Dow Jones & Company, Inc.
Charles Henry Dow, cofounder of Dow Jones & Company, Inc. and the first editor of The Wall Street Journal, was an American journalist and financial analyst. He created an index of a dozen leading stocks, mostly railroads, that eventually became the Dow-Jones Averages, the most popular and widely-read of all stock measurements. The Dow Theory, an analysis of stock market behavior that remains valid today, was derived from Dow's essays in The Wall Street Journal at the turn of the century.
Charles Henry Dow was born on November 6, 1851, on his family's farm in Sterling, Connecticut, the youngest of three sons. His father died when he was only six years old and his mother raised him. Dow's only formal education took place in a one-room village schoolhouse. Dow left home at the age of 16 in 1867 to work as an apprentice printer and reporter and begin a newspaper career that took him to Springfield, Massachusetts; Providence, Rhode Island; and finally, to New York City in 1879.
In 1881, Dow married Lucy M. Russell and her daughter by a previous marriage became Dow's step-daughter. A tall, stooping man, Dow was quiet, studious, and hard-working. He was renowned for his mild manner, measured speech, and personal integrity. He died at the age of 51 at his Brooklyn home on December 4, 1902.
Dow said he had tried some 20 jobs before landing his first real reporting position at the Springfield, Massachusetts Springfield Daily Republican, at the age of 21. He covered the city beat for the newspaper and quickly advanced to the position of assistant editor under the watchful eye of legendary editor Samuel Bowles III. The Springfield Daily Republican was the most popular provincial newspaper in the country and Bowles was the most respected editor of his time. His tutelage and advice helped many young journalists, including Dow, secure positions at other leading metropolitan publications. In 1875, Dow moved to Providence, Rhode Island where he first became night editor of the Press and Star and then joined the Providence Journal in 1876. At the Providence Journal, he distinguished himself as a writer of significant historical articles such as a history of steamboat transportation that was later reprinted as a book. Another well-received article, also made into a book, was a history of the city of Newport, Rhode Island.
Dow's well-written, carefully-researched articles for the Providence Journal led to an 1878 invitation to join a group of eastern financiers on their way to the boom town of Leadville, Colorado to assess possible investments in silver mines. A huge silver strike in the area had brought thousands of speculators, miners, and gamblers to the area, and Dow wrote a series of articles from Leadville called the "Leadville Letters." These vividly detailed articles included stories, not only on the mining industry and mining economics but on the fast life in the wide-open mining town as well.
On his return from the West in 1880, Dow decided to relocate to New York City. He recognized that his strength as a reporter lay in his ability to research and analyze economic issues, and so he began to look for opportunities in financial journalism. After first taking a job as a business reporter for the New York Mail and Express, he left this position for a job as an editor with the Kiernan News Agency, a firm that wrote and delivered brief news bulletins to banks and brokerage houses as well as individuals. A former colleague and acquaintance in Providence, Edward D. Jones, also joined the Kiernan News Agency as a reporter.
In November of 1882, Dow and Jones left the Kiernan News Agency and formed Dow Jones & Company, Inc. as a competitor to the Kiernan News Agency. They were a well-balanced team. Jones was a first-rate financial reporter with excellent sources who could explain technical details succinctly and accurately. Dow's forte was thoughtful analysis of companies and industries and market trends.
They set up a news-bulletin service at 15 Wall Street (next door to the New York Stock Exchange) in a dreary room behind a soda-water establishment. Throughout the day, their boy messengers rushed "flimsies" or "slips" containing business news and analyses reported and written by the two named partners and silent partner Charles M. Bergstresser to subscribers in banks and brokerage houses throughout the financial district. The flimsies were hand-written in duplicate on thin sheets of paper with an agate stylus.
At the end of the firm's first year in 1883, the partners introduced the Customer's Afternoon News Letter. This one page report, also handwritten with a stylus on small, thin sheets, summarized the day's news and financial activities and occasionally included a brief analysis of the stock market or a financial forecast, usually written by Dow himself. This reporting of the financial average for a particular day came to be known later as the Dow-Jones average. By 1884, a small cylinder press had replaced the stylus and both the messenger service and the afternoon publication began to expand. The Customer's Afternoon News Letter, now printed on a larger press, had grown to two pages by 1885 and had become the precursor to The Wall Street Journal.
On July 3, 1884 Dow Jones & Company, Inc. began to publish the average closing price of representative active stocks, including ten railroad and two industrials. The list was determined by Dow from his research to be reliably indicative of market trends.
The first issue of The Wall Street Journal appeared on the afternoon of July 8, 1889. The new daily afternoon paper was published by Dow Jones & Company, Inc. and Dow's name was on the masthead as editor. The price was two cents a copy, but reduced rates were offered to bankers and brokers, and the paper was delivered free to subscribers to the company's news bulletin service. Correspondents from London, Boston, Philadelphia, and Chicago regularly wired news stories by telegraph from those cities. An office in Washington, D.C. for The Wall Street Journal was established in 1897. In 1898, Dow Jones & Company, Inc. would publish a morning edition of the The Wall Street Journal.
The circulation of The Wall Street Journal was small at first, but the news bulletin service, which had grown to some 1,500 copies daily, was grossing about $300,000 a year by 1899. The small staff was able to get out both the daily newspaper and the news bulletins because of their strong work ethic. The three partners often met at Dow's home until late at night after evening assignments, and all worked 12-hour days. Dow had immeasurable amounts of energy. He not only managed the editorial side of the newspaper but also the business side of Dow, Jones and Company, Inc.
By 1900, The Wall Street Journal was clearly headed for success. Its circulation had reached 10,000 in 1899 for both editions of the newspaper, and Dow sought to expand its readership from Wall Street insiders to the general public. On April 21, 1899, he introduced a regular column called "Review and Outlook," in which he attempted to educate readers on the stock and bond markets. These essays are today considered stock market classics and form the basis for what was later called the Dow Theory. Two decades after his death, a book containing Dow's writings was published and, since then, countless newspaper articles, investment letters, stock commentaries and books have continued to reinterpret Dow's theories in light of modern stock market conditions.
Dow wrote clearly and intelligibly to the uninitiated about complex subjects. For example, he compared the market dynamic to a tug-of-war in which the side with the most investors pulled the market either up or down. In another essay urging patience in holding stocks, he explained that investors had to expect to wait before making a profit just as a farmer does before harvesting corn from seed.
In addition to running and managing Dow, Jones and Company, Inc., from 1885 to 1891, Dow was also a partner at Goodbody, Glynn and Dow. He was also a member of the New York Stock Exchange where he gained experience handling stock orders on the trade floor.
Dow continued to write his influential essays until 1902 although, after 1900, he was in ill health. Jones had left the firm in 1900 to pursue other interests and on March 13, 1902, Dow resigned as director and president of Dow, Jones and Company, Inc. As the company's majority owner following Jones' departure, Dow arranged for the sale of Dow Jones & Company, Inc. to Clarence W. Barron, whose descendants continue to have a controlling interest in it. The sale of Dow Jones & Company, Inc. was finalized only two months before Dow's death.
Social and Economic Impact
The Dow-Jones average has remained as one of the most important, useful, and trusted indicators of stock market conditions throughout the world. Today, the same methods used by Dow around the turn of the century are put to use daily in order to indicate financial trends.
Dow Jones & Company, Inc. published its first Dow-Jones industrial average on May 26, 1896 which has been kept up to date every day since by The Wall Street Journal. On that day, the market closed at 41 based on Dow's method, which was based on the stocks of 12 well-known and successful smokestack firms. Dow added up the prices for these companies stocks and then divided that number by twelve. Today, the market regularly exceeds a level of 8,000 based on the same methods used at the turn of the century. Only now, the stock prices are divided by 0.33839549 because of the sheer volume of stocks traded.
Chronology: Charles Dow
1867: Left home to begin career.
1872: Began working at the Daily Republican.
1875: Became night editor at Press and Star.
1882: Cofounded Dow Jones & Company, Inc.
1883: Published Customer's Afternoon News Letter.
1889: Published The Wall Street Journal.
1896: Published first Dow-Jones industrial average.
1902: Sold Dow Jones & Company, Inc.
There are those that do not prefer Dow's method and think that it is too slow for the modern market place. These detractors feel that Dow's theories are very useful in analyzing the past but less useful in predicting the future. They suggest that other methods, such as the Standard and Poor's 500 Index (S&P), are a better indicator of market activity. The S&P started in 1923 and measured each stock differently according to its market success while Dow's method measured each stock the same regardless of a particular company's success or failure.
In addition, they feel that Dow's method does not take into account the large number of stocks traded on the market and would leave an investor reading the wrong signals. Dow's original method was based on the prices of 30 stocks while today, thousands of stocks are regularly traded on a daily basis.
Among the many tributes to Dow that appeared in The Wall Street Journal following his death in 1904, was one from his long-time partner and colleague, Edward D. Jones that quite possibly explains why his influence is still felt so long after his death. Jones said: "(Dow) was a ceaseless searcher for facts and the best way to tell and distribute them. His honesty was rugged, his industry was prodigious, his integrity unsullied, and his home life ideal."
Sources of Information
Contact at: Dow Jones & Company, Inc.
200 Liberty St.
New York, NY 10281
Business Phone: 212-416-2000
Bishop, George W., Jr. Charles Dow and the Dow Theory. New York: Appleton, Century Crofts, Inc., 1960.
Bishop, George W., Jr. Charles H. Dow: Economist. Princeton, NJ: Dow Jones Books, 1967.
Dow Jones & Company, Inc. "Charles Henry Dow." The Dow Jones Averages: The Market's Measure. 1997. Available from http://djia100.dowjones.com/chDow.html.
Scharff, Edward E. Worldly Power: The Making of The Wall Street Journal. New York: Beaufort Books Publishers, 1986.
Wendt, Lloyd. The Wall Street Journal: The Story of Dow Jones & the Nation's Business Newspaper. Chicago: Rand McNally & Co., 1982.
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