Sometimes you can pick up information in the most unlikely places, a case in point is the book Edison & The Electric Chair by Mark Essig  published by Walker Publishing Company, NY, 2003. The book has two interwoven sections  – one the aspect we all know the name of Tomas Edison as inventor and owner of electricity networks (Con Edison is a company many people know well) and the aspect is using electricity to kill people in the electric chair.

In his early years Tomas Edison was a tramp telegrapher, although he has equally interested in how the structure of the telegraph worked. His first patented invention was US Patent 90,646 issued in June 1, 1869 to tally votes in legislative houses. His next invention was provide gold and stock quotations for banks and stock brokerage houses which was successful. Western Union bought the company. The new invention was for duplex telegraphy or the ability to send 2 messages and the same time, one in each direction. Although Edison sold to Jay Gould’s Atlantic & Pacific which later sold out to Western Union.

With the money from his inventions, Edison built up the laboratory in Menlo Park, New Jersey. The research community is still very evident in the area – Bell Labs. The area is 20 miles south of New York. In terms of light bulbs, when Tomas Edison looked at the solution, his idea was to domesticate electric light. One has to consider at that time, light was generated by oil in lights, then gas and Edison believed it was possible to invent a low cost light that would be safe and improve life after it was dark. Similar to most beliefs, proving it and making it a success is easier to say than do. For example if you look at the light – the filament had to be invented – what is it made of?

Fortunately, Edison had some advantages others did not – he had a successful track record as an inventor. His success brought those with capital to help him. Edison had a stock company called Edison Electric Light Company and investors included: William Vanderbilt, the principal shareholder of Western Union; Norvin Green the President of Western Union; Egustio Fabbri, a partner with Drexel, Morgan & Company. The company associated with JP Morgan snapped up the British rights to Edison’s patents and became his agents for all of Europe.

The above shows he had access to capital, he also had the ability to send press releases to suggest he was almost there or had achieved success. This brought in a well fund laboratory to work in; Edison had the sense to employ extraordinary talent which lead to press releases which the public followed. When the public was invited to see an electric light because they had the correct materials for the filament – thousands showed up.

Similar to all industries, it was easier to invent the product than the next step is wire city blocks for lights to work and collect a revenue stream from. One reason is the gas companies did not go asleep. Gas lighting was introduced in the 1840s and 1850s which meant by 1880 they were well entrenched. Relatively cheap coal allowed the price to be low, the gas companies enjoyed a government-protected monopoly and by 1880s, 70% of the consumer price was pure profit. If you were an investor you loved gas companies.

If you think about electric companies, they would have to do everything the gas companies are doing and beat their prices. Edison closely studied the costs of gas lighting and tried to eliminate all the waste from the system “Everything must be got down to the last penny”

Linking to dividend paying stocks, in every company one considers do they do the invention and roll it out or do they do the invention and license the technology for others to do? There is no one correct answer because both can work although using license will use less capital from the original investors. Having a better idea is never the single answer, a whole complex of other issues come into place before a consumer buys on a consistent basis with enough margins to make a profit. As you look around in today’s economy the issues do not necessarily change a great deal, the execution does.

There are more questions than answers, till the next time – to raising questions.