Edison to Enron: Energy Markets and Political Strategies

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Book 2 Internet Appendices

Chapter 1: Building General Electric

1.1 Electricity before Edison

Thomas Edison did not discover and introduce electricity in the late 1870s/early 1880s. Static electricity had fascinated observers since classical times, although its properties were hardly understood. In 1752, Benjamin Franklin’s kite experiment with lightning “raised electricity from an interesting novelty to the dignity of a science” (Jehl: 200).

Other advances occurred in the eighteenth century with the storage of electrical charges and invention of electric batteries, and in the early nineteenth century with arc lighting and electromagnetism. Michael Faraday in 1831 provided the “foundation of the modern electricity industry” (Jonnes: 41) by generating electricity with magnets. His dynamic electromagnetic machine became known as the dynamo (Carlson: 68), offering a supply source to get electricity out of the laboratory. Faraday also worked up the first transformer to complement his dynamo. This was the beginning of a major advance, supplementing the steam engine’s mechanical energy with another prime mover (Hammond: 5).

The first electric automobile and locomotive were constructed in 1835 and 1850, respectively. As early as 1857, a French physicist experimented with fluorescent lighting and other luminescent materials. With little commercial use to bring electricity out of the laboratory, a leading physics textbook of the day referred to the energy carrier as an “imponderable” force (quoted in Carlson: 67).

Arc lighting from steam-generated electricity began in the 1860s. In 1878, the year after Thomas Edison patented the phonograph, the first patent for incandescent lighting was awarded in England to Joseph Swan. Another innovator in the 1870s was Charles Brush, who did much to improve and commercialize arc lighting. What remained, and what the experts said violated physical laws, was subdividing electricity—say a 2,000 candlepower arc light into 20 lamps of 100 each.

Then Edison got busy. His inventive and entrepreneurial drive literally got electricity from the laboratory to mainstream society. His breakthrough with an incandescent light bulb in 1879—finding a high-resistance filament that could run on a low current from a high-voltage system—was just the beginning. He received 375 electrical patents in his lifetime: 149 in incandescent lamps and manufacturing; 77 in transmission and distribution; 106 in generation; and 43 miscellaneous devices such as safety catches, meters, sockets, switches, and underground conductors (Dyer and Martin: 343). Edison was mostly done with electricity by 1884, whereupon Edwin Houston, Frank Sprague, William Stanley, Charles Steinmetz, Nikola Tesla, Elihu Thompson, George Westinghouse, and others shifted the center of innovation away from Edison.

The place of Edison in the history of electricity has been described by biographer Matthew Josephson: “It was Edison who had finally applied the knowledge of electrical science that had been accumulating during those fifty years in a decisive form (his ‘system’) and boldly imposed it upon the ‘new’ commodity, electricity, which thereafter was introduced to practical usage on a large scale. Henceforth, the mass production and sale of electric current was to be carried on in all the world’s markets” (266). Josephson added:

Leadership in inaugurating the Electrical Age was almost universally attributed to Mr. Edison. What James Watt had been to the Age of Steam, Edison was to the new era of technology. Watt represented steam power—pounding piston rods, flywheels, roaring fires of coal. Edison symbolized electricity—thoughts and words soaring across great distances; energy freed from the engine and belt by smokeless motors; cities wreathed in light (432-33).

Edison himself modestly stated, “The problem … I undertook [was] … the production of the multifarious apparatus, methods and devices, each adapted for use with every other, and all forming a comprehensive system” (quoted in Hughes, 1983: 22).

Samuel Insull, who knew more about Edison and electricity than any one else, described his mentor’s contribution in broad terms. “He not only gave of his brains, his ability, and his time and his energy, but he risked every penny of his personal fortune in trying to bring to a commercial success the marvelous system of distribution of electrical energy that enables us to enjoy so much in this present day” (Insull, 1915: 6).

A (rare) critic of Thomas Edison, who argued that his persona was exaggerated and that his inventions promoted materialism and an unnatural automated society, has not questioned his title as “the father of the new electrical age” (Wachhorst: 22).

1.2 Getting Fired: Never Letting Go

The ego of Samuel Insull is an important factor in understanding his business career from its meteoric, prolonged rise to its stunning fall. Perhaps no incident is more revealing than Insull’s firing at the tender age of 19, an event that actually was a blessing in disguise. Oddly, Insull never made peace with the act of customer cronyism that led to his dismissal nor did he ever realize that this bad luck was his incredibly good luck.

Insull remembered how his temper flared upon receiving the news of his firing and his being asked by the senior partner when he might be ready to leave, while offering him some time to wrap things up. “‘I will leave now,” [Insull] said. ‘I have been here some four years and if I am of so little use to you that at the end of that time it is worth your while to have somebody pay you for the work you are paying me to do, I certainly ought to get out immediately'” (Insull, 1926b: 12). Insull’s books were in order, and he did just that.

Here is Samuel Insull’s full account of the incident, recalled in a 1920 speech to the woman’s group of Commonwealth Edison Company:

[At] this institution where I had started work at a dollar and a quarter a week, after I had been there three or four years and had mastered most of the things that they would let me do and arrived at what I thought were years of maturity, [at] about nineteen or twenty [years of age], I was called into the office of one of the partners, and I was sacked; I was discharged.

I have never forgiven [my boss] for it. I go to call on him every now and then when I am in London, and I go into the same room where I was discharged, but I have never forgiven him for it. He hurt my pride as it was never hurt before or since. I think it is the only time that I was discharged. He was paying me the munificent sum of five dollars a week, and he told me that somebody else who was thirsting … to do my job was willing to pay a hundred pounds a year, that is practically ten dollars a week, as an articled clerk, for the privilege of working three years for nothing while he learned to do the work that I was being paid to do.

I could not help thinking while he was discharging me that there was a big difference between being paid fifty pounds a year, $250 a year, for doing a certain amount of work, and some other fellow being willing to pay $500 a year for the privilege of making mistakes in doing that work.

But [my boss] asked me whether my work was in order, and how soon I could leave. He said—he rather got my dander up—he said: “Of course we don’t want to throw you right out, and if you want two or three weeks’ or a month’s notice, why, we will be very glad to give it to you, and give you ample time to get another place, to finish up your work and put it in apple pie order and get another place.”

But I told him that my work was usually in apple pie order and I thought it would take me about fifteen minutes to finish it, and that as I was making three or four times as much per week as private secretary at night as he was paying me, why, it would probably be a good thing for me to leave right away. I imagine that I was very lippy to him. As I say, I have always resented his firing me (Insull, 1920: 13-14).

On his London trips, Insull mentioned in another speech five years later: “I usually go [to the room where I was fired] three or four times a year … because I think it helps me to a preservation of a proper sense of proportion.” He added: “There is nothing like being fired, let me tell you, to take the conceit out of you” (Insull, 1925a: 13).

But rather than recognizing the event as just one of those things—the father of the articled clerk, after all, was paying the firm double of what the firm was paying Insull—Insull treated it as if it was a for-cause firing. Moreover, the “firing” was a blessing in disguise. Insull in his new position immediately negotiated a 50 percent increase in salary. And it is hard to imagine a better coincidence for Insull than that of getting, serendipitously, on an open path to Thomas Edison and the United States.

Insull extracted his revenge. “I go to see him once in a while,’ Insull confessed in a 1929 speech. “One time he asked me whether I would loan his concern $5,000.” The verdict? “I got even with him; I turned him down” (1929: 4).

1.3 Gouraud to Edison on Insull: Letter of February 17, 1881

The genesis of Insull’s coming to America was this fortuitous decision to work for George Gouraud, who was Thomas Edison’s European representative. In his new job, Insull befriended Edward Johnson, whom Edison sent to London in July 1879 to work on the inventor’s new telephone. Insull assumed the job of taking diction for Johnson’s reports back to Edison. In one such communication, Johnson mentioned to Edison’s principal assistant Charles Bachelor that Insull was a good candidate should Edison need a new private secretary.

In August 1880, Johnson returned to America with instructions from Insull to send for him should the position of private secretary become open. On January 17, 1881, the cable came, and one month later Insull left London, arriving in New York City on the last day of February to assume his new position (Insull, 1937: 2-4).

With Insull leaving, George Gouraud wrote this letter to Thomas Edison about the superb job that Samuel Insull had done in his three-year employ. (This hand-written letter is contained in the Insull Papers at Loyola University of Chicago, Box 93, Folder 4.)

My dear Edison

Any introduction of Mr. Insull to your good self seems quite superfluous, but, as he has asked me for a line it gives me great pleasure to say that, great as is, and will be for some time to come, the inconvenience to myself in parting with his services, I cannot but feel that all things considered, he is right to accept the appointment you have offered him. As you are aware he has been with me for the last two years during which he has certainly had a very severe training, but one that cannot but prove of value to himself and any future employer.

During the past year he has occupied the most confidential relations to my business. I have trusted him not only with the knowledge of everything concerning my business and private affairs, but with monies and securities. It would be saying only what is his due, and my very great pleasure at the same time, to state that he has fulfilled all my very exacting requirements to the fullest, and beyond what would be reasonably expected of a young man of his age—I cannot speak too highly of his devotion to his duties, his tireless energy, in which he never counts either the hours of the day or the days of the week, and the thoroughness with which he has performed everything to which he has put his hand.

And in saying this I say more than would be generally understood from the language used, because of the great variety of the things with which he has had to charge himself and the great pressure under which many of them have had to be performed. In a word I congratulate you upon acquiring the services of one whom you can and no doubt will trust as fully as I have trusted and find as worthy and efficient as I have found him. I can only add that I have parted with him at very great inconvenience and certainly should never have allowed him to go to anyone but yourself.

I trust to derive in some measure a compensating benefit in the promptness and thoroughness with which I am certain he will discharge that portion of your correspondence which it is my pleasure and honor to receive.

Wishing that your experience may be the same with him as mine has been, and wishing him the success which I feel that he deserves and have no doubt will attain to.

Believe me
My dear Edison
Yours very sincerely,

George E. Gouraud

1.4 Edison and Politics

Thomas Edison was a babe in the woods in important respects. “He possessed but little knowledge or experience in big business, finance, law or politics, any one of which can be a formidable help or deterrent” (Jehl: 779). Certainly Edison did not possess a political persona or the habit of seeking the public dollar. He once refused to accept pay for consulting work for New York City concerning underground electricity mains, which surprised the beneficiaries (Dyer and Martin: 392). His politics were defensive until the battle of the currents, where he went on the offense in a quest to stifle competition.

Edison’s introduction to politics came with his very first invention, which was patented on June 1, 1869. The telegraphic vote recording machine was intended to replace time-consuming roll calls in the legislature. Despite his high hopes, Edison’s machine failed to get from the patent office to the marketplace. Representatives of the Massachusetts Legislature and U.S. Congress both told Edison that filibustering and the rights of the minority would be disadvantaged. The ringing rebuff—”Young man, this is just what we donot want” (quoted in Josephson: 66)—taught the 21-year-old a lesson—from now on he would invent in areas where they was established commercial demand—such as the lighting market already served by coal gas and kerosene.

Edison’s second brush with politics came when he had to negotiate a contract with the New York City Board of Aldermen to lay underground electricity cables from Pearl Street to locales Manhattan. A get-acquainted event was necessary given that incumbent coal-gas interests had the ear of the legislators. After a two-hour tour of Edison’s electricity works, the “quite dry and hungry” city fathers were soothed. “For half an hour only the clatter of dishes and the popping of champagne corks could be heard, and then the wine began to work and the Alderman, true to their political instincts, began to howl, ‘Speech, speech’.” Edison, the eyewitness added, handled his cigar as adroitly as the boys of Tammany Hall.

Still, Tammany Hall threatened to delay Edison’s 14-mile underground network through lower Manhattan unless the Department of Public Works inspected the project and were paid by Edison for doing so. Edison feared what the inspectors might require. As it turned out, they did little more than show up on Saturday afternoon to receive their weekly paycheck (Josephson: 257; Dyer and Martin: 393).

Edison also dodged a $1,000 per mile tax on his underground electricity tubes, coupled with a 3 percent gross receipts tax, levies that gas mains did not have to pay (Simonds: 192, 202; Jehl: 785). Despite the efforts of the gas lobby, Edison received his franchise in April 1881 free of these charges (Passer: 90).

Edison’s early leave-me-alone politics changed to hurt-thy-rival politics with Edison’s war against alternating current. AC was a dangerous but improving product; only a very static view of invention and technology could condemn it in its original state. It was ironic—and hypocritical—for Edison to hold a reactionary view (Israel: 331). A case for banning AC would be analogous to banning automobiles in favor of the far safer, but less practical, transportation alternatives of bicycles and horse-pulled carriages.

In 1884, Edison and Insull founded a new trade group, the Association of Edison Illuminating Companies, to bring together the LDCs around the country that had entered into licensing agreements to use Edison dynamos or jumbos. Such an organization was one step away from a political agenda, and it would come just a few years later as described in the next chapter.

Outside of his self-interested political positions, Edison’s had some views that naturally carried weight because of his stature. He came out in favor of a protective tariff in 1892 to aid the reelection campaign of President Benjamin Harrison (Israel: 354). He was opposed to the Sherman Antitrust Act of 1890 (Israel: 446). Edison had opinions about money and banking and government wartime preparedness that he publicized (Israel: 446-47). In a general sense, however, like so many businessmen, Edison strongly favored freedom and capitalism over omnipotent government.

1.5 J. P. Morgan

J. P. Morgan’s industry consolidations included not only General Electric (in 1892) but also U.S. Steel (1901), International Harvester (1902), and American Telephone and Telegraph (1902). Railroads were at his core, however. “The power of the house of Morgan in American railroading is emphasized by the fact that besides heading … the Erie, the Reading, and other coal as well as the southern and allied roads in the South, and the New Haven … totaling just under 20,000 miles … [Morgan] had a prominent influence on the affairs of three of the six others, the Vanderbilt, the Pennsylvania, and the Hill systems” (Gras and Larson: 278-79).

Morgan and John D. Rockefeller, two quite different men, personally and professionally, dominated their era in their businesses (finance and oil, respectively) as few have done before or since.

The muckraker’s rap on Morgan was that he was a speculator in and not a builder of companies. John Flynn’s “builder” chapter on John D. Rockefeller is followed by his “promoter” chapter on Morgan.Arbitrager, promoter, middleman, and speculator were descriptors held in less esteem than inventor,producer, and industrialist. But in Morgan’s case, financer was the right word.

Morgan was called “America’s Money Devil Number One” (Flynn: 492). Lincoln Steffens called him “the boss of the United States” (Chernow: 149). “Money Trust” was code for Morgan (Flynn: 512), as was “Trustification” (McDonald: 49). The so-called Money Trust investigation in 1912/13 by the House of Representations focused on J. P. Morgan & Company more than on any other company or individual.

Morgan’s personality did not help. Biographies describe him as arrogant, autocratic, brusque, gruff,impatient, insular, and irascible (Flynn: 452). He was ill-tempered and “famously impatient” (Jonnes: 9). His power and control led to such characterizations as imperial, imperator, and Pierpontifex Maximus. Emperor and King were other titles used to describe him. Morgan’s stare was described as formidable, Sphinx-like, terrifying. These traits only became magnified as his career went on, although he mellowed in his last years (Flynn: 504).

Morgan was all business. He boasted that he could perform any job beneath him at his firm. “He never renounced the founder’s itch to know the most minute details of the business. He examined the cash balance daily, boasted he could pay off all debt in two hours, had a deadeye for fake figures in scanning a ledger, and personally audited the books each New Year’s Day” (Chernow, 1990: 66). A letter from 25-year-old Pierpont to father Junius said much about his later career: “I am never satisfied unless I either do everything myself or personally superintend everything done even to an entry in the books. This I cannot help” (quoted in Gras and Larson: 259).

Morgan certainly had rare ability and earned his profits, even spoils. Samuel Insull in 1919 spoke glowingly about Morgan’s high finance.

The late J. Pierpont Morgan … has done all kinds of things and taken all kinds of risks in developing the great industries of this country. All of us in this country owe a great deal to men of that character who risked their money at a time when the investment was by no means a sure thing, but was simply in the experimental stage, and they certainly were entitled, having risked their money at such times, to reap a rich reward on their investment (Insull, 1919: 195-96).

Insull added elsewhere that Morgan was “always a warm friend of the Edison central-station business” (Insull, 1915: 349). He would probably have agreed with Morgan’s biographer (and son-in-law) Herbert Satterlee that J. P. accelerated the development of the new industry by years (214; Jonnes: 10).

J. P. Morgan was a whiz with numbers and possessed the talent to be a mathematics professor. He was considered stern but fair and honest (Chernow: 39). Morgan surrounded himself with men of integrity and talent, another explanation for his success (Strouse: 160). One early biographer described his subject as follows: “Morgan’s method [was] doing big things but in his own way. His way was autocratic and intensely personal, but result-producing. The principal drive in Morgan’s nature may be expressed in one word: results.”

Morgan advanced business transparency, although he was very private about the profitability of his particular deals, including before the United States Congress. Reorganization plans developed by J. P. Morgan & Company for different companies were “marvels of bank financial disclosure” in their time (Gras and Larson: 285). Morgan supported the public release of its corporate auditing work, done by Price, Waterhouse & Company, beginning in 1901. Morgan-run U.S. Steel introduced quarterly reporting of its financials and tonnage in this period, a first (Gras and Larson: 285).

1.6 J. P. Morgan as Political Capitalist

J. P. Morgan was a political as well as a market entrepreneur, exploiting government derived profit opportunities as readily as private-sector ones. He was one of the very few Americans that became rich during the Civil War when he bought and resold military rifles obtained from different agencies of the federal government. The arbitrage profit came from his alertness—and bureaucratic ignorance (Flynn: 470-76).

After the war, Morgan profited handsomely by placing government bond issues, first in the United States and then in Britain, Germany, Mexico, and Russia. In this period, the railroad industry’s top banker chafed at competition from parallel tracks and sought to cartelize the industry through voluntary means (Flynn: 478). When this did not work, political efforts to achieve the same result were fine by him.

Morgan correctly saw a new and better era from the elimination mom-and-pop competition, but he failed to understand free-market rivalry among large firms as an incessant force for business efficiency and consumer gains. The intensity of railroad competition despite the cooperative provisions of the Interstate Commerce Act of 1887 led to Morgan-sponsored meetings with railroad heads to soften rivalry. After a gentleman’s agreement failed in 1888 to freeze rates in return from a promise by Morgan not to finance competing lines, the financier tried to cartelize the industry via the (private) Interstate Commerce Railway Association. It fell short as did a third Morgan attempt to stabilize the industry in 1890.

Four years before the Sherman Antitrust Act made such action illegal, Morgan tried to cartelize the eastern Pennsylvania coal industry to help his coal-hauling railroads receive higher rates, while advancing the financial fortunes of mining operators. In March 1886, a newspaper reported:

Representatives of the various coal companies met at the house of Mr. J. Pierpont Morgan this week, and informally decided to limit coal production and maintain prices. The new coal combination agrees to mine 33,500,000 tons of coal this year. Last year’s output was 31,600,000 tons. An advance of 25 cents a ton was made by the companies on the following day (quoted in Allen: 56).

One or two railroads would have been easy to keep in line, but several proved difficult. This agreement, like the others, proved “brittle at best” (Allen: 57).

Soft competition worked better on the banking side. The “Gentleman Banker’s Code” meant “not to complete, at least not too openly” (Chernow: 24). Advertising was verboten, and it was a sin to lower prices and raid another firm’s clients. Such an implicit arrangement was elegant on the surface but highly inefficient (ibid).

Morgan was a pure money maker with “little intellectual curiosity or aptitude for theorizing” (Chernow, 20). Government was always considered a potential partner, as it had been for his father. George Peabody and Company was bailed out by the Bank of England during the Panic of 1857 when Junius Morgan was at the helm (Chernow: 11).

J. P. Morgan had a reputation for intensely disliking government intervention (Flynn: 477; Winkler: 106), but such hypocrisy was inbred among political capitalists. Morgan’s intense feeling toward government activism that worked against him came from the same personality that rebelled when he did not get his way in the free market. He was ultimately pragmatic. “Law or no law, he was determined to protect the holdings of his clients and insure [sic] the prosperity and prestige of his firm” (Winkler: 107).

Morgan’s five-second world view of political economy—government help me, government don’t hurt me—was powerfully seconded by some of his chief lieutenants. George W. Perkins (1862-1920) fancied himself as an intellectual, giving speeches and publishing essays on a variety of subjects, including political economy. He saw the grand U.S. Steel corporation as no different from a federal Department of Steel. Government control measures and social welfare programs for steel workers created his utopia: “socialism of the highest, best, and most ideal sort” (quoted in Chernow: 110). Elbert Gary, head of U.S. Steel, lobbied for federal public utility control of the industry—similar to, but stronger than, that imposed by the Interstate Commerce Commission beginning in 1887 (Chernow: 111).

1.7 Edison versus Morgan

Should Morgan have opened the money valve more for Thomas Edison in the late 1870s and 1880s? At the time, Edison and Insull thought so with a passion (Josephson: 340-41; Israel: 322). Historian Matthew Josephson (340-41) saw Wall Street and Morgan as the bad guys. Insull’s biographer, Forrest McDonald, insinuated that Wall Street was both miserly—leaving the great inventor in the “absurd situation” (27) of having to self-fund his commercial activities—and obstructive, placing “almost impassable obstacles” (25) in Edison’s way. John Wasik, too, speaks of “the tightfisted New York bankers” who considered Edison’s electrical initiatives as “amusing novelties” (5).

Edison’s shortcomings, detailed in chapter 1 and in Internet appendix 1.9 (below), challenge the interpretation that Wall Street and J. P. Morgan in particular inadequately funded the great inventor, needlessly delaying commercialization prior to the formation of General Electric Company. This reconsideration also reinforces the view that Edison was a burden to Insull, at least from 1884, and continuing to their split in mid-1892 (McDonald: 33).

Revision of the Morgan-as-impediment thesis can begin with the fact that Edison Electric Light Company’s original capital of $300,000 in 1878 was increased to $480,000 in 1881, $720,000 in 1882, and $1,080,000 in 1883 (Jehl: 924). Second, Edison Electric Light showed interest in taking an ownership position in the manufacturing side as the ventures indicated profitability, which occurred with dynamos in 1882 (Israel: 14)and lamps in 1884 (Hammond: 44).

Edison’s greatest mistake was to not turn over his manufacturing operations sooner to outside capitalists. The investors wanted a good deal (naturally) but were not being unreasonable. Edison biographer (and sympathizer) Paul Israel noted about the 1884 merger proposal (227): “Although the reorganization was to a large extent very favorable to Edison and his manufacturing partners, they decided to wage a proxy fight at the stockholders’ meeting in October and acquire control of Edison Electric.”

Samuel Insull also spoke well of Morgan’s early capitalization of the industry.” “If it had not been for the very generous support accorded the business by such houses as Drexel, Morgan & Company,” Insull allowed in a 1911 speech, “I think the development of the business would have been still further delayed” (1911: 175). Insull stated the same in his 1934 memoirs: “It is doubtful whether, but for the assistance afforded by the partners of the firm of Drexel, Morgan [&] Company, the establishment of the business and its financial success would have materialized anywhere nearly as early as it did” (1934: 33-34). With Edison’s blessing, Insull could have worked more closely with the great Morgan for everyone’s benefit.

At the end of his life, Edison admitted: “My trouble has been that I have always had too much ambition and tried to do things that were sometimes financially too big for me.” But then again, “If I had not had so much ambition and had not tried to do so many things, I probably would have been happier, but less useful” (Edison, 1930: 59).

What would have happened if Edison had ceded more ownership and control to Edison Electric Light beginning around 1882? What if Edison had focused earlier on dynamo manufacture? What if Edison had pursued his patent infringement strategy earlier? What if Edison judged the safety and market acceptance of AC in the same way he did with electric lighting itself in 1882 (Passer: 91), by letting regulators and the insurance industry—or just consumer demand—tell him?

Better capitalization and focus would have resulted in greater market responsiveness and increased size and profitability. The touch-and-go periods in the 1880s that nearly sank Edison and Insull could have been avoided. Samuel Insull might well have reached the top of General Electric (he nearly did anyway). Edison could have gone his own inventive way without compromising the interests of Edison Electric Light. An electricity behemoth on a par with Standard Oil might have emerged under the name Edison. As it was, General Electric ended up big enough, and the name Edison would dot the utility map across the United States, quite a consolation prize for the inventor.

The bad did not have to come with the good. The fact that Edison did so much for so many should not blind history to his shortcomings and mistakes. A lesson emerges: misplaced ego and emotionalism can hurt the greatest of individuals. The good news is that it is correctable by heeding the timeless wisdom of Samuel Smiles and other capitalist philosophers, as well as learning the lessons of history.

1.8 Insull: Edison’s Top Business Executive

The relationship between Thomas Edison and Samuel Insull is fascinating and often underappreciated. Insull saved Edison from himself business-wise for much of their eleven years together, and both men remained extremely close to each other after their business parting in 1892 under strained circumstances.

Part of their business affinity was that Insull’s engineering mind that grasped Edison’s capabilities. Although Insull was no Edison-like inventor (Weare: 20), Insull was “the alter ego of the miraculous one at Menlo Park.”

To Insull, Thomas Edison was the man who “gave me my chance in life” (Insull, 1915: 7) and was “one of the greatest teachers this world ever produced” (Insull, 1925b: 11). Insull, in fact, spent nights watching Edison’s experiments, part of Insull’s learning “the technique of the business and of its underlying technical and financial principles—a knowledge of manufacturing, of the true elements entering into cost” (Insull, 1925b: 12). There can be no question about the information flow from mentor to protégé.

But some writers have questioned whether Insull was Edison’s top business executive, implying that Edison would have done about as well, or reasonably well, without him. Stated Francis Jehl: “Insull was never the financial genius of Edison as some flatterers styled him years afterward” (1011). Jehl identified Charles Bachelor as Edison’s ablest businessman and labeled G. P. Lowrey as “the only and real financial genius of Edison” (ibid.).

But Jehl’s demotion of Insull relative to the other able leaders of the Edison team is questionable. A more typical view at the time was pronounced by an in-depth newspaper account published in 1899: “Mr. Edison soon saw that his secretary [Insull] had a natural aptitude for business management, so he turned over everything he could to the newcomer and buried himself in purely scientific research” (Sunday Chronicle). It was recognized that dozens of Edison inventions ranging from the duplex telegraph to the chalk battery “were brought before the public under the management of Mr. Samuel Insull” (quoted in pamphlet, Insull/Bird Scrapbook). The two never questioned their one-two position; each “thoroughly understood and appreciated each other,” although “two more dissimilar characters could hardly be imagined” (Western Electric, quoted in Sunday Chronicle).

Forrest McDonald’s Insull and other accounts (Israel: 220; Hogan: 6) have documented the émigré’s influence on Edison’s businesses from their very first night together in February 1881. Certainly, Lowrey was preeminent in putting together the financing of Edison Light Company in 1878 and New York Edison two years later. But after Insull arrived, Edison put Lowrey to work on legal and political matters. Edison was so impressed with Insull that he appointed the 21-year-old the secretary of his companies in the first month (McDonald: 22fn). Edison also gave Insull his power of attorney (Hogan: 6). “Edison gave Insull power of attorney for corporate matters, including the voting of all Edison’s shares, and hoped that by placing the responsibility on someone else he would not need to concern himself further about money” (Conot: 273).

In 1883 Edison tapped Insull to run the Thomas A. Edison Construction Department, his make-or-break central station venture. Edison again tapped Insull for his most important job: running Edison Machine Works in Schenectady. Charles Batchelor was nominally Insull’s superior, but the real boss was the man who Edison told to relocate to upstate New York to “run the whole thing” (quoted in McDonald: 38). Within a year, Insull was general manager, and Bachelor was back in New York City. Edison, recalled Insull in his memoirs, “expected me, as secretary and treasurer, to dominate the Schenectady establishment, which I ultimately did” (1934: 48). And Schenectady would burgeon from 200 employees to 6,000 during Insull’s reign (Insull, 1934: 49).

But now Insull had two jobs, for “Edison … had grown so dependent on Insull’s handling of his fanances and personal affairs that—even though Insull relocated to Schenectady—he was to continue as Edison’s private secretary” (Conot: 244).

Insull was chief operating officer of the newly created Edison General Electric, which proved so time-consuming that he resigned another post in which Edison had placed him—president of North American Phonograph Company (Tate: 249).

John Wasik referred to Insull early on as Edison’s “financial enforcer” (36). Larry Plachno, who edited Insull’s memoirs for publication, called Insull “the best management person on the Edison team” (vi). Matthew Josephson in his Edison biography recognized Insull as the top man. “The light and power business was growing by itself in charge of his lieutenants, with Sam Insull, the sharpest of them, handling the business at Schenectady” (318). In fact, it can be argued that not only was Insull Edison’s top business lieutenant, he was too much so in the sense of becoming, to a degree, Edison’s “yes man.” Insull, under the spell of Edison, did not do some things that he should have in retrospect: support the buyout of Electric Light Company in 1884 and refuse to fight against AC four years later. But that was asking a lot from such a young man with such a high sense of loyalty.

“Insull was of great value to Edison, but Edison’s influence on Insull was of greater consequence,” concluded technology historian Thomas Hughes. Hughes explained:

[Insull] took part in the establishment of the manufacturing facilities that ultimately became General Electric; he participated in numerous conferences involving inventors, engineers, entrepreneurs, mechanics, financiers, managers, electricians, and others who shaped the early history of the electrical industry, both utility and manufacturing. In short, he studied in the Edison school, absorbing its creative, problem-solving, inclusive systematic, innovative, and expansionist approach. He knew its graduates, who spread far and wide to take part in the growth of the industry (203).

Insull confirmed this view of the man whom he called “my chief” (Insull, 1934: 48) many times. Edison was variously described as “the father of central station work” (Insull, 1898: 17) and “the greatest inventor, to my mind, that America has produced, and one of the great world figures of his time” (Insull, 1934, 58). On a more personal note, Insull remarked to a chapel full of students and faculty at the University of Kentucky three decades after leaving Edison for Chicago: “I do not know of any more inspiring theme for the younger generation than the life and work of [Edison]” (1922: 365).

A final, overall assessment was given in Insull’s memoirs, written several years before his death at age 78 in 1938:

[Edison] was my hero when I was a boy, and after fifty-five years engaged in various businesses of which his inventions were the fundamental basis, my admiration of him and his accomplishments is greater than ever” (Insull, 1934: 58).

But working for the erratic genius was not easy work. “[Edison’s] demands on us begin to scare me,” Insull wrote to Frank Tate in 1888. “They are now growing so heavy that I must call a halt” (quoted in Conot: 274). Another time he wrote his boss: “I am, as you well know, perfectly willing to run all around the country to hunt up money for you, and I can by hook or crook supply your wants, but I cannot do it unless you advise me ahead of your requirements” (Conot: 274). Such was business life in general in the 19th century, when (compared to today) capital was very scarce and transaction costs were very high.

1.9 Electricity versus Manufactured Gas

In a market economy, superior energies expand their market share at the expense of less desired ones. In the face of such creative destruction, to use the term of Joseph Schumpeter (83-84), political capitalism has come to the fore time and again. For example, candle makers, as well as makers of lamps burning whale oil and tallow, challenged “health-menacing” gaslights soon after the new technology appeared in London (1812), Baltimore (1816), and other cities (Bright: 20). But it was futile, given that coal-gas provided five times more light than candles at the same price. By 1870, 390 gas-light companies had left candlelight for the poor and the dining rooms of the rich (Klein: 110).

When electricity threatened 90 percent of the gas-company revenue that came from lighting, coal-gas interests became obstructive. Thomas Edison remembered how gas light operators “were our bitter enemies in those days, keenly watching every move and ready to pounce upon us at the slightest failure” (quoted in Hammond: 47). Political capitalism was practiced by gas interests lobbying local government to deny franchises to electric companies needing rights-of-way for city streets, such as in Chicago (Platt: 40-42). Gas interests in that city, for example, convinced city officials to require underground cables rather than overhead wires, which significantly increased the costs of the electrics business and limited its competition (Platt: 43). Construction permits and inspection permits were required for such underground work (ibid). In a variety of franchise fights, all knew that “specific terms of the grant could spell the difference between profit and loss” (Pratt: 45).

In 1885, marketing material from Edison Company for Isolated Lighting listed 30 reasons why electricity was superior to existing forms of illumination. They ranged from economic to aesthetic to environmental to safety. A partial listing follows:

It is the most economical artificial light.

It is brighter than gas.

It is steady as sunlight—never flickers.

It is reliable.

It emits no heat.

It cannot vitiate the air.

It gives no disagreeable odor….

It cannot explode.

It cannot produce death by poison, as gas often does….

It cannot flare or be blown out by the wind….

It is the perfect burglar-alarm….

It produces no poisonous product of combustion….

It produces no water of combustion….

It does not emit smoke to blacken the ceilings or walls, or destroy pictures….

It does not leak sulphurated hydrogen or blacken silverware, or lead-painted woodwork, or destroy oil paintings….. (reprinted in Collins and Gitelman: 125-27).

Electric lighting was not the death knell for manufactured gas, however. The coal-gas industry reduced cost, dropped prices, and improved service under competitive strain. Major advances included better production (the Lowe water-gas method) and better burning (the Welsbach gas mantle). Still, there was little question about which was a better illuminator. After thousands of electric lights were installed in Brockton, Massachusetts, in 1885, for example, only three customers returned to gas or oil (Hammond: 61-62). Once hailed, “brilliant gas” was now a flickering, dirtier alternative (Coleman: 11).

While some companies resorted to political means to forestall electric lighting franchises, others became both gas and electric companies. “If you can’t beat the enemy, embrace him” became the strategy of many utilities across the country, such as the San Francisco Gas Light Company, which became the San Francisco Gas and Electric Company in 1896 (Coleman: 82).

Coal-gas as an illuminant was also challenged by the beginning of the commercial petroleum age, which dated from the Drake oil-well discovery in 1859. Kerosene lamps were a direct competitor, but indirect competition came too with the advent of water gas, a new form of manufactured gas made from oil as well as coke (a hitherto useless product of coal-gas manufacture). “Oil was thus employed to help meet the competitive threat that oil itself had fostered” (Passer: 196).

Water gas threatened traditional companies that manufactured and sold coal gas. The initial capital cost was high, but production costs were lower and the product distinctly better than what had come before (ibid).

Coal gas found new uses with improvements in gas cooking ranges, gas water heaters, and gas furnaces. The overall result was a five-fold increase in consumption between 1869 and 1889 (Passer: 202). Coal itself would go to a higher-value use by powering steam turbines to generate electricity (Dyer and Martin: 352-53).

The end for coal gas would come from natural gas when long-distance pipelining came of age in the 1920s and 1930s. The pipelines that Enron came to own in the 1980s were built between the 1920s and 1950s to displace not only manufactured gas but also petroleum: Houston Pipe Line in 1925, Northern Natural Gas in 1930, Florida Gas Transmission in 1959, and Transwestern Pipeline in 1960 (Tussing and Tippee: 90, 106).

1.10 The “Battle of the Currents” Revisited

Thomas Edison’s public and political campaign against alternating current had an economic and technological rationale—at least in the beginning (Carlson: 284fn). Some AC-driven central-station LDC practices were sub-standard, creating electrocution hazards. Elihu Thomson refused to endorse AC until a year of work produced protective grounding (Woodbury: 169-73). Edison’s position was immutable, however, and became less tenable over time as technology improved. And in the end it turned into a sizable entrepreneurial error for Edison, his team, and his investors.

Edison’s ghoulish, costly diversion to ban alternative current (AC), a case study of the perils of emotionalism over market realities, had social costs as well. “Edison’s propaganda had thrown the electric-power business into such confusion” (Woodbury: 173) that the public and even insurance companies did not know what was safe. It was a low point in Edison’s career and set an unsavory precedent for Insull’s own political activism to come. Francis Hastings in the Edison organization has been identified as the attack dog (Carlson: 285fn), but Edison gave the orders and did much himself. Edison cannot be exonerated.

Some historical review is necessary to put Edison’s ill-fated effort into perspective.

Drawing upon his excellent rapport with the press, Edison found a new reason to challenge the “ubiquitous” Westinghouse (Jonnes: 144), who was rapidly building AC-connected central stations. Under an invitation from the New York State Death Commission to help find an alternative means to execution than hanging, Edison saw “an irresistible opportunity for wreaking some sub-rosa vengeance on his new enemy” (Jonnes: 148). His suggestion was the AC-powered electric chair, surely to put Westinghouse’s invention in the worst light.

In February 1888, Edison Light Company published an 84-page diatribe against AC, titled WARNING! The war of the electric currents was on (Jonnes: 150). Edison was even behind an effort to add a new term to the English language—”to Westinghouse,” meaning “to electrocute” (Strouse: 312). Edison’s crusade got traction in the same year when a 15-year-old boy was accidentally electrocuted by AC current before a crowd in New York City (Jonnes: 143).

That June Edison was joined by little-known Harold P. Brown, who published an influential letter in the New York Evening Post, titled “Death in the Wires” (Jonnes: 165). Brown began a crusade against AC with the legislative end of outlawing AC above 300 volts to “prevent the wholesale risk of human life” (quoted in Jonnes: 166-67). His little-man crusade abruptly ended when it was discovered that he was on the Edison payroll (Jonnes: 197-98) and had spent time with Edison as a lab assistant (McDonald: 45). The owner of the Evening Post, moreover, was Edison investor Henry Villard, another sub-rosa fact that came to light.

Before he was exposed, Brown publically demonstrated how 330 volts of AC versus 1,000 volts of DC killed (“westinghoused”) dogs, stirring the American Society for the Prevention of Cruelty to Animals into action against Brown (Jonnes: 173). Brown also challenged George Westinghouse to an electricity duel, with Brown taking DC and Westinghouse AC in equal voltages (Jonnes: 197). Brown’s closer was, “the only places where an alternating current ought to be used were the dog pound, the slaughter house, and the state prison” (Jonnes: 173). Needless to say, the public relations department at Westinghouse was busy countering the Edison-backed offensive against AC (Jonnes: 201).

In an 1889 article for the North American Review, “The Dangers of Electric Lighting,” Edison went the political-capitalism route by urging authorities to “require electrical pressures to be kept within the limits of safety” (Baldwin: 202). Insull was dispatched to lobby state legislators to ban or restrict AC electricity as unsafe. Brass-tacks public relations included the aforementioned effort to market AC to state governments for electrocution.

“The battle of the currents” (Hughes: 107) was described by Insull biographer Forrest McDonald as “unscrupulous political action and … even less savory promotional tactics” (45). Edison’s rivals grew grander in the fight. The inventor that Edison dismissed from his team over the issue, Nikola Tesla, praised George Westinghouse as “the only man on this globe who could take my alternating system under the circumstances then existing and win the battle against prejudice and money power” (quoted in Jonnes: 163).

Insull fought doggedly for the boss in this public relations-political fight. It would prove good training for the political side of Insull’s grand strategy for the electricity industry that lie ahead.

1.11 Edison’s Strengths and Weaknesses

Thomas Edison was a man of pronounced strengths and weaknesses. Between 1879 and 1889, he had gone from “a bold and courageous innovator” to “a cautious and conservative defender of the status quo,” noted Harold Passer (174). The perils of ego and the far different skills and responsibilities of invention versus commercialization were responsible.

Edison’s unparalleled genius as an inventor stands without doubt. Part of this success came from his managerial skills in the laboratory, where his staff numbered as many as one hundred men (Miller: 6). Edison was described by an assistant as “a gentle master in everything—word, deed, and action” (Jehl: 460). Edison’s ego was not a problem here. “Edison always stood shoulder to shoulder with this associates, but no one ever questioned the leadership, nor was it ever in doubt where the inspiration originated,” one biography noted (Dyer and Martin: 324). Edison’s year of engineering work with the Pearl Street project, with many days spent in the trenches laying electric cable, showed his teamwork.

Edison’s great intuition regarding the possible rescued him at times on the business side. For example, in March 1881 he entered into a long-term contract to supply Edison Light Company with lamps for forty cents each. His production costs at the time were $1.10 per lamp, but by 1883 technical and manufacturing economies allowed him to turn the corner. With volume very high and costs still dropping, Edison Lamp Company was profitable from 1884 forward (Hammond: 43-44).

Edison’s sense of what could be done also allowed him to take risks and deliver. Technology historian Thomas Hughes (1983: 29) called this Edison’s econotechnical sense. Post-electricity, some Edison projects lost in the marketplace not because Edison had failed at invention and lowering unit costs, but just because unforeseen superior alternatives emerged, such as high-grade iron ore in Minnesota or the internal combustion engine.

Edison had very strong opinions about the superiority of electricity, but he showed unbiased judgment by enthusiastically supporting Henry Ford’s idea of the internal combustion engine in 1896 when Ford was a young engineer working for the Detroit Edison Company (Insull, 1934: 142-43; Strouse: 314fn). Edison could have pitched the electric battery to propel the automobile on faith, but he did not. Ford was eternally appreciative and rewarded Edison handsomely in later life through friendship and commemorative charity.

Edison knew that success came from higher production and lower prices, not cartelization. As he told a central station manager in 1895:

Try everything toward economy. No one is safe in the cold commercial world that can’t produce as low as his greatest competitor. No matter how much money you are making never for an instant let up on economizing” (quoted in Carlson: 284fn).

His view was in contrast to some industrialists, including J. P. Morgan himself, who tried to artificially suppress competition as a way out of business problems. Edison was wed to the economic, not political, means, and partly because he was working in a capitalist world of creative destruction where consumers, not politicians, ruled. This instilled a discipline that was summarized by Harold Passer:

Everything [Edison] did was directed by the realization that, in a free economic society, the market test is the sole test of achievement. If the result of a man’s work can command the purchasing power of the consumers in a free market, that work is worth doing (180).

Edison had little patience for idle speculation. He complained about one of his workers, otherwise a “fine fellow”:

He gets sidetracked … and losses time. We can’t be spending time that way! We have got to keep working up things of commercial value—that is what this laboratory is for. We can’t be like the old German professor who as long as can get his black bread and beer is content to spend his whole life studying the fuzz on a bee! (quoted in Passer: 180-81).

As if led by an invisible hand, Edison’s electricity produced a better light, reduced wastage, and greatly enhanced safety. No longer would there have to be waste heat from an open flame, or soot and smoke in the home. No longer would there be the threat of explosion or suffocation. Even the risk of fire was reduced (Passer: 184).

§§§

But Edison could be his own worst enemy. His “colossal ego” and “almost pathological hostility to any form of system, order, or discipline imposed from without” (McDonald: 28) skewed his judgment at the intersection of what Edison called “dollars and science” (quoted in Josephson: 339). Alfred Tate, the successor to Insull as Edison’s private secretary, described his boss as having

a dominant pride of individuality which was inseparable from his nature. Throughout his life [Edison] always relied upon his own resources. The idea of diluting his organizations with anything foreign to them was a concept which he abhorred. No material considerations could influence him” (88).

Edison’s intransigence was joined by a mid-life conceit. His grand new laboratory in West Orange, and mansion and jewels for his second wife, had him “spending money like water” (Josephson, 309). Not quite forty, Edison saw himself as more an industrialist than inventor. The Edison of 1886 was quite different from the Edison of two years before, a humbled man morning over the death of his first wife and wondering if his financial predicament meant the end for his laboratory and manufacturing ventures.

Edison knew that his business acumen was not his strong or natural suit. As he was closing his research facility in Menlo Park to move to New York City in 1881, a friend asked, “Are you fit for business?” Edison replied, “I never tried until I had to. Applesauce and industry are all right, but a man must not be a fool” (quoted in Jehl: 925). Francis Jehl, an aide to Edison, commented, “Many people asked me for years what the turn of events would have been if Edison had had business capacity as well as inventive genius” (925). Insull was too young to be the savior (Jehl: 936), although he enabled Edison in some controversial decisions (1884 proxy fight, 1886-90 AC controversy) when working to save Edison from himself would have been better, had it been possible.

Edison’s five major problem areas were:

  • Animosity toward financial accounting and inability to work within a budget.
  • A proclivity to prematurely share and oversell new discoveries to the press.
  • A “Napoleonic” approach to inventions.
  • Failing to embrace alternating current over direct current.
  • Leaving Edison Electric Light undercapitalized between 1882 and 1889 by not selling part of his interest to an outside party.

Edison qua inventor has attracted kudos for his focus on creating commercial value. “Everything [Edison] did was directed by the realization that, in a free economic society, the market test is the sole test of achievement” (Passer: 180). But this market affinity was one-dimensional. He abhorred double-entry bookkeeping (Josephson, 89: 296), the basis of profit-loss accounting. Alfred Tate remembered how Insull would “throw up his hands in despair” (141) when going over financial accounting with the boss. Edison’s notorious inability to control costs (Israel: 210) was part of this problem.

Edison’s respect for consumer feedback was not joined by a respect for the market signals of his investors,the capitalists. Rather than considering the Morgan group as his partner, providing valuable input and working toward common goals, Edison perceived them as the enemy.

Edison’s optimism and passion made him an easy target for the newspapers in search of exciting copy. Edison went public with his inventions too early, which attracted investors at first but hurt his credibility in the longer term. Statements in 1878, such as “I can produce a thousand—aye, ten thousand lights from one machine” (quoted in Josephson: 185), raised expectations skyward and made him a public figure when he could least afford interruptions in his around-the-clock work (Josephson: 206). Real damage was done in late 1879 when a newspaper printed the technical details of Edison’s incandescent work, publicity that complicated his later patent infringement suits (Passer: 99).

Edison’s bold predictions might have been a self-spur to get himself out of his self-made predicament (Josephson: 187). But even if this were true, was it healthy for Edison Electric light stock at $100 par to reach $4,800 per share in the early period (Tate: 55)? One of Edison’s earliest investors, Morgan partner Egisto Fabbri, advised “friend Edison” to improve his reputation by staying out of the papers until his inventions were perfected (Strouse: 232). Greater humility should have come from Edison’s trial-and-error world; discoveries and completions that seemed just around the corner often were not.

Edison’s ego and stubbornness manifested itself in the infamous “war of the currents” between 1886 and 1890, discussed in chapter 1 and in Internet Appendix 1. 8 above. “Edison was swayed by passion rather than wisdom; he could be a good hater, and the thought that Westinghouse and others whom he considered no better than interlopers were forcing their way into his own vineyard filled him with rage” (Josephson: 344). Who was really the more unbalanced when Edison said of George Westinghouse, “the man has gone crazy” (quoted in Carlson: 290)?

Edison’s re-entry into electricity “to show some people that I resent the treatment received” (quoted in Conot: 381) was marked by form over substance when it come to perfecting the electric car. In 1911, Edison proclaimed to the press that his new suitcase-sized battery could power a car with a recharging time of between five and ten minutes, to which his backer, William Anderson, exploded in protest that the hyperbole could not be backed up and much credibility would be lost (Conot: 381).

1.12 Insull on Edison: Speech of March 14, 1926

Below is an extract from a speech given by Samuel Insull to the Boy’s Better Movement Club in Chicago, Illinois, on March 14, 1926. Insull made numerous speeches on his beloved mentor, but this particular one was particularly insightful. As it was never published, it is reproduced below from the only copy known to exist—at the Insull papers at Loyola University in Chicago (Insull: 1926a).

I will talk to you a little while this afternoon about the work of a man who has been more of an inspiration to me than anything else in connection with my period, so I am going to talk to you this afternoon in the time allotted to me about the work of my friend, Mr. Thomas A. Edison, the great inventor.

I know him, Mr. Thomas A. Edison, pretty well, boys. I came to this country to work for him. He is one of the most intimate friends I have. He has been more to me than any other man in business, so I know something about his work. I did everything for him when I worked for him, from writing his letters to buying his clothes and sometimes running his house. So I know the business side of him and the personal side of him, and I am going to show you this afternoon just what one man can accomplish. I am going to tell you what a man starting as a young boy, younger perhaps than the average of you boys, will accomplish in life; what in the course of a lifetime—he is approaching his eightieth birthday now; he will be eighty years old next February, 1927, what a man within the compass of one lifetime, without any influence, with little or no education, with no advantages over other boys, except the advantages that God has endowed him with, can accomplish in a lifetime.

I remember going from Detroit to Port Huron with Mr. Edison on a local train. I could not understand why he wanted to take a local train. The train stopped at every station. It left Detroit about noon and arrived at Port Huron some time in the evening. It seemed to me he naturally would want to take the fast train, but still he told me to get the tickets and we would go on the slow train. I was his private secretary at that time, and of course did whatever he told me to.

When we boarded the train I asked him why it was he wanted to travel on that particular train. He said, “This is the train that I used to be a newsboy on. I used to sell papers and peanuts and candy and such things on this train as a boy, and this is the first opportunity I have had in a great many years to travel on this train. I thought I would come along and see how the old business was going along.” He turned to me and said, “Do you know, Sammie” – he always called me Sammie “Do you know, Sammie, that there is not much difference between this newsboy business now and when I used to run the job myself.” Of course, the man who was talking to me was the famous inventor, known the world over for his accomplishments, and he was sitting there talking just as simply and just as earnestly about the time when he used to be a newsboy on that train as he could be talking on something that might seem a great deal more important.

He did some things on that train that were rather unusual for a newsboy. I suppose it was the beginning of his showing a capacity for the unusual.

It was during the early days of the war that he was a newsboy on the Detroit-Port Huron train, and he used to publish a newspaper called the Grand Trunk Herald. He worked on the Grand Trunk Railway. He used to print that newspaper in the baggage car and sell it along the road. All he had in it was the most recent war news. He was an enterprising youngster.

Then he obtained a book on chemistry and he tried some chemical experiments in the corner of the baggage car. He mixed two compounds together that did not agree and had an explosion and almost lost his life and, what would have been equally serious to him, he almost lost his job.

But that was the kind of fellow he was. He was always at work. He was earning his living, selling his papers, selling his candy and selling his plug tobacco, and then he was trying in between times, first to learn how to set up the type of a newspaper and print it, and then learn something about the fundamental experimental work of chemistry.

One day he was standing at a railroad station somewhere along the line. His train was on a siding waiting for another train to pass by. A little girl ran across the track. He made a jump and seized her and saved her life just as the train passed. The girl was the daughter of a man named McKenzie, who was the station agent and telegraph operator at that point. I think it was at Woodstock in Ontario. I am not quite sure. But as a reward for his deed the station agent taught Edison how to telegraph, and he became as proficient at telegraphing as he did as a newsboy.

I used to wonder how it was he wrote so plainly. And he writes the same way today. I received a letter from him yesterday or the day before and his writing, when he is in his eightieth year, is just as plain as it was when I first knew him, in the early thirties.

I remember asking him one time how he came to write so plainly. He said he had analyzed it and noticed that people who wrote very quickly usually wrote very illegibly, so he studied his own system of how to write. He had had no education of much account. In his day they taught the Spencerian system. I do not know what is taught today. I know the most of the fellows in my office are better on the typewriter than they are with the pen.

Edison learned to write very rapidly. He learned to telegraph, and to receive as a result very rapidly. He was noted in the early days, when he first went to Boston as a telegraph operator, as being one of the most rapid receivers in the United States, and within the last two or three years, I saw him, just for amusement, receive a telegram, and he is almost as fast today as was fifty years ago, as an operator.

He is thorough. He did everything thoroughly. He is a very thorough man. I obtained a lot of my training under him when I was a youngster and I know how thoroughly I used to have to do the work myself if I wanted to satisfy him.

Well, he went to Boston as a telegraph operator. At that time, of course, he was not known at all as an inventor. He had not done anything much in that line. He went into the Boston Public Library, and remembering his early studies in chemistry when he was on the train and the experiments he made that got him into trouble, he sought that part of the Boston Public Library where the books on chemistry were to be found. There was a whole lot of them, a room full of them. He did not know much about the great authorities on chemistry. He did not know where to start in. He had a good deal of spare time. He was a night operator on the Associated Press at that time, receiving, and he had lots of spare time. He was never very much given to sleep. So he started in and he read every book in the room. He did not take any one particular author, but he just started down the book case and read every book he could find on chemistry.

It had a great deal of influence on his experiments. If you get interested in the work of inventors and read much about Edison’s work, you will find that the thing that has influenced him more than anything else in his career has been chemical experimenting. The incandescent lamp, the electric lamp, which is an invention of his, is a chemical experiment. His main contribution to the telephone, which is the part you talk into, is a carbon transmitter, they call it technically. That is Edison’s invention, and it is the result largely of chemical experiments in the production of carbon.

You take his principal telegraphic inventions, method of very rapid telegraphy. He employs electro-chemical methods in those inventions. . . .

Later on I became private secretary to Mr. Edison’s agent in London. Mr. Edison sent some engineers over to London. One of them had a lot of work to do and he could not get a shorthand writer who could take his stuff down. He was willing to do it at night. Mind you, he wanted it done by someone in the office who would do it for nothing, so I volunteered to do the job. I wanted to learn something about the technical side of the business. The man I worked for happened to be a very great friend to Mr. Edison, one of his principal assistants. My working for that fellow in London, taking down his letters at night, got me the job of private secretary to Mr. Edison; gave me my real start in life. . . .

Now, just let me go back to the case of my friend, Mr. Edison, and see what he has done. The whole world is his debtor. No advantages of education; no advantage of money, but with a mind that he was able to develop, because he had the power and the will to stick at the thing. See what that man achieved. No American in history, no man in history, has ever influenced the industrial development and the comfort and convenience of the people of the world so much as that one man has done, who started life as a train boy, and who is today enjoying the position of the most distinguished inventor the world over.

Sources for Appendix Citations

Allen, Frederick. The Great Pierpont Morgan. New York: Dorset Press, 1948.

Baldwin, Neil. Edison: Inventing the Century. Chicago: University of Chicago Press, 1995, 2001.

Bright, Arthur, Jr. The Electric-Lamp Industry: Technological Change and Economic Development from 1800 to 1947. New York: Macmillan, 1949.

Carlson, W. Bernard. Innovation as a Social Process: Elihu Thomson and the Rise of General Electric, 1870-1900. Cambridge, U.K.: Cambridge University Press, 1991.

Chandler, Alfred. The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Harvard University Press, 1977.

Chernow, Ron. The House of Morgan. New York: Atlantic Monthly Press, 1990.

Collins, Theresa, and Lisa Gitelman. Thomas Edison and Modern America. New York: Bedford/St. Martin’s, 2002.

Coleman, Charles. P.G. & E. of California: 1852-1952. New York: McGraw-Hill, 1952.

Conot, Robert. Thomas A. Edison: A Streak of Luck. New York: Da Capo, 1979.

Dyer, Frank, and Thomas Martin. Edison: His Life and Inventions. New York: Harper & Brothers, 1910.

Flynn, John. “J. Pierpont Morgan: The Promoter.” In Men of Wealth, 452-513. New York: Simon and Schuster, 1941.

Gras, N.S.B., and Henrietta Larson. “J. P. Morgan, 1837-1913.” In The Coming of Managerial Capitalism,edited by Alfred Chandler and Richard Tedlow, 257-88. Homewood, Ill: Richard D. Irwin, 1985.

Hammond, John. Men and Volts: The Story of General Electric. New York: J. B. Lippincott, 1941.

Hogan, John. A Spirit Capable: The Story of Commonwealth Edison. Chicago: The Mobium Press, 1986.

Hughes, Thomas. Networks of Power: Electrification in Western Society, 1880-1930. Baltimore: Johns Hopkins University Press, 1983.

Insull, Samuel. “The Development of the Central Station” (1898). Reprinted in Insull, Central-Station Electric Service, , 8-33. Chicago: Privately Printed, 1915.

Insull, Samuel. “Stepping Stones of Central-Station Development through Three Decades” (1911). Reprinted in Insull, Central-Station Electric Service, 174-81. Chicago: Privately Printed, 1915.

Insull, Samuel. “Stepping Stones of Central-Station Development through Three Decades” (1912). Reprinted in Insull, Central-Station Electric Service, 342-56. Chicago: Privately Printed, 1915.

Insull, Samuel. “Speech of October 21, 1915.” Loyola University Chicago Archives and Special Collections. Samuel Insull Papers, 1799-1970. Box 21. Folder 7.

Insull, Samuel. “Looking Backward” (1919). Reprinted in Insull, Public Utilities in Modern Life, 184-98. Chicago: Privately Printed, 1924.

Insull, Samuel. “Address Before the Electra Club of the Commonwealth Edison Company, January 15, 1920. Loyola University Chicago Archives and Special Collections. Samuel Insull Papers, 1799-1970. Box 20. Folder 6

Insull, Samuel. “Some Reminiscences of Business” (1922). Reprinted in Insull, Public Utilities in Modern Life, 362-67. Chicago: Privately Printed, 1924.

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