Charles Dow (1851-1902), with his partner Edward Jones, founded Dow Jones & Company and The Wall Street Journal, in order to present business news in a simple, unbiased way. The paper became the most respected financial journal in the world. Dow also developed several stock averages and the Dow theory, based on his personal observations of the relationship between the stock market and general business activities.
Charles Henry Dow, born in Sterling, Connecticut on November 5, 1851, was the son of a farmer who died when his son was six years old. The family lived in the hills of eastern Connecticut, not far from Rhode Island. Knowing that he did not want to be a farmer, the tall, stooped, bushy-bearded Dow decided to try journalism.
Dow did not have much education or training, but he managed to find work at the age of 21 with the Springfield Daily Republican, in Massachusetts. He worked there from 1872 until 1875 as a city reporter for Samuel Bowles, who taught his reporters to write crisp, detailed articles. Dow then moved on to Rhode Island, joining The Providence Star, where he worked for two years as a night editor. He also reported for the Providence Evening Press. In 1877, Dow joined the staff of the prominent Providence Journal. Charles Danielson, the editor there, had not wanted to hire the 26-year-old, but Dow would not take no for an answer. Upon learning that Dow had worked for Bowles for three years, Danielson reconsidered and gave Dow a job writing business stories.
Dow specialized in articles on regional history, some of which were later published in pamphlet form. Dow made history come alive in his writing by explaining the development of various industries and their future prospects. In 1877, he published a History of Steam Navigation between New York and Providence. Three years later, he published Newport: The City by the Sea. It was an account of Newport, Rhode Island's settlement, rise, decline, and rebirth as a summer vacation spot and the location of a naval academy, training station, and war college. Dow reported on Newport real estate investments, recording the money earned and lost during the city's history. He also wrote histories of public education and the prison system in the state.
Danielson was so impressed with Dow's careful research that he assigned him to accompany a group of bankers and reporters to Leadville, Colorado, to report on silver mining. The bankers wanted the publicity in order to gain investors in the mines. In 1879, Dow and various tycoons, geologists, lawmakers, and investors set out on a four-day train trip to reach Colorado. Dow learned a great deal about the world of money on that journey as the men smoked cigars, played cards, and swapped stories. He interviewed many highly successful financiers and heard what sort of information the investors on Wall Street needed to make money. The businessmen seemed to like and trust Dow, knowing that he would quote them accurately and keep a confidence. Dow wrote nine "Leadville Letters" based on his experiences there. He described the Rocky Mountains, the mining companies, and the boomtown's gambling, saloons, and dance halls. He also wrote of raw capitalism and the information that drove investments, turning people into millionaires in a moment. He described the disappearance of the individual mine-owners and the financiers who underwrote shares in large mining consortiums. In his last letter, Dow warned, "Mining securities are not the thing for widows and orphans or country clergymen, or unworldly people of any kind to own. But for a businessman, who must take risks in order to make money; who will buy nothing without careful, thorough investigation; and who will not risk more than he is able to lose, there is no other investment in the market today as tempting as mining stock."
Working on Wall Street
In 1880, Dow left Providence for New York City, realizing that the ideal location for business and financial reporting was there. The 29-year-old found work at the Kiernan Wall Street Financial News Bureau, which delivered by messenger hand written financial news to banks and brokerages. When John Kiernan asked Dow to find another reporter for the Bureau, Dow invited Edward Davis Jones to work with him. Jones and Dow had met when they worked together at the Providence Evening Press. Jones, a Brown University dropout, could skillfully and quickly analyze a financial report. He, like Dow, was committed to reporting on Wall Street without bias. Other reporters could be bribed into reporting favorably on a company to drive up stock prices. Dow and Jones refused to manipulate the stock market.
The two young men believed that Wall Street needed another financial news bureau. In November 1882, they started their own agency, Dow, Jones & Company. The business' headquarters was located in the basement of a candy store. Dow, Jones, and their four employees could not handle all the work, so they brought in Charles M. Bergstresser, who became a partner. Bergstresser's strength lay in his interviewing skills. Jones once remarked that he could make a wooden Indian talk.
In the days before annual reports and press releases, getting information often took much patience and diplomacy. Dow and Jones' reporters visited the brokerages, banks, and company offices, looking for news. The reporters took messengers with them who would run back to the office with the stories. Someone would then dictate to a group of writers who, using styluses, would write on thin sheets of tissue paper that had carbon paper in between each sheet. In this way, each writer could produce 24 copies at a time. These copies were called "flimsies." Waiting messengers then raced down Wall Street delivering the "flimsies" to subscribers. This process was repeated several times a day. Eventually a late edition and a seven a.m. edition were added, based on private wires and stock prices in London.
In November 1883, the company started putting out an afternoon two-page summary of the day's financial news called the Customers' Afternoon Letter. It soon achieved a circulation of over 1,000 subscribers and was considered an important news source for investors. It included the Dow Jones stock average, an index that included nine railroad issues, one steamship line, and Western Union. Because the "flimsies" were inefficient to produce and difficult to read, the company started using a hand-operated press in 1885. However, their publications were still delivered by messenger until 1948.
Birth of The Wall Street Journal
In 1889, the company had 50 employees. The partners realized that the time was right to transform their two-page news summary into a real newspaper. The first issue of The Wall Street Journal appeared on July 8, 1889. It cost two cents per issue or five dollars for a one-year subscription. Dow was the editor and Jones managed the deskwork. The paper gave its readers a policy statement: "Its object is to give fully and fairly the daily news attending the fluctuations in prices of stocks, bonds, and some classes of commodities. It will aim steadily at being a paper of news and not a paper of opinions." The paper's motto was "The truth in its proper use." Its editors promised to put out a paper that could not be controlled by advertisers. The paper had a private wire to Boston and telegraph connections to Washington, Philadelphia, and Chicago. It also had correspondents in several cities, including London.
Dow often warned his reporters about exchanging slanted stories for stock tips or free stock. Crusading for honesty in financial reporting, Dow would publish the names of companies that hesitated to give information about profit and loss. The paper soon had power and respect.
Dow Jones Industrial Average
In the 1890s, Dow saw that the recession was ending. In 1893, many mergers began taking place, resulting in the formation of huge corporations. These corporations sought markets for their stock shares. The wildly speculative market meant investors needed information about stock activity. Dow took this opportunity to devise the Dow Jones industrial average in 1896. By tracking the closing stock prices of twelve companies, adding up their stock prices, and dividing by twelve, Dow came up with his average. The first such average appeared in The Wall Street Journal on May 26, 1896. The industrial index became a popular indicator of stock market activity. In 1897, the company created an average for railroad stocks.
Dow also developed the Dow theory, which stated that a relationship existed between stock market trends and other business activity. Dow felt that if the industrial average and the railroad average both moved in the same direction, it meant that a meaningful economic shift was occurring. He also concluded that if both indexes reached a new high, it signaled a bear market was underway. Dow did not believe that his ideas should be used as the only forecaster of market ups and downs. He thought they should be only one tool of many that investors used to make business decisions.
In 1898, The Wall Street Journal put out its first morning edition. The paper now covered more than just financial news. It also covered war, which it reported without rhetoric, unlike many of the other papers. Dow also added an editorial column called "Review and Outlook," and "Answers to Inquirers," in which readers sent investment questions to be answered.
Endorsed a Presidential Candidate
Edward Jones retired in 1899, but Dow and Bergstresser continued working. Dow still wrote editorials, now focusing on the place that government held in American business. The Wall Street Journal started a precedent in reporting during the election of 1900 by endorsing a political candidate, the incumbent president William McKinley.
In 1902, Dow began to have health problems and Bergstresser wanted to retire. The two sold their shares of the company to Clarence Barron, their Boston correspondent. Dow wrote his last editorial in April 1902. A few months later, on December 4, 1902 he died in Brooklyn, New York, at the age of 52.
Vermont Royster, a later editor of the The Wall Street Journal said that Dow always believed that business information was not the "private province of brokers and tycoons. In writing about high finance, Dow used homely analogy and the language of everyday life. Neither as a writer nor as a person did he ever lose touch with Main Street."
Further Reading on Charles Dow
Rosenberg, Jerry M, Inside the Wall Street Journal: The Power and the History of Dow Jones & Company and America's Most Influential Newspaper, Macmillan, 1982.
Providence Journal-Bulletin, May 24, 1996.
The Wall Street Journal, July 3, 1984.