The Wizard of Menlo Park (21 page)

These dolls, the first-generation ancestors of Chatty Cathy, did not prove capable of being very chatty. Every one was tested at Edison’s factory before being shipped, but in the course of the journey to stores, the internal organs of almost every single doll suffered injuries that left it capable of emitting nothing but discordant squeaks. One dealer found that of the first 200 dolls sold, 188 were returned. At that point, he told prospective customers that his remaining stock of dolls was for sale only on an as-is basis, without guarantee. He then learned what the modern parent knows all too well: The hot toy of a given season must be obtained by any means necessary (and in any condition). His customers continued to buy up the doll.

After the 1890 Christmas season had passed, and the tears of disappointed children dried, Edison shrugged off blame and distanced himself from the party that was least responsible, the company to whom he had licensed the marketing rights. With the loss of Edison’s name, the company died and the talking dolls’ fiasco was complete. On a parallel track, the North American Phonograph Company similarly failed to survive while handling Edison’s far-from-Perfected Phonograph. The Phonograph Company’s principal owner suffered, too. Lippincott fell behind in his payments to Edison, suffered a paralyzing stroke, and died soon after.

These ventures were the first ones that Edison mounted after building his new laboratory complex. Their unhappy endings suggest that Edison was mistaken in thinking that expanded space, new equipment, and large technical support staff were everything he would need to succeed in his ambition to eclipse his own earlier achievements in Menlo Park.

Two years before, soon after the lab had begun operations, Edison had declared publicly that his inventions should be judged only on the basis of commercial success. This had come about when a reporter for the
New York World
had asked him a battery of questions that threw him off balance: “What is your object in life? What are you living for? What do you want?” Edison reacted as if he’d been punched in the stomach, or so the writer described the effect with exaggerated drama. First, Edison scanned the ceiling of the room for answers, then looked out the window through the rain. Finally, he said he had never thought of these questions “just that way.” He paused again, then said he could not give an exact answer other than this: “I guess all I want now is to have a big laboratory” for making useful inventions. “There isn’t a bit of philanthropy in it,” he explained. “Anything that won’t sell I don’t want to invent, because anything that won’t sell hasn’t reached the acme of success. Its sale is proof of its utility, and utility is success.”

He had been put on the spot by the reporter, and had reflexively given the marketplace the power to define the meaning of his own life.

CHAPTER EIGHT

BATTLE LOST

B
Y THE EARLY
twentieth century, Edison had earned a reputation as “the world’s greatest inventor and world’s worst businessman.” The phrasing, attributed to Henry Ford, is memorable, even if both characterizations as greatest and worst are too extreme to be accepted literally. The range of Edison’s technical interests was enormous, but it is hard to separate cleanly his accomplishments from those of his assistants. His standing as a businessperson is not aptly described in extreme terms, either. He never passed through bankruptcy, nor lost ownership of Glenmont or his Orange laboratory. In fact, he was a genuine millionaire at the time of his death in 1931. Still, Ford was correct, Edison was the “world’s worst” businessperson if one compares what Edison himself earned from his most significant inventions to the far larger sums earned by his contemporaries who profited from Edison’s original work. The dismal commercial beginnings of Edison’s phonograph business provide materials for one case study; the shaky start of electric light service provides materials for another.

The central irony in Edison’s biography is that his electric light became the foundation of a viable business, eventually known as General Electric, only after Edison yielded control of its management. Samuel Insull, Edison’s young assistant, deserves credit for his role in guiding the electric light business through the transition from Edison era to post-Edison. Insull was precociously self-assured. He spoke well, dressed well, and made sure that everything was handled just so. Edison gave him genuine decision-making authority because Insull was preternaturally adept at management and yet, because of his youth and lack of technical background, he could never be Edison’s peer, drawing public attention away from Edison. Technically gifted individuals who arrived at the Lab with their own strong opinions, such as Nikola Tesla and Frank Sprague, clashed constantly with Edison and left. Insull had strong opinions, too, but he stuck around longer than the engineers. He had begun as Edison’s private secretary—the cocky lad, then only twenty-one years old, had insisted that he be appointed to the position as a condition of his emigration from England—and was soon taking care of whatever Edison needed, from buying clothes to arranging for financing for Edison’s businesses. Edison no longer needed to sign his own checks; Insull wrote them. As for handling correspondence, Edison merely scribbled a
yes
or a
no
in the margin of a letter that had arrived, and Insull would figure out how to compose a detailed response to the correspondent. (Insull’s talent for creative writing makes it likely that he was a collaborator in, if not the author of, Edison’s formal letter to Lewis Miller, seeking his blessing for Edison’s marriage to Mina.)

What is most surprising about Insull’s relationship with Edison was that it was not at all sycophantic. He was the only member of Edison’s inner circle who was unafraid to tease Edison publicly about sensitive subjects, such as Edison’s heavy reliance on staff members in the invention factory. One evening, Edison, Insull, and others were sitting around in the office, bantering, when Edison teased Insull about his comically extreme self-confidence in his expertise in business. Insull retaliated, telling everyone present how Edison really worked: In the evening, Edison would hand out various assignments to his lab assistants, who were expected to toil through the night. He would then lie down and sleep. In the morning, he would arise, have a good breakfast, and exclaim, “What a wonderful night’s work I have done.” This was daring—everyone present knew well that it was not far from the truth. At first, Edison showed irritation, but then regained his equanimity and laughed with the others.

There was precious little else to laugh about, after all. After Pearl Street’s launch, Edison’s various electric light businesses struggled to remain alive. The Edison Electric Light Company failed to win contracts with large- or even medium-sized cities, so Edison decided to add another company to his portfolio, the Thomas A. Edison Central Station Construction Department, which offered to build turnkey power-and-light systems. The business it attracted turned out to be meager. Instead of relieving Edison’s financial difficulties, the Construction Department only exacerbated them.

The financial reports that came in from the municipal licensees show a painfully slow process of winning customers. The Edison Electric Illuminating Company of Jackson, Mississippi, which could boast of $100,000 in capital stock, reported profits of $139 for the first four months of 1886. For the first nine months of that year, the electric company in Cumberland, Maryland, reported profits of $282. Des Moines earned $426 for the first eight months, and New Bedford, Massachusetts, $155.

One wag wrote a mock letter to the shareholders of the Edison United Manufacturing Company: “We wish to impress the fact indelibly on the minds of our stockholders that our object is not to make money. This fact once accepted will prevent much dissatisfaction and many unpleasant explanations.”

Samuel Insull was Edison’s right-hand man—and left-hand man—when Edison’s finances were in their most parlous state. One night, the two hunched over the books, mulling over schemes to put off the creditors of Edison’s Construction Department. In matters of finance, Edison deferred to Insull, but Insull himself later said that he himself “knew little or nothing” about the subject. Edison’s assets were tied up in the various companies that supplied Edison Electric. He had no cash and was embarrassed that he could barely meet his household expenses. Only royalties from some hitherto-forgotten telegraphic devices saved him from worse. Insull was personally getting by with loans from Edison associate Sigmund Bergmann and credit extended by Delmonico’s, where Insull ate two meals a day. The situation seemed so hopeless that Edison, the irrepressible optimist, was wondering aloud that night what would happen to them. “This looks pretty bad,” Edison confessed to Insull. “I do not know just how we are going to live. I think I could go back and earn my living as a telegraph operator.”

It was the only time Insull ever saw Edison betray deep discouragement. The moment passed. Revenues in the other companies began to increase, the Construction Department was liquidated, and prospects for Edison’s electrical interests began to look up. Insull played a major role in the turnaround. Edison can be credited with being willing to turn over major operational responsibilities to Insull, which he did only because, by chance, a labor dispute created the opportunity.

In Edison’s view, his troubles with his workers at the Edison Machine Works on Goerck Street began when he was too generous.

It seems I had rather a socialistic strain in me, and I raised the pay of the workmen twenty-five cents an hour above the prevailing rate of wages, whereupon Hoe & Company, our near neighbors, complained at our doing this. I said I thought it was all right. But the men, having got a little more wages, thought they would try coercion and get a little more, as we were considered soft marks. Whereupon they struck at a time that was critical.

In his recollection in an oral history he prepared years later, Edison regarded the incident as amusing. The strikers did not realize that Edison’s company happened to be so short of cash that it would have difficulty meeting its next payroll. Edison decided to use the strike as an occasion to catch up on other matters, and when a committee representing the strikers appeared at the company’s offices to begin negotiations, the office was empty. For two weeks, Edison and his managers found other places to be. When they finally returned, they were pleased to discover that “the workers were somewhat more anxious than we were.” There were no more demands for raises.

The strike by the Machine Works personnel had ended with a victory for management, but the experience gave Edison an excuse to find a new location far away. More spacious quarters were needed in any case. The Machine Works was so cramped that lathes had to be placed on the sidewalk, powered by belts that came through the shop windows. At the time of the strike, the company had already purchased a piece of property in Brooklyn and was about to let contracts for construction of a new factory. But in the strike’s aftermath, Edison decided to quit the city and leave its workers behind. Charles Batchelor heard of a possible site in upstate New York, in Schenectady. A locomotive works with two large buildings situated on a ten-acre site, adjacent to rail tracks and the Erie Canal, was available for less than the property alone in Brooklyn. “And we will have no more trouble there from strikes,” said Batchelor to reporters, speaking exaggeratedly of
strikes
in the plural. Edison appointed as general manager of his relocated machine works none other than Samuel Insull, who had just turned twenty-seven years old.

The new position in Schenectady meant greater responsibility and diminished income; Insull could no longer supplement his modest salary by serving as a secretary to the boards of other Edison companies. It rankled him that he was not given an allowance for entertaining and had to personally maintain a stable of horses for the sporting pleasure of guests of the company. He had never asked Edison for a raise, however, and he decided to “leave these things to [Edison’s] own good judgment to deal with them whenever he thought it advisable.”

Insull began with two hundred employees in Schenectady and immediately obtained improved results, building up an electrical supply business that was not dependent upon the sale of turnkey systems. He oversaw newly brisk business in almost all lines: electrical conduits, dynamos, motors, pulleys, and wire insulation. Discarding slack operations and sloppy accounting, he reorganized the office so that statements to customers went out on time, invoices were paid promptly, and letters handled professionally. By the fifth of each new month, he knew exactly how all the accounts stood. He even introduced the novel concept of sales goals. By “pushing” the department responsible for wire insulation, for example, monthly sales increased within a year more than tenfold. Within sight were annual profits of $100,000 a year for the combined departments.

After his first year was complete, Insull came down from Schenectady and paid a visit to Glenmont to report to Edison in person. Pleased with what he heard, Edison rummaged in his waistcoat pocket and pulled out a piece of paper that he handed to Insull. It represented stock warrants in the company, which would be worth $75,000 when Insull cashed them in. Edison also wanted to know who had paid for company-related entertainment. When Insull said he had absorbed the cost himself, Edison awarded him on the spot a substantial raise in salary and a separate entertainment allowance. Insull’s decision to trust that Edison would eventually reimburse him was vindicated.

Insull was engaged in an ongoing campaign to modernize business practices in Edison’s offices, a campaign that brought him into conflict, at times, with other senior managers and with Edison himself. For example, he berated Alfred Tate, who was in Orange, in a letter with an unmistakably sharp tone. Insull wrote that in the future whenever he asked Tate about a particular matter “what I want you to do in these days of cheap telegraphic rates is to leave nothing to my imagination” when replying. When he noticed that Tate had made a withdrawal depleting Edison’s account the day before Edison had a note of $1,600 due, Insull was furious. “Don’t you realize that the first thing in business should be to meet a man’s notes and let everything else wait?”

Poor Tate—he was merely acting at Edison’s behest. Edison treated the Schenectady shops as a handy source of funding for his lab complex. The more the shops prospered, the more boldly Edison, through Tate, siphoned off the profits by overcharging the Schenectady factory for lab services. In his second year in Schenectady, Insull noticed that when the lab transferred materials up to the shop, the lab billed at double the rate that the shop collected when the same materials moved down to the lab. In January 1888, Insull openly defied Tate and Edison, refusing to pay any more of Edison’s laboratory bills until he could tote up the outstanding liabilities. Insull wrote Tate: “The large and rapid calls that [Edison] has made upon us for money simply puts me in the position of being compelled to refuse to assume any further liability.” In July, furious at new charges assessed by the lab that Insull felt were “simply outrageous,” he threatened to bring the paperwork down to Glenmont and “see Mr. Edison personally about them.” This was bluster: Tate had done nothing without Edison’s approval.

Under Insull’s management, the Schenectady workforce grew from two hundred to eight thousand in just six years. Looking back, Insull attributed his success during this time to simple geography: “We never made a dollar until we got the factory 180 miles away from Mr. Edison.”

Insull did not oversee the marketing of the Edison power and light system, however. That remained under Edison’s direct purview. Edison’s conviction that his direct-current system was vastly superior to the alternating-current systems of his competitors was unshakable. But it would have been better for the business if he had been willing to pay attention to what the market was telling him. Customers favored the system that served a wide area. To avoid prohibitively high costs, Edison’s direct-current generating station could only serve a small district, like Pearl Street’s. Edison sales agents in the field felt helpless as they lost municipal contracts again and again in competitive bids against rivals like Westinghouse, which offered an alternating current system, and Thomson-Houston, which offered customers a choice of alternating or direct current systems. A frustrated sales agent wrote the home office: “Are we going to sit still and be called ‘old fashioned,’ ‘fossils,’ etc. and let the other fellows get a lot of the very best paying business?” Edison’s longtime lieutenant Edward Johnson corroborated the reports from the field, telling Edison that until the company had a system that could compete on price with alternating-current, “we may as well accept the fact” that the company would not win business in its targets. Edison paid no attention. He was convinced that his system was technically superior, end of discussion. “If our patents were public property,” he wrote an acquaintance, “you wouldn’t find an alternating man in the US.”