The Architect of Modern Financial Journalism
Charles Dow was born in 1851 in Sterling, Connecticut, a small town in the rolling hills, close to the Rhode Island line. Not a lot is known about his early years except that he was raised by his widowed mother and at 16 would leave home to work as an apprentice. At 21 he would take up the profession that would define the rest of his life, and indeed his legacy: Journalism.
His first real job was that of a reporter at the Daily Republican, in Springfield, Massachusetts in 1872. He would work there for three years before crossing into Rhode Island to take a job writing for the Providence Star. Two years later he would join the Providence Journal, which would be the catalyst that would eventually make Dow a household name across the country.
At the Journal Dow was known for writing compelling pieces that combined history and business as he sought to give readers information not only about a company specifically, but about the environment within which the company was operating. It was at this time he wrote a history of Newport, RI, which was then becoming the summer refuge of some of America’s richest families. Dow would become familiar with many of the town’s gentry and they came to respect his engaging writing and his commitment to keeping confidences as it related to sources of information shared with him.
It was about this time Dow’s editor sent him on a journey to Colorado, accompanying a group of investors, barons, geologists and lawmakers as they investigated the state’s nascent silver mining industry. Bankers were interested in generating attention to the opportunity so they could sell shares in the mines. Listening as the men drank and smoked and played cards and told stories, Dow began to understand much about business as well as the kind of information that the people on Wall Street sought out as they invested.
Dow wrote nine “Leadville Letters” based on his experiences in Colorado where 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, 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.”
Bitten by the business writing bug, in 1880 Dow would move to New York and write for the Kiernan Wall Street Financial News Bureau. Two years later he would partner with Edward Jones and Charles Bergstresser to form Dow Jones and Co. The company would start publishing the Customers’ Afternoon Letter, a two page newsletter focused on the day’s financial and business news. Soon it had a daily circulation over 1,000 and became a much sought after source of information from investors.
Five years later, in 1889 the company transformed the two page letter into a full fledged newspaper, the Wall Street Journal. At that point the company had over 50 employees and desks in or telegraph connections to major business centers such as Boston, Chicago, Washington, Philadelphia and London.
From the beginning Dow was adamant that the Wall Street Journal would be a straight news newspaper. It would not allow its coverage to be swayed by advertisers, nor would it allow companies to dictate how they were covered in his paper. In a word, in a market where financial journalism was often seen – rightly so – as a shill for companies or investors, Dow wanted the Wall Street Journal to be known for its integrity. (And for most of it’s history it has been.)
In 1896, building on the success of his 11 stock (mostly railroads) index he had created as part of the Customer’s Afternoon Letter in 1884, Dow created the Dow Jones Industrial Average, (DJIA) which included 12 of the biggest and best capitalized industrial companies in America at the time: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal and Iron, U.S. Leather, and U.S. Rubber. Each day he would add up the closing prices of all twelve stocks and divide the total by 12. This blue-chip average – which would expand to 30 companies in 1928 – would go on to become the most watched stock market metric in the world over the next century. When historians talk about the great stock market crash that ended the Roaring Twenties, they typically refer to the DJIA, which lost almost a quarter of its value on October 28th and 29th of 1929 and over the next three years would lose almost 90% of its value.
Dow was instrumental not only in giving investors information about business and a measure by which to gauge market health, but he also gave them a theory of investing – Dow Theory – that has been the foundation for shrewd investors for more than a century. Dow’s theory basically said that the stock market follows trends, which can be analyzed to discern where stocks are headed. Today that type of model is called technical analysis and is used by investors around the world every day.
Dow would manage the company until 1902 when it was sold Boston correspondent Clarence Barron. He would write his last piece for the Journal in April of that year. On December 4th 1902 Charles Dow would suffer a heart attack and die at the age of 51. The paper he built would go on to become America’s most widely read – and most respected – newspaper well into the 21st century and the Index that bears his name one of the most watched financial metrics in the world. Not bad for a self-made man with little education who left home at 16 and started out knowing almost nothing about stocks and business and investing.
Sources consulted / Further reading:
https://www.encyclopedia.com/education/economics-magazines/dow-charles