American History Revised (15 page)

Tesla never did fulfill his dream of wireless transmission of energy (imagine a motorless car, or a boat being propelled by a signal!). Nor did he realize his other great dream, conservation of nonrenewable resources. Wind and solar power, he argued, should be developed to save coal, wood, and oil. So radical was this idea at the time that other inventors laughed, especially Thomas Edison, who argued that shortages would not occur for “more than 50,000 years.” The forests of South America alone, claimed Edison, could support the world for that long.

According to the esteemed
Encyclopaedia Britannica
, only three Americans score among the top ten people whom subscribers call to get more information on. They are Abraham Lincoln, JFK, and Nikola Tesla. (Thomas Jefferson and Benjamin Franklin rank high, but fall outside the top ten.) When
Life
magazine in 1930 did a compilation of the one hundred most influential people of the past thousand years, it included Tesla. A year later he appeared on the cover of
Time
magazine with the center “All the world’s his power house.”

Yet Tesla hardly appears in the history books. Look up
radio
, and the inventor named is Marconi, even though the U.S. Supreme Court invalidated his patents as “absurd” and awarded the discovery to earlier patents filed by Tesla. Look up
electricity
, and far more is written about Edison, even though his technology lost out to Tesla’s superior technology.

Tesla is not an easy subject for historians. A lifelong bachelor, he lived and worked alone, leaving few witnesses to explain how he achieved his scientific feats. Lacking strong financing, he rarely pursued his demonstrations through to the point of developing workable prototypes that succeeded in the marketplace. When he died, his papers were seized by the U.S. government, concerned that his insights into particle beams and other military matters might fall into enemy hands. What remained after full vetting was shipped off to his birth country, what is now Serbia, many papers missing. He left behind no great scientific treatises or teams of well-trained assistants to carry on his work.

Yet his memory lives on. In 2006 a group of high-powered Silicon Valley investors, led by the two cofounders of Google, announced
the startup of an electric car company ready to take on Detroit. Their first car would be a sportscar capable of zero to sixty miles per hour in four seconds—faster than a Ferrari. In naming itself Tesla Motors, the company modeled its vision after a man who thought big.

No other businessman can boast of having beaten
both
Cornelius Vanderbilt and Thomas Edison in their respective fields—railroads and electricity. During his business career he produced an average of one invention every six weeks, backed with 361 patents, all of which he defended vigorously. He formed sixty companies that employed fifty thousand people—making him the largest employer in the United States. Most remarkable of all, in an age of tycoons he was a tycoon as rich as the rest of them, but he was not a robber baron. He was scrupulously ethical, and treated his employees generously.

In terms of immortality, this worked to his disadvantage. Unlike Vanderbilt and other buccaneers of the Gilded Age, George Westinghouse did not crush competitors or flout the law. He was never the subject of any high-profile government investigations. Happily married for forty-seven years, he was never embroiled in any personal scandal—no exciting copy for newspapers here. In fact, just the contrary: he disdained publicity. He rarely gave interviews. He hated to be photographed, and to this day only a half-dozen photographs of him exist. He did not preserve his personal letters or papers. Only two biographies have been written about him, and none since 1926. Over the years his companies disappeared in mergers and takeovers, and when his major company took on the name of its media subsidiary CBS, and was dismantled in the late 1990s, all the historical archives disappeared.

One has to search the history books long and hard to find a great American treated so shabbily by history’s benign neglect.

When America’s largest life insurance company in 1907 announced the appointment of three new directors, it sent out a press release as follows: “Grover Cleveland, ex-President of the United States; Morgan J. O’Brien, Justice of the Supreme Court of New York, and George Westinghouse.”

This man who needed no introduction started his career at age twenty-two, when he filed his first patent in 1869. Putting his creative mind to the great industry of the future—railroads—he invented the first system of using compressed air to bring trains to a halt. Needing money to start a production plant, he went to Cornelius Vanderbilt to try to interest him in investing in his new company. Vanderbilt would have none of it: “If I understand you, young man, you propose to stop a railroad train with wind. I have no time to listen to such nonsense.”

Within a year the Westinghouse Air Brake Company became the industry standard, and the biggest customer of “stopping
railroad trains with wind” was Vanderbilt. To this day, air brakes based on Westinghouse’s technology are still used for railroads, trucks, and buses. Also used today are other inventions of Westinghouse concerned with railroad safety and yard switching equipment. Moving beyond railroads, Westinghouse invented and manufactured equipment for drilling and distributing natural gas. Also at this time, the telephone came into use. All telephone calls were routed through a central switchboard, each call on its own single wire; Westinghouse invented a way to reduce the wiring by creating substations for routing calls; thus the modern switched telephone network was born.

George Westinghouse

Then came the great growth industry: electricity. The problem with getting electricity from the power station to the consumer was that power decreased with distance, meaning that for Edison’s invention of the lightbulb to work, houses and offices had to be within fifteen miles of a power station. This meant a lot of business for Edison’s company manufacturing the generators (that company today is General Electric), but it was very costly and inefficient, and could only serve areas of high population density. An alternative technology was to send high power over distances, then use a transformer to reduce the power to a safe level at the point of consumer use. Westinghouse resolved that this was the wave of the future, hired Nikola Tesla to develop the technology, and installed the nation’s first AC power network. Thereupon ensued “the battle of the currents” between Edison’s direct-current system and Westinghouse’s alternating-current system, which Westinghouse won conclusively. When the Columbian Exposition world’s fair opened in 1893 with its stunning displays of light beams, the company that provided all the lighting and electrical systems was Westinghouse Electric, not General Electric.

Having established his technology as the winner, Westinghouse moved on to actual production. Within two years of his Columbian Exposition coup, Westinghouse set up the first long-range power network, at Niagara Falls. Other innovations
pioneered by Westinghouse included an alignment system for enabling turbines, normally working at 3,000 rpm, to work with ship propellers that can do only 100 rpm. Such is the propulsion system used by virtually all ships today.

It is small wonder that an entrepreneur in so many capital-intensive businesses incurred a lot of debt to finance all his companies. In the Panic of 1907, the banks called in their loans and Westinghouse lost control of his company.

Westinghouse’s most lasting legacy—one largely lost today—is the notion that a company’s foremost obligation is to its employees (as opposed to its top executives). At a time when people worked six days a week, Westinghouse gave his employees a half day off on Saturdays. He paid his people top wages, and built a company town to provide his workers with affordable housing, indoor plumbing, and electric lighting. He was the first CEO to offer his workers a pension plan and paid vacations. His workers were so enamored of his generous compensation policies that they refused to form a union. Even Samuel Gompers, the famous labor leader, extolled Westinghouse: “If all employers treated their employees like Westinghouse did, there would be no need for unions.”

Unlike other industrialists like Rockefeller, Carnegie, and Ford who incurred much labor unrest in their companies and re-created their image for posterity by forming large philanthropies to give away money, Westinghouse’s priorities were just the opposite. “I would rather give a man a chance to earn a dollar than give him five and make him feel he’s a ‘charity case,’” he said. When advised that perhaps humanity might be better off if he devoted himself to pure research, he said, “Perhaps so, but think of the many men to whom I give employment. I can’t stop now.” That he created more new jobs for American workers than any other businessman, before or since, was his stellar achievement. He was the antithesis of today’s CEOs who brag how adept they are at “outsourcing” to low-wage countries.

“Easy to give away a lot of money when you’re rich and successful,” cynics might say. To which we offer the remarkable story of Samuel Insull, the father of the electrification of the nation. Regarded in the 1920s as the most powerful businessman in America, Insull stuck to his principles and died a pauper. His social consciousness stands in sharp contrast to that of the executives of Enron, the energy giant of recent memory. For that reason alone, his story is worth telling.

Thomas Edison once said, “We will make electric light so cheap that only the rich will burn candles.” Only he couldn’t do it, he the promoter with no idea how to make it happen. To implement his vision he had to rely on his young finance
manager, the English immigrant Samuel Insull. After twelve years under Edison, Insull left to take over a small electricity company in Chicago. At a most unusual farewell black-tie dinner hosted by Edison, attended by the fifty most powerful men in the electricity industry who were Insull’s “most intimate friends and intimate enemies,” Insull announced to the tycoons, “My new company will be bigger than General Electric.”

Upon arriving in Chicago, he walked through the grounds of the Columbian Exposition of 1893, with its stunning display of electric lighting provided by Westinghouse Electric, and determined to waste no time electrifying the continent. He came up with the brilliant idea to cut prices below the normal cost of production, but still make money by slashing his costs even more through a realignment of the load factor from peak to nonpeak hours. Says the historian and former editor of the London
Financial Times
, Harold Evans, “Insull’s concept of load and diversity factors was the single most significant innovation in the single most important technological advance of the twentieth century, the electrification of the continent.”

Said Insull, “Here is an industry which supplies convenience and comforts to the day laborer, which kings could not command half a century ago.” He provided electricity at one-third the price charged by utilities on the East Coast, yet made enough money to buy more than 250 companies. By 1929 he was providing one-eighth of the nation’s electricity, and gas, and became known as “the power wizard.”

He was a financial genius robot, but he was “a robot with a heart.” When Chicago’s elevated railways went broke, he not only showed them how to reorganize their peak-load traffic capacity and start making money, he personally paid for new coaches and redecorating the stations. He also enforced a universal transfer pricing, and maintained good relations with unions. Unlike the robber barons of the day, he urged more—not less—public regulation: “No monopoly should be trusted to run itself.” He helped set up the Illinois State Public Utility Commission to ensure better service to the public and enable utilities to invest to meet future demand—a model suddenly abandoned in the deregulation of the 1980s and 1990s (resulting, in 2003, in the nation’s most extensive blackout as well as the nation’s biggest corporate collapse, Enron).

As his empire grew, he gave away millions in anonymous gifts to widows, orphans, hospitals, and the Chicago Opera. He treated his employees well, paying them more to work forty-six hours than his competitors did to work seventy. He also gave them free medical benefits, night schooling, and a profit-sharing plan. He went out of his way to hire black workers who could not find employment elsewhere. When the Depression hit, he raised $10 million to pay the teachers, policemen, and firefighters in order to save Chicago from bankruptcy.

But when the Depression continued through 1933, Insull found himself overextended. Advised to sell his stock short so that every time his share price dropped he could “reap billions and bankrupt every New York bank in the process,” Insull blew up: “We can’t do that. It would be immoral. We’ve got a responsibility to our stockholders. We can’t let them down.”

His decency cost him plenty. On the very day that Samuel Insull raised $10 million for Chicago’s poor, the New York banks—angry that he had given most of his business to London banks—abruptly threw Insull’s company into receivership in order to grab the best pieces for themselves (“asset stripping” is what it’s called today). Insull and all the shareholders in his holding companies got wiped out, whereas the shareholders in his operating companies made out fine. In addition, because Insull had personally guaranteed several recent loans in a valiant effort to keep his companies afloat, Insull lost his homes and personal possessions, too.