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  |  Fall 2012  |  FINANCIAL HISTORY  15