On this day in economic and financial history...
The Burj Khalifa, the tallest man-made structure in the world, first opened to the public on Jan. 4, 2010. At 2,723 feet, the massive three-pronged crown jewel of Dubai's new downtown area stood more than 1,000 feet taller than the Taipei 101 tower, which had been the world's tallest skyscraper since 2004. The building's cost, at about $1.5 billion, resulted in astronomical costs to prospective tenants, who paid up to $4,000 per square foot for office space and $3,500 per square foot for residential apartments at the height of its popularity.
Unfortunately for the Burj Khalifa's developer and for Dubai, this coincided with one of the worse periods for the global economy following the worldwide financial crisis that began in 2007. The skyscraper had been commissioned in 2004 and thus underwent the latter half of its construction while much of the world was mired in a deep recession. This brought renewed interest in the Skyscraper Index, which had been created in 1999 around the claim that heightened construction of ultra-tall buildings tends to coincide with economic crises. The Index notes the Empire State Building's construction proceeding through the Great Depression, the World Trade Center's 1973 completion coinciding with the collapse of Bretton Woods, and the construction of the Taipei 101 commencing just before the burst of the dot-com bubble. The Burj Khalifa is only the latest example of this trend, according to the index, which points to a number of upcoming skyscraper projects in China and India as evidence of the next big crash.
The Burj Khalifa may be an excellent symbol of man's ego and ambition, but with nearly four years of lead time between the beginning of construction and the crash of 2008, it turned out to be virtually useless as a predictor of impending economic meltdown. Economics professor Jason Barr of Rutgers University put the Skyscraper Index through a rigorous analysis in 2012 and came to the conclusion that it suffers from the post hoc -- i.e., correlation without causation -- fallacy. There have been 26 recessions since 1890 (where the index starts to track skyscrapers) but only 14 record-breaking new buildings. There was no apparent relationship between the skyscrapers' construction periods and the inevitability of an impending recession.
Kicking the market up a notch
1933 started with a bang for the Dow Jones Industrial Average (DJINDICES:^DJI). After a weak open on Jan. 3, the Dow shot to a 5.2% gain on Jan. 4, 1933, with total market volume barely exceeding 1 million shares. Traders were in a great mood that day, still basking in the residual glow of President-Elect Franklin D. Roosevelt's victory, but also buoyed by improvements in railway traffic, a sure sign of economic recovery.
This would prove to be the best trading day of January 1933, but it was by no means an aberration. The year of Roosevelt's inauguration still stands as the best modern-era (post-1929) year in the Dow's history. The 67% gain the index posted that year has only ever been bested by 1915's 82% gain, which occurred in one of the lowest-volume environments in American market history.
Thomas Edison wasn't just a brilliant inventor whose creations formed the cornerstone of General Electric (NYSE:GE). He was also a ruthless businessman who would go to any extreme necessary to crush his competition. On Jan. 4, 1903, Edison added elephant electrocution to his roster of underhanded stunts.
Topsy was an elephant of the Forepaugh Circus on Coney Island. Maltreatment by the circus workers had prompted Topsy to kill three men, including one abusive trainer who fed her lit cigarettes. Authorities made plans to put Topsy to death, at which point Edison stepped in to suggest electrocution via alternating current, a new method of electric delivery popularized by Nikola Tesla and used by GE competitor George Westinghouse. Edison captured Topsy's highly public electrocution by 6,600 volt AC current on video, and later distributed to audiences throughout the United States. The video still exists on the Internet for curious (or morbid) searchers.
Edison's campaigning couldn't stop the eventual victory of alternating currents, which GE itself quickly dominated after its founding. Westinghouse Electric fell behind in its battle with GE and underwent a series of bankruptcies, restructurings, and acquisitions during the early 1900s. A complex series of acquisitions and divestitures were to follow in the decades thereafter until it finally became the broadcasting corporation CBS (NASDAQ:VIAC). The Westinghouse Electric that exists today as a utility company is majority-owned by Toshiba and licenses the name from CBS.
Who killed GM's electric car?
General Motors (NYSE:GM) announced on Jan 4, 1996 that it would sell an electric car by the end of the year. This was a notable development in the automotive world, which had seen no serious electric-vehicle developments since the 1930s. The EV1 had already run up $350 million in development costs since GM had first presented an electric concept car called the Impact in 1990. GM promised a range of 70 miles in the city and 90 on the highway at a cost in the $30,000 range. However, GM executives were pessimistic that the car would ever recoup its costs.
The EV1 would go on sale that fall, and by the end of the EV1's short life, the total costs of its program (including marketing and sales expenses) had ballooned to more than $1 billion. Only 1,117 EV1s were ever produced. GM recalled the leased vehicles due to the purported costs of maintaining the necessary maintenance infrastructure for so few cars, making the remaining EV1s in existence extremely rare and unexpectedly valuable; a used EV1 sold for nearly half a million dollars in 2008. This was the same year that Tesla Motors' (NASDAQ:TSLA) groundbreaking Roadster first went on sale, and that vehicle has gone on to notch more than twice as many unit sales as GM's EV1.
The EV1 was not without controversy. A 2006 documentary called Who Killed the Electric Car? cast a harsh light on GM's development and promotion of the vehicle. Its claims that GM actively undermined its own efforts led the company to issue a stern response on its blog pointing out that a lack of consumer demand was the real death knell. GM's later efforts, particularly its highly public promotion of the Chevy Volt in the face of intense conservative media pressure, do much to solidify the company's electric-vehicle bona fides.