Edison, Tesla, and the History of General Electric

We could say that the history of General Electric began and ended with Tesla.

Our story started in 1882 and concluded this week.

General Electric History and Tesla

The Beginning

The year was 1882. Transforming electricity from a novelty to an everyday practicality, the Edison Illuminating Company had 513 customers in New York City by the next year. When you create electricity, you need to make it flow. In addition, you have to overcome the resistance to the flow. And still, long distance transmission is a problem.

At this point Nikola Tesla and George Westinghouse enter the picture. Described as a somewhat mad Croatian touched with genius, Tesla was tall, stiff, and humorless. At first Tesla worked for Edison’s telephone company in Budapest. However, when he asked his boss for a raise from $18 to $25 a week, not only did Edison refuse but he also ignored the inventions that Tesla offered to sell him. Edison called Tesla a “poet of science. His ideas are splendid, but they are utterly impractical.”

So Tesla quit.

However, for long distance transmission, Tesla had the best answer. His work on rotating magnetic fields led to the alternating current and an AC motor patent. Once Edison’s arch rival, George Westinghouse had purchased Tesla’s patents, he soon sold AC systems in 130 towns and cities.

The End

General Electric just announced that it would become three companies instead of one. The goal is to reduce debt, simplify, and revitalize what remains.

During its 129 years, GE had been known as the prototype American corporation. In 1896, it was included in the first Dow Jones Industrial Average. Ranging from light bulbs to consumer appliances, to jet engines and financial products, its innovations were legendary. Recently though, the company declined. The Dow deleted GE in 2018. The Great Recession had a cataclysmic impact on its financial products. Now the pieces will focus on healthcare, energy, and aviation.

Meanwhile, the new prototype American corporation is Tesla.

Our Bottom Line: Competition

Market economies depend on the tension between self-interest and competition. Displayed by Thomas Edison, Nikola Tesla, and George Westinghouse, the quest for profits drives business leaders. Then though, others figure out how to do it better. If the process works as Adam Smith envisioned, when competition enters the market, quality increases and prices drop.

Certainly, the history of GE revolves around self-interest and competition.

My sources and more: I first learned about the Edison and Tesla conflict in a historical novel that I highly recommend. Now, seeing the GE decline and Tesla’s ascent, I returned to some GE history through the NY Times. Happily, I also discovered an Edison biography on my bookshelf. Then this paper conveyed the bigger picture.