George Armour

George Armour was a Scottish American businessman and philanthropist known for his contributions to the global distribution process for commodities. He was credited with developing the grain elevator system, establishing grain trading standards as director and president of the Chicago Board of Trade, founding the Chicago, Burlington and Quincy Railroad, Commercial Club of Chicago, YMCA of Chicago, Merchants' Loan & Trust Company, the precursor to Continental Illinois, and the Chicago Academy of Fine Arts which later became the School of the Art Institute of Chicago and Art Institute of Chicago. He served as a director of several notable companies during his career.
As founder of Armour, Dole & Co. and other firms, he created the first extensive system of large mechanized grain elevators in Chicago and thus enabled the shipment of grains from the American Midwest to destinations all over the world. During his tenure, the CBT standardized the grading and selling of grains and established the first commodity futures markets. He was "popularly known as the father of the grain elevator system" or as a "rapacious, blood sucking insect."

Early life

George Armour was born on 24 April 1812, in Campbeltown, Scotland, on the Mull of Kintyre.
Armour was a wheelwright and worked his way across the ocean as a shipboard cooper or carpenter.
In 1834, Armour with his brother John and cousin James a shoemaker, left Campbeltown and made a voyage to Ottawa, Illinois.
Soon after their arrival in Ottawa, the brothers went north to what was then known as the "Argyle Settlement" near Rockford, Illinois.
The brothers built a 14' x 14' cabin in hopes of establishing a timber and prairie land claim, but "farming was not to their liking."
In 1836, while on a trip to back to Scotland, the brothers helped their friend John Greenlee and his family escape from Campbeltown in order to avoid Greenlee being arrested by one of the Duke of Argyll's tax collectors.
After the escape, the brothers furnished the Greenlees with passage to the US and set up the Greenlees in the cabin they had built in the Argyle Settlement. Subsequently, Armour lived in Joliet and Lockport, Illinois, and entered the business of merchandising.
At the time, both cities were expanding rapidly because of the construction of the Illinois and Michigan Canal.
Lockport became headquarters for building the canal in 1837.
Later Armour became a sub-contractor with George Steel. Steel was born in Forfarshire, Scotland in 1797 and arrived in Chicago in 1837. Steel had come to the US on contract for building a section of the Illinois & Michigan Canal but the work had stopped in the aftermath of the Panic of 1837.
Steel and Armour built a section of the Illinois and Michigan Canal sometime between 1836 and 1848.
They also built a portion of the CBQ. The railroad was constructed starting in March 1848 and was completed in 1853.
Armour was a contractor for 16 miles of road grading for the ROCK which started construction in 1851 and was completed by 1854. Armour most likely also worked on the Galena and Chicago Union Railroad – the first railroad built west of Chicago and a highly profitable venture that established William B. Ogden and George Smith as major figures in Chicago history. Smith operated a "wildcat bank" that issued scrip which was used to pay workers – including Armour's employees.
In the early 1850s, Armour resettled in Chicago. His brother John Armour remained in Ottawa where he became a successful businessman. Of John Armour's many investments, one that remains is Armour's Warehouse built in 1861. In contrast, George Armour – in the following thirty years – went from being a foreman to being one of the richest and most influential businessmen in America.

Prospering in Chicago

In Chicago, Armour reunited with George Steel – who had become a prosperous Chicago businessman. In 1852–1853 Steel was president of Chicago Board of Trade. In 1856, a new three-story building was erected on Steel's site: an office and warehouse located at the foot of LaSalle Street on South Street and this became the first permanent home for the CBT. Armour was an early member of the CBT and also commenced what became his signature venture – the erection and management of grain elevators.
Prior to Armour's efforts there had been a small number of what may be termed "grain elevators" constructed in the United States. Dart's Elevator was the world's first steam-powered grain elevator. It was designed and built by Joseph Dart and Robert Dunbar in 1842 in Buffalo, New York.
The first large steam elevator ever built in Chicago for handling grain from railroad tracks was on the North side, on the Chicago River, west of Wells Street. It was built by George A Gibbs and E W Griffin of Gibbs, Griffin & Company in 1854. It might also have been known as the Chicago & Galena Union Railroad Elevator.
In 1854, George Steel took over a warehouse and built another grain elevator just west of the Gibbs, Griffin and Company warehouse. It was capable of operating from the canal as well as the railroads. The elevator had a capacity of 100,000 bushels and was located at Franklin and River streets – in the Chicago & Galena Union Railroad track on North Water Street.
In that year Steel's warehouse burnt down and Steel sold the property to Wesley Munger and George Armour. Munger had owned a small mill at Waukegan, which had burned down. As Munger & Armour, they built the first modern, steam-driven grain elevator in Chicago. The grain elevator was completed in 1855 and had a capacity of 300,000 bushels.
Armour's influence as a Chicago businessman grew and Armour was first elected a director of the CBT in 1856.
In 1860, he joined with Charles Sydney Dole, James Henry Doyle and Wesley Munger, together running Armour, Dole & Co. The company operated grain elevators at the depot of the CBQ with a capacity of 850,000 bushels. After the American Civil War, Armour, Dole & Co. remained among the city's leading grain warehousers. Their elevators had a combined capacity of 2.1 million bushels in 1871. By the early 1880s, this figure had grown to 6.3 million bushels.
In 1863, Hiram Wheeler entered the Munger & Armour, which then became Munger, Wheeler & Co. Armour remained a partner. The company owned large grain elevators next to the depot of the Chicago & North Western Railroad.
At the Chicago Canal Convention of 1863, Armour was a member of the CBT delegation.
The Convention proceedings called for laws and budgets to widen and deepen the Illinois and Michigan Canal and thus make it possible for ships to sail between the Great Lakes and the Mississippi River.

Enablers of success

In order to succeed with a vision of moving of very numerous bushels of grain, Armour needed more than steam powered conveyor belts. He needed:

Products that could be graded for quality according to industry-standards
Banks that did not fail and supported stable currencies
Futures exchange where contracts to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future
Industry-standard grading systems for grains

Through the 1830s sacks or barrels or even buckets of grain were hoisted off vessels and into warehouses by manpower – sometimes even using bucket brigades. The amounts of grain being moved in a contract were measured in the thousands of bushels. By the 1840s, a certain amount of bulk transport was taking place and grain was stored in individual bins according to source in warehouses and the heavy lifting was done by block and tackle pulled by horses. By 1848, the horse was replaced by a steam engine, but not the block and tackle. The amounts being moved were in the tens of thousands of bushels. If the transport of grain was to move into the hundreds of thousands of bushels then changes were needed.
When grains from multiple sources were to be co-mingled in silos holding hundred of thousands of bushels, then methods of grading and inspecting the quality of the grain are required. The CBT had been concerned with grading and inspecting products since the day it was founded. In 1856 Armour was elected to the Board of Directors of the CBT. In the same year, his partner Charles Dole was charged to set up a committee with the purpose of establishing grades by the separation of wheat into three industry-standard grades. By 1858, the grading and inspecting standards were established and compliance mechanisms set up. In 1859, the CBT received a state charter that enabled it to enforce grading standards and inspections with a legally binding basis.

Banks that do not fail

In banking, the period 1837 to 1863 is known as the "Free Banking" era. It was a period of "Wildcat Banks". In the Panic of 1837, out of 850 banks in the United States, 343 closed entirely, 62 failed partially. If Armour's business was to prosper, he needed a bank that would not fail. In 1857, along with Cyrus McCormick, who invented the reaper, and Chicago's first mayor, William B. Ogden, Armour was a founder and, later, elected director of the Merchants' Loan and Trust Company. The book published by MLTC in 1907 titled Fifty Years of Banking in Chicago identified the banks' early mission:

Fixed pricing by using futures contracts

In 1865, the CBT recognized the futures contract as a legitimate feature of trades and full rules were first established. Given the increase in pricing certainty around the globe, Chicago grain elevator operators became free to construct grain elevators with capacities of millions of bushels.

And more

While the above three conditions may have been paramount in developing the grain warehousing business, there were a number of other hurdles to be cleared. The technology for moving grain had to improve and he development or trains, vessels and conveyors continued its rapid progress in typical nineteenth century fashion. Perhaps the most significant less obvious aspect was that the site and logistics planning for the warehouses needed to be just right: warehouses needed to have navigable water on one side and railroads on the other side. The navigable waters needed to give vessels access to any other port in the world. The railroads needed to reach tens of thousands of farms to the west as well to the major consumer cities on the East coast.
Armour fully recognized the site and logistics planning needs. He was a supporter of the railroads and was a stockholder in the CBQ, the Chicago & Northwestern, and the Chicago Milwaukee and St Paul Railroads. Later he was a director of the ROCK. He was probably one of the few shareholders that had actually laid track. On the canal side, at the Chicago Canal Convention of 1863, Armour was a member of the CBT delegation – most likely one of the few members that had actually dug a canal.
Because of the likelihood of dust explosions, grain warehouses were frequent venues for fires. Armour also foresaw the need for fully funded insurance. He was a local director of the Liverpool & London & Globe Insurance Company, a director of the Chicago Mutual Insurance Company and a director of the Merchants Insurance Company.
By 1870, the remaining impediments to growth were less about the technology and more about legal and political matters. In 1870 the Chicago Tribune reported: