STRATEGY

Defying Gravity

Some of America's iconic companies took flight in gloomy times.
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1873

A stock market crash, the collapse of a major bank, and a credit crisis lead to the Panic of 1873 and a deep six-year recession.

Coors Seeing that the country desperately needs a drink, a 26-year-old Prussian immigrant named Adolph Coors opens what he calls the Golden Brewery near Denver. The area is growing fast as rail lines open the West, buoying the start-up. And Coors is able to persevere despite fierce competition -- with $20,000 (in 1873 dollars) on hand, he is extremely well capitalized.

1891

Wrigley With just $32 to his name, a 29-year-old Chicago entrepreneur named William Wrigley Jr. starts a business to manufacture soap. When it sells poorly, he tries baking powder. As a gimmick, he includes free chewing gum in every package. Customers seem more taken with the gum than with the goods it is meant to promote, so Wrigley drops the other products and starts developing new brands, including Juicy Fruit and Wrigley's Spearmint.

1896

William Jennings Bryan delivers his famous Cross of Gold speech, in which he assigns blame for the weak economy to corporate greed.

IBM (NYSE:IBM) Herman Hollerith is working at the U.S. Census Bureau when he invents a device that can tabulate and sort census data recorded on punch cards. The innovation makes it possible for the government to process population data in months rather than years. Hollerith quits his government job and starts a business named the Tabulating Machine Company; it will be renamed International Business Machines in 1924.

1907

J.P. Morgan bails out a number of banks following a major stock market crash.

United Parcel Service (NYSE:UPS) Amid a spike in interest rates and a sagging stock market, James Casey, 19, borrows $100 to start UPS, in Seattle, in 1907. His timing is great: The Klondike Gold Rush has flooded the town with thousands of transient new residents, many of whom send and receive notes by messenger. Most services are unreliable and seedy. Casey succeeds by insisting that his delivery boys show up on time, wear tidy (though not yet dark brown) uniforms, and treat customers with courtesy.

1908

General Motors William Crapo Durant, an entrepreneur who has been kicking around the nascent car industry for a few years, uses the occasion of a volatile stock market to go on an acquisition spree. As company values drop, Durant buys Buick and several other manufacturers of horseless carriages and combines them into a new company called General Motors to take on then-dominant automaker Ford.

1913

In a bid to bring greater stability to the economy, Congress establishes the Federal Reserve System.

1923

Herman Miller In the same year that a currency crisis in Germany spurs a recession in the U.S., D.J. De Pree orchestrates a buyout of the furniture business he runs. The deal is funded by his wealthy father-in-law, Herman Miller. De Pree renames the company after his patron and begins experimenting with the sleek modern designs for which the company is now famous.

Walt Disney Company (NYSE:DIS) Brothers Walt and Roy Disney come to Hollywood from Kansas City, Missouri, in 1923 to start fresh. Their previous company, Laugh-O-Gram Films, went bankrupt after financing fell through for a series of cartoons based on Alice in Wonderland. Luckily, the slump of 1923 is mild, and the Roaring '20s quickly resume. Industrywide, box-office ticket sales grow rapidly. In 1928, Disney releases Steamboat Willie, starring Mickey Mouse. The first cartoon to feature sound, it is a smash hit.

1929

The great stock market crash commences on October 24.

1932

Zippo Desperate to bring stability to his family's fortunes, which are tied to the sagging oil industry, George Blaisdell decides to sell fancy Austrian-style lighters that cost $1.95 -- or $30 in today's money. Manufacturing in a rented room over a garage in Bradford, Pennsylvania, he comes up with a lighter that is elegant and easy to use. The company survives the '30s and then thrives during World War II, when the military becomes Zippo's largest customer.

1938

In the final year of the Great Depression, Congress establishes a federal minimum wage of 25 cents an hour.

Hewlett-Packard (NYSE:HPQ) Bill Hewlett and Dave Packard launch a company that is in many ways impervious to the struggles of the economy: They bootstrap it, starting with just $538 in capital and working from that now-famous garage in Palo Alto, California. At launch, they have an order in hand for their first product, an audio oscillator, ensuring cash flow. And their first client is itself a growing business: Disney uses HP's products to test sound for Fantasia.

1948

Toys "R" Us During a time of high inflation, a 25-year-old named Charles Lazarus gambles that rising birth rates will sustain the baby-furniture store he opens in Washington, D.C. He soon adds toys, which prove popular. Sensing that consumers' buying habits are changing, he decides that his second store will sell only toys and uses the supermarket as a model. The stores that Lazarus subsequently opens feature shopping carts and long aisles of merchandise and are an early example of big-box retail.

1960

Domino's Pizza Tom and James Monaghan borrow $500 to buy DomiNick's, a pizza shop near Eastern Michigan University in Ypsilanti, Michigan. The business's proximity to the school helps to define its brand. "They succeeded mostly because they were able to make their deliveries very quickly," says Stephen Litwhiler, who was one of Domino's first delivery men and is now a franchisee in Burlington, Vermont. "No one else was focusing on that at the time."

1973

The OPEC oil embargo begins.

1974

Super 8 When Ron Rivett and Dennis Brown open the first Super 8 motel, in Aberdeen, South Dakota, in 1974, they set their room rate at a recession friendly (and memorable) $8.88 per night. The company expands quickly and cheaply through franchising, and it establishes itself very deliberately as the low-cost competitor by locating new Super 8s as close to Holiday Inns as possible. By 1977, the chain is adding a property every 18 days.

1975

Stagflation!

Microsoft (NASDAQ:MSFT) With the economy in the doldrums and the nation still reeling from Watergate, Bill Gates leaves Harvard and strikes an informal partnership with his friend Paul Allen to launch a company called Micro-Soft. Their first office? An Albuquerque motel room. The company chugs along, making software using the BASIC programming language, until 1981 -- during another recession, no less -- when Microsoft introduces MS-DOS, which catapults it to the forefront of the industry.

1979

Jimmy Carter delivers his "malaise" speech.

1982

Symantec In 1982, Gary Hendrix is working for a struggling company called the Machine Intelligence Corporation. His team of researchers is developing software to search databases for information with plain-English queries. When Hendrix learns that his bosses are considering selling to HP the intellectual property he has helped to develop, he persuades them to let him spin off a company instead. The following year, Hendrix raises $3 million in venture capital from Kleiner Perkins Canfield & Byers.

1987

The market crashes on Black Monday, October 19.

1991

The savings-and-loan crisis reaches its peak; in all, a thousand thrifts will fail.

Nantucket Allserve The sluggish economy doesn't deter Tom Scott and Tom First from setting up a juice bar on Nantucket, Massachusetts. The company takes in $52,000 in its first year, before the self-proclaimed Juice Guys switch gears and begin selling bottled beverages through grocery and convenience stores. Money is tight -- Scott often sleeps in his car -- but the company soon builds a killer field sales force, which ensures its success.

2000

The Nasdaq hits 5,132 on March 10, the top of the dot-com bubble.

2001

Wikipedia The popular online encyclopedia, which has changed the way people collaborate online, is shaped in two ways by its experiences during the dot-com meltdown. First, amid a dearth of venture capital funding for new Web-based enterprises, Wikipedia is set up as a nonprofit (and initially viewed as a side project). And second, founders Jimmy Wales and Larry Sanger are able to expand quickly because they can borrow plenty of unused server capacity from other companies.

Newegg.com When Fred Chang notices that the computer integrator he works for is turning away a lot of requests for components from customers who don't want to buy complete systems, he launches an online emporium to sell custom parts to gamers and do-it-yourself techies. While dot-com companies crash and burn, the City of Industry, California, company builds a loyal following by providing excellent customer service. Revenue tops $1.5 billion in 2006.

2008

Although the dimensions of the current downturn are not yet clear, Warren Buffett tells CNBC in March that "by any commonsense definition, we are in a recession."

Last updated: May 1, 2008




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