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Monday, October 1, 2001

America’s Forgotten Entrepreneur

Powel Crosley Is a Role Model for Future Entrepreneurs

Anthony Young is a freelance writer based in Florida.

Among the ranks of American entrepreneurs in the first half of the twentieth century, the name Powel Crosley is virtually unknown.

Nevertheless, Crosley’s inventiveness and persistence made him one of the most recognized individuals of the period and his products known to millions. His impact is still felt today. Crosley was able to achieve what he did, in part, by the virtual absence of government regulation.

Powel Crosley Jr., born in Cincinnati, Ohio, in 1886, grew up in an era of sweeping technological change. At the dawn of a new century, young Crosley was at the threshold of an age of invention with new modes of transportation and communication. As a teenager, his imagination was fired by Horatio Alger’s novels of plucky youths who through hard work, honesty, and persistence achieved financial success. This strong capitalist influence forged Crosley’s belief that he too could one day become a wealthy man. On many occasions his father would take him to a Cincinnati Reds baseball game.

Sitting in the grandstands watching the game he grew to love, the young Crosley could not imagine that one day he would own that baseball team, having become the financial success he had dreamed of.

While attending the Ohio Military Institute, Crosley’s imagination was captured by the new Henry Ford Motor Company and its 1903 Model A, and the first flight by the Wright brothers at Kitty Hawk, North Carolina, that same year. If he wanted to become an entrepreneur, he first had to be an engineer. In 1906 he enrolled at the University of Cincinnati to study engineering, but he impulsively dropped out in 1907. Convinced he could build an inexpensive six-cylinder automobile, he borrowed $10,000 to set up a small production facility. He succeeded only in building a prototype before the panic of 1907 dashed his hopes.

Crosley felt he needed experience in automobile manufacturing and marketing, so he moved to Indianapolis. He worked for several small automobile manufacturers, and moved back to Cincinnati in 1910.

That year he married Gwendolyn B. Aiken. Mrs. Crosley admired her husband’s vision, but wondered about his future direction. Crosley continued to view the car as the future of personal transportation. Over the next five years he made several attempts at starting businesses, one being a motorcycle sidecar company, but the Crosley automobile remained a dream. He did succeed in becoming a father, however, with Gwendolyn giving him two children.

In 1916 Crosley went to work for the American Automobile Accessory Company. Here his inventiveness produced a host of successful aftermarket products. He aggressively pursued mail-order sales and was so successful he was able to buy the company in 1917. Crosley had found his niche, and by 1918 his booming mail-order business was grossing over one million dollars a year. Instrumental to the company’s success was Lewis M. Crosley, his brother. Lewis’s business acumen would prove a vital asset to Powel’s future business efforts.

You’re There With A Crosley

When radio broadcasting was in its infancy in 1920, the number of radio manufacturers was few. Vacuum-tube technology was evolving and the cost of manufacture correspondingly high. One of the manufacturers, the Precision Equipment Co. Inc., was also making radios in Cincinnati. In February 1921, Crosley wanted to buy a radio for his 9-year-old son, Powel III. Crosley visited the radio manufacturer and was shocked by the prices; there was nothing affordable for a young boy to listen to.

He immediately set himself to study radio construction and operation. Rather than vacuum tubes, Crosley built a radio using a crystal, something hobbyists had been doing for a number of years. Cost: $35.00. This was still a considerable sum in Crosley’s view. Seeing the commercial possibilities of manufacturing an inexpensive radio, he contacted Dorman Israel, a talented amateur wireless operator studying electrical engineering at the University of Cincinnati, who had been written up in Wireless Age magazine. He asked Israel to design a crystal radio for the consumer market.

Using the manufacturing facilities of a phonograph-cabinet company he had purchased adjacent to his business, Crosley began mass production. The Harko Junior crystal set hit the market within weeks and sold for $20. The Harko Senior vacuum-tube radio followed, and multi-tube radios were added to the line between 1921 and 1922. Crosley realized the key to keeping the cost of his radios low was efficient mass production. He borrowed a page from Ford’s methods, implementing concurrent component manufacture and just-in-time component assembly with every radio built. As with most of his other products, he sold them by mail order, but eventually added a dealer network.

Edwin Armstrong had patented the regenerative circuit to boost performance of the vacuum tube, and Crosley didn’t have a license to use it. Precision Equipment Company did. Crosley looked at the long-range prospects of radio and concluded it would grow dramatically over the years. He bought the company in January 1923, but kept that radio line separate from those made by the Crosley Manufacturing Company. Since the Armstrong license was not transferable, he changed Precision’s name to the Crosley Radio Corporation in 1924 and marketed a greatly expanded line of radios under that name. “You’re There With A Crosley” was used in all its advertisements.

Shortly after launching the Harco in 1921 Crosley explored the possibility of broadcasting. That spring, he received an experimental license to operate a low-power station from his home.

His vision of broadcasting was much larger, however. In March 1922, the Crosley Manufacturing Company was issued a license with the call letters WLW from the Radio Division of the Bureau of Navigation, U.S. Department of Commerce. Broadcast power increased from 200 to 500 watts, then 1,000 watts, until it was broadcasting using 5,000 watts from the company’s downtown Cincinnati plant. Charting WLW’s growth was technical supervisor James L. Chambers. Like other successful capitalists of his day, Crosley knew it was vital to surround himself with professional talent in the areas of manufacturing, marketing, and management.

By 1925 the Crosley Radio Corporation was the largest radio manufacturer in the world, producing 5,000 radios a day; nearly a thousand employees were on the payroll spread among three plants, according to Popular Mechanics in January 1925. In 1927 the company achieved net profits of $3 million on sales of $18 million. One publication dubbed him “The Henry Ford of Radio.”

The company continued its expansion throughout the late twenties. A six-story addition was built next to the existing four-story main plant, and an eight-story addition was built in 1929. On the eighth floor were located the lavish WLW studios, and by now the station was a 50,000 watt powerhouse. With the transmitter located outside Cincinnati in Mason, Ohio, the live broadcasts could be heard as far away as Jacksonville, Florida, and Washington, D.C.

Crosley was not heavily invested in the stock market prior to the crash in 1929, choosing instead to invest in his own company. He had diversified into major appliances, particularly refrigerators that, like his radios, he could price below his competitors. During the Depression he was able to keep his plants running and workers employed. His strong cash position allowed his company to ride through relatively unscathed. In fact, he was able to expand. He continued his innovative methods. In 1930 Crosley entered the National Air Race from the west coast to Chicago, and from a transmitter built into the plane became the first station to broadcast from an aircraft. That same year Crosley introduced the first car radio, called the “Roamio.” These were sold as aftermarket products and installed in thousands of cars. Car manufacturers soon realized they should offer a radio as an option.

The Nation’s Station

Ever since Crosley had launched WLW he had relentlessly pursued more broadcasting power. In 1932 he conceived a plan to make WLW the most powerful radio station in the world. It was an order of magnitude that no other station had even dreamed of. What Crosley had in mind was boosting the station’s power to 500,000 watts. The two overarching questions were: was it technologically feasible? And, could WLW receive a license to broadcast at that power? To achieve this, Crosley had to gather the most experienced minds in broadcasting to study the scope of the project. It required the combined engineering capabilities of RCA, Westinghouse, and General Electric. There were trips to Washington to discuss the license issue. RCA’s powerful president, David Sarnoff, backed the ambitious plan. In the end, Crosley pulled it off. In February 1933 RCA, not surprisingly, was awarded the contract to build the world’s most powerful transmitter at Mason. Engineering proceeded at amazing speed. Eleven months later the work was finished and tests began.

Everything about the new WLW facility was big. The broadcast tower was over 830 feet high and weighed 135 tons. The adjacent substation featured a sophisticated cooling system with large outdoor pond and pumps to recirculate over 500 gallons of water per minute. At 9:02 p.m. on May 2, 1934, programming commenced at full power. The broadcasts could be heard clear to central Europe and South America.

Amidst all this activity Crosley realized another dream. In February he had purchased the Cincinnati Reds from owner Sidney Weil who had lost much of his wealth after the Wall Street crash. As a means of boosting game attendance, Crosley secured permission from the baseball commissioner to hold seven night games at the renamed Crosley Field. On May 24, 1934, under the blaze of 632 lights, over 20,000 fans witnessed the first nighttime game in baseball history between the Cincinnati Reds and Philadelphia Phillies. The average evening-game attendance more than quadrupled the daytime attendance, dramatically improving the team’s cash-strapped position. And once again, Crosley set a precedent that was emulated by others.

Crosley’s firsts continued. In 1933 he had introduced the “Shelvador” line of refrigerators with shelves in the door, and other manufacturers later followed suit. In 1934 he secured Procter & Gamble as a sponsor of his daytime serial programming. With their radio spots of laundry detergent, the programs became known as “soap operas.” However, the Crosley Radio Corporation lost its top position in the market thanks to more than 60 other competitors, from Atwater Kent to Zenith.

New Directions

The dream of building his own line of cars never left Crosley. He felt there was still a need for an economical and affordable car, even while America’s economy floundered. In 1939 Crosley introduced the first compact car to America. It had an 80-inch wheelbase, a diminutive 39-cubic-inch engine, and a price tag between $325 and $350. You could order one through any Crosley appliance dealer—a rather novel approach. The cars were manufactured, of course, in Ohio. When gasoline rationing was declared with the outbreak of World War II, the only drivers smiling were Crosley owners, who could boast of getting 30 miles per gallon. Like all other car manufacturers, Crosley ceased production for the switch to war materiel.

In 1941 Crosley’s company was one of only five selected by the U.S. Navy to manufacture the proximity fuses used in shells fired from ships to destroy attacking aircraft. At peak production the Crosley Corporation employed 10,000 people, with three shifts working around the clock to manufacture 16,500 fuses a day.

Automobile production resumed at the end of the war, and production of the company’s other appliances rose in the postwar economy. With the emergence of television Crosley pioneered the first portable TV, which became the best-selling set in the industry.

Crosley died in 1961, but Crosley major appliances—and radios—are still manufactured today and sold through a nationwide network of independent distributors.

In 1991 Crosley’s former estate, Seagate, overlooking Sarasota Bay in Florida, was purchased by the Manatee County Commission to preserve the home and establish the Powel Crosley Museum of the Entrepreneur. In affiliation with the University of South Florida and Manatee Community College, degree programs in entrepreneurship are being established. In advance of the degree curriculum, the Museum and the nearby Manatee Convention Center will be the location of the Powel Crosley Entrepreneurial Seminars featuring the world’s most prominent business leaders and entrepreneurs.

Crosley succeeded in marketing products to consumers without the long arm of government regulation driving up his costs. He did not have to deal with minimum-wage guidelines, the Americans With Disabilities Act, OSHA requirements, EPA standards, crash and rollover standards, or countless other impediments to bringing a product to market. Nevertheless, the innovative Crosley would no doubt have found ways of doing so despite them. He will remain a role model for all future entrepreneurs.