The year 1889 was a time of vigor and excitement in the American economy. Risk-takers with capital were building railroad lines, long and short, creating an intricate network of rails, siding and switches that was opening up more and more of the continent to travel and shipping. Canning factories were springing up alongside the railroads, giving farmers and food processors greater access to the national market for cash crops like grains, fruit and vegetables and thereby offering households an expanding selection of affordable groceries. The steel and coal industries were thriving because railroads needed steel, and train engines needed coal and also because railroad development meant that producers could ship steel, coal and other commodities to a broadening range of buyers in the towns and cities that had sprung up throughout the great North American continent. Even Alaska was not out of reach to adventurers attracted to that vast and remote region by the discovery of gold in the Klondike.
New York’s Wall Street reflected the excitement because that was the principal trading center for the shares in new joint-stock companies that were being formed to build railroads and factories. It was in that year that The Wall Street Journal was born in a barren basement room down some steps to the rear of a soda fountain at 15 Broad Street, just a few yards from where Broad intersected Wall and where the New York Stock Exchange now stands. The printed newspaper was born when Charles Dow, Edward Jones and Charles Bergstresser, who had been circulating handwritten financial and business news bulletins to traders and investors, acquired a small hand-operated printing press.
Thomas Woodlock, an Irish immigrant who joined the firm not long after its inception, later provided a colorful description of the three partners. The Woodlock sketches, recorded in a 1982 Journal history written by Lloyd Wendt, described Dow, the prime mover, as a tall, slightly stooped, black-bearded, dark-eyed Connecticut Yankee with a “grave air and the measured speech of a college professor.” His resume included reporting stints on the Springfield (Massachusetts) Republican and the Providence (Rhode Island) Journal. He had sought, but failed to find, a mining fortune in Leadville, Colorado, but had learned a lot about mining stocks in the process. He had then come to New York and a job with Wall Street’s Kiernan News Agency.
Not long afterward, in November 1882, he teamed up with two other Kiernan employees, Jones and Bergstresser, to start their own news agency, Dow Jones & Co. Bergstresser supplied much of the capital but somehow never attached his name to the partnership. It was he who would later supply the name for their newspaper.
The redheaded Jones was born in Worcester, Massachusetts, and first met Dow when they worked on the Providence Journal. He was, according to a later description by Woodlock, “tall and ruddy, swift in his motions, as high-strung as a race horse, tempestuous in manner and speech, with a mind quick as lightning and a nose for news.”
Bergstresser was a short and stocky “Pennsylvania Dutchman” with a black beard who wore thick glasses that enlarged his eyes and gave him a pugnacious look. Woodlock wrote that “he had a fine memory, a capacity for penetrating recesses where no other reporter could gain access.” He also took shorthand and, according to Woodlock, was never accused of misquoting anyone.
News agencies in those days created bulletins on flimsy sheets of paper interleaved with carbon paper, writing the news with a stylus on the top sheet and making as many as 24 copies at a time. Boy runners would distribute the flimsies to clients. The Dow Jones runners must have resembled Fagin’s boys in “Oliver Twist” as they dodged among the carriages and beer wagons and jostled men in top hats, except that they were engaged in an honest business, not picking pockets. The partnership thrived, and after seven years the three bought their old-fashioned printing press and started a more practical way of serving their growing list of clients, a printed newspaper, although meanwhile keeping their news bulletin service up and running.
Today, what was then a little four-page newspaper has become the largest-circulation newspaper in America, delivered both on newsprint and the World Wide Web to readers not only in the United States but throughout the planet. It is said to be one of the nation’s most influential publications, not only because it still digs hard for news, in the manner of Dow, Jones and Bergstresser, but because its editorial pages provide a daily diet of vigorous commentary.
Jones specialized in collecting news while sharing in the conviviality of stock traders, bankers and hangers-on in the barroom of the Windsor Hotel at Fifth Avenue and 46th Street, a place sometimes referred to as the “all-night Wall Street.” He also kept the dozen or so boy runners in line with a strict disciplinary code and the force of his personality. Bergstresser did his digging in the daytime, successfully mining the money houses on Wall and Broad streets for news.
An account of late 19th-century Wall Street reporting was given much later by Oliver Gingold, an Englishman who joined Dow Jones in 1900 and played a key role in stock market coverage for a further 60-plus years. Journal reporter Cynthia Crossen quoted him in an article about the Journal’s history on the occasion of the sale of Dow Jones & Co. to Rupert Murdoch’s News Corp. in 2007.
Said Gingold: “In those days, a financial journalist was a combination private detective, stenographer and gossip columnist. Gathering news was a bare-knuckle business. Many companies refused to issue annual reports even to their own stockholders. Reporters spent long hours waiting outside directors’ rooms or corporate offices for a chance at buttonholing an insider. Messengers shadowing the reporters ran the news back to the office where scribes made carbon copies—as many as 24 at a time—that were hand delivered to subscribers.
“What soon distinguished Dow Jones from its competitors was its revolutionary approach to financial journalism: Instead of collaborating with companies and investors to manipulate the financial markets—and taking a piece of the action—they would try to impartially distinguish fact from rumor. From the beginning, they forbade their employees from investing in companies they were covering (a rule sometimes observed in the breach). An early Wall Street Journal motto was succinct but audacious: ‘The truth in its proper use.’”
All three of the founders were talented, but it was Dow, quiet and studious, who was the philosophical and ethical pillar of the operation. He insisted that his team remain aloof from the constant offers of bribes from brokers and investors to reporters willing to promote their stocks. He kept a check on Eddie Jones, whose evenings at the Windsor sometimes brought him into contact with ambitious speculators.
And thus it was he who was most responsible for earning Dow Jones a reputation for probity, which served them well in a place and era where well-founded, honest reporting was of great value to subscribers who were in the business of betting large sums on the stock of this or that railroad or bank. Aside from the moral and ethical dimensions, Dow, a student of markets, would demonstrate that integrity had market value, a lesson that would not be lost on future editors of the Journal.
It was also Dow who ultimately began to offer opinions on subjects broader than the trading of stocks and bonds, venturing into questions of corporate management or public policy. It was he who early on started the Review & Outlook column, which still carries the institutional opinions, or editorials, of the Wall Street Journal.
Those editorials today, more than a century later, still in some sense reflect the personality of Charles Dow. For example, the Journal editorial writers sail under the pennant, “Free People, Free Markets,” which is very much in keeping with what we know of the philosophy of Charles Dow. They defend the sanctity of contracts, holding that, when legally and voluntarily made between private individuals, they should be upheld not only by the parties but by the law. Dow argued that markets could not exist without mutual trust, and that was true of the rambunctious Wall Street of the Gay Nineties just as it is today.
Yet another parallel with today was the founders’ belief in sound money. They argued strongly against the Sherman Silver Purchase Act of July 14, 1890, which required the U.S. Treasury to buy 4,500,000 ounces of silver a month. Since the Treasury issued newly printed paper dollars for the silver, this was simply a way of engaging in the politically tempting practice of inflating the currency, something the Journal has been wary of throughout its history because it has been a tempting way for politicians to repay public debts with cheaper dollars while at the same time falsely blaming the rising cost of living and erosion of public savings on producers and merchants.
The act was popular with silver miners, of course, but also the powerful farm lobby, because it enabled farmers to more easily pay off their land purchase debts. A downside, in addition to higher living costs, was its effects on the working of the then-existent gold standard, which had provided sufficient monetary soundness to facilitate rapid U.S. and European economic growth in years previous. Foreigners grew suspicious of the dollar and began to demand physical gold, which resulted in a gold outflow, sending U.S. supplies of physical gold down to a dangerous level.
The Journal at that time was just an upstart, but it had influence with Wall Street and New York banks. It helped win repeal of the silver act in January 1893. Journal opinion editors today would be overjoyed if they could achieve a monetary victory of that importance. Despite sharp criticism from the Journal, the modern Federal Reserve Board has persisted in its dubious faith in the economic efficacy of its artificial suppression of interest rates, thus encouraging excessive borrowing, particularly by the government, and costing savers and pension funds many billions of dollars in lost earnings.
When Dow expanded his oeuvre from market commentary to a broader range of editorial topics as the turn of the 19th century approached, one of the subjects that engaged him was the rising militancy and influence of organized labor. By one count, there were 37,000 strikes between 1881 and 1905, some of them violent. One of the most dramatic was the 1894 Pullman Strike, an attempt to shut down the railroads led by Socialist Eugene V. Debs. President Grover Cleveland was only able to end the strike by calling out the army to enforce a court order.
One of Dow’s most interesting editorials addressed the issues raised by the strike of anthracite miners in eastern Pennsylvania in May 1902. John Mitchell, leader of the United Mine Workers of America, had taken some 100,000 miners off the job to back his demands for union recognition, a shorter working day and more pay. The 163-day strike was a major issue because it threatened to reduce the winter fuel supply for a nation then wedded to coal for most of its energy, including home heating. As compared to “soft” or bituminous coal, anthracite “hard” coal has a high carbon content. It was a vital ingredient for high-quality carbon steel production. Many railroad locomotives of the era were designed to use it because it was relatively smokeless, and its high heat and slow burning gave trains a longer range before refueling.
In addition to the economic threat, there was a sociological element as well. Many of the miners were recent immigrants from middle Europe trying to gain an economic foothold in a new land. Some of these Poles, Hungarians and the like spoke very little English and were vulnerable to exploitation by the mining companies in the absence of union representation.
Since the steel, railroad and mining stocks were affected, a Wall Street editor might have been expected to take the side of management. But, partly because of industry leaders’ arrogance in the face of union demands, Dow took an evenhanded approach instead. He defended collective bargaining, writing that “a combination of labor is just as legal, just and moral as a combination of capital.”
However, he was opposed to “union shops” agreements that required union membership as a condition of employment, regarding them as infringements on the rights of workers. He also wrote eloquently cautioning labor unions that once they had signed a contract with management, they should adhere to it. Contracts freely arrived at were a moral obligation for both parties.
In his usual analytical style, Dow argued that the ability to enter into a contract was a mark of freedom. A slave couldn’t make a contract because he was not free to uphold its terms, being subject to the wishes of his master. Only a free man could enter into a contract; hence, private contracts were artifacts of freedom and thus sacrosanct, he wrote.
The strike was ultimately settled by the hyperactive Theodore Roosevelt by means of a federally backed Anthracite Coal Strike Commission. The miners got a 10% pay raise and a one-hour reduction, to eight hours, in the working day. It was said to be the first presidential intervention in a major strike, setting a precedent that, in some future cases where political partisanship was involved, would not win favor from Journal editorialists.
The Dow commentary shows that the youthful Wall Street newspaper was already broadening its participation in the national debate beyond the realm of stocks and markets. But it was with regard to markets that Dow would make a lasting name for himself. In those early days, he originated a means for taking the minute-to-minute temperature of the stocks listed on the New York Stock Exchange by inventing the Dow Jones averages. The first average, compiled in 1884 when Dow Jones was still only a news service, consisted of nine railroad and two industrial stocks, chosen because they were actively traded. Dow simply divided the closing prices of his chosen stocks each day by 11 to get an average.
Out of that primitive beginning, which Dow himself improved by adding more stocks, would grow the carefully managed market samples that comprise the averages of today. It’s interesting how closely the Dow readings have paralleled those of newer and broader samples, such as the S&P 500, suggesting that Dow’s original design, as modified to reflect stock splits and the emergence of important new industries, was fundamentally sound.
Since Dow was primarily a market analyst, there is not a sufficient record from those early days to offer an account of what he thought about a broad range of issues. He was no doubt less skeptical of federal regulation than the editors of today. A hint of that comes from the writing of Woodlock, who became editor of the Wall Street Journal on Dow’s death in 1902 (Jones had already departed to join a stock brokerage, and Bergstresser had become less active) and whose 50th-anniversary recollections provide some of the best records of those early days.
Woodlock suggests that Dow looked with favor on the Interstate Commerce Act of 1887, which was enacted under pressure of shippers to bring the rates and service terms of the railroads under federal regulatory control. If true, that would have been counter to free-market principles. A free marketer would have answered the complaints of the shippers that, even though they were captive to the railroads that served them, the combinations of shippers and railroads serving separate regions were in competition with each other in urban markets where the lines terminated and thus had an interest in keeping the costs of the shipped products competitive. Moreover, the railroads, built at great expense, had to charge rates sufficient to amortize their debts and meet operating costs. Dow would have known all this.
Woodlock’s later recollection may have been colored by his own attitude toward regulation. After leaving the Journal in 1905, he became a Wall Street railroad analyst. In 1926, Calvin Coolidge appointed him a commissioner of the Interstate Commerce Commission (ICC). He spent four years as a regulator before returning to the Journal as a columnist.
But even if it is correct that Dow favored the ICC, it should be remembered that federal regulation of commerce and industry was far more limited in the 1880s than today. The federal government was small and in good favor with much of the industrialized North, because Abraham Lincoln had recently won a war to preserve the union. There can be little doubt that the tycoons of the 19th century invited political interventions with their sometimes high-handed business practices.
The arguments for federal regulation were based on far different circumstances at the turn of the century than now. Western grain shippers in particular argued that the railroads were in a position to take unfair advantage because shippers had no alternative way to get their products to market. Motor vehicles and trunk roads were still in the future, so there were no trucks to compete with the railroads. The farmers wanted lower shipping costs, and it seems that in the case of the ICC, farmers had more muscle in Congress than the railroads.
Dow’s own writings, including his stand on free collective bargaining and his interest in measuring market trends, support the conclusion that he was very much in the “free people, free markets” camp. Even today’s editors don’t oppose all forms of market regulation, for example, Securities and Exchange Commission rules that require corporations to promptly inform the public of any decisions that materially affect the value of their securities. Dow Jones built a business, the Dow Jones Newswires, on providing corporations with a medium for doing just that, and every reporter and editor quickly learned the importance of getting information that might move the market onto the wire as quickly as possible.
A skeptic might say that it’s far-fetched to suggest that the founders of Dow Jones in their cellar print shop set the tone and standards of the modern Journal, with its printing presses and electronic network serving just about every populated area of the world. But it is not so implausible, really. Customs and mores are handed down from generation to generation, and if that is true in a social sense, why can’t it be true of a long-lived business organization, particularly one that puts its institutional opinions on public view every day? Americans still hark back to the writings of Founding Fathers like James Madison and Thomas Jefferson for political guidance, and the Constitution those founders so carefully designed still is the basis for decisions by America’s highest court.
Editorial writing bears a certain resemblance to jurisprudence. A well-run editorial page adheres to precedents, fundamental principles established by core editorials of the past. Journal editors have by and large adhered to the principle that when an editor decides to depart from a precedent, he must let his readers know that he is doing so and explain why. An editorial page that merely reflects the daily changing whims of the editor is not likely to acquire the confidence and loyalty of readers.
Charles Dow could see the importance of establishing a reputation for integrity. When that reputation for integrity was put to the test 60 years later in a tussle with General Motors, its largest advertiser, the Journal scored high, and that may have been the event that set it on the growth path that has allowed it to reach its present level of size and influence. More about that later.