Financial History 25th Anniversary Special Edition (104, Fall 2012) | Page 17
EDUCATORS’ PERSPECTIVE
cargo by insulating its hold with shredded
bark and hay. The Tuscany left Boston on
May 12, 1833 loaded with 180 tons of ice
and arrived in Calcutta on September 10
with about 100 tons of ice still intact. The
overheated British residents of Calcutta
joyfully celebrated the miraculous arrival
of ice, and sales were brisk.4 Money was
quickly raised to build an ice house, and
plans were made to establish regular shipments of ice to India.
Tudor received word of the ship’s safe
arrival in January of 1834. The partners
made a profit of $3,300 on the venture,
but by the end of the year Tudor’s losses
from coffee speculation had reached an
astounding $210,000. However, because
of the success of the India venture, his
creditors agreed to let him continue in the
ice business unhindered and allowed him
to repay them over time from the profits.
It took Tudor 14 years to pay off his creditors, but by then he was a wealthy man.
Some of his wealth came from ice trading
profits5, but the lion’s share came from
his investments over the years in seaport
properties around the world. By 1847,
Tudor’s real estate investments alone were
valued at over $1 million.
The joint-venture with Austin and Rogers did not survive beyond the voyage
of the Tuscany. Rogers stayed in India
and became a dentist. Austin and Tudor
became competitors, but Tudor’s long
years of experience allowed him to dominate the market. The Civil War brought
sales of northern ice in the South to an
end, but trade elsewhere in the world
continued unabated. Tudor died in 1864
at the age of 80. Voyages to India ended in
Ice harvesting, circa early 1900s.
1880 when the technology for producing
artificial ice finally reached a point where
it was able to produce enough ice to meet
demand.
As I finished my story, I asked my
harried MBA student if we could learn
anything from Frederic Tudor. “Yes,” he
replied, and as our discussion continued,
we were able to draw a number of useful
lessons from the experiences of Tudor.
First, Tudor was passionate about his
idea to sell ice in the tropics. It’s not
enough to have a good idea; you have to
believe in it enough to take action in the
face of overwhelming opposition. Everyone in Boston thought Tudor was off his
rocker when he first proposed selling ice
in the Caribbean. No one was willing to
back him financially, but he went ahead
and financed the venture by mortgaging
some of his own investment properties.
Tudor’s brother-in-law wrote, “The
idea was considered so utterly absurd by
the sober minded merchants as to be the
vagary 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, to aid him in the
enterprise.”
Second, Tudor had to exercise a great
deal of patience. When describing the
cash flows of long-term projects, modern finance textbooks typically assume an
initial year of cash outflow immediately
followed by cash inflows for the remainder
of the project’s life. While such a pattern
of cash flows is desirable, few new businesses ever experience them. Tudor didn’t
see positive cash flows from his business
for several years as he struggled against
embargos, wars and various government
bureaucracies. Only the patient can survive in such a world.
Finally, Tudor persevered. He didn’t give
up at the first sign of failure, but looked for
new and creative ways to operate his business. Although passion, patience and perseverance receive scant attention in today’s
finance textbooks, they are qualities that
must be developed by anyone who wants
to succeed in the world of business and
finance.
» continued on page 45
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