Legacy of the Natural Ice Industry

Did you ever notice how you spend hours shopping online, only to pause it checkout because you wonder if you trust it enough to hit By now Agentic commmerce is testing that moment more than ever That's where PayPal comes in twenty five years of checkouts, four hundred million consumer accounts globally, and the benefit of fraud protection So no matter where a purchase starts, it ends with trust built for payments, Gth, and Aentic PayPal open Built for all business PayPaloppen. com It's Jacob Goldstein from Business History. In our new series, American Genius, we tell the stories of three great writers who changed the way business works in America Our first episode is about Benjamin Franklin Among many other things, was a best selling business right. takeake a listen He's writing this much later in his life. consonsciously creating this image of himself I do want to emphasize how unusual this model is at the time, this self made man myth because you don't want to be self made. It's low class to be self made. You know, this idea that we have today is the opposite, right? And it comes from Franklin. Today. There is the derisive term neepob baiting. Well, exactly right. And these days, if you are a billionaire, you had better have a Benjamin Franklin story about starting in a garage, coming up with the idea from nothing. And here is Benjamin Franklin inventing it right before our eyes been brought to you by Odu T listen to more of our American Gius series, listen to business history New episodes release every Wednesday on the IHart Radio app or wherever you get your podcast. This is Malcolm Glael from Medal of Honor, Stories of Courage. This episode is brought to you by Navy Federal Credit Union At Navy Federal, they want you to know that if you need a positive sign towards achieving your goal of home ownership, this is it Because even though today's housing market can seem discouraging The homeome buuyer's choice loan offers members down payment options as low as zero percent no required private mortgage insurance Look for your sign today Navy Federal Credit Union Navy Federal is insured by NCUA equal housing lender. Terms and conditions apply loans subject to approval and eligibility requirements. Learn more at navyfederal. org slash zero down You caught it I want to talk to you about ice as in frozen water Yes, I know what ice is. In the year eighteen hundred, in the city of Boston. they have lots of ice in Boston. have lots of ice in in the winter. And they have figured out by this point that you can cut ice out of frozen lakes in the winter stored in spepecially built ice houses and get it out in the summer to enjoy a cold drink. were ice cream. they actually had ice cream. loveove it. And so you could sit there eating your ice cream On an August day and staring out at Boston Harbor And you would see ships heading out For the world New Orleans Havana, Calcutta.. And you might think, oh, I bet those people in. Havana and New Orleans. Chill for some ice right about now because they're so hot. I bet they'd pay out the nose for it. And then you think, oh no That would never work because ice melts. Iice melts. You can't get it there. Or can you? What? I'm Jacob Woldldstein. I'm Robert Smith, and this is B show about the history Bus Today on the show There was, in fact A man from Boston sounds like the beginning of a limerick, but it's not who set out to see if he could build business, an industry really By shipping ice halfway around the world And this story of that effort is about What I will argue is the most underrated idea in economics And this industry was started by a guy who got thrown in jail who? annoyed Henry David Thoreau, easasy man to annoy, reonounced Thoreau and who everybody thought was a joke I don't even know his name yet. His name was Frederick Tutor He was born in seventeen eighty three to a pretty rich family. His dad had been George Washington's judge advocate general in the Revolutionary War called him the judge The way people who are ambassadors always get called ammbassadors of their lives And they had a house in Boston and a country house O a farm outside of town. And Frederick was supposed to go off to Harvard like his dad, of course, but he thought school was boring. So when he was thirteen years old, he dropped out and hung out on the farm hunting and fishing and eating ice cream in the summer, living the dream because the tudors had this ice house on their farm. and when the pond on the farm froze in the winter, workers would cut blocks of ice out and put it in this house. and the house was probably built a little bit underground for insulation and they would put like or hay or something on the ice to keep it cold. They had like drainage out of the ice houses so that water wouldn't puddle up And this is really Th one, step number one, he knows about ice and ice cream. You forgot step number zero, which is If you're going to try a crazy business, have a rich dad. Yes An excellent excellent to this day. If you want to be an entrepreneur taking taking a flyer? Yes. have some money to fall back. H some money. Fair enough. So whatever step we're on now, step two, step three, however you're counting it, the next step came When he was seventeen years old in the spring of eighteen oh one, One of his brothers, his older brother, who was nineteen, got sick And they decided to send him to Havana to recuperate didn't help them in part because it was so hot in Huia. It was so unpleasantly hot. But in fact Fred's brother died before they got back to Boston. You know it was tragic. Frederick was devastated But he has now experienced in a visceral way ust how hot it is in the tropics in summer. And the next thing kind of the last piece of essential context for him Dad gets him this what we call an internship working with some merchants in Boston And Boston, of course, a big trading town at this time You know, the harbor iss full of ships coming and going from all over the world rcially, Boston in a kind of local way has what we call a trade deficit at this time. Stuff is coming in from all over the world, you know, spices and tea and whatever, sugar. But not so much stuff is going out. someome stuff, you know, manufactured goods, some stuff is going out, but a lot more is coming in And so because of this imbalance, a lot of the ships are heading out largely empty Their holds are not full of stuff. Which happens to this day, there are places who have to send back empty ships to China because they import more than the exp. Yes, Yes. and in fact, they had dredged Boston Harbor to pull up rocks to put in the ships as ballasts so they wouldn't ride too high in the water. So he's sitting there eating ice cream, He's got his ice farm. He's thinking about how hot it is and he sees empty ships. Yeah, he sees them, you know, paying essentially to get rocks to put in the ships. And so now It comes together for him. And conveniently for our story, we know this because in the summer of eighteen oh five, he's in his early twenties, he starts a diary and he draws a picture of an ice house on the cover of this diary, and he writes the words Ice house diary And he makes the first entry In the diary, camera zooms in, young man with a quill in his diary. And his other hand and dripping ice cream cone?h? Okay. Boston, august first, eighteen oh five, have this day determined to get together what property we have and embark in the undertaking of carrying ice to the West Indies the ensuing winter I feel like he's already writing to future generations. He imagines himself is a magnet. it's like this is how it started I like the idea that whatever he's doing throughout this story, I'm gonna imagine him eating ice cream. He loves it. I don't actually know if he loves ice cream Everyone loves ice cream. I love ice cream. I'll mention here, by the way, that the quotes from the diary in the show come from a book about Tutor called The Frozen Water Trade by Gavin Witman. Great book. And you know, when you think about this entry, like It seems like Fredrick deciding to get into the international ice business But it's bigger than that because there is no international ice business, right? L he is making up this idea for a thing that doesn't exist But it is clear when you look at it Pball in hot places had always really wanted to be cool You know, it's not like, oh, now we have air conditioning and we're like weak modern people. No, peopleeople always hated it when it was super hot. They always tried to cool off if they could. I mean, it's a biological imperative. We sweat because our body is ninety eight point six degrees and does not like to be hotter than that. It's caused distress as long as there's been temperatation And there is evidence of this, right? People in the Andes would bring snow and ice down from the mountaintops to Lima on the coast. and the ancient Romans bring snow down from the mountains and pack it into these straw lined pits, you know to store it. Yeah, you've got the always the Iper, you know, being fanned by those giant palm fronts. Yes, the giant palm front, a classic sign that coolness is luxury. And my favorite actually that I learned about working on this show I don't entirely understand it, but they did it in India. down like not to freezing, but like forty degrees or something. they would Dig a hole in the ground, line it with straw, and then take these like shallow, porous earthenware dishes and in the evening they would pour I guess boiling water into them And then somehow, I don't know what, evaporative cooling, something something in the morning, there would be like a little patina of ice on it, a little you know rind of ice. and they would collect a little bit of ice out of all these dishes and mash it all together. like That is ice the hard way. They really wanted ice. they dreamed of a land where entire lakes became ice So the point is they really wanted ice and Frederick knows this. he has seen it And he decides he's going to be the one to solve this timeless problem sets out to raise the money to do it. You know, I don't know exactly what his elevator pitch was, but I think it's basically I'm going to put ice on ships and then the ships are going to sail for like a month or a couple months, something something dot dot dot. profit And thans for the check dad. Thanks for the check dad. So the judge, his dad was out. And in fact, the response he got was described by Frederick's brother in law. who later wound up working for him. So here, re read from that letter The idea was considered so utterly absurd by the sober minded merchants as to be the vagy of a disordered brain, and few men would have been willing to stand the scoffs and sneers from those whose assistance it was necessary to obtain Merchants were not willing to charter their vessels to carry ice The offices declined to ensure, and sailors were afraid to trust themselves with such a cargo whichich is what? because it because it's gonna to melt because it's not melt. The one thing know about ice is like you're hiring me to take this ice around the world to a hot place There won't be any left and everyone's going to blame me the sailor. And and The point of a ship is to keep the water out. Yes, rightight? you know, don't put the water in, you keep it out Not only are people not investing, he can't even get people to take his money, right? He's saying like, inssurers wouldn't insure it because they're like, no, you're just going to flood the ship. We're not going to insure this So one of the things that becomes clear about Fredrick, you know, who is this guy? Who is the protagonist of this story He is absurdly persistent. He seems truly not to care that everybody thinks his idea is just a bad idea. And at one point he actually writes on the cover of his diary of the Ice House Diary this sort of motto Hugh gives back at the first repulse, and without striking the second blow, despairs of success has never been is not and never will be a hero in love, war, or business He's basically giving himself a pep talk in this kind of absurd elevated language. Never give up is what he's saying. He's saying never give up. Today if he were, you know, an entrepreneur, Instead of a diary, he would be like a thinkfluencer with his own TikTok channel buildilding in public. Yeah, definitely a TEed Talk hero in love war in business. So he is not despairing. He is he is a man of action And he sends his brother in law and his brother died, different brother to Martinique to the French colony in the Caribbean And amazingly, he tells them the colonial governor there to give us a monopoly on the ice trade. Here's a business that everybody thinks is terrible, but my idea is so right that everybody is going to want in and we are going want a monopoly. I love it. I don't think they're other competitors, but not yet. Yeah. colonial governors like, sure, have a monopoly. Yeah I think they have to bribe him because why would he give it for free? But yes, getting a monopoly from the government is a thing at this point. We talked about it in the Match King show So it it's a thing businesses do. Now while his brother and brother in law are down there, whatever bribing the colonial governor for the Mopoly. Fredrick is getting ready to send the merch, the ice. and Nobody will let him pay for space on their ship because the water And so He mortgages a piece of family land. and buys a ship Brig I believe is a who masted square rigg ship, but s really half the people listening know exactly what a brink is Eail us at Bus History at Pushkin. f U the brig is called the Favorite. And on february tenth, eighteen oh six He sails on his ship full of ice for Martiny And it's news. It gets written up in the Boston Gazette. I read to the news reporters like Oh, there's a ship full of ice. I gotta see this. And this is what they wrote in the newspaper No joke Siously they wrote, No joke, a vessel with a cargo of eighty tons of ice has cleared out from this port for Martin Nike. We hope this will not prove to be a slippery speculation Congratulations, Boston, because that' so clever. To this day, if a ship full of ice left the harbor, they would be making the slippery joke. For sure, for sure. There would be a melt joke in there. There would be liquidity. Oh I'm not even making that liquidity jokes So the ship gets to Martinique about three weeks later We don't know how much of the ice has melted, but a lot of it is still there. whichich is amazing, right? And just to answer like the most obvious question, how does that work? Well Hey, the blocks are pretty big. Like I don't know exactly how big, but something like a foot by two feet by two feet. So pretty big and they're all put together, right? So they're all kind of insulating each other. And then he works on insulation all through his career, tries different things, you know, peat and sawdust and whatever. So he's figured out enough at this point that There is ice there Now You know, if you've lived in Martinique all your life You've literally never seen ice which is amazing, right? It says it's like a moon rock or something, but weirder. There a moon rock just looks like a rock. And so Frederick gets there and he's like Get your ice. ice getet your ice here.very wass like, what should I use this? What we do it for? Yeah? Nobody got our refrigerator. Yeah. And it actually reminded me this part of hundredundred years of solitude, you know, that Gabrielle Garcia Marquez Yeah, You know the famous first line. Absolutely incredible first line. Do You have a memorized? I do, but I also wrote it down. Okay Many years later, as he faced the firing squad Colonel Aliano Windia was to remember that distant afternoon when his father took him to discover ice. So without the firing squad, that's what's happening here. Yeah, right? Like some people are buying ice just to be amazed, just to be like Hey, son Hey, daughter, hey, look. lookook at this. It's touch it. It's solid, but it's so cold. It's water But colder So yeah, they don't really know what to do with it. It's kind of a novelty. Fredrick does take like sixty pounds of ice to a guy who runs some kind of little amusement park or something and shows him how to make ice cream. And as you mentioned before Everybody loves ice cream. Picture Frederick again, eating ice cream, shaking hands with the guy But there was problem that he's up against. and the problem is Physics, there's nowhere to store the ice So It's melting. It's just sitting there melting. He's selling what he can, but it's melting. And a few weeks later He sails back to Boston. does get paid to carry sugar back from Martinike to Boston And in all he gross is about two thousand dollars from the trip, but that's gross That's just the money that has come in. You know, it does strike me that this is one of the first times we're talking about logistics with a cargo that really has a clock ticking on it, right? I mean, all of World Trade was design being like, well, this is going to take months. Yeah. So let's let's put things in that can last for months. Yeah. And so he's facing what will become a bigger and bigger problem in modernity, which is how do we get things to someone fast enough that it stays good. Yeah, in a weird way, he's inventing the cold chain, right? Today we talk about the cold chain of like whatever, milk or a vaccine or something has to stay cold the whole time. Ice itself, which is Yeah Yeah ye. It is a profound logistical problem that he is up against. So so as I said, he grows something like two thousand dollars But that was not nearly enough to cover his costs, even if you don't count the cost of the ship. And so essentially what happened is what his dad, the judge and everybody else it said would happen. The ice melted and he lost a lot of money And what is Fredrick or Ginds side entrepreneur do. Flames his employees. Blames his brother, his and his brother in law from his diary They never entered into the undertaking with the ardor, which was necessary to ensure success in the outset of the business. They were easily discouraged and did not announce the thing with that confidence that defies ridicule and opposition, ensures friends, and leads in every project more than anything to success. I didn't believe. They didn't believe in dream. want it enough. They didn't want it enough. Frederick Tutor's ice has melted But his resolve has not. In a minute Things are about to get worse now. 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Let's do it He sends his brother to England to get monopolies on selling ice in the British colonies in the Caribbean, you know, Jamaica see the Barbados The idea that you would need a monopoly on something as ridiculous as selling ice makes the British think the brother is a spy a spy with a terrible cover story. It's like, come on, make up something better. Meanwhile, Tutor himself goes to Cuba much bigger market than Martinie and builds a nice house So now he can, you know keep his inventory for longer, start selling ice in Havana U and it sort of works, but he's still losing money, still underwater, if I may. The world is just not cooperating with his entrepreneurial dreams. In eighteen oh seven President Thomas Jefferson signed the Embargo Act. which I had forgotten about. Yeah. Amazingly. It bans the U. S from engaging in foreign trade in order to punish Britain and France for messing with U S. shipping during the Napoleonic Wars. Wh would ever international trade in order to punish their enemies Or their friends. Yeah or themselves. Imagine In particular, this punishes New England Boston, which you know relies much more heavily on trade than Thomas Jefferson's Virginia, right? Which might have been kind of the point might have crossed his mind. And in really particular, it hurts Frederick Tutor, whose entire business at this point is entirely dependent on foreign trade. So Tutor is falling deeper and deeper into debt And in eighteen oh nine, he is arrested because of his debts. And as you know at this time, you could get thrown in jail for debt Yes He manages to scrape together enough money to stand of jail But then a few years later he gets arrested again for debt. And this time he is thrown in jail. and I guess they let him bring his diary to jail because he wrote about it Yeah, Debtors's Prisons actually did have often desks and writing materials so you could Try and pay off your debts wr your family to ask for money or whatever. Yeah. yeah, you would write to like try and sell your property try and cover your debts. from the diary On this memorable day in my little annals, I am twenty eight years, six months and five days old. This is scratching it out markarks. It is a climax which I did hope to have escaped as my affairs are looking well at last after a fearful struggle with adverse circumstances for seven years P phrase I want to note here? Yes. My affairs are looking well at last Men is in jail Poret, he's been at this for seven years and he thinks it's just turning around for me And Aain I think this is a very entrepreneurial trait, right? Like keepe doing this, to keep failing for this long. You always have to believe Oh I got it now. Oh this time, this time I really got it. I get at any day in those seven years He could have written in his s. This is the moment. it's about to turn All upside from here So he scrapes together enough money to get out of jail And he keeps going, keeps trying And then comes eighteen twelve. You know what happens in eighteen twelve? There's a war named after it. International trade basically gets shut down again He gets jailed for debt again. Gs out, keeps going I think it's worth pausing here talk about this Trade, right? this persistence, this grit becausecause it's seems admirable. It is admirable on some level It's not always admirable to keep doing a thing that's not working. You know, There are thousands of entrepreneurs from history, millions maybe, who are doing a thing and everybody's like, That's a terrible idea. And they were like, No, it's a great idea. I believe in it, and I'm going to persist. And most of them are terrible ideas. A terrible ideas. That's why everybody' say it's a terrible idea. you know, we don't tell those stories because Well It's a boring story. It's a terrible idea And it continues to be a terrible idea at the end. And we also understand ce now, but looking back Everyone thinks he's a joke. Yeah. And he's proving it every day being thrown back in. And so I just want to and this is like a professional risk we have telling these kinds of stories, right? Like it's a survivorship bias kind of thing where we'll tell the stories where the terrible idea turned out to be great. But It's not obvious to me that a lesson to take from this is always believing in your dreams. Sometimes your dreams are bad ideas. Yeah, we're not doing a show about the guy who decided he was going to put fresh air in boxes from the mountains and take them to polluted cities so that people would enjoy fresh air. I'm interested. Okay. What have gven my email U so Whatever the lesson is or is not Frederick Tutor doesn't pivot And I should say, and this maybe is a little bit more of a lesson, he is a meticulous businessman His account books are stored at the I think the business school library at Harvard. And there was actually this article in nineteen eighty four in the Counting Historiian's journal. What a great journal. Why did you not tell me about this journal? you've been keeping againing Historians's journal. So in this article, they studied his books, his ledgers And they said he employed sophisticated accounting techniques Analyze and control transportation costs And the cost of product shrinkage, which is usually a euphemism for people stealing Y product A shrinkage is like if it gets stolen, if it breaks, if it rots, that's all shrinkage. This is actual shrinkage. Yeah, the ice is getting smaller. It's literal shrinkage. And in fact, all through this time, when he's in debt and he's in and out of jail and shut down by wars Frederick Tutor is trying to reduce shrinkage. She's trying to figure out how to the ice to melt more slowly. And crucially, he's trying to figure out how to quickly build an ice house in some tropical foreign port so that he can store his merchandise. too much shrinkage He gets his chance to really test all this out When the War of eighteen twelve ends In eighteen fifteen, by the way, didn't know that. Should have called it the War of eighteen twelve, eighteen fifteen. Three years war. the three years war. Worageing Tal is actually a good N, you know when it was for one thing. So he's still in debt, eighteen fifteen, running from the law, step ahead of the sheriff. He gets on a ship bound for Havana saailing with one hundred and fifty nine cedar posts and a crew of carpenters who are going help him build an ice house in Avana. The ice is coming on a later ship They get there, they build the ice house. It's like a cube of twenty five feet on a side And then on the inside, they build like a little inner shell, right? They're going to make it sort of like a giant thermos in a way and they put like sawdust and peat for insulation between the inner and outer wall. And then Up on the top on the inside, there's like the floor where you can hang out and whatever or do business. and they put a trap door on the floor. So you lower the ice down beneath the floor and raise it up out of it. It's a nice image. And now the ice gets there and he's like frantically caring for it, measuring the runoff to you know, assess how fast it's melting, adjusting the insulation U pitching the ice, you know, going to all the bartenders in town and giving a like first on'es free kind of thing, you know, free subscription. Because even in Havana, they wanted refrigerated drinks You bet. It been no I've been there. It's hot I pictured they had a Cuba Libre, which is all sticky and warm and terrible. They have a glass of warm rum and they're like, o if only I had ome ice and somebody would invent Cca Cola. this would be amazing They had a le, I probably So it it kindind of works. kind of works at this point. It's like a proof of principle works. He's able to store the ice for months. They do like it in Havana He's at this point now where he's it's it's, you know, not entirely profitable. It's sort of working. But he he's got the model. And so he's building ice houses now in other places in Martinique, original spot in Stain. Thomas And also in the American South in Savannah and Charleston. And at the end of eighteen twenty He sends another brother, his younger brother, to set up an ice business in New Orleans Aing New or if anyone loves a great Cold cocktail. It's New Orleans. It's New Orleans. They're about to love a great cold cocktail. So he figures if they can sell ten dollars a day worth of ice in New Orleans. that that'll be a good business. And at this point Even our guy, even our, you know, fight on persistent grind entrepreneur getting nervous about this. O day his entire diary entry is in all caps and it's one word Anxiety M day. What is he write Anxiety. Anxiety. nextext day, anxiety. The most relatable part of the diary for me This is often Jacob's Google Dcs and he writes the shows. Anxiety. Anxiety And then I don't despair though. I don't despair. I keep making shows. and then in July of eighteen twenty one After a decade of failures, The breakthrough finally comes Fredrick gets a letter from his brother inew Orleans And remember, they'd hopope for ten dollars a day in sales brrother says they are now selling forty dollars every day in ice. New Orleans is going bananas I just the parade is going down. The jazz hasn't been invented yet, but they're playing. in line. they're all drinking hurricanes in one of those weird long tall glasses. cool It's a pure enachritus and time is running forward and backwards. The bachelorette parties are so happy at this point The Tutor is thirty seven years old. He spent his entire adult life trying to sell ice And now Finally, He's doing it. It's happening. It's a real business. He pays off his debts. He buys some land on this little island next to Boston And now Interestingly, he has a new problem. It's a good problem Much better than, you know getting thrown in jail for deaths, but it is still a problem Demand is outstripping supply He doesn't have enough ice And this one And you're trying to be the ice King and you're like I mean, he wasn't prepared for it after all these years. It is. so you know, I've interviewed lots of the startup founders basically, and they talk about this moment. I remember the American giant guy in particularly, you know, the sweatshirt American made sweatshirts. he talked about having this moment where there was this article that just made his business take off. And it's not great, right? Like he hated it. meant he couldn't give people this thing that he wanted to give them because He's not trying to sell ice as a luxury product. Yeah. He wants to sell commommodity ice around the world. And he's a logistics man and logistics is really hard to pull off. Yeah. And so you can't just turn one ice lever and double your supply. Yeah. And I mean, when you're saying he doesn't want it to be a luxury product, you mean he can't just jack up the price, right? Because the kind of mechanical econ one on one thing is like, oh, people are buying more than you have, just jack up the price. You know In general, people don't want to do that becausecause business is a many time game You want loyal customers. You want them to love you. You don't want them to remember you as the guy who tried to gouge them when you could So often entrepreneurs don't want to just jack up the price. What they want to do is increase supply by increasing efficiency You know Getting the ice out of the frozen lakes is actually quite inefficient at this point. It's all guys out there with saws, basically sawing blocks out of a frozen lake and it's hard to get it up out of the lake. It's hard to saw it. It's all hard guy who's going solve this problem is actually a guy who works for Tutor guy named Nathaniel Wyath who who had grown up on this littleittle lake outside of Boston called Fresh poond. His family had a hotel there, they cut their own ice And Wyife becomes a supplier to Tutor And around eighteen twenty five, he has this ideea where he builds this thing with metetal blades that you can attach to a horse. So like think of a plough, right? It's like a plough, but for the ice. And you push the horse out on the ice? I love it. You actuallyually you put spikes on the hororsse' Yeah. And so when the ice is thick enough, important. the horse pulls the plow across the ice and it cuts it and logical. He actually figures out you have it go at like ninety degree angles. You have it go one way and they have it go at a ninety degree angle. and you do this all across the pond and you're essentially turning the pond into a giant Ice cube tray. If you're old enough Let rememember ice cube trays. Okay. Welcome to businessusiness History He has this other innovation that I love, which is After you've cut it, it's still hard to get the ice up out of the lake. And he figures out some kind of a system with like pullies and horses pulling on ropes where the pulleys are actually lifting these ice blocks out of the frozen pond so they can be put into the ice house. Like industrial ice. It's industrial ice. That is exactly what it is frozen by nature. So now, put that on the label,es. Our hero has what he needs. He has demand, he has supply Ice is going to the moon. W, or at least it's going to India, long way away after the braak Did you ever notice how you spend hours shopping online? only to pause right before you hit By now. Tiny hesitation the one where you wonder if it's trustworthy can make or break the sale. Now, with AI changing the way we discover and compare things, that split second trust question matters more than ever That's where PayPal comes in. For more than twenty five years, PayPal has been a leader in online payments. And now they're at the forefront of agentic commerce, making it work for businesses, letting them maintain control of their brand and their customer relationships. So even as the way we shop changes, the moment that matters most still feels familiar and deeply dependable. built for payments, Gth and agentic PayPal open buuilt for all business Visit payPal openpen. com to get started It's Jacob Goldstein from Business History. In our new series, American Genius, we tell the stories of three great writers who changed the way business works in America Our first episode is about Benjamin Franklin. Among many other things, was a best selling business rightite takeake a listen He's writing this much later in his life consonsciously creating this image of himself I do want to emphasize how unusual this model is at the time, this self made man myth because you don't want to be self made. It's low class to be self made. You know, this idea that we have today is the opposite, right? And it comes from Franklin. Today, there is the derisive term neepo baiting. Well, exactly right. And these days, if you are a billionaire, you had better have a Benjamin Franklin story about starting in a garage, coming up with the idea from nothing. 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Visit beachbum dot com to find a location near you eighteen thirty three Boston merchant comes to Frederick Tutor with an idea Boston has this booming trade with India All this stuff is coming from India to Boston But not that much stuff is going from Boston to India There is a trade deficit basically And so what that means, and I mentioned this earlier in the show is you have ships coming in from India with whatever cotton spices And then going back largely empty Boners remember putting rocks in as ballast in those outgoing ships. So this merchant is like Tutor, what if instead of rocks We had Frozen ice the only kind, the best kind of guys U What if we put ice in there and send it to India? And Frederick Tudor was like Where have you been all my life? Yes, yes. a thousand times, yes. And so they make the deal Tutor is gonna to send one hundred and eighty tons of ice. on a single ship This is farther than he's ever sent a ship full of ice going to be very hot. It's going down across equator around the tip of Africa. And so, you know, he starts going down to the ship multiple times a day builds this what he calls a sheathing of boards. So it sort of, again, like kind of trying to turn the hold of the ship into a thermos, builds this sheathing of boards around the ice insulates it with Hey and u Can which apparently is ground up bark on all sides. He says the it's like styrofoam, right? Because it would be light and it would have lots of little levels of air in it. I guess so. yeah He calls the insallation an unbroken stratum on top ends, sides and bottom And he hopes that something like two thirds of the ice will make it. knows a lot's going to make it. The ship sails out of Boston Harbor on may twelfth, eighteen thirty three Bound for Calcutta Today we call Ckata And Tudor at this point is too old and frankly too rich to go by himself. send somebody in his place and his eyes sales off out of Boston Harbor Picture him standing there eating an ice cream cone and watching it until it sails over the horizon And you know across the Atlantic, down around the tip of Africa, up through the Indian Ocean sixteen thousand miles or so, four months at sea. It still it still amazes me that in the eighteen hundreds you could do that. It shouldnt work. It shouldn't work It's ninety degrees where the ship gets to India and the ice f course is melting fast And Calcutta is like seventy miles up this river from the sea As the ship with the ice is coming up river People in Calcutta start hearing this rumor basically that a ship from Boston full of iceices coming up the river And there's an article about it in this newspaper called The Calcutta Courier, which is the paper sort of of the British colonialists in Calcutta The Yankees are so inventive and so fond of a joke at the expense of the old country that we had some misgivings about the reality of Brother Jonathan's frozen manifest and suspected him to be coolly inditing a hoax So easy to laugh at. Slippery, slippery. They can't resist. They can't resist it I feel like I would have covered this back at the time like it's ice on a boat. It's so crazy. It's a perfect story for you They think it's a joke. But they find out it's real You know, it's still coming up the river. They find out, yes, it's real. And once they find out it's real, they're like, get that ice here right now. The newspapers actually start a campaign to send a steamship to tow this sailing ship up the river so it gets there faster to waive the customs duties when it arrives so they can unload it before it melts, the clock is ticking. The clock is ticking. The ice is melting minute by minute And in fact, it all happens. They do tow the ship up. they do waive the customs duties And the ship arrives, and there is ice left. We don't know how much left, but there is ice. The newspaper Calcatta Kara writes the names of those who planned and have successfully carried through the adventure at their own cost deserve to be handed down to posterity with the names of other benefactors of mankind, the importer of the potato into Europe, the disseminator of useful plants in regions where they were unknown and the authors of every species of Discovery They're saying this is one of the great human achievements. Iice to India. Yes, yes. In fact, the colonial governor in Calcuttaiv gives Tutors's guys some kind of like specially engraved silver cu like a trophy kind of for this incredible breakthrough. And They become in Calcutta. dependent on ice. When a shipment is late or doesn't arrive, it gets rationed. People will get a note from their doctor. like if they have a fever, which you know, people got a lot, they would use ice for the fever So it becomes this necessary part of life there And Shooter gets a monopoly on the Calcutta ice trade. He's still got that same move and it works for him. Over the next few decades You know, he keeps selling ice to Calcutta and he makes Hundreds of thousands of dollars in profit. which of course would be, you know, millions in today's money And so Tutor has done it He has turned this thing that sounds like a joke into a great business and seems to have a nice life. He gets married at fifty, has kids and is like a H happppy rich guy in Boston as far as we can tell. And so There is still kind of this question which is How does it make sense? How does this work that you can send I From Boston to India and it takes four months and it's still a profitable business Yeah. in other words, what did he see that no one else saw? Yeah, yeah. And and, you know, at the beginning of the show, I said, that the story of the ice trade is at some level A story about the most underrated idea in economics. So here it is. The idea is opportunity costs. love opportunity come. giveive us give us the definition If you are doing something, it's opportunity cost is basically the highest value option that you do not choose. It's the second best thing. You mentioned when I brought this up the other day, you mentioned business school. You said they would tell you this on the first day of business school. Yeah, becausecause if you think about it, there is the cost to go to business school, which is high in intuition But really the opportunity cost is even more significant, which is if you are sitting in business school, you are not working at Goldman Sachs or at JP Morgan Chase, where you might be making two hundred, three hundred thousand dollars a year. That is your opportunity cost for the education that you're getting. Think about opportunity cost in this story. There's There's the most obvious one. those Sailing out empty like The opportunity cost for that space is zero essentially. right? A merchant is going to, you know, sell space to the highest bidder If nobody's bidding, you can get that space real cheap. But it's not just the ship itself There's the ice The ice that is just sitting there on a pond in Massachusetts in January. Yeah. there is no value to that ice other than ice skating. Y. Nobody's going to pay for it. They were pay u to skate on ponds in eighteen thirty There's a third kind of opportunity cost play here as well. And this one is a little more subtle, which is Labor The workers cutting the ice. Tutor mostly hired farmwers They're doing this work in January in February What's the opportunity cost of the time of a farm worker in January? There's nothing for them to do while there's snow in on the ground and ice on the on the lake. Huddling by the fire to keep warm until spring is not a job. They're not giving up a lot of money to go out and get paid to cut ice And you know