Baker Library Historical Collections Feature - R.G. Dun and Co.

by Martha Lagace, Staff Writer, HBS Working Knowledge

What would you do if you were a newspaper publisher in 1881 and were in need, say, of a bit of credit to shore up the mortgage on your antiquated presses?

If you were, for example, Gerry Brown, publisher of the Bunker Hill Times in Boston, chances are you'd do what many aspiring business people did in the credit-hungry 19^th century: you'd submit your life's assets, your reputation and perhaps your future to the scrutiny of one of the 2,000 active correspondents of the pre-eminent credit-reporting firm of the day, R.G. Dun & Company.

Originally called The Mercantile Agency, the company was founded by a New York merchant named Lewis Tappan, and was the first commercial credit reporting agency in America.

Tappan began selling his services by subscription to a group of leading New York merchants on August 1, 1841. The terms of the original contract with his subscribers priced his services in relationship to the size of the merchant's business.

    We the subscribers, individuals and firms, trading and selling merchandise in the City of New York, being acquainted with the objects of The Mercantile Agency as set forth in a published Circular signed by Lewis Tappan, approving thereof and being desirous to avail ourselves of its advantages, do hereby severally agree to pay to the said Lewis Tappan, for the information which he may be able to furnish us from time to time at the office of said Agency for one year from the first day of August, 1841, and until we shall inform said Tappan in writing of our wish to discontinue our subscriptions--three months notice thereof to be given--the sums of money which shall be payable by us respectively in advance according to the following terms, to wit:
    Those of us whose sales of goods for one year amount to One Hundred Thousand dollars or less will severally and respectively pay One Hundred dollars.
    Those whose sales are over $100,000 and less than $200,000, One Hundred and fifty dollars.
    Those whose sales are over $200,000 and less than $350,000, Two Hundred dollars.
    Those whose sales over $350,000 and less than $500,000, Two Hundred and fifty dollars.
    And all whose sales are over $500,000, Three Hundred dollars.
    And the subscribers do further agree and promise to send all their claims that are or shall be past due, and for the collection or settlement of which they need the agency of another person, to the correspondents of said Tappan, it being understood that said correspondents shall do the business as promptly and faithfully as other attorneys and agents, and that their charges and commissions shall be at the customary rates.

July 31, 1841.

(As cited in Edward Neville Vose's 1916 history, Seventy-Five Years of The Mercantile Agency R.G. Dun & Co. 1841-1916

The firm's reach and scope grew in response to the bank wars of the 1830s and 1840s, and to the need for potential lenders to gauge their risk factor for merchants whose assets they did not know. A vast network of correspondents – usually local attorneys, bankers and other merchants – was called into action to provide timely, accurate reports.

These reports were sent at least twice a year to New York, where they were meticulously transcribed into ledgers at Dun headquarters. Data on any individual merchant was based on a strict set of criteria, including everything from "length of time in business" and "amount of net worth after deducting all liabilities of every nature" to "character: very good, good, medium, poor."

The collection of ledgers, which was donated to Baker Library at Harvard Business School, is comprised of 2,580 volumes of painstakingly hand-written details on individuals and firms between 1841 and 1890 in what are now the United States, Canada and the West Indies. (Note: Due to the great fragility of the volumes, access to Baker Library's R.G. Dun Collection is restricted to academic researchers working on scholarly projects.)

All told, the ledgers at Baker Library, through their meticulous chronicle of the assets and liabilities of everyone from saloon keepers to cigar salesmen to high-society dressmakers and portrait painters, are a tremendously valuable resource for economic and social historians as well as students of business history. Unlike other business records from that era, which often focused on the administrative aspects of large companies, the information in the Dun volumes provides a fascinatingly intimate glimpse of North American practices and attitudes in the 19^th century. According to Laura Linard, the director of Historical Collections, Baker Library has 1,400 manuscript collections, but scholars' use of the Dun Collection alone easily accounts for more than half of such manuscript research.

"One of the phenomena of the Dun Collection," she says, "is the fact that it reflects all aspects of American society. It provides a window onto all of America and entrepreneurship at that time period. The Dun Collection is attractive to scholars working on an unbelievable spectrum of projects, even those that might never otherwise consult business records."

A Question of Confidence

The 19^th century was a volatile yet optimistic period. Rowena Olegario, whose PhD thesis at Harvard drew from material in the Dun Collection, writes that "The establishment of orderly markets ... depended for its success on another, more elusive, element: confidence — the collective belief that risks were worth taking because economic and political conditions would continue to be good, that other people would honor their contracts, and that methods existed that allowed creditors and investors to calculate risks reasonably accurately ... American business came to prize transparency and to tolerate a high degree of instability."

Financial instability could be tolerable to Dun, when, for example, the subject's business prospects looked at least reasonably bright. While Dun correspondents investigated assets and liabilities, their decisions of credit-worthiness often hinged as well on an assessment of that elusive quality known as "character." Character was vital in determining one's business prospects; and Dun reports could at times be brutal in their dispassion.

Of the aforementioned Gerry Brown, for instance, a correspondent noted that while Brown had had the business acumen to buy out his partners, "[He] is an industrious well meaning man of average ability… Was formerly publisher of the Spiritual Scientist and sunk it is said every dollar he was ever worth in that enterprise."

Any potential lender, scanning such a report on Brown, was then free to draw his own conclusions.

Not a Practical Butter Man
On the other hand, people with only modest businesses who nevertheless displayed a propensity for committed work stood a fair chance of gaining the confidence of Dun correspondents. In the ledgers, a Boston vendor of butter and cheese named W.W. Palmer is characterized in his Dun entry as "not a practical butter man, but is represented as straightforward and of good character."

The ledgers also record what may have been fateful miscalculations. There is no way to know, for example, whatever happened to a woman ahead of her time — aspiring fancy-goods vendor Mrs. J.A.L. Gessner – who earned only a single line in the Boston ledger for 1882. "We are unable to find any such party [at the address]," the correspondent writes. "The location given is occupied by a Schoolhouse and Police Station."

And although relatively few women at that time offered themselves for credit assessment, female business skill (or lack of) behind the scenes occasionally made its way to reports on their husbands and male relatives. One page in the Boston ledger, for example, relates the hard luck of a would-be saloon keeper who kept running aground, opening saloon after saloon – financed through his wife's property — "but never with success."

"A bill sold to [his wife] could probably be collected," noted the Dun correspondent, "but we find no one who wants to take a risk with James."

The Search for Respect
Harvard University history professor Sven Beckert says he found the Dun Collection extremely helpful during research for his book The Moneyed Metropolis, to be published by Cambridge University Press in the autumn of 2000. Beckert's research, on the history of the New York City upper class, relied heavily on the Dun Collection to learn more about 50 New York merchants, manufacturers and bankers: what they did, how much they invested and, especially, how certain businesses were perceived at different points in time. The class of manufacturers — building everything from pianos to steam engines – did not fare well at first in Dun's eyes, Beckert discovered.

"My insight," Beckert says, "was that Dun credit reporters were quite suspicious of manufacturers during the 1850s, because the manufacturers were not held to be well educated; they were not considered 'gentlemen' as Dun imagined gentlemen to be.

"Dun was suspicious of their chances for success," Beckert says.

Fortunately, this attitude evolved over the following decades as North American business grew up. In some cases, Dun credit correspondents were proved wrong in their notion of what constitutes a gentleman and what defines success. After all, they were only human.

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