by Jill Jonnes
The next morning, Westinghouse strode into the imposing nine-story Westinghouse Building on Pittsburgh’s Penn Avenue, a street notable for the presence of trees, wearing his usual somber, vested suit and high collar and carrying his ever-present umbrella. He knew all too well that he needed at least $500,000 in cash to pay his immediate creditors. The company’s current assets totaled $2.5 million, its short-term liabilities $3 million. Before the Barings bankruptcy, closing this gap would have been accomplished quietly. Unlike Edison, who had from the first been linked to the powerful Morgan financial forces on Wall Street (though they were generally far too cautious and tightfisted), George Westinghouse had amassed capital as needed by personal appeals to friends and existing stockholders. Biographer Henry Prout explained, “He had such an impelling personality and such a remarkable power for effectively presenting his case that he frequently secured large sums of money from men of wealth.”5 The majority of Westinghouse stockholders were leading citizens of Pittsburgh who had invested and prospered as the indomitable industrialist and entrepreneur created one flourishing company after another.
In those grim November days of 1890, the economy was souring swiftly, even as Westinghouse grappled with his money woes head-on. He and his board of directors appealed immediately to their own stockholders to raise the desperately needed $500,000, by doubling the electric company’s capital stock and offering shares at a 20 percent discount. But fear was in the air even as Pittsburgh was becoming the nation’s greatest producer of steel, recounted Francis Leupp, and “general commercial conditions were so depressing that the response fell far short of what he had hoped.”6 A delegation of employees from the original Westinghouse Electric Company appeared, offering to work for half pay until the crisis was solved. Their boss was deeply touched, but he declined. Next, Westinghouse convened an informal meeting of Pittsburgh’s leading bankers, men “who had profited by the business brought them through the industries he had built up in the city or had attracted thither from outside.”7 Forceful and charming as always, he stood before them and confidently reviewed for these potential rescuers the excellent health of his seven other companies and, most relevant, the large future prospects of the at-risk electrical company. All told, his eight companies were worth $23 million and earned $16.5 million, of which an impressive $4.2 million was profit. The bonded debt was just over $1 million. Accounts receivable, however, stood at more than $6 million, and materials on hand were an unproductive $2.5 million.
Ironically, the Westinghouse Electric Company had just posted its best year ever. Westinghouse fervently believed that “in spite of its temporary embarrassment, [it] was destined for a career of unparalleled prosperity.” Westinghouse had, after all, just begun to light up and power the world. Every day, cities all over America were sending in orders, not just for light, but for electric streetcars. Once Westinghouse Electric got its elusive AC induction motor working, the sales potential was stupendous. And then there was the rest of the globe. Had not Westinghouse already installed 750 incandescent lights in Havana, Cuba? And was the company not active in Canton, China?
Now Westinghouse, his large walrus mustache bristling, asked these men, who certainly had grown rich (or merely richer) through his eight companies, to see him through in his hour of need. So certain was he of the solidity and future of the electric company, he declared himself prepared to put up his own beloved Homewood mansion, Solitude, along with several other adjacent suburban parcels, as collateral for the half-million loan he so urgently needed. The assembled bankers murmured in a friendly manner and agreed to appoint a committee to review the books.
On December 10, the Westinghouse Electric Company publicly stated that due to the “difficulty in raising new money … owing to the stringency in the money market,” the board of directors would raise the required $500,000 by creating and selling preferred stock. Over the next two weeks, thirty Pittsburgh businessmen and seventeen banks, many having been part of the friendly group present a few weeks earlier, subscribed from $2,000 to $35,000 each to the needed $500,000, which then entitled them to stock, even as Westinghouse Electric stock, originally valued at $50, plummeted to $13 a share. The day before Christmas, the Electrical Engineer reported the heartening news that “only minor details are to be looked after before a deal is closed. This will put the electric company—certainly a money-making concern when properly managed—on a sound footing and it would seem that the improvement noted in the stock to-day reflects those changes.”8
The phrase properly managed reflected an ominous turn of events. Believing Westinghouse cornered, one of the bankers saw an easy chance to gain partial control of this highly valuable industrial property. He said to his colleagues, “Mr. Westinghouse wastes so much on experimentation, and pays so liberally for whatever he wishes in the way of service and patent rights, that we are taking a pretty large risk if we give him a free hand with the fund he has asked us to raise. We ought at least to know what he is doing with our money.”9 When the bankers demanded a voice in management, Westinghouse explained in a genial and pleasant way that this was impossible. He had always run his own companies, they were flourishing—but for this immediate need to pay off electric creditors—and he had no intention of being second-guessed or told what to do. The two sides went back and forth at some length, until Westinghouse said he must have an answer: Either they were providing the loan no strings attached or they were not. The bankers looked at one another and said, no, they must insist on naming a general manager.
“Realizing what this meant to him, they waited almost breathlessly to note its effect,” wrote Francis Leupp. “To their astonishment, instead of being staggered, he rose with a smile, remarking, ‘Well, thank God I know the worst at last!’” It was not Westinghouse, imperturbable as ever, who was shaken, but the overreaching bankers. Westinghouse told several jokes, bade the silent bankers good day, and left the room. They had just witnessed the deservedly famous Westinghouse courage. As his old friend and biographer Henry Prout explained, Westinghouse was a great one for consulting others, “then he made up his own mind, and nothing milder than an earthquake could budge him. We have seen him sitting like a rock, serene, gentle, and unmoved when every member of the board of directors was against him. Whether he was determined or just obstinate depends upon your point of view.”10 Westinghouse had been right far too often when those he judged pusillanimous had been wrong. Why should he stop trusting his own formidable instincts?
That very Friday night, as a snowstorm engulfed the eastern seaboard, George Westinghouse again boarded the Glen Eyre, his private railway car complete with sleeping quarters, dining room, kitchen, and office, and as the snow rapidly carpeted the countryside, he steamed toward Gotham, the heart of America’s brittle financial system. By the time they came across on the Pennsylvania Railroad ferry from Jersey City the next morning, the snow had stopped falling and the Hudson was bobbing with chunks of floating ice. The city looked festive swathed in holiday greens, and its usual noise and bustle were muffled by the thick mantle of clean, sparkling snow. But the pretty winter scenes were merely irksome to the cursing horsecar operators, who found draymen and their big teams also driving on the cleared horsecar rails, the only usable portion of the snowed-in city streets. Few avenues or side streets were passable, even as shopkeepers and “useful men” were gamely shoveling aside the snow. Far uptown, spirits were more frolicsome, as hundreds of sleighs glided colorfully along behind handsome horses, bells jangling, all thronging the uptown avenues and Central Park drives. One “dude” had three big bays pulling his elegant getup, each horse trimmed smartly in fur and prancing plumes. But whether New Yorkers cursed the snow or reveled in it, Westinghouse was embarked on a far more serious mission: the seeking of New York money. This would be just the first of numerous sallies into the magnificent marbled edifices of Wall Street, the nation’s gilded financial heart. Westinghouse had never before met many of the nation’s big money men, but they certainly knew of him, and
he had his young and brilliant New York lawyer, Paul D. Cravath, to smooth his way. The survival of Westinghouse’s best-loved and most promising company, the fulfillment of his very electrical dreams, was now at stake.
Back in Pittsburgh, where the fresh snow was promptly glazed squalid gray with soot from a hundred belching chimneys, the bankers smugly assumed that it would just be a matter of time before Westinghouse returned ready to proceed on their terms. When this had not transpired by mid-January, and Westinghouse was telegraphing back from Manhattan and describing his prospects as “rosy,” the Pittsburgh bankers and businessmen began returning the $520,000 in uncashed rescue checks. Nor did they share Westinghouse’s perennial rosy optimism. The New York Times reported that in Westinghouse’s headquarters city, “financiers and stockholders now favor the appointment of a receiver for the Westinghouse Electric Company.” Meanwhile, the first of the creditors filed lawsuits—one a small bank seeking $2,000, another a local steel company after its $800. The human jackals were beginning to circle.
In Manhattan, Westinghouse had found a possible savior in August Belmont, son and partner of the fabled founder of one of Wall Street’s most respected investment houses. August Belmont & Company was a major power, for it served as the American branch of the legendary Rothschild banks. The Belmonts were strong Democrats and famous horsemen. On January 4, 1891, Electrical World carried a statement from the Westinghouse Electric Company describing the new rescue plan (it made no mention as yet of New York bankers), which entailed selling a new block of preferred stock, having existing shareholders turn in 40 percent of their old stock and accept less valuable new stock, and paying as many creditors as possible with new preferred stock. It listed various other steps taken to restore fiscal health, including “elimination of doubtful values and the book value of patents.” George Westinghouse was described as “now devoting himself to the placing of this stock and is very hopeful of success.”
This story only obliquely hinted at one of the many sticking points for the Westinghouse rescue: Tesla’s lucrative AC patent royalty deal. George Westinghouse was well-known for having a soft spot for inventors, always remembering his many early rebuffs when trying to sell his air brake. The general feeling was that he was too generous. The New York bankers felt that Westinghouse’s championing of Tesla’s as-yet-unworkable alternating current motor was one more contributing cause in the company’s woes. The industrialist had paid $20,000 in cash to Nikola Tesla, then $50,000 in notes. He had laid out yet more big money trying to develop Tesla’s AC induction motor and the rest of his system, paying the Serbian inventor handsome consulting fees. And all this had come to very little. The top Westinghouse engineers had not cared for Tesla or his system. They had balked when he was in Pittsburgh, and were still balking, at designing a system that operated on the 60-cycle frequency Tesla insisted was necessary. The industry was in its infancy, but already there were various established cycles for electrical equipment, and 60 cycles was not one of the common frequencies. Tesla had run into the problem that even if one system (his) was better, sheer inertia, habit, and the cost of the new could combine to thwart technological improvement. The hard truth was that Westinghouse had spent a great deal of money and did not seem even close to making Tesla’s system or his AC induction motor work on a commercial basis. Nor was that all. Westinghouse also had paid sizable legal fees to defend his Tesla patents against all sorts of interloping engineers and inventors claiming priority. Westinghouse had sunk large sums into Tesla, and now his money-short company was imperiled.
Nikola Tesla had returned disillusioned from Pittsburgh in the fall of 1889, just over a year earlier, lingered briefly in Manhattan, and then sailed off to France to visit the Paris Exposition, with its sprawling and marvelous electrical exhibits. From the still wondrous City of Light, he would travel east to Austria-Hungary to reunite briefly with his many sisters and their Eastern Orthodox priest husbands and to comfort his dying mother. Tesla was an immigrant success story now, one of the self-made Gilded Age rich, thanks to his AC patents. The inventor’s ocean voyage back to Europe was a luxurious contrast to his penniless seaboard arrival five years earlier. In Paris, le tout monde could talk of nothing but the soaring Eiffel Tower and the amazing American wizard Thomas Edison, whose multilingual phonographs dazzled all visitors to the exposition’s huge Edison display. Edison, also in Paris, was in excellent spirits, relishing the great acclaim that greeted his every public appearance and his own ascension into the ranks of the American millionaires.
That summer, Edison had happily allowed Edison Electric president Henry Villard—onetime crack Civil War correspondent, the Union Pacific builder who had driven in the golden spike, U.S. representative for big German banks, and longtime Edison investor—to reorganize the Edison Electric Light Company and its various manufacturing entities into Edison General Electric, capitalized at $12 million. The Drexel, Morgan investors were very handsomely rewarded—their original $1 million investments were now deemed worth $2.7 million in Edison GE stock. Edison emerged flush with $1.75 million in stock and cash for the manufacturing shops he had created. Wrote Edison gratefully to Villard, “I have been under a desperate strain for money for 22 years, and when I sold out, one of the greatest inducements was the sum of cash received, so as to free my mind from financial stress, and thus enable me to go ahead in the technical field.”11 Edison GE president E. H. Johnson enthused to Edison, “We shall speedily have the biggest Edison organization in the world with abundant capital when goodbye Westinghouse et al.”12 By 1889, Edison General Electric had indeed become a major American corporation, employing three thousand men in its three main shops and bringing in revenues of $7 million a year, with profits of almost $700,000. During this reorganization, Villard had also sold $4 million in new Edison GE stock, mostly to his German-backed North American company and to the Morgan group. So Edison had every reason to feel buoyant during his triumphant 1889 Parisian visit.
Tesla’s own European sojourn involved meetings with numerous eminent electricians, and as he sailed back into New York Harbor in the late fall of 1889, he was afire with new electrical projects and plans. He established a commodious and well-equipped laboratory on the fourth floor of 33-35 South Fifth Avenue (today West Broadway), a run-down commercial block just west of City Hall. Edison had decamped to the countryside and his magnificent West Orange lab, while the Edison General Electric corporate offices were moved to 16 Broad Street, next to the Sub-Treasury Building, in the more logical Wall Street district, leaving 65 Fifth Avenue to serve as an elaborate and fashionable showroom of electrical lighting wonders, ablaze with chandeliers and such.
When Tesla returned to Manhattan, he was the picture of European elegance, a tall, slender man in the prime of life, impeccably dressed in the finest hand-tailored Parisian styles right down to his cane, spats, and soft-leather shoes. He was well able to afford his indulgence of tossing out his fawn-colored kid gloves and silk handkerchiefs after a week of use. Many who met him noticed the intense blue of his eyes and the size of his hands and their unusually long thumbs. Tesla had also acquired a taste for the convenience of luxury hotel living while residing in Pittsburgh. After inspecting numerous Manhattan hostelries, he elected to live in the Astor House, Gotham’s first luxury hotel. Situated on Broadway and Vesey, it was conveniently near his lab. He began to dine nightly at Delmonico’s, America’s most famous restaurant, a gustatory temple that for six decades had served exquisite French cuisine and wines. Tesla preferred the mutedly elegant uptown Delmonico’s at Fifth Avenue and 26th Street, located across from the civilized greenery of the handsome and leafy Madison Square Garden Park, a pleasant refuge from Manhattan’s tumult, an oasis of spreading elms, graveled paths, statuary, and fountains.
As a regular solo customer of Delmonico’s, the polite and gracious inventor had let the highly trained staff know that he liked to have eighteen pristine napkins in a stack at his table. Very discreetly, Tesla used them to wipe the germs off ea
ch piece of heavy silverware, sparkling china, and crystal stemware before he partook of the chef’s many delights. Tesla’s germ phobia had developed after a fellow scientist allowed him to observe through a microscope the many normally invisible creatures inhabiting unboiled water. Tesla would later explain, “If you would watch only for a few minutes the horrible creatures, hairy and ugly beyond anything you can conceive, tearing each other up with the juices diffusing throughout the water—you would never again drink a drop of unboiled or unsterilized water.”13 So Tesla was ever vigilant in limiting his exposure to these vile microscopic bugs.
Tesla’s new wealth and the luxurious lifestyle he now adopted with such relish in no way affected his complete obsession and devotion to his electrical dreams. All through 1890, even as he prided himself on his exquisitely tailored clothes and daily savored his excellent Delmonico’s dinners, he still labored his usual seven days a week in his laboratory, working through the night and retreating to the Astor House in the wee hours for five hours’ rest—reportedly only two of these being actual sleep. During the day at his lab, Tesla could hear the loud rumbling of the passing elevated, spewing sparks and cinders on the unwary below, while down on the grungy street lined with ash barrels and piles of refuse arose the angry shouts of the teamsters and their massive teams of horses negotiating their way to and from the nearby wharves. Tesla had one or two helpers and sometimes his partner, Alfred Brown, to work with him and assist. Sadly, his old friend and colleague Szigety had died while still a young man. Despite the disillusionment with his own Westinghouse experience, Tesla maintained cordial relations with the firm and remained hopeful that the problems with his AC system and induction motor would finally be overcome. He offered whatever advice he could to the Westinghouse Electric engineers, visited from time to time when he was picking up special equipment for his lab, and sent along possible clients. He was most distressed when he heard in late 1890 that all development work on his motor had been halted.
