Throughline - The Phoebus Cartel

Episode Date: March 28, 2019

Have you ever wondered why your smartphone or toaster oven doesn't seem to last very long, even though technology is becoming better and better? This week, in a special collaboration with Planet Money, we bring you the history of planned obsolescence – the idea that products are designed to break.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

All right, y'all. Let's do this. Let's do it. Let's just do it. Okay. Sally. Hey, Sally. Hi. Hey, guys. Welcome to the studio. Thank you so much for having me. I took a long walk around the corner,

around the corner from the Planet Money section of the office over to the through line part. What brings you here? Well, I think I have a story for you. So I've been looking into the history of planned obsolescence. Do you guys know what this is? Yes. Yeah. I know what planned obsolescence is.

It's like the idea that companies might be deliberately breaking products in order to get us to buy more. Yeah, I had the old washer-dryer combo. It broke the day after the warranty ended. I'm not kidding. It just broke. Water went everywhere. And like we were left with nothing. We couldn't do anything about it. The worst. So when that kind of thing happens, that is when people start tossing around this phrase, planned obsolescence. And I wanted to look back and see what the history of this idea is. I found two stories. One happens in the shadows

and the other happens right before our eyes. And these two stories helped me understand a force that I think it is not an exaggeration to say shapes the entire consumer economy. So do you want to hear it?

Bring it on. All right. Coming up after the break. Thank you. for your small business, you want to find the right person for the job. LinkedIn jobs can help. People come to LinkedIn every day to learn and advance their careers, so LinkedIn understands what they're interested in and looking for. Which means when you use LinkedIn to hire someone, your matches are based on so much more than a resume. Learn more at linkedin.com slash throughline.

Terms and conditions apply. What does what you eat or don't eat say about who you are and where you fit in? It's the memories and the feelings of nostalgia that is what connects you to your family. It's not chicken or beef or pork. This is Gene Demby of NPR's Code Switch. This week on the menu, food and family. Okay, I'm going to start this story in the 1990s in Germany with a small group of, I would call them book nerds. And they were nerds about one book in particular. Gravity's Rainbow by Thomas Pynchon.

Thomas Pynchon and Gravity's Rainbow. A demanding novel of comic terrifying incidents that traces the odyssey of the antihero, an American lieutenant stationed in London during World War II. Strong language and explicit descriptions of sex. Do you guys know this book? I don't know. It's sort of like one of those cult classic books. It's like 700 pages long, very dense, paranoid, has like, you know, technical details about rocket science kind of thing. It's that kind of book. Gravity's Rainbow was something like the Bible of a circle of friends.

So we're really delving into the history of that novel and we're absolutely fascinated by the fiction. That's Marcus Krajewski. He and two of his friends were obsessed with this one book in particular because they were all sort of technically minded people. One of them studied the machine gun. Marcus had studied the Dewey Decimal System. So, you know, machines, systems, conspiracy theories, the same sort of thing that Pynchon was writing about. So this book was great fuel for intense discussions, drinking tea together, smoking dope together, trips to the countryside together, spending the whole weekend talking

about light bulbs within beautiful nature. They would spend the whole weekend talking about light bulbs. Correct. Light bulbs. Yes. So there was this one story within the story of Gravity's Rainbow that they were really intrigued by. A small history of an eternal light bulb. It's called Byron the Bulb. An eternal light bulb. Yes. An eternal light bulb which would never fade out. It's perfectly built, so it cannot just die. It's eternal. In the book, Byron the Bulb is conscious and he knows that he is going to live forever. But he also knows that there is a group of people out there who are trying to get him. It is a group of light bulb manufacturers called Phoebus, who know that

obviously if light bulbs can live forever, then light bulb manufacturers will be out of business. So Phoebus learns about Byron and tries to destroy him. Okay, clearly fiction. Well... Once you're familiar with Pynchon, you know that it's not only fiction, but it's very much based on facts. So the history of the eternal light bulb sounds like pure fantasy, but if you dig a little bit into history, it turns out that Pynchon had sources. So that is what they talked about all weekend. Which parts of this totally far-fetched seeming story might actually be true. And they started to ask themselves this question. Could there be a light bulb that could live forever?

I'm going to say no. Really? Because recall that this is a podcast and I am forced to reveal at this moment that in fact there is a light bulb that lives forever. At least, I mean almost forever, forever-ish. It's been burning since 1901, which is almost 118 years. And I went out to Livermore, California to meet it. See the bulb.

That's it up there. That's it. Can you see the light? Yeah. It's just a light bulb, right? Wait, you flew across the country to look at a light bulb? I flew across the country to see a light bulb, to interview a light bulb. Actually, I was interviewing a person.

I talked to Tom Brammel. He's a retired deputy fire chief. The bulb hangs in the Livermore Fire Station. This is a hand-blown bulb. And when it was manufactured, it was a secret formula that they used on the carbon filament. Ooh, a secret formula. Which is still secret today. Remember, this bulb has been burning continuously for almost 118 years,

so obviously no one has broken it open to figure out what exactly is going on. We do know that there is carbon involved. The carbon filament was so hard, they said it would reach the density of a diamond. What kind of magical light bulb lasts for more than 100 years? Yeah, I'm kind of hung up on the fact that this bulb has lasted for so long, and I literally have a light bulb in my bathroom that we put in six months ago when we moved in, and it died. So how do we go from the eternal light bulb to Run's dead light bulb? I mean, it's kind of a story about the whole light bulb business, actually.

So, OK, in 1879, Thomas Edison introduces what is the first commercially viable light bulb. And by 1901, when this long lasting bulb first turns on, the light bulb market is booming. Companies are innovating, and there are lots of little light bulb manufacturers all trying to make the best light bulb that they can. So that's kind of like the first link in the Pynchon story because there was this period where companies were making very durable light bulbs, a la Byron the Everlasting Bulb. So that is step one. Now, Marcus goes looking for the next link in the story. He wants to find Phoebus. The people out to get Byron.

Exactly. So he sees the name Phoebus come up in a few places, like it's in this one book. But then one of Marcus's friends has an idea. Why don't you check out the archives of Osram, which was the biggest lightbulb manufacturer in Germany. And there was a huge trove of documents right there in Berlin. So, Marcus goes searching in the German archive system you can see who was reading the files before you and you discover that nobody has touched these files for decades you're the first you're sifting through those original documents which is thrilling and in document after document, there it is.

The Phoebus Cartel. A cartel named Phoebus. The Phoebus Cartel. Yes. Do you guys remember how there were all those little light bulb companies competing to make long-lasting bulbs? Yeah. Well, by the 1920s, things have changed. The market has gotten really consolidated.

And there are a bunch of big light bulb companies that are basically controlling things. Compagnie des Lampes was governing the whole market in France. In Hungary was Tungsram. General Electric had a branch for the UK. Osram was in Germany. And that, of course, is more or less paradise for an industry. If you have no competitors at all, you can do everything with the consumers because they totally depend on you. Imagine it's the early 1920s. You're looking at a map of the world. You could go through and write

the name of a light bulb monopolist on the countries that they control. They all have their territory, which is great for them, but things aren't perfect. In fact, 1923, at least in particular for that German company, Osram, it's a pretty bad year for sales. And the head of Osram is this guy named William Meinhardt. He decides that he's going to get the whole crew together, all the monopolists in all the different countries, in order to rule the whole world of the production of light bulbs. It's late December, 1924, a couple days before Christmas,

in Geneva, Switzerland. I assume it's snowy. It's Christmas, we can imagine candles flickering in the windows. They meet in secret. It's a short meeting because they've sort of already been chatting about this plan already. And by the time they meet, they're decided. I can quote that if I would only be able to find it, zum Zwecke eines engeren Zusammenarbeitens, insbesondere zur Vermeidung. So, for the purpose of a stronger cooperation, especially in order to avoid a conflict because of competition and in order to increase sales.

They are forming a cartel, a secret group to control the market. The Phoebus Cartel. Why did the market. The Phoebus Cartel. Why did they call it the Phoebus Cartel? So the name Phoebus comes from the Greek god of light, also known as Apollo. Clearly saw themselves very highly. Exactly. You know, as these gods of light. They divide up the whole electrified world.

And the plan really boils down to this one essential restriction that they put in place. They agreed on exactly 1,000 hours. We intentionally have to reduce the quality of the lamps in order to increase sales. These light bulb companies, as part of their mission to sell more light bulbs, have conspired to make their products worse. To break the light bulb so that you have to buy more. Wait, what? They all pledge to do this? Yeah.

They decide we are going to reduce the lifespan of the light bulb from where it was hovering, which was around 2,000 hours. They decide we're going to get it down to 1,000 hours. How do you even do that? Well, they're experimenting with different materials. They're like changing the size of the filament. I mean, you have to imagine that for a long time, the engineers at these companies were trying to make light bulbs better. And what Marcus sees in some of these documents is engineers comparing notes, like going against all their training, and now trying to make the product

worse. It actually took a few years after the agreement was signed before they were even technologically able to make the light bulb as bad as they wanted it to be. So they've figured out how to make the light bulb fail. Yeah, totally. They break the light bulb. Also, obviously, like it's hard to sort of get everyone around the world to do this. Yeah. Because I mean, if you think about it, so in a cartel, in any cartel, you cheat, that might be good for you and bad for everyone else in the cartel, right? Like if one person makes a better light bulb, they could sort of take over. And the Phoebus cartel knows this.

So they set up a system that basically ensures that people are following the rules. They have light bulb testing rooms. Like in a library, bookshelves, but rather books. You have plug-ins for light bulbs. I've seen a picture of this. It's kind of magical looking. There's a guy in like a lab coat looking thing standing in front of these glowing rows. And all the light bulbs are numbered and they are burning.

And the cartel has fines. For the fiscal year 1929, they have penalties with 304,000 Swiss francs, which is quite a lot considering the late 1920s. I actually saw a graph of the lifespan of light bulbs around the world during this period. And the lifespan just goes down and down and down and down. Phoebus's plan is working. So they were able to get down to 1,000 hours and reach those goals. Did that translate into more profits, more revenue? Yeah, sales were going up. They were selling more light bulbs.

And the cooperation, like, it's kind of impressive, you know? Yeah, that's going up. They were selling more light bulbs. And the cooperation, like, it's kind of impressive, you know? Yeah, that's the thing I'm very, very surprised by. I mean, sinister, but impressive. I'm wondering, though, was there any upside for consumers? Well, I thought this was really interesting. Marcus says Phoebus helped move us towards a more unified system. He told me the reason that there is one kind of incandescent light bulb thread that screws into one kind of socket, that that is partly because of Phoebus, because they did this big coordination and it ended up coordinating that aspect too. So what ended up happening with Phoebus Cartel?

A few things happened. So first of all, General Electric, the big American light bulb company, they were involved in the Phoebus cartel in sort of a sideways way through their international subsidiaries. But they get into some legal trouble in the United States for alleged anti-competitive practices. And there's a judgment against them in 1953. In that court opinion, a bunch of information about Phoebus actually comes out. There's no way to know for sure, but this might be where Thomas Pynchon got his inspiration. But the real sort of death knell for the cartel was World War II. And it's for sort of obvious reasons. Global cooperation among these powers was impossible because they were at war with each

other. But I should make clear that for years, they did succeed at this whole bland obsolescence thing. They made their product worse in order to make more money. So are we at the end? Well, that is the end of this story. But as I mentioned, there are two. I came across another story from this same general time period where obsolescence changes shape and takes on an even more insidious form. After the break, the dark art of a different obsolescence. Thank you. Support for this podcast and the following message come from The Great Courses, offering a digital video series on the wisdom of history. Through 36 lectures, explore the people and events that have shaped the world and the lessons that can be learned to avoid repeating past mistakes. The Great Courses has a special offer for ThruLine listeners.

Order a digital copy of The Wisdom of History and get 85% off the original price, a $275 savings to get this offer, go to the great courses.com slash through line. Give us just about 10 minutes and up first gives you the biggest stories from NPR news. No need to stay glued to your phone or your television up first has you covered as soon as you start your day. And all it takes is 10 minutes.

Listen to Up First every morning from NPR News. Okay, Sally, so you have another obsolescence story for us? Yes, I do. This one takes place right out in the open, and it changed my whole sense of who the villain is behind planned obsolescence. The story starts around the same time that the lightbulb story does, at the turn of the 20th century. Lightbulbs are getting more popular in the U.S., and so are automobiles. One automobile in particular.

If you went to buy a car in the United States, you'd find a lot full of black Model Ts that all look almost exactly the same. Henry Ford said you could have it in any color as long as it's black. This is Giles Slade. He's the author of Made to Break, Technology and Obsolescence in America. Okay, so it's not the most glamorous ride, but what do you get when you buy Henry Ford's Model T? I mean, you can think of it as basically like a replacement for your horse. So the driving experience is really like driving a tractor through a field. These machines are very popular, but they're sort of like farm machinery.

They're not very luxurious. And like tractors, the way Model Ts were made and marketed, they were geared towards men. Yeah, not surprising. Uh, the men. They're everywhere. Ah, here we go. Here we go. Are you still here? So Henry Ford is just the start of this story. There's another man that I would like to introduce you to. His name is Alfred P. Sloan. This is the Sloan Foundation guy, right? The NPR funder. I mean, yes. So you've heard him because the Alfred P. Sloan Foundation. Same guy. And full disclosure, that foundation is one of Planet Money's financial supporters.

Okay, so Sloan. Like Henry Ford, Sloan is an electrical engineer. He graduates from MIT in 1895, and he becomes this serious, single-minded businessman. One journalist who wrote about him made this list of his character traits, including works every hour, has no hobbies, never reads, never drinks, never tells stories. Sounds like Rand. Not because we're friends. You want to take this outside, Ramteen? No, no. Don't take it outside. Sloan is a business genius.

So, you know, I don't know. Maybe that's like rent too. Thank you, Sally. You're so welcome. So in one of his first jobs, Sloan basically saves a failing company. And by 1918, he has caught the eye of General Motors. GM is maybe not failing, but struggling. Because the car business is tough in the 1920s. Henry Ford has already sold a car to like many of the people who would want to buy one. So why would they buy a car from General

Motors? Sloan had some ideas. First up, he introduced different makes and models. A luxury line, a kind of premium line, a sort of middle class line, four-door sedans for families, and then an economy line. The very cheap, you know, 1923 Chevy. All America is waiting and watching for the new Chevrolet. Have you heard anything about the new Chevrolet? I Wonder what the new Chevrolet is going to be like. And I heard the new ones are going to be even more comfortable. This is a total innovation for cars. This has not been done before. And then Sloan starts looking at the data on who is buying things. Not necessarily cars, just things.

Marketing and advertising firms began the first real demographic research in the teens. And what they discovered around 1920 was that women were actually spending the family money, making 85% of all purchases. But remember, the Model T was plain, simple, and made for men. So Sloan realized... He could sell more by doing a lot of things that Henry Ford would never think of doing, like making it a much more comfortable experience to start and ride in a car,

and also making it a much more aesthetics experience by, you know, having different colored cars. This last thing, colors, was huge. Because before this, cars were covered in a lacquer that just like did not hold colors all that well. Like it would sometimes like fade to yellow. It was just not really working. So black was the most practical, the most permanent.

But in the 1920s, this company DuPont, which was an investor in GM, they spent a fortune trying to create durable colored paint. And in 1923, they succeeded. In the next few years, as Sloan rolled out new models aimed at women, they were all different colors. Side note, this same paint breakthrough actually also leads to nail polish, as we know it. Nail polish and car paint were the same thing.

I know, I found this so funny. But yes, the same basic paint right there. Right, exactly. If you want. This color thing, I mean, this is Sloan's big gambit. He is wondering, can I sell the same basic machine just in a radically different package? We make the superficial things the key thing to the purchase. So the fins on the back, a better radio, new upholstery, all the sorts of accessories,

the kind of what would have been considered frivolous things, they become essential. Sloan said we want the consumer to buy a new car every year. That's Jacques Peretti, author of the book The Deals That Made the World. Over time, GM tries out different looks. They lower the car's body. They elongate the hood. It has crazy curves. They don't really change the engine, but eventually you can get the car in blue. Or red.

Or green. After the break, Or yellow. Or alfred sloan gets into our heads and stays there Support for this podcast comes from the John S. and James L. Knight Foundation, helping NPR advance journalistic excellence in the digital age. Okay, so at this point, Sloan is busy making cars sexy. But they weren't, like, breaking the car. This wasn't a FIBA situation, right? No, no, no, no, no.

The cars work. It's just that they were... Obsolescent, psychologically. Obsolescence in the sense of fashion. So it would seem radically out of date by year three, given all the new models. And so by 1927, Henry Ford was forced to stop production of his Model Ts and revamp his entire manufacturing process and come up with another model that would then compete with the General Motors products and so he came up with a new Ford called the Model A. That only worked for so long and eventually he was forced to bring out

different lines in different colors and basically copy GN who won the Consumer Award. To tell the waiting public of the car we have ready for them Chevrolet must have a new advertising theme. A theme that is militant. A theme that will impel people to act. A theme that will make owners proud to say, I bought one. Sloan had won the consumer war by ushering in a whole new style of warfare. This psychological obsolescence, which made the consumer want to buy something new even if they didn't necessarily need it. Sloan was actually one of the first big businessmen to use

the word consumer and he realized. Consumers want things but perhaps they don't want things quickly enough. We could make them want something, the newest new thing, a little faster. They shifted the idea of obsolescence from something done to an object to something we ourselves would choose. We want the newest thing. That was key. That's Jacques Peretti again. And he says Sloan was like this psychological master. He was figuring out all these new ways to really get inside our heads. And so when you bought the Chevrolet Bel Air,

it came with a catalogue for the new one that was going to be coming out next Christmas. So at the very moment of purchase, they've built in a chip, you know, inside your head that says, actually, this isn't going to be very good because you're going to want this newer one that's even better. And so there's a kind of built in disappointment with the moment of purchase. I think psychological obsolescence fashion depends on disappointment.

And that was intentional. And that was what Sloan's genius was about. Giles Slade says that the last part of the psychology in psychological obsolescence has to do with something that marketers and advertising writers began doing in the 1920s, selling products based on pride and shame. I mean, I get that. Like a new car was something you could be proud of. You'd want to drive down the street in it. And an old beat up one was something that, you know, you might be a little bit ashamed of. Yeah, that's exactly it. And Sloan takes these new ideas from advertising and builds those psychological triggers into the products themselves. He makes each new car more desirable than the last.

And this is what you see with the iPhone today. The iPhone. We have arrived at the iPhone. So, okay, Rand, Ramteen, when I tell someone that I'm doing a story about planned obsolescence, they almost always say, oh, a story about the iPhone. So let's talk about it. The battery thing. The battery thing.

So, okay, maybe you heard about this. There's sort of this conspiracy theory, this controversy. In 2017, iPhone users were noticing that after they had updated their software, their phones started to slow down, which is frustrating. Like an update is supposed to make your phone better. And some people felt like it was making the phone worse. So people started yelling at Apple about this, and Apple said, whoa, whoa, no, we're actually doing this for your own good. We're not breaking the phone. We're not trying to shorten its lifespan. But if we slow down some older phones, they don't crash as much. We're sorry we didn't mention it, and Apple offers a cheap battery replacement to sort of sweeten the apology. Well, I mean, this kind of sounds like planned obsolescence, modern-day Phoebus. I mean, look, Apple totally denies that they were doing this to drive upgrades.

But if you believe that Apple slowed down older phones in order to make people buy an expensive new phone, then, yeah, that would be a perfect example of planned obsolescence. And the thing is, we don't really know if that's true. There's a lawsuit about this right now in the US, also in France. France actually has a law against planned obsolescence. But the suits are still in progress. We don't know exactly how they'll turn out. And, you know, I mean, Apple has a reasonable case to make about why they did what they did. However, I think we can say for 100% sure that Apple is a modern master of a different

type of obsolescence, Alfred Sloan-style psychological obsolescence. This is the new iPhone, and it lets you do some pretty incredible things. If you don't have an iPhone, you don't have the retina display. This is iPhone 6S. Not much has changed, except a new color looks like this. It's rose gold. It's awesome. Hey Siri, show me photos of tortellini. I have to admit, for a long time, I was a sucker for this. I feel like when we find ourselves wanting these new phones, like really wanting them, like feeling like we almost need them, it's really tempting to think there's a sinister plot behind this.

Totally. I, yeah. Like, you know, we imagine that there's someone pulling the strings, right? Like some mustache twirling person in a back room or something. Exactly. And, you know, with Phoebus, it was true. So it's not that far-fetched. But with psychological obsolescence, though, it's like what Albert Sloan did. We can't blame that on some shady cartel. We all know that that's happening, right? And there's something inside us that's making us get in the car, drive to the Apple store, and stand in a long line. What, to get a new phone with facial recognition? I mean, right.

Like, we are cooperating, right? But, like, this isn't just the iPhone. I mean, this is baked into so many products, so many places in the economy. And look, GM used to be the biggest company in America. Over the past couple of years, Apple has often been the biggest company in America. Like psychological obsolescence is not just some cute, clever marketing scheme. And it's not just some trick that's being pulled on us. Like, I think I came into this story thinking of planned obsolescence as basically what Phoebus did, you know, something that companies do to consumers. But the most powerful kind of obsolescence is in our heads. We are choosing this ourselves. And I don't think we could stop

it if we wanted to. That's Sally Helm from NPR's podcast, Planet Money. By the way, Planet Money is an awesome show. You should listen to it all the time. Or at least twice a week when new episodes come out. That's it for this week's show. I'm Ramtin Arablui. I'm Randa De Fattah. And you've been listening to ThruLine from NPR. This show was produced by Randa and I. Our team

includes Jamie York, Jordana Hochman, Lawrence Wu, Noor Wazwaz, Yo-Yo Yotes, Michelle Lance, Semane, Semane, Nigery Eaton, Jordana Hochman. Lawrence Wu. Noor Wazwaz. Yo, yo, yo. It's Michelle Lance. Say my name, say my name. Grace Meising-Masomer. Nigery Eaton. Planet Money's editor is Brian Erstad. Their senior producer is Alex Goldmark.

And special thanks to Michael Waldman. Brian Merchant. David Farber. And Adi Kamdar. Thanks also to Anya Grunman. Chris Turpin. And Aida Porrasan. Our music is composed by Drop Electric.

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