Major's Cabin Grill
Frank McNamara and Ralph Schneider were having a great lunch meeting at Major's Cabin Grill, a busy diner right next door to the Empire State Building.
The two colleagues exchanged ideas amid a cacophony of clattering plates. Familiar, intoxicating smells from the kitchen, sounds and sights of hungry diners in a bustling city, and great flavors stimulated the conversation.
This was 1950 in New York city—a booming time and place for business. World War II had left the US in a position to do business with the rest of the world and to prosper domestically. While most of Europe and Asia had been decimated by war, much of the US had come out relatively unscathed. Now was a great time for business in the US.
The two Hamilton Credit Corporation executives had a lot of experience with lending credit to businesses and customers, and the universe was theirs to conquer. Nothing could go wrong today!
As the meal wound down and the waiter presented the check, a moment of dread washed over McNamara. His hand, reaching for his wallet, found only the smooth fabric of his suit. A wave of embarrassment flushed over him as he frantically searched his pockets. He had forgotten his wallet, and all his cash was at home, in another suit!
McNamara probably thought something like, “never let a good crisis go to waste,” because in that moment of panic and embarrassment at Major's Cabin Grill, a tiny seed of an idea was planted in his mind.
What if there was a way to avoid such predicaments in the future? What if there was a means to pay without cash or a specific store's charge card?
In the months that followed, McNamara let necessity be the mother of invention. He and Schneider worked with their attorney friend Alfred Bloomingdale to turn this idea into a reality. They envisioned a rectangular card that would fit into the sleeve of a wallet, just a hair larger than a business card. This card would allow for customers to sign for their meals, but pay for them later on.
In 1950, they launched the Diners Club Card, initially intended just for use in restaurants. The first batch of cards was issued to a select group of McNamara and Schneider's acquaintances, primarily salesmen who dined out frequently. The idea caught on quickly, and soon, the Diners Club had expanded its reach beyond Major's Cabin Grill to a network of restaurants and, eventually, other businesses.
Credit was nothing new. Ancient civilizations borrowed and lent out things long before the invention of money. Tally sticks and other analog methods to keep track of credit on a local basis were common all around the world.
However, what the Diner’s Club card did that was different was to make credit a universal concept. Prior to the 1950s, local businesses everywhere would often give credit to patrons on a case by case basis, but one store’s credit couldn’t normally be spent at another store.
This card changed all that.
For the first time, people could carry their credit in their pockets, and they could use it in more and more places. No longer did lines of credit need to be limited by geography and personal relationships.
The success of the Diners Club Card spurred the financial sector to innovate further. Banks and other financial institutions began to see the potential in offering their own credit cards, leading to the development of Visa, MasterCard, and other major credit card networks. Over time, credit cards evolved from cardboard to plastic, and now we may be on the verge of eliminating the physical card itself.
In retrospect, the moment McNamara left his wallet at home was not just a personal mishap; it was the catalyst for a financial revolution. It underscored the necessity for a more flexible, secure, and efficient way of managing personal finances, a need that the Diners Club Card met and that subsequent credit systems have continued to evolve and refine.
Major's Cabin Grill and Frank McNamara’s forgetful nature combined in 1950 to provide a moment of crisis that led to an innovative spark. This serendipitous discovery, like the microwave oven or the Palermo Stone I’ve written about before, reminds us never to let a good crisis (or moment of discomfort) go to waste.
I want to ask a question that inverts this story a bit today: do you carry cash anywhere with you any more? Can you remember your first credit card?
My first account in high school circa 1996 came with a debit card. I didn't use a credit card until many years later... probably 2009 when my bank was offering 4.5% cashback on everything. It only made sense to use it. Also, credit cards end up having better fraud protection than debit for some reason.
Anyhow, the main thing is I've never carried a balance forward or paid interest on a credit card.
I've been cash-free for years now. Denmark makes it very easy to use your credit card, smartphone, or smart watch everywhere, which is more than I can say for Germany. Whenever we visit Hamburg, I'm always surprised by how many places, including public train stations, insist on having cash still.