Though he never worked for GE, no story of GE would be complete without its Wizard, Thomas Alva Edison. The Old GE embraced that ancestral Wizard. The New GE downplayed him. Neither, however showed much interest in his actual connection to their company. This first chapter explores that question. What was the real connection between that Wizard, Thomas Alva Edison, and General Electric?
Thomas Edison was born in 1847 to a middle class family in an Ohio town on the shore of Lake Erie. He grew up active, curious, ornery, and ambitious. He was expelled from grade school as unteachable, then capably home schooled by his mother. As a young boy, he sold newspapers on a train and set up his chemistry lab in a boxcar. He learned telegraphy from a railroad employee whose young son Edison had saved by pulling him off the tracks just before a train's passage. Edison then mastered electricity while traveling the country as a telegrapher.
It is sometimes said that Edison was uneducated. Another way to look at it, however, is that he got his bachelor's degree from Western Union and his Ph. D. from Michael Faraday. Working on Western Union's telegraph system he got a better education in electricity than he could have gotten at any U.S. college. Taking Western Union equipment back to boarding houses in cities where he worked, he repeated the experiments described in Michael Faraday's book Experimental Researches in Electricity. (12)
General Electric rarely acknowledges how completely its electrical century of 1886-1986 rests on work done by Michael Faraday and a handful of other scientists in the decade 1821-1831. They worked separately, connected by an emerging practice of scientific publication. They were propelled by curiosity and funded frugally by non-profit institutions or their own resources. They gave little or no thought to the impact of their research on their own financial future, or on creating new industries. Faraday, like Edison, was self educated and a visual rather than a mathematical thinker. In 1831, he made one of the greatest discoveries in history when he discovered how to use magnetism to generate electricity.
That observation, now called electromagnetic induction, revolutionized science. It also initiated a rarely occurring socio-economic mechanism called the innovation assembly line. The analogy is to a factory assembly line. In this mechanism, the processes of discovery, invention, engineering, manufacturing, marketing and use occur sequentially in that given order like the linearly arranged operations of a factory. Most of history's innovations did not happen by that mechanism. "New technology,", historians of technology Donald MacKenzie and Judy Wacjman wrote
typically emerged not by flashes of disembodied inspiration but from existing technology by a process of gradual change or new combinations of that existing technology. (13)
Gradual change would, however, have been extremely unlikely to develop Faraday's wholly new way of converting mechanical to electrical energy. The electric power industry is one of the few industries that emerged directly, if with century-long slowness, from a sudden, curiosity powered, giant conceptual scientific leap. Joining Faraday in taking that leap was a small group of mainly European scientists such as Hans Christian Oersted of Denmark, Andre Marie Ampere of France, and perhaps the only significant U.S. participant, Joseph Henry of Albany, NY.
Faraday made the key discovery in 1831. He showed that it was not magnetism alone, but a change in magnetism, that caused an electric current to flow. Push a magnet through a loop of wire and there follows a brief burst of electric current in the wire. Without that observation, no electromagnetic induction, no electric power industry, and no GE.
Over the following decades, that discovery sparked inventions, most notably the electricity generator. Other sources of electric current, such as the battery, had earlier been invented. So had primitive versions of the electric light and the electric motor. The battery would, by the 1840s, prove useful in such applications as telegraphy and electroplating. The electric light and motor, however, remained through the first half of the 19th century only potentially useful. Running them with batteries proved far too expensive.
The electric generator, based on Faraday's discovery, required a human generation of improvement to become useful. That improvement was mainly engineering, which has been defined as doing for one dollar what any damn fool can do for two. One might add being able to do at the hundred kilowatt scale what any damn fool could do at the hundred watt scale, then doing reliably in actual application what any damn fool could do erratically in a demonstration.
By 1870, a lot of the engineering of electrical generators had been done, mainly in Europe.The results were diffusing to the U.S., a nation just getting started at financing capital intensive industries. So when Thomas Edison moved from corporate telegrapher to independent inventor in the early 1870s, and then moved to New York City, he was in the right place at the right time.
By repeating and analyzing Faraday's experiments, Edison had gained a scientific understanding of electricity. He then proceeded to put that understanding to work. His big break in inventing happened on Wall Street when he first fixed, and then manufactured, the electric stock tickers the financiers needed to follow the market. It was then, as a still boyish looking Harry Potter of invention, that he got that nickname the Wizard.
In 1876 he decided to devote full time to invention. He and a dozen or so skilled associates set up in Menlo Park, New Jersey perhaps the world's first, and perhaps the world's all time most productive, invention factory. Edison almost immediately made his most creative invention, the phonograph. He would go on to get more than 1000 patents. He did not, however, invent the one thing most people think he did. That is, he did not invent the light bulb.
Instead, he was in part inspired to work on the light bulb in 1878 after visiting an electric light factory. The factory was in Connecticut where William Wallace, the innovative son of a brass maker, and Moses Farmer, an independent inventor, were improving an earlier invention called the arc lamp. It was sort of a long-lived lightning bolt. It was already in 1878 in commercial use for lighting city streets. It was, however, too bright for use inside houses.
Another form of electric light had also long since been invented. It had a lesser brightness that made it suitable for household use. It was simply a wire in a glass bulb, heated by a current of electricity to glow, or, to use a fancier word, to incandesce. Unfortunately, unlike the arc lamp, this incandescent lamp had too short a life to be useful. The same electric current that caused the wire to incandesce soon caused it to melt or burn out.
Edison proclaimed that he could develop a practical electric lighting system based on a longer lived incandescent lamp. In 1878, before he actually knew how to accomplish this feat, his conviction was embodied in the Edison Electric Light Company. It was backed by an unusually large capitalization for an 1870s start-up, a par value of $300,000. An initial $50,000 was put up by an unusually eminent group of backers such as William Vanderbilt, President of the New York Central Railroad, Norvin Green, President of Western Union, and Egisto Fabbri, a partner of J. P. Morgan in the nation's pre-eminent bank, Drexel, Morgan & Co. (14)
At Edison's side stood his legal adviser, Grovesnor Lowry. He had been Edison's patent attorney. He had convinced Edison to drop an early effort to manufacture stock tickers and concentrate full time on invention. Now he was helping Edison make that focus pay off. (15)
In just one year, in 1879, Edison achieved what he had promised. He demonstrated the essentials of the modern incandescent lighting system. Every part of that system had been invented earlier. The dynamo that generated the electricity, the copper wires that sent it to and from the lamp, the carbon wire that heated up and glowed, and the glass bulb enclosing that wire in a near-vacuum all were previous inventions. (16)
What Edison added started with economics. He first computed what incandescent lighting had to cost to compete with the present best lighting method, gas lighting. Then he determined the specifications of the system and its parts needed to achieve that cost. Those specifications were, across each light bulb a voltage of about 100 Volts and through each bulb's filament an electric current of about 1 Ampere. This required a filament resistance of about 100 Ohms. Then he developed the system meeting those specification, and chose the circuit type needed, parallel rather than series.
In a word, he did innovation. He turned a bunch of components that had already been invented but were only potentially useful into an indoor electric lighting system that could be, and soon actually would be, used. In November, 1879, Menlo Park shone with the glow of prototypes of the kind of indoor electric lights that would be used throughout the world through the twentieth century.
How could the people who put up the money cash in on this innovation? Those with the least patience could watch as publicity drove up the stock price of the Edison Electric Light Company and sell out. Those somewhat more patient could finance the first successful Edison product: "isolated systems", complete electrical supply and lighting systems for a rich person's home (J. P. Morgan's was the first), or for such sites as a factory or commercial establishment. Fewer were willing to follow Edison on the quest to light and power the world. "When I asked them to furnish capital for manufacturing shops" Edison would later recall
They were sorry (Wall Street sorry) that they could not see their way clear, as it was an untried business, etc. I pawned my future, and with a few associates funded the necessary shops. (17)
In those necessary shops, Edison's expanding work force built the systems that put his lighting system to work. In the fall of 1882 Edison lit up a square mile of New York City with electricity produced in a single building, the Pearl Street station. It was the ancestor of the electric utility industry of today. In that year he made his last major contribution to electric power technology, his three wire system. Turning on the first commercial three wire system at Sudbury, PA on July 4, 1883, to the accompaniment of the roar of cannon and the bursting of fireworks, celebrated the ending of the peak years of Edison's electrical innovation.
In 1884-1885 his time of triumph became a time of troubles. They began as business troubles, as Edison fell out with his financial backers, and even with his adviser Lowry. They became personal troubles, as his wife became ill, both physically and mentally, and died of a brain tumor in the spring of 1884. The Wizard himself was changing from a youthful Harry Potter to a greying Gandalf. He put on weight, and suffered increasingly from a bad stomach, the taste of too many cigars,and then, in 1885 persistent illness.
Recovering his health, Edison began the year 1886 by remarrying. His second wife Mina came from an upper middle class family. She encouraged him to start enjoying the social amenities that his achievements had earned. The couple took a long honeymoon. They bought two mansions, one in New Jersey and one in Florida. When the Wizard got back to work, in mid year, he had a new goal. That was to build, in West Orange, New Jersey, the greatest laboratory in the world. This laboratory embodied a sharp turn he planned to take in his inventive career. As he would put it in an 1887 letter, he was building that laboratory to produce "new and useful inventions" not "big cumbersome things like a system of electric lighting." He added that "My ambition is to build up gradually and surely a great industrial works in the Orange Valley [of New Jersey]." (18)
He also added in that same letter that "I do not manage shops myself as I am incompetent for that class of work but I do know how to select the right kind of men to do it for me." These right kind of men mainly included long time inventive associates, such a Princeton trained physicist Francis Upton and skilled craftsmen Charles Batchelor and John Kruesi.
The most recent addition to Edison's inner circle was different. Samuel Insull was young, only 26 in 1886. He grew up in London in a lower middle class family. He initially worked as a clerk-stenographer. He moved upwards rapidly, ultimately to a post in the Edison companies' British office. He moved on to the U.S. in 1881 to take up the post of Edison's private Secretary. He quickly made himself indispensable. (19)
In the summer of 1886, those managers of the Edison empire had a new problem: a union. The problem was most acute at the company run by Charles Batchelor, the Edison Machine Works, successor to the machine shop at Menlo Park. The machine works was an independent company. Thomas Edison owned the majority of shares. It was housed in a former iron works on Goerck Street in New York City, in an area an Edison associate described as "an 'east side' region of decayed tenements and tumble down buildings." (20)
There some 300 workers, many of them skilled machinists, made parts for and assembled Edison's dynamos. By 1886 it was already apparent that the Goerck St. works would be too small to meet the growing demand for electrical machines. Bachelor had, in the spring of 1886, taken an option on a property in Brooklyn.
In the summer of 1886, workers across the nation rose up in strikes, rallies, and demonstrations. Those addressed agendas that included the eight hour day and recognition of a rapidly growing new national union, the Knights of Labor. Around these realities swirled vastly exaggerated rumors of anarchist and communist conspiracies. In May of 1886, in Chicago's Haymarket Square, the throwing of a dynamite bomb into a line of policemen, with fatal results, seemed to verify those conspiracy theories.
The May, 1986, activities of the Knights of Labor at the Edison Machine Works in New York City were peaceful. They brought a list of demands regarding wages, hours, and other workplace issues to works manager Charles Batchelor. He was willing to compromise on wages and hours (reducing the work day from 10 to 9 hours with no reduction in pay), but not on recognizing any union, or any other compromise of management prerogatives. The workers went on strike. After two weeks Bachelor met with the strike committee and made a further concession on wages, after which the strikers returned to work. The Edison management seems to have taken a lesson from the incident. Perhaps moving the Machine Works to Brooklyn was not far enough.
Aware of this situation were two machinery salesmen and Edison associates, George Place and his brother-in-law Harry Livor. Their territory as salesmen included a small machinery industry center, Schenectady, NY. (21)
It is located 180 miles north of New York City, near the state capital of Albany. It is on the south bank of the eastward flowing Mohawk River, just west of where a waterfall blocks river travel to the Mohawk's junction with the southward flowing Hudson River. This had marked Schenectady as a transportation break for the region's indigenous inhabitants. Under the Dutch, then the British, and then the Americans, its role as a transportation hub widened to include the Mohawk River west of the city. That prosperity was interrupted when the Erie Canal replaced the river. Then prosperity was revived by Schenectady's choice as terminus for some of the earliest U.S. railroads, and then for the building of locomotives.
In 1882 the Schenectady Locomotive Works was a significant competitor to the industry leader, Baldwin of Philadelphia. In that year, the recently demoted long time chief locomotive designer of Schenectady Locomotive joined forces with Schenectady County's richest man to launch a second Schenectady locomotive making company. Two modern factory buildings were built on the Schenectady flats beside the Mohawk River. Then the new company ran into the 1884 business depression. It never built a locomotive, and went out of business.
Place and Livor, in May, 1886, put together their knowledge of the Edison Machine Works' need with this Schenectady opportunity. In a few weeks, they had not only brought their idea of buying these abandoned buildings to Charles Batchelor, but had made an offer for the buildings on behalf of the Edison Machine Works. By June, Edison had set aside $42,500 for the purchase. This was a great bargain. Ever cash short, however, the Edison team did not close the deal without a money saving twist. They put out the word that the sellers were demanding $42,500 while the the Wizard would pay no more than $35,000.
Schenectady's city fathers panicked at the thought of losing this lucrative and prestigious new industry. One of them, merchant Robert Furman, organized a fund raising rescue. Dozens of Schenectadians pitched in, at a few hundred dollars each from the wealthy to ten or twenty dollars each from owners of small stores. Even Charles Ellis, president of the local Locomotive Works, made a contribution, despite the likelihood that the new works would poach his skilled machinists. Nor did it bother the Schenectadians that they were getting nothing concrete for their contribution: no stock in the new business, or even a promise that it would stay. (22)
Once the $7500 was raised and given to them, the Edisonians wasted no time. In June, 1886, the deal closed and the move was announced. The purpose of the move, Edison told reporters, "was to get away from the embarrassment of the strikes and communists to a place where our men are settled in their own homes." (23)
That summer and fall of 1886 saw a stream of men and equipment flow up from New York City to Schenectady. Edison aimed to get a full 300 man work force up and running by the end of October. The most notable arrival happened on August 19. Checking into Schenectady's Givens Hotel was the 39 year old Wizard himself. (24)
A reporter described him as "a jolly looking gentleman of medium height, good build, with a round, smoothly shaven face and a thick head of hair only slightly tinged with gray." After pausing to light a cigar, Edison noted he had stopped in to see his new works, and found it "just what he wanted in every particular." At the new Works, he said, "they will make dynamos, torpedoes, shafting, pulleys, wire covering, electric cables, underground tubing, electric motors, and rock drills."
He talked most about the most surprising item on that list, the Sims-Edison Electric Torpedo. It was developed by AmerIcan inventor Winfield Scott Sims, with funding from the U.S. government. Edison's rare second billing reflects the fact that he contributed little beyond his name and the efforts of his Edison Machine Works associates to make the electric motors. As a weapon for defense of the U.S. coasts, this underwater metal fish would be driven by an electric motor that was fed through a long extension cord. It would carry 750 pounds of dynamite. It would, Edison said "blow up a $2 million ironclad so there won't be enough left to make a row boat."
The actual torpedo, indeed built in Schenectady, would, after some promising early tests, prove impractical. Widespread torpedo use would await a portable power source. Edison's message, however, was accurate in its implications. The Edison Machine Works would not merely be a dynamo factory. It would also be a major development center for extending the electrical idea. It, and its successor General Electric, would join the already emerging Military-Industrial Complex. Soon the Edison empire was selling less futuristic but more useful apparatus to the military, such as a dynamo and light bulbs to illuminate the cruiser Yorktown.
Edison also told the reporter that he would not be moving to Schenectady. Nor would the president of the Edison Machine Works, Charles Batchelor. Those who would move included Samuel Insull, soon promoted from Edison's Secretary to Secretary and Treasurer of the Edison Machine Works. He would run the business side of the new works while continuing to provide Edison with a high level of personal assistance. Running manufacturing at the works would be John Kruesi, assisted by skilled machinist and millwright William "Pop" Turner.
For Insull it was an opportunity to shine in an area where he believed he surpassed his mentor. As he put it many years later (and not altogether accurately) "we never made a dollar until we got the factory 180 miles away from Mr. Edison." Insull's first efforts, however, involved not making money but raising it. He immediately, in August, 1886, sought a mortgage on the property and buildings. (25)
Raising cash was the Works' chronic issue. The Edison Machine Works Co. was under financed, indeed hardly financed at all. Three fourths of the stock was owned by Edison, whose contribution had mainly been his inventions, not cash. "We have had to work," Insull complained to Edison in 1887, "with a capital which is decidedly inadequate for the amount of business." (26)
Instead of putting capital into the Schenectady Works, Edison instead sucked cash out it. He required an annual payment to his laboratory from the works. That was the fee for Edison's West Orange Laboratory to serve as the Schenectady Works' research and development arm. The Works was to concentrate on manufacturing existing products and making money. In its first full year, 1887, it recorded $2 million in sales. Insull claimed a profit rate of 18%, almost all of which he plowed back into the Works. In that first year's report Insull anticipated a conclusion later reached by historian Chandler. A major reason for corporate bigness was economies of scale in manufacturing. As Insull put it, "our general expenses do not increase in anything like the same proportion that our work has increased." (27)
Insull's bet on economies of scale paid off. Profits stayed high while sales climbed to $10 million by 1891. Most of the Works' profitability came from being part of the Edison empire. The Edison electric utility businesses agreed to a contract that named the Edison Machine Works as the exclusive supplier of its dynamos and other equipment, at a 20% profit rate. (28)
Future payoffs were, however, less certain. What the Works lacked, and its two largest competitors, the Thomson-Houston Works at Lynn, MA, and the Westinghouse Works at Pittsburgh, PA possessed, was the capability for innovation. This lack largely stemmed from founding circumstances. Recall that Edison had combined the move of his Machine Works to Schenectady with creation of his new laboratory. That West Orange, NJ lab was intended to be big enough both to serve as the research and development arm of the existing Edison empire, and the launching pad for new Edison enterprises. In the rapidly evolving ca. 1890 electrical industry, this arrangement was insufficient. Edison put inadequate effort after 1886 into advancing electrical technology. At the same time he both charged Insull for lab services, and discouraged Insull from funding research and development at the Schenectady Works.
A main promising area for R&D was alternating current (AC). This technology enabled longer distance transmission from central stations than did Edison's direct current (DC): tens of miles and perhaps much more for AC, versus less than five for DC. This was true for an economic reason. The cost of electricity transmission depended largely on the amount of copper needed to carry the electrical energy. It turned out that the higher the voltage (a sort of electrical pressure) the thinner the wires could be, so the less copper you needed. AC electricity could, using a device with no moving parts called a transformer, raise or lower the voltage much more easily than could DC, thereby enabling this copper saving.
At this time, Europe was far ahead of the U.S. at inventing AC. Teams in Great Britain and Austria-Hungary had invented practical transformers. The U.S. innovator earliest to follow the Europeans was George Westinghouse. He had spent his youth in Schenectady, fought in the Civil War, dropped out of Schenectady's Union College after one semester, then started making inventions while working as a machinist at his father's agricultural equipment works. In a typical late nineteenth century career move, Westinghouse then climbed the urban ladder to Pittsburgh, where he found both better metals for his early railroad inventions, and more capital to fund them. (29)
In 1886, when he challenged Edison in electricity, Westinghouse was already rich and famous from feats such as perfecting the railroad air brake. He started out his electrical efforts by imitating Edison's DC system. In the same month, May, 1886, that Schenectady newspapers carried the first stories about the Edison Machine Works' interest in its two abandoned factory buildings, a bigger story in the same paper announced that Schenectady was getting its first incandescent electric lights, via the Schenectady Westinghouse Illuminating Company, using DC and managed by George's brother John.
At the same time, however, George Westingouse had hired researcher William Stanley to explore AC. Stanley added significant improvements to the AC systems invented in Europe that Westinghouse had licensed. In that month of May, 1886, Stanley was lighting Great Barrington, MA with an experimental AC system. By 1887, Westinghouse AC systems were competing vigorously with the Wizard's DC systems. (30)
Edison continued to focus on his laboratory. The managers of the Edison empire responded to Westinghouse not with research, but with rhetoric. Potential new electric utility creators in the late 1880s would receive from the Edison companies a booklet with a blood-red cover entitled "A Warning". (31)
Part of the warning was legal. The Edison system was protected by more than 200 patents, on everything from the generator to the system configuration to the light bulb. Going with Westinghouse meant fighting, and probably losing, an expensive legal battle. Another part of the warning was economic. The copper cost savings of 90% touted by Westinghouse were actually more like 50%. When you added in the cost and energy losses contributed by those new and untried components the transformers, you ended up with a system more expensive and less reliable than Edison's. Yet another part of the warning was technological. DC could drive powerful and efficient electric motors. AC could not. It was true that there were in 1887 a total of only 450 kW of motors in New York City, and 150 kW in Boston.The electric motor was, however, coming into its own, and only DC could power it.
The big warning of the booklet, however, and the reason for its blood red cover, was another issue — safety. Sending electricity around cities at the thousands of volts of the Westinghouse AC system, compared to the hundreds of volts of the Edison DC system, would kill people. This had already been proven by high voltage arc lamp street lighting systems. Examples in the booklet described the grisly deaths of men and horses who came in contact with those killer high voltages.
From this start, the safety issue veered in 1887-1890 into black comedy. DC advocates challenged Westinghouse to a duel to be fought by grasping electrically charged cables. They electrocuted dogs during public lectures. In their greatest coup, they convinced the New York State Legislature to change the state's method of capital punishment to electrocution — using, of course AC. In 1890, at the Auburn, NY state prison, convicted murderer William Kemmler was wired up to a Westinghouse AC generator and died a prolonged and painful death. (32)
Edison was not the worst offender in this publicity war of the currents. He did, however, participate in it strongly enough to stain his reputation as a man of science. In opposing AC from the economic and technological standpoints, by contrast, the Wizard was on more solid scientific ground. He was not, as sometimes alleged, either ignorant or suffering from a severe non-invented-here complex. In fact, the contest between Edison's improved DC system, and Westinghouse's original AC system would be, in the 1880s, essentially a draw. Edison's DC, improved by his last major electrical invention, the three wire system, had the advantage in large densely populated cities. Westinghouse's original version of AC had the advantage in smaller sparsely populated cities and towns. In addition, Edison's DC could drive electric motors far more effectively than could Westinghouse's original version of AC. (33)
What AC did have was greater potential for further advances. DC, by contrast, was reaching a temporary dead end. It would later be revived by 20th Century power electronics. Today the two types are essentially equal and interchangeable. For very long distance transmission, DC is now superior.
Back in 1886-1889, Edison's financial backers urged him to explore AC. An Edison company did purchase an option on a European patent on the key AC component, the transformer, but did not exercise the option. Edison hired a man who would become one of the top U.S. AC experts, Arthur Kennelly. Edison, however, used him more to expose AC's dangers than to explore its possibilities. In a rare episode of disagreeing with his mentor, Insull objected to Edison's policy of doing all research on AC at the West Orange Laboratory . "Our experimental expenses are very small, but you cannot possible [sic] wipe out our experimental account here", he argued. "There are lots of little things which it would be absurd for us to send to Orange to be tried". This came to include an 1888 effort at the Schenectady Works to develop a transformer. This effort, however, proved too little and too late to have any discernible effect. (34)
Insull seemed generally, despite his objections, to have accepted this geographic division of labor between manufacturing and R&D. When in 1887 he had received a recommendation to hire a man who was touted as a "mechanical genius" Insull replied:
It does not strike me that a 'marvel of mechanical genius' is the class of lad to enter a machine shop. I should think that he would be better suited for employment in the Edison Laboratory. We don't want marvels of genius in a manufacturing establishment. All we want are young men who have the ability to do as they are told. 'Marvels of mechnical genius' in such a position are usually troublesome and chafe under discipline. (35)
Competitors' efforts at exploring AC's potential were far more extensive and productive. The technical and commercial consequences of this next step in AC will be detailed in a subsequent chapter. Suffice it here to say that the science and technology of that next step were sufficiently complicated to stall development for some six years.
A strong competitor to both Westinghouse and Edison, producing both AC and DC systems, was the Thomson-Houston Company. The company's founder was a prolific inventor, Elihu Thomson. Though he acquired many patents, some useful, the company's main tactic was fast following. That is, Thomson kept company President Charles Coffin informed about the best technology available in small rival companies. Coffin then bought the rivals and hired their top technologists. They were put to work in the well-organized engineering and manufacturing works run by Thomson's former student Edwin Wilbur Rice, Jr.
Edison's Schenectady Works was saved from an early eclipse at the hands of such effective competitors by luck. This had two parts. First, the luster of AC temporarily dimmed in 1888-1890 when it proved harder than expected to develop an improved system. In 1890, Westinghouse, facing severe financial pressures, put further AC advances on hold. Westinghouse's caution at this point showed up in his 1889 recommendation to the Niagara Falls Commission on how to transmit power from the falls over the 22 miles to Buffalo, NY: do not use electricity, but use compressed air! (36)
Meanwhile, in those years 1886-1891, another electrical technology leaped to the fore. In contrast to the future possibilities of AC, it emerged as an immediate money maker. This was electric transportation, the replacement of the horses that pulled trolley cars through the streets of U.S. cities by DC electric motors. It had many pioneers before 1886, including Thomas Edison himself. These early movers, however, produced only token systems of only a few cars running on only a few miles of track.
All this was changed by a bolder pioneer named Frank Sprague. He was a graduate of the Naval Academy and former Edison employee. Sprague contracted in 1886 to run 40 cars over 12 miles of track in Richmond VA. By early 1888, after a succession of failures, a stream of burnt out motors, a massive cost overrun, and four months past the deadline, he succeeded. Electric street railways vaulted from impractical novelty to the most promising way to make money from electricity. (37)
Sprague contracted to build his motors, both for street railways and stationary uses, at the Edison Machine Works in Schenectady. This alone assured that despite its lack of innovation, the Works would remain profitable in the 1890s. (38)
It would do so under a new corporate identity. The more initially successful and soundly financed big fish of the electrical industry were now gobbling up the little fish. A new player had entered the game, a German immigrant named Henry Villard. He had begun his U.S. career as a newspaper reporter during the Civil War and moved on to railroad financing. He had gone bankrupt, and returned to Germany to refresh his fortunes. He returned to the U.S. in 1888 with a new interest in the electrical manufacturing business.
A longtime admirer of Edison, Villard soon established strong ties also with Insull. The two were soon hard at work in late 1888 putting together a new electrical combination. "The proposition is," Insull reported to Edison, "that a Trust should be created which would purchase a controlling interest in all the shops, the Light Co., and the Sprague Co." (39)
Crucial to the deal was the approval of the Edison Companies' banker and major stockholder, J. P. Morgan. On December 27, 1888, Insull reported to Edison that Villard had gotten "absolute agreement" from the bank Drexel, Morgan & Co. Villard had also brought in new money: "Villard's German friends, $1,500,000-$2,000,000". (40)
The new company was incorporated in April, 1889. In its first full year it would report sales of $10 million and 4576 employees, 2420 of them in Schenectady. Villard's German friends, especially the Deutsche Bank, ended up investing more than $2 million in the new company, and secured its presidency for Villard. In deference to the Wizard, it would be called Edison General Electric. Edison himself, however, would not be an employee. He would be a board member and a well paid consultant, offering the services of his new laboratory. The contract he signed with Insull in 1890 ran to 30 pages. It called for Edison to devote half the time of his laboratory to the needs of Edison General Electric in exchange for a payment of $62,500 a year. Meanwhile, the Wizard himself was to receive a personal payment in cash and stock of over a million dollars, rendering him at last financially independent. (41)
The efforts of Edison's lab were, however, still proving insufficient to provide technical leadership. The resulting technical weaknesses of Edison General Electric were showing up in its products. An engineer installing Edison General Electric streetcar motors in Pittsburgh and Cleveland found those motors so defective that they had to be rebuilt with new insulation systems. In power systems in Chicago, Edison General Electric junction boxes were blowing up. The Edison Lamp Works failed to investigate new combinations of materials and heat treatments that competitors were using to increase lamp life and efficiency. (42)
The technological battle among Schenectady, Lynn, and Pittsburgh was accompanied by a financial battle in New York City and Boston. It matched Villard and his German backers against the Drexel, Morgan bank of New York City with its senior partner J. P. Morgan, and the principal backers of the Thomson-Houston, the Boston financial house Lee, Higginson and Company.
Villard's opening salvo was to create secret cartels with competitors. In street railways he offered, in a letter to the President of Thomson-Houston in 1889, that "Sprague will withdraw from Washington for a consideration of $250 per car provided you withdraw from Richmond". He made similar deals with incandescent lamp competitors. These deals soon, however, collapsed due to each of the participants cheating on its quota. His next step, in early 1890, was to meet with a Lee, Higginson partner and the President of Thomson Houston. "I am trying," Villard wrote in a letter, "to acquire a controlling interest in the Thomson-Houston Company." He launched a similar exploration with Westinghouse. By early 1891, these efforts had come to nothing. "We have considered long ago all possibilities of connection with Westinghouse and Thomson-Houston," he wrote early in 1891, "and reached the final decision to let them take their chances as we do ours." (43)
By then, Villard had returned to his main interest, railroads, and stumbled into another round of financial difficulties. To raise money, he had to sell Edison General Electric stock to Morgan . That banker had originally put less cash into the new company than had the Germans. However, the stock Morgan held in the original Edison companies had been exchanged for Edison General Electric Stock on such favorable terms that when Villard stumbled, Morgan took financial control, forcing Villard's retirement.
Morgan's controlling role was exercised in New York City by the "Morgan Men". On the Edison General Electric Board of Directors sat Morgan's closest associate, Charles Coster. At Schenectady a more recent Morgan protege, Joseph P. Ord, served as Edison GE's comptroller. He was not previously a Morgan employee, but had impressed the great financier by his work for a Morgan-related railroad. One of Ord's co-workers described him as "practical to the point of ruthlessness". His favorite phrases were "what's his market value?" and "fire the kickers." (44)
At Schenectady, Ord and Insull began the process of turning Edison's federation of independent companies into a Chandlerian Visible Hand style corporation. The Edison General Electric Company now was made up of three functional departments: manufacturing, accounting, and engineering; five product departments: light and power, lamps, railway equipment, wire, and lamp fixtures; two main Works, a Machine Works in Schenectady, NY, and a Lamp Works in Harrison, NJ, some smaller factories, and six sales offices, spanning the nation from New York to San Francisco. The product departments specified a product line, produced a catalog, and promoted products nationwide. The district offices handled actual sales, and placed orders with the Works. The Works then built the apparatus, based on the engineers' designs. (45)
This structure was designed, implemented and operated by Ord, Insull, and another rising star, Samuel Dana Greene, Jr. He was the son of a Civil War naval hero and later Admiral, and was himself a Naval Academy graduate. He had joined fellow Annapolis alumnus Sprague's electric traction venture, and was a key contributor to the Richmond success. At Edison General Electric he proved to possess a rare combination of technical knowledge, aggressive salesmanship and organizational skill. Greene seems to be the one who finally got a serious effort started at Edison General Electric on AC. In 1890 he wrote to the Edison Lab asking what progress been made on a proposed multipolar AC dynamo. By August, 1891, Greene and Kruesi at Schenectady and Kennelly at Edison's lab were leading a collaborative AC development effort. (46)
So by 1891, three companies of roughly equal size contested for leadership in the new electrical manufacturing industry. All were now exploring opportunities in both AC and DC. Each had competitive strengths, embodied in key personnel and protected by key patents. Thomson-Houston led in arc lamps, Edison General Electric in motors, and Westinghouse in exploring, though not yet quite mastering, the next advance in AC.
The companies also contrasted in control. With the departure of Villard, Edison General Electric was firmly under the control of J.P. Morgan. Westinghouse was still a technology driven company, controlled by its founder, though he now has to supplement the capital he raised in Pittsburgh with finance from New York City's August Belmont. Control of Thomson-Houston was divided between its sales oriented president, Charles Coffin, and its Boston financial backers.
Where did the Wizard fit in? In 1891, he was on the outside looking in. Though promising to put a significant part of his laboratory's services to work on electrical matters, he was actually concentrating on such technologies as sound recording and iron mining. As for the electrical industry, he was contemptuous of the financiers who now dominated it. He saw them as seeking to suppress technological competition in order to keep prices high and increase profits. Edison had nothing against profits. He wanted to earn them, however, in a different way than did the financiers. He wanted to do it by inventing superior technology, protecting it with invulnerable patents, and then offering products to the public at the low, though still profitable, prices that would maximize sales. He would get high profits, in other words, by high volume, not by high margins. He also objected to any further mergers. "On no solid business ground," he concluded in 1889, "is there a shadow of reason for any justification for any coalition with the Thomson-Houston Company or any other company." (47)
So what was the real connection between that Wizard, Thomas Alva Edison, and General Electric? Was he its founder, or one of its most vocal critics? The answer was both, but each at a different time. In 1878 he was the founder of the first of the companies that in 1892 would become GE. By that year 1892, however, he had become the man who did not want to see GE happen.
This was not, however, a decision for the Wizard to make. Since 1886 an increasingly grey and weary Gandalf, the Wizard had lost touch with the industry he had created. By 1892, he was still a significant stockholder in Edison General Electric, but not an employee, much less an executive. Though a member of the Board of Directors, he was not a decision maker. As the Wizard, now a spectator, awaited the financiers' next move, consider the changes that the move of his Machine Works to Schenectady had already wrought.
Notes
- By far the best biography of Edison is Israel, Paul. 1998. Edison. John Wiley. Also useful are Josephson, Matthew. 1955. Edison. McGraw Hill. Conot, Robert. 1979. A Streak of Luck. Seaview, which describes Edison's repeating Faraday's experiments on p. 50, and Dyer, Frank and Martin, T. C. 1929. Edison, His Life and Inventions. Harper. 2 vol. The Edison Papers Project at Rutgers University has put a large share of Edison's papers on line.
- MacKenzie, Donald and Wajcman, Judy. 1985. The Social Shaping of Technology. Open University Press. See pp. 3-7.
- Edison to Lowrey, Oct. 3, 1878, Edison Letterbook 003:390, Thomas A. Edison Papers, Edison National Historic Site, Orange, N.J., quoted in Friedel and Israel. "Contract between Thomas A. Edison and the Edison Electric Light Co., Nov. 15, 1878, General Electric Co., Secretary's File. MiSci.
- Taylor, Jocelyn. 1980. Grosvenor Porter Lowrey. Privately Printed. Edison to Lowrey, Oct. 3, 1878, Edison Letterbook 003:390, Thomas A. Edison Papers, Edison National Historic Site, Orange, N.J., quoted in Friedel and Israel.
- Friedel, Robert, and Israel, Paul. 1986. Edison's Electric Light. Rutgers. Edison, Thomas A., "The Beginning of the Incandescent Lamp and Lighting System," (Dearborn, Mich., Edison Institute, 1976 (draft dated 1926).
- Edison, Thomas A. "The Beginning of the Incandescent Lamp and Lighting System," (Dearborn, Mich., Edison Institute, 1976 (draft dated 1926).
- Edison, Thomas A. to William Lloyd Garrison Jr. 13 Aug. 1887. Edison Papers.
- McDonald, Forrest. 1962. Insull. U. of Chicago.
- Bryan, George S. 1920. Edison, the Man and His Work. Garden City, NY. p. 188.
- Details of the story that follows, the move of the Edison Machine Works to Schenectady, NY are taken from Wise, George. 2014. Edison's Decision, on file at Schenectady County Historical Society, Schenectady, NY, and accessible on the web [free PDF viewer required].
- The negotiations for the McQueen Locomotive Works are described in Charles Batchelor Diary, pp. 37-87, Edison Papers. Rutgers. See also Schenectady Evening Star 31 May 1886 p. 4, 4 June 1886 p. 4. A list of Schenectady contributors is in the City Hall History Center, Schenectady NY.
- Edison Machine Shops Going. New York Tribune 24 June 1886, p. 1.
- Schenectady Evening Star 20 Aug 1886, p. 4.
- McDonald, Forrest. 1962. Insull. U. of Chicago. p. 28. Samuel Insull to NY Life Insurance Co. 6 Aug 1886, LB 022309. Edison Papers.
- Minutes, Edison Machine Works Annual Meeting, Oct. 29, 1888. Edison Papers. Insull to Edison, 3 Aug 1887, D8736ADC. Edison Papers.
- Report from Edison Machine Works, Samuel Insull to Thomas Edison, Jan 26, 1888. Edison Papers.
- Agreement Edison Machine Works and Edison Electric Co. Sept. 1, 1884, Edison Papers.
- Leupp, Francis. 1918. George Westinghouse: His Life and Achievements. Little, Brown. Prout, Henry. 1921. A Life of George Westinghouse. Huber, William. 2022. George Westinghouse. MacFarland & Co. Usselman, S. W. 1992. From Novelty to Utility; George Westinghouse and the Business of Invention. Business History Review. 66. 251-304.
- Furfari, F. A. and Owen, E. L. 2003. Rediscovering William Stanley. IEEE Industry Applications. 9. 8-12 and 10. 10-13. Wise, George. 1984. William Stanley's Search for Immortality. American Heritage's Invention and Technology. 4 (now online)
- A Warning. 1887. Edison Electric Light Company. [free PDF viewer required]
- Hughes, Thomas. 1958. Harold P. Brown and the Executioner's Current. Business History Review. 32. 143-165. Reynolds, Terry and Bernstein, Theodore. 1976. The Damnable Alternating Current. Proceedings of the IEEE. 64. 1339-1343. Edison, Thomas A. 1889. The Dangers of Electric Lighting. North American Review. 149. 625-634.
- David, Paul and Bunn, J. A. 1988. Economics of Gateway Technologies. Information Economics and Policy 3. 165-202.
- Letter, Samuel Insull to Thomas A. Edison [citation missing]
- Letter, Samuel Insull to E. O. Tate. 4 June 1887. D892 4AO9 Edison Papers.
- Adams, Edward. 1932. Niagara Power. Bartlett. Vol. 1, p. 227.
- Passer, Harold. 1952. Frank Julian Sprague. In Miller, William, ed. 1952. Men in Business. Cambridge. Sprague, Frank J. 1887-88. The Solution of Municipal Rapid Transit. Trans. AIEE. 5. Sprague, Frank J. 1904. The History and Development of Electric Railroads. Hammond File H-315. MiSci. Passer, Harold. 1953. The Electrical Manufacturers. Harvard. pp. 235-245.
- Edison Machine Works Weekly Report. 28 May 1889. Electric Light-EMW- 1889. Edison Papers. Letter from Frank Julian Sprague to Edward Hubbard Johnson. 27 April 1889. X120CAR. Edison Papers.
- Samuel Insull to Thomas A. Edison, 18 Aug 1888 D8832 DAE. Edison Papers.
- Letter from Samuel Insull to Thomas A. Edison, 27 Dec. 1888. D88 32 ADL. Edison Papers. McDonald, Forrest. Insull 1962. U. of Chicago, p. 39.
- Hammond File D-56, MiSci. Yearly stockholders meeting of Edison General Electric, as reported in New York Evening Post, 19 Jan 1891.
- Insull to Edison, und. "1889 Electric Light-EMW." Men and Volts, p. 186. Emmet, W. L. R. 1931. Autobiography of an Engineer. Ft. Orange. pp. 75; 86-89. Henry Villard to J. C. Henderson. 16 Oct 1889, Box 186, Book 64. pp. 197-198. Villard Papers. Baker Library. Cambridge, MA.
- Villard's negotiations with Thomson-Houston regarding cartels and.consolidation are in Villard Papers, Harvard Business School, Villard to Charles Coffin 15 Mar 1889. Box 126 Book 61 p. 381. 24 May 1890, Box 127, Book 64, p. 325. Villard to S. Eaton 26 May 1890. Box 127 Book 67. p. 302. The Edison Papers contain a Memorandum of Agreement between Thomson-Houston and the Sprague Railway Co. New York Times 13 Feb 1890; Daily Union 12 Nov 1890. Carosso, Vincent. 1967. The Morgans. Harvard. pp. 270-273.
- Biography of Joseph P. Ord. ethw.org; New York Herald 21 Mar 1901 p. 14. Broderick, John. 1929. Forty Years With General Electric. Ft. Orange. p. 57.
- HF H-290-295. Recollections of S. L. Whitestone, 3/10/25. Organization of Edison General Electric, 1 Aug 1890, Secretary's File. MiSci.
- Letters from Samuel Dana Greene Jr. to Thomas A. Edison 10 Oct 1890, A. E. Kennelly to Samuel Insull, 25 Aug 1891, LM115201. Edison Papers. Kennelly to Kruesi, 4 Nov. 1891 Edison Papers.
- Edison to Villard. 23 Mar 1889. Box 63, item 472, Villard Papers. Baker Library.