by Jill Jonnes
As for George Westinghouse, the eternal optimist who had successfully weathered previous financial panics when Westinghouse Electric’s prospects were nowhere so rosy, he assumed the best. Five thousand of his own employees put up $600,000 to help in the firm’s reorganization by buying “assenting stock,” far more expensive stock that would help retire much of the debt. But when the electric company emerged from bankruptcy a little more than a year later in December 1908 (under a plan largely of Westinghouse’s own devising), Westinghouse was no longer the supreme ruler. At long last, the New York and Boston banking interests had gained majority control of a company they had long coveted. They promptly elected as chairman of the board the dour Robert Mather, a railroad attorney of no major accomplishments, to rein in the Westinghouse exuberance they found so galling.
The very reckless boldness that made the domineering Pittsburgh magnate a great inventor and entrepreneur was now denounced—his lavish treatment of inventors, his big spending on research, his generosity with his men, and his expensive gambles on new and experimental machines. In short, the usual complaints of the money men. (Andrew Carnegie, whose steel company was famous for its fabulous profits and infamous for its poor labor relations, was very much of that mind-set. He described Westinghouse as “a fine fellow and a great genius, but a poor businessman.”13 These criticisms infuriated Westinghouse, who had created one major pioneering company after another.) In any case, Westinghouse and the new president, Mather, were like oil and water, and bitterness festered. One Friday afternoon at the end of a meeting in Pittsburgh, as Mr. Mather packed up his briefcase, Westinghouse, ever genial, said, “If you are going to New York this evening, I shall be glad to take you in my car. I am going East myself.”
There was an uncomfortable silence, punctuated only by Mather’s methodical gathering of papers and stacking them into his briefcase. He finally said, “I prefer to go to New York by myself and pay my own fare.”14
By late 1910, Robert Mather and the new directors had pushed Westinghouse off the electric company board entirely. They made various lukewarm overtures to bring the great industrialist back into some kind of active management, but he disagreed with their whole corporate philosophy. He saw himself as interested in progress and profits and the welfare of his men, while they were interested only in profits. The board, predictably, saw Westinghouse as an utter profligate. Westinghouse also disapproved of the new board’s reneging on their promise to pay dividends on the “assenting stock,” shares bought at high prices to get the firm out of receivership. Westinghouse felt a special responsibility to these stockholders, who had stepped forward in tough times and seen him through. So as the electric company flourished and the board refused to pay these dividends, Westinghouse launched one last effort to recapture his stolen company.
A short-lived, two-week attempted coup, the Battle of the Proxies, stirred up great excitement in the broiling month of July 1911, when a deadly heat wave enveloped East Coast cities. Those who had come to loathe the Wall Street money men and their hard-eyed greed were rooting for Westinghouse. From his Pittsburgh office, he rallied the troops, proclaiming to the nation’s newspapers that proxies were rolling in by the boxload to unseat the tightfisted board. But when the showdown came, the great electrical dreamer could produce but 200,000 votes, compared to management’s avalanche of 490,000 shares. His public relations officer, Ernest Heinrichs, watched this poignant last hurrah with sadness. “The loss of the Electric Company was to Mr. Westinghouse a disappointment from which he never recovered. There is no doubt that it broke his spirit.”15 The boss who had once proudly and impatiently informed a subordinate, “Impossible is not in my vocabulary,” had discovered that retrieving his beloved company, the corporate chariot that was to spread electricity across the universe, was indeed impossible. It had fallen irrevocably into hostile hands.
The loss of his electric company was a cruel blow, but Westinghouse was at heart an optimist, a doer, and a builder. He still had his four other major American companies and his insatiable desire to improve the world. Although he had always shunned publicity and avoided public speaking, Westinghouse now began to use his renown and prestige to lobby frankly in support of the Progressive agenda. On January 21, 1910, as the after-dinner speaker at a Boston meeting of the American Engineering Societies, he denounced the “evil practices” of the “large and powerful railway and industrial combinations” and their “selfish and unwise course in suppressing competition by methods transparently wrong.”16 He urged his fellow engineers to support government regulation that would rein in the ruthless and predatory capitalism that dominated the American business world. Though Westinghouse never mentioned his own company, it stood as a chilling example of how the Boston and New York “money power” could use an unregulated stock market and fragile banking system to gain control of someone else’s valuable property.
At a time when many Americans had come to view the nation’s industrialists and financiers as little better than robber barons and “malefactors of great wealth,” Westinghouse was a notable exception: an honest industrialist who sold the best product for the best price, who relished competition and valued his workers, and who deserved his hard-earned fortune. His late-life besting by Wall Street was a chastening reminder of the feared and concentrated “money power.” During the 1912 congressional Pujo Committee hearings, the full extent of that long whispered, incestuous stranglehold on money and capital was finally revealed: The officers of the five biggest New York City banks also held 341 key directorships in 112 major U.S. companies. The Morgan partners alone occupied seats on 72 boards. Westinghouse always viewed such blatant collusion and power grabbing as wrong.
In the two years leading up to his death in 1914, Westinghouse was in obviously declining health, pining, many believed, for the loss of his great life’s work—the Westinghouse Electric & Manufacturing Company. In June of 1912, the American Institute of Electrical Engineers awarded him the Edison Medal for “meritorious achievements in the development of the alternating current system.” He and many others savored the exquisite irony of an Edison honor being bestowed upon Westinghouse, once so maligned by Edison for being the stalwart champion of alternating current. Numerous other honors rained down upon him from engineering groups and foreign governments. Through all his struggles and triumphs, he and his wife of fifty years remained deeply devoted to each other and their son. At George Westinghouse’s sixty-sixth birthday party luncheon, held on a glorious blazing blue October day at their Berkshires mansion, many toasts were drunk. Then Westinghouse himself arose. “A glass of champagne in his hand, [he] smiled across the table to his wife, and in a voice so tender, so affectionate, so deep in feeling that all were spellbound, said: ‘If I have had any success in life it has been due to my wife.’”17 All rose and lifted their glasses of champagne to toast this devoted couple’s lifetime of ardent marital felicity, and to honor a man who had been so dedicated to improving the world.
After the Westinghouse Electric & Manufacturing Company’s bankruptcy of 1907, The New York Times wished the best for Westinghouse, calling him “an American institution in whom we have patriotic pride.”18 But Westinghouse never really recovered from his loss. It was as if part of his heart and noble spirit had been excised. On March 12, 1914, George Westinghouse died in Manhattan at the Hotel Langham, where he and his wife had stopped en route to their house in Washington, D.C. At his death, fifty thousand people worked for the many companies he had created. The companies were valued at $200 million, and Westinghouse himself was worth $50 million. In the heyday of the robber baron, Westinghouse showed that an honest and honorable entrepreneur could triumph, building admired and valuable companies. The Pittsburgh magnate had provided good and useful work to his legions of employees, as he hoped to do. Probably more important to him, he had daringly brought the wonders of electricity to the world. With each passing year, more industries, more towns and villages, more homes, became electrified. He had, despite his many
powerful opponents, achieved his life goals. Wrote one biographer, “Westinghouse was always working for ideals…. High spirit flowed down through the Westinghouse companies and left enduring love, loyalty, and enthusiasm. A corporation can have a soul.” Money meant little to George Westinghouse but the means to lift up the world around him. One day toward the end of his life, he was on a train whose air brakes helped avert a derailment at a bad track washout. He told an aide, “If some day they say of me that with my work I have contributed something to the welfare and happiness of my fellow men, I shall be satisfied.”19
THOMAS A. EDISON
After the formation of General Electric in 1892, Thomas A. Edison was little involved in the development of the electric power field. Some months after that bitter day when Morgan combined his company, Edison General Electric, with Thomson-Houston into GE, Edison’s secretary, Alfred O. Tate, came over from Wall Street to the West Orange laboratory to confer with Edison about a battery project. The jolly Tate found his boss alone in the magnificent wood-paneled library. “‘Tate,’ [Edison] said, and I had never heard him speak with such vehemence, ‘I’ve come to the conclusion that I never did know anything about it [electricity]. I’m going to do something now so different and so much bigger than anything I’ve ever done before people will forget that my name ever was connected with anything electrical.’”20
True to his word, Edison plunged himself and his new fortune of $2 million (his part of the GE merger) wholeheartedly into something “so much bigger”: an iron ore separating and concentrating plant on nineteen thousand acres in the bleakest wilds of New Jersey. For some years, Edison, believing (along with many others) that America was running out of iron ore, had concluded there was money to be made extracting iron from played-out East Coast mines via powerful magnets. As early as 1889, he was full of schemes and iron dreams, writing an associate, “If I could get possession of practically all the magnetic ore deposits in the center of the coal and iron district of Penn[sylvania] I would have a monopoly of one of the most valuable sources of national wealth in the U.S.”21 The caveat in all these grandiloquent plans was the need for significant capital investments in giant crushing machines that pulverized the old ore-containing rocks, preparatory to extracting the iron with giant magnets. Experienced mining engineers doubted the feasibility of such (as-yet-unbuilt) giant machines. As Edison biographer Matthew Josephson said, that “was all Thomas A. Edison needed to hear.”22 Edison still loved to be doing “big things,” but his understandable mistrust of Wall Street (and their view of him as a poor businessman) would hobble him to some extent, for “big things” in the industrial world of the 1890s generally required big capital.
Edison pressed ahead full bore and designed and built for $750,000 (his and other investors’ money) a large ore-crushing plant in the remote highlands of Ogden, New Jersey, the site of an old iron mine. By April 1891, the monstrous machine was clanking away, its huge rollers crushing hundred-pound boulders gouged out from the dynamited hillside by gigantic steam shovels. The powdery grains of extracted ore, removed from the magnets, were then pressed into iron briquettes. But Edison had a hard time finding steel mill customers at first because the briquettes contained too much phosphorus or too little iron ore. Meanwhile, mechanical problems continually rippled through the noisy, dusty works, cropping up here or there, and the issue of damp or wet ore was a constant headache. Mere months after the giant plant roared into production, it had to be closed for an overhaul. Edison threw himself wholeheartedly into this “much bigger thing,” often spending six days a week there from 1894 to 1897. During those years, he regularly closed and rebuilt the plant or engaged in major, expensive tinkerings, all with the ultimate goal of producing three hundred thousand tons of iron briquettes yearly. In 1895, when Edison learned his men planned to strike, he shut down the whole unprofitable enterprise for several months.
Through year after year of setbacks and expensive solutions, Edison was his usual cheerful self, glorying in the rough life of the mining operation. He wore a filthy old duster coat, a broken-down hat, and a dust filter mask, which he continually lifted up to spit out his chewing tobacco. Sundays he would clean up and return home to his wife and two small children at the family mansion, Glenmont. Although by 1898 Edison finally had a fully automated plant that required no human labor—to the amazement of the press and his good friend Henry Ford—the endless mechanical problems and breakdowns required a staff of almost two hundred men to keep the automated wonder up and running. The plant was now able to crush four- and five-ton rocks, and the capital investment had reached $2 million, most of this being Edison’s money. His early investors, beset by the nation’s worst depression, had long since refused to ante up new funds for what many had started to call “Edison’s Folly.”
In August of 1897, Edison sold off his stock in the Edison Electric Illuminating Company of New York, saying, “I actually needed the money. My Wall Street friends think I cannot make another success, and that I am a back number, hence I cannot raise even $1000 from them, but I am going to show them that they are very much mistaken. I am full of vinegar yet, although I have had to suffer from the neglect of an absentminded Providence in this scheme.”23 The economics were not promising. Edison needed to sell his extracted ore at about $6 or $7 a ton to make a profit, and he anticipated that ore prices—hovering at $4 a ton—would rise. But then in 1899, longtime aide Charles Batchelor, who had declined to get dragged into what Edison fondly called his “Ogden Baby,” came out to the dust-covered camp with its gargantuan grinding and clanking machines to show Edison a newspaper story. Of course, the terrible racket didn’t bother Edison, for he was deafer than ever. The article described John D. Rockefeller’s plan to mine the vast high-grade iron deposits of Minnesota’s Mesabi Range.
When Edison read the newspaper clipping, which noted iron ore prices had dropped to below $3, he laughed out loud and said, “Well, we might as well blow the whistle and close up shop.”24 In fact, he lingered on another year, losing money fulfilling existing contracts. In typical Edison fashion, he had no regrets: “I never felt better in my life than during the five years I worked here. Hard work, nothing to divert my thoughts, clear air, simple food made life very pleasant.”25 One suspects crushing rocks out in the sticks with his “boys” was a nice change from the rancorous years of the War of the Electric Currents and the machinations of Wall Street. And so, giving up on rock crushing, Edison went back to his West Orange laboratory. (When he recycled his disastrous “Ogden Baby” into a cement plant, it made excellent Portland cement, but it still was not very profitable.)
Thomas Edison never completely left the West Orange laboratory. During slow periods at the ore mill, he would return and work feverishly on various projects. During those years, his original phonograph was dramatically improved, creating a much needed stream of income as it became good enough to play music. Edison’s Kinetoscope had dazzled visitors to the 1893 World’s Fair in Chicago, and the whole field of motion pictures had advanced rapidly, with many striving to perfect the technology. When on April 23, 1896, Thomas Edison’s Vitascope debuted at Koster & Bial’s high-toned Music Hall at Herald Square, the silk-hatted crowd of theatrical promoters and businessmen watched the strange big screen in amazement as across it swept, in full color, “ballet girls dancing with umbrellas, burlesque boxers, some vaudeville skits, and finally so realistic a scene of waves crashing upon a beach and stone pier that some of the viewers in the front row recoiled in fear.”26 At the end, the audience burst forth in wild applause, cheering the gray-haired Edison up in his balcony box. He had the good grace not to come down on the stage, for he knew he was not the inventor, but the promoter, of this projector. Nonetheless, Edison, who tore himself away from his New Jersey iron ore operations to attend this Manhattan premiere, was unwilling ever to acknowledge the important contributions of his longtime laboratory assistant William K. L. Dickson, or the reality that the Vitascope machine showing the “moving pictures” that
night was actually patented by inventor Thomas Armat, who was up in the projection room making it run smoothly.
Edison had set up a primitive movie studio out at West Orange, a sweltering structure known as the Black Maria, and there, from mid-1893, his movie men had been churning out short, hyperlively silent motion pictures—prizefights, funny skits, and such. Only in 1904, with the Edison studio’s The Great Train Robbery, did early movies begin to move beyond skits to real stories. This was a revelation, soon copied by others flocking to the business. Generally these “movies” ran about fourteen frenetic minutes, during which time trains were spectacularly wrecked, ladies saved from villains, and all manner of calamities and heroics acted out. Audiences could not get enough, and by 1909, there were eight thousand theaters just for movies, a figure that quickly doubled. Once again, Edison, whose laboratory was continually improving the motion picture technology, dispatched his legions of well-trained attorneys into long-drawn-out patent wars, emerging triumphant as the holder of the key motion picture patents in 1907. Like Westinghouse, Edison understood the supreme importance of owning technology.
A year later, Edison’s biggest rivals, including the American Mutoscope Company, gathered for a wary December peace lunch in Edison’s West Orange library. There they ostensibly celebrated the formation of the Motion Picture Patents Company, essentially a movie trust. It guaranteed fees worth $1 million a year to Edison, who smiled blandly from that day’s group photo. When one former colleague expressed concern to Edison about his financial status, he wrote back cheerfully, “My three companies, the Phonograph Works, the National Phonograph Company, and the Edison Manufacturing Company (making motion picture machines and films), are making a great amount of money, which gives me a large income.” And so, as he turned sixty, Edison was flourishing. While Westinghouse had become a great industrialist building ever bigger, heavier machines, Edison was almost unwittingly developing a whole other sector of the American economy, one that was far less capital-intensive and far more glamorous—the entertainment industry.
