they had invested in the first year. By then, their product and people were woven into the account, the expensive selling was done, and the account became a long-term, high-margin profit center.

There’s more where that came from, all courtesy of Slywotzky’s engaging storytelling and ability to see clear patterns in a variety of business models.

All of which, finally, leads me back to our beaver problem.

I’m sorry to say that Jedediah Smith died at the early age of 31, surprised by a Comanche hunting party. His life burned, in the parlance of Bladerunner, twice as bright but half as long.

I just looked up Adrian Slywotzky on Wikipedia and he appears to be very much alive and well, industrious as ever.

Given those two very different outcomes, and given that the rain is still falling hard, would you like to wager which future is most likely in store for our neighbors, the beaver family?