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How Our Days Became Numbered
Risk and the Rise of the Statistical Individual
By Dan Bouk The University of Chicago Press
Copyright © 2015 The University of Chicago
All rights reserved.
ISBN: 978-0-226-25920-8
CHAPTER 1
Classing
Thomas Scott Lambert delivered a lecture on 2 January 1878. He was by then well known as a speaker and writer on "popular" medical topics. His Popular Anatomy and Physiology, Adapted to the Use of Students and General Readers had, by the mid-nineteenth century, become an oft-used teaching text, joining prior works like his Popular Treatise on Bathing. He lectured widely and had held teaching positions at Young Ladies' Institutes in Brooklyn and Pittsfield.
On this winter afternoon, his large audience heard a very different talk in extraordinary circumstances. Packed into the Court of Oyer and Terminer in New York City, the crowd had come to hear Dr. Lambert sentenced for perjury in connection with the failure of his company, American Popular Life. He seized the moment to mount a final, public defense of his behavior, of his company, and of his pet medical theory: "biometry," a full-body phrenology encompassing the secrets to predicting any person's life span (and much more too).
The court clerk, having instructed Lambert to rise to receive his sentence, asked the convicted perjurer "what have you to say why judgment should not now be pronounced upon you, according to law?" At that point, according to a reporter for the New York Times, continuing its extended coverage of the sensational trial: "The prisoner's tall form bent somewhat, and he reached down on the table beside him for a thick roll of manuscript. He straightened himself up, and for one hour and fifty minutes addressed the court, talking rapidly, and, from an elocutionary or rhetorical standpoint, very well."
Lambert denied the charges against him. He had not knowingly signed a false financial statement. He had, if anything, he insisted, been duped by his underlings. Moreover, he deemed it suspicious that of sixty or seventy failed life insurers with sixty or seventy failed presidents at their head, only he and one other had been brought before the law, and both were the poorest—the least adept, he intimated, at bilking their companies for cash on the way down. New York's superintendent had singled him out unfairly, he persisted, while allowing other life insurers to "swindle" the public for millions of dollars without punishment. Lambert further argued that the superintendent felt threatened, like Lambert's competitors, by his innovative approach to life insurance. He read testimonials from Popular Science Monthly to support his claims to biometry's scientific status and practicality. Finally, Lambert begged for mercy so that his family would not endure further hardships atop his financial embarrassment.
Lambert's case and the story of American Popular Life's collapse packed courtrooms and fascinated readers who, in the 1870s, were anxious to see someone brought to justice for the cascade of life-insurer failures brought on by the Panic of 1873. A flood of Americans had bought life insurance in the prior decade. Life insurers had advertised themselves in glossy sales pamphlets proffered by eager agents as sources of security and stability, a security and stability made manifest in elegant, lavishly decorated offices and magnificent new edifices housing growing operations (as exemplified by Mutual Life of New York's gorgeous building at the corner of Broadway and Liberty, built in 1864). They offered protection from death's economic consequences and the certainty of a high rate of return on policyholders' premiums. Many Americans in the commercializing, industrializing North—very much aware of their own fragile mortality after the devastations of the Civil War and also increasingly at the mercy of a boom and bust economy—had bought the promises of security and opportunity that life insurers sold. Life insurance had become, in historian Sharon Murphy's words, "a pillar of modern middle-class life." But by 1878 experience had exposed the hollow cores of many such promises. Corporations supposed to ensure stability had become causes of distress. Someone had to pay.
Prosecutors in New York offered up Lambert. They levied a charge of perjury. But that was to some extent a matter of convenience—it was a criminal charge they thought would stick. Even as the prosecution set out to prove that Lambert knowingly lied about his company's financial status, the prosecution made their case into a broad demonstration of Lambert's mismanagement, his abuse of policyholders' trust. In prosecuting Lambert, they put a face on the broken promises of life insurance.
Lambert, even as his attorneys sought out every technical or formal avenue to win his freedom, directed his energies toward a defense of his approach to the prediction of individual fates and the making of risks. Thanks to Lambert, spectators eager to hear about corporate malfeasance were treated (whether they liked it or not) to an unexpected glimpse into an ongoing and unresolved debate taking place among life insurers—with state insurance commissioners and the courts involved too—over the propriety of using probabilistic, statistical methods to make risks. Lambert occupied an extreme position in such debates, as he would himself admit. He thought actuarial and statistical methods should be superseded by medical judgment in the making of risks, and he wore his unorthodoxy proudly. He believed, perhaps correctly, that his unorthodoxy played a part in his being brought to trial while so many other companies' executives suffered their failures in private. His critics looked at Lambert's eccentricities and saw only further evidence of either incompetence or hucksterism.
Lambert's extreme position made a certain sense. He was not (entirely) a crazy outlier—he had simply gone further than most of his fellow life insurers along a course that many of them were also following. Lambert's biometry served the more general purpose of individualizing life insurance—and individualizing life insurance was the goal of most life insurers at the time. So long as life insurers made contracts with individuals, life insurance could not help but be individualized to some degree. A risk, by definition, derived from an individual. But the extent to which individual characteristics determined the way a life became a risk remained always up for negotiation. To say that Lambert and his peers individualized life insurance is to say that they cared more and more about the factors that made people distinct and less about those that bound them together into masses.
Life insurers' drive to individualize manifested itself in a growing volume of "equity" talk. Equity, to a risk maker, meant fitting each life insurance contract as best as possible to each individual's projected life span. Life insurers pursued equity in deference to ideals of individual justice (so that the morally good and mortally blessed should not subsidize intemperate weaklings), but also because caring about equity allowed them to better compete for prime applicants: it allowed life insurers to attract sound lives with insurance offered at a lower price. In a packed marketplace, equity made commercial sense even as it appealed to a liberal sensibility. Equity could be achieved by changing the way that individuals, in the process of being made into risks, were grouped together and offered policy terms—by "classing." Leading life insurers often constructed classes based on the regions policyholders came from (the South having been a particularly disfavored area in the years before the Civil War), the types of policies they held, the years they bought those policies, their sexes, and most fundamentally, their ages.
Equity could also be achieved by changing the cost of insurance for already existing groups in accordance with each group of risks' statistical record of survivals and deaths—by "smoothing." Thus a company's actuary could mathematically review the mortality of the company's policyholders and suggest to his president and trustees an "equitable" cost structure for their insurance that charged more to the short-lived and less to the long-lived. Lambert joined many of his peers in looking for better roads to equity, but he left the pack in his conviction that classing should dominate, with little room left for smoothing in the making of risks. Lambert's approach to equity thus resisted—or, more precisely, claimed to resist—making either statistical communities or statistical individuals.
This chapter aims neither to prosecute nor to defend Lambert. Nor does it attempt to adjudicate the proper roles of classing and smoothing in life insurance. Rather, it uses Lambert's company, its failure, and his subsequent trial to investigate the tensions that existed between life insurance offices over the best way to individualize life insurance. As life insurers built larger and more diverse statistical communities within a competitive environment, they struggled to reconcile their commitment to broad groupings with their preference—shared by many in the shadow of what Emerson called the "age of the first person singular"—for exalting individuality. Most life insurers refused to make a choice: they hewed to statistical laws while simultaneously classing their risks. Out of the play between smoothing and classing, they made statistical individuals from a growing number of Americans.
As this chapter will show, the panic ultimately damned Lambert's approach to classing risks and his condemnation of the statistical individual. But the tension that his unorthodoxy exposed between preserving individuality and equity through classing while finding overarching regularities through smoothing found no easy resolution—that is why it deserves our attention. After the panic, that tension only became more pronounced. Those companies that survived—and many did not—learned any number of lessons about, for instance, the value of maintaining a large capital reserve or of keeping in good standing with regulators. But one lesson of particular importance to the study of making Americans into risks came in the form of a widespread realization by life insurers of the hazard they faced in selling policies to only the northern, male, middling classes. As a result, many life insurers decided to look toward other regional markets, workers, and even women and children, all in a quest to sell more policies and make new risks. Life insurers thus expanded the reach of their classing and smoothing systems, without settling on a right way to smooth, a right way to class, or resolving tensions between smoothing and classing. As more Americans fell subject to risk makers' efforts, debates over the proper way (if there was one) for a corporation to make a statistical individual and predict that individual's fate would only become more heated, and as subsequent chapters will show, more public.
* * *
Lambert founded American Popular Life in 1866, alongside twenty other companies that opened their doors the same year in the United States. With the Civil War finally ended and the shock of demobilization fizzling out, the American economy began a spectacular boom. The life insurance industry did too. War's carnage reminded the American middle classes of their own mortality and spurred them to consider purchasing policies. Increased commercial and industrial activity also made it seem more important to many striving Americans—whose wealth came from their hands or heads, rather than from land or property—to protect their families (or secure their debts) in the event of their death. It did not hurt that life insurers also sold their policies as an easy way to invest (indirectly) in the raging economy.
"Whole life" insurance policies offered their purchasers protection at a fixed rate (usually with an annual premium payment) for their entire lives—the premium primarily dependent on the age of the applicant and inversely proportioned to the applicant's expectation of life. In the oldest nod to equity in life insurance, older applicants paid more, younger less (in proportions dictated by a "life table" or "mortality table" like that in figure 1.1). Most whole life policies came with "dividends" announced every few years, or sometimes yearly, as a share of the company's profits handed back to policyholders, which added value to policies or could be used to pay upcoming premiums. When a policyholder died, the insurer promised to pay the entire face value of the policy—usually around $1,000–$5,000, but sometimes much more—to a beneficiary.
Whole life policies drove industry growth as the amount of insurance in force increased by a factor of five from 1865 to 1870 and the number of policyholders grew into the hundreds of thousands by the mid-1870s. At the same time, new insurers proliferated, eager to meet rising demand and probably even more anxious to grab premiums and turn them into investments in a rebuilding, westward-looking nation's vast market for mortgages and railroad debt. The number of companies tripled from about 40 before the war to a peak of 129 in 1870. Of those 129, only 6 boasted at least $100 million of insurance in force—with Mutual Life of New York (MONY) in a class by itself at $242 million—while 14 firms had between $30 and $70 million in force, with the remaining mass of companies mainly doing business on a much smaller scale. In that mass of small upstarts, American Popular Life had plenty of company.
But even in such a crowd, American Popular Life stood out. One of its directors later admitted "that considerable money had been invested in advertising under the peculiar style of the President, by literary documents and circulars setting forth his theories." In one such book, Sources of Longevity, the reader encountered two essays by Lambert on the principles of "biometry" and its application to life insurance, two medical essays having won a hefty $500 prize, and only in the final pages a short advertisement for the company itself. American Popular Life sold more than insurance; it sold a way of thinking about lives.
Biometry complemented phrenology. While phrenology promised that scalp measurements could provide insights into the nature of individual minds, biometry promised to use a wide range of medical measurements and inquiries to reveal the mysteries of individual bodies and lives. Skilled practitioners of biometry could, Lambert promised, help with "the selection of vocations, of education, of partners, either in business or for life—in fact in all the most momentous concerns of life." Biometry, like phrenology, depended on "a harmony, a perfect relation between all parts" of the body, whether internal or external. Lambert argued that "a difference in constitutions ... should be observable at the surface of the body," and thus that careful observation and measurement of superficial characteristics could speak to inner vitality.
The correspondence of the superficial to the fundamental allowed Lambert to overcome a major problem he faced in predicting longevities. He considered ancestry the most important determinant of life span. "Blood," rather than "climate" or hygiene—factors more amenable to medical thinkers with a statistical bent—made for long lives. Lambert classified whole peoples by their longevities: Laplanders, Esquimaux, and citizens of Zurich suffered notably short existences, he asserted, while Jews, Welsh, Scots, Italians, and New Englanders lived very long indeed. Each individual's family history mattered even more. But therein lay the problem: "Most persons do not know the longevities of their ancestors, nor the diseases of which they died," complained Lambert. So, lacking oral family histories, Lambert resorted to reading family longevity off of individual bodies.
Upon seeing the ideal body, Lambert argued, "There need not be any hesitation in concluding that the ancestry on both sides were naturally long-lived." He sketched out such a body for his readers: "The members of the body are well proportioned, the trunk relatively long, the orifice of the ear decidedly below the eyebrow and distinct from it" and so on in minute detail. He favored large noses, "true hazel" eyes, lips and gums "of a good color," "well colored" skin, sound teeth, and a broad head. One of the essays Lambert published cited the soul of quantification himself, Alexander von Humboldt, as the model individual from the perspective of longevity—with his small stature, "remarkable length of body, mounted on equally remarkable short, small, lower limbs." Another essay by a prominent New York doctor, John H. Griscom, offered an even more finely drawn "Portraiture of a Man destined to Longevity."
(Continues...)
Excerpted from How Our Days Became Numbered by Dan Bouk. Copyright © 2015 The University of Chicago. Excerpted by permission of The University of Chicago Press.
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