Dividends and Edison & The Electric Chair part 2

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.

After Thomas Edison invented the light bulb, the next step was to bring the light to the public. Just because there is something better and newer, does not mean the public will automatically switch to it. In New York in 1881, although Edison had a dream that every home in America and around the world should be using electricity, logistically it was a very different matter. The investors believed the company should be a holding company and avoid risky manufacturing enterprises. Edison was the opposite, he wanted to do the manufacturing of the components and thus sold off most of his stock to build the parts that are necessary to transmit electricity from generator to homes and businesses. Although the way, wires needed to be laid – Edison had decided to go underground rather than on poles. The Manhattan campaign where Edison started not surprisingly ate up a lot of up front capital. While isolated central stations allowed other countries and people to create a market for electric lighting and more importantly provided a cash cow in the manufacturing installations. The first major installation in New York was on Pearl Street. More installations happened outside of New York as competition was enhanced with the lighting craze.

With success there was a limitation, electricity had a limited distance of one mile. Along came George Westinghouse who as an inventor, started with the brakes on a train. Westinghouse invented alternating current which can send electricity for miles. The competition with Westinghouse would last for generations as in the 1900s most Americans lived in rural areas, away from the lights of the big city.

If you think about Tesla cars, you think about the parallels Tesla has with competition – the internal combustion engine most of us drive with and building an infrastructure to run the vehicles.

Linking to dividend paying stocks, it is expensive to create infrastructure unless there is an monopoly. If you examine the utilities they have government monopolies for the good of the residents and a steady stream of income for shareholders. The dynamics of the industry has not changed a great deal as we live in hope for the next better thing, but it is easier to invest in the existing monopoly.

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




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