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Home , Alexander Graham Bell, Amos Dolbear, Bell System, Bell Telephone Company, Elihu Thomson, Elisha Gray

Entrepreneurshipin the Early Development of the : How Did William Orton and Gardiner Hubbard Conceptualize this New Technology?

W. Bernard Carlson Divisionof Technology,Culture, and Communication Universityof

Bothhistorians and the public often assume that the "enduse" of a newtechnology is embeddedin thetechnology itself. It is assumed that oncea deviceis invented,it is clearhow it will be usedand by whom. For instance,in thecase of thetelephone invented by GrahamBell in 1876,it wasobvious that the devicewould be usedby individuals to talk with each other and that businessmeneasily understoodthe need for settingup local telephone exchanges. • In this paper,I wish to challengethis commonassumption. Instead,along with otherhistorians and sociologists of technology,I will arguethat the "end use" of technologyis createdor constructedby a varietyof participantsin a technologicalenterprise [Bijker et al., 1987; Bijker and Law, 1992;and Bijker, 1993]. Theseparticipants may includethe originalinventor, the skilledtechnicians who built the ,and the firstconsumers, but hereI wish to focusattention on businessmenor nontechnicalleaders. Businessmen often play a crucial

'lThe researchreported here was undertaken while I wasa DibnerLibrary Resident Scholar atthe during the summer of 1993,and I am gratefulto the staffof theDibner Library for their assistance. Over the past seven years I havebeen investigating the inventionof thetelephone jointly with Michael E. Gorman,and we havebeen supported by the NationalScience Foundation and the SpencerFoundation. I wishto thankmy undergraduateresearch associates (the Repo Team) for permittingme to testvarious ideas out on them. And finally,I am gratefulto David F. Weimanfor his valuablecomments whenI presentedthis paper at the BusinessHistory Conference in March1994.

BUSINESS AND ECONOMIC HISTORY, Volume 23, no. 2 Winter 1994. Copyright¸1994 by theBusiness History Conference. ISSN 0849-6825. W. Bernard Carlson / 162 role in creatingan "enduse" for a technologyfor they possessboth perceptionsof potentialmarkets as well asthe skills needed to bringa newinvention to market.2 In my readingof recenthistorical studies of invention,I have noticedthat backersand patronsare frequently mentionedbut their contributionsare not necessarilyseen as beingas importantor ascreative as the work of theinventor? To highlightthe role of thebusinessman in the process, I will examine the roles of Gardiner Hubbard and William Orton in the developmentof thetelephone from 1876 to 1879.Although neither man iswell knowntoday, both contributed to howthe telephone came to be used in the . Hubbard was 's father-in-law,and it was Hubbardwho playeda significantrole in identifyingand exploiting the commercialpotential of the telephone. Ortonwas president of the WesternUnion Telegraph Company and encouragedThomas Edison to developa telephonefor eliminatingBell asa competitivethreat. Although publicly opposed to WesternUnion, Hubbardprivately offered to sell Bell's telephonepatent to Orton. Curiously,Orton turned down the chanceto buy what is sometimes regardedas the mostvaluable patent of the nineteenthcentury. To explaintheir peculiar interaction, this paper will discusshow Orton and Hubbardformulated distinct business-technological mindsets about the telegraphindustry and how they usedthese mindsets in making decisionsabout the telephone. 4

aInanother study [Carlson, 1991], I arguedthat Charles A. Coffinplayed the crucial role in recognizingthe centralstation strategy for the developmentof electriclight andpower systems.

3In the lastdecade, a numberof new biographiesof inventorshave appeared based on in-deptharchival research. As examplessee Leslie, 1983; Friedel and Israel, 1985; Philip, 1985;Crouch, 1989; Hughes, 1989; Jakab, 1990; Cooper, 1991; Brittain, 1992; and Kline, 1992. nlenkins[1975] introduced the concept of business-technologicalmindset to explainhow businessmenin the photographicindustry made decisionsabout new technological .For a similarconcept, frames of meaning,see Carlson, 1992. Entrepreneurshipin the Early Developmentof the Telephone/ 163

In narratingthe story of thesetwo men, I wishto suggestthat there is a needand opportunity to studyonce again the entrepreneur. Studies of entrepreneurshipflourished in businesshistory forty years ago, and these studies revealed much about the motivation of individuals in takingrisks and pioneering new practices[Sass, 1986; Leslie, 1986]. Thesestudies petered out for a varietyof reasons,but a key factorwas that therewas a limit to how muchone can sayabout motivation. In contrast,I will proposethat focusingon the entrepreneurin the introductionof newtechnology is vital becauseit is the entrepreneuras much as the technologistwho shapesthe deploymentof a new technology. If we want to understandhow the material and technologicalworld is constituted,then we need to examine entrepreneurssuch as Orton and Hubbard.

William Orton and

Let us lookfirst at William Ortonand his experiencesat Western Union. I will arguethat the mindset he usedto shapeWestern Union stronglyinfluenced his responseto the telephone. William Orton(1826-1878) was bornin upstateNew York and studiedto be a teacherat the StateNormal Schoolat Oswego. As a student,he built a modelof an electromagnetictelegraph and wrote his thesison the subject. After teachingfor a few years,Orton ran several bookpublishing firms, studied law onhis own, and became involved in RepublicanParty politics in City. In 1861,he was elected to the city'scommon council and then appointed a FederalCollector of InternalRevenue for New York. Ortonsuccessfully administered the new incometax law, andin 1865he waspromoted to Commissionerof InternalRevenue in Washington. After sixmonths in Washington,Orton accepted the presidency of the United StatesTelegraph Company. This firm was a poorly organizedamalgamation of threesmaller telegraph companies, and it was losingmoney and unableto raisecapital. Within a year, Orton reformedU.S. Telegraphand his effectivenessbrought him to the attentionof the leadersof WesternUnion. In 1866, WesternUnion and U.S. Telegraphmerged and Orton was namedvice president[Reid, 1879,pp. 520-3]. W. Bernard Carlson / 164

WesternUnion had been founded by HiramSibley in 1851as the New Yorkand Mississippi Valley Printing Telegraph Company. During the1850s, Sibley built up the firm by taking over smaller telegraph lines until he had gainedcontrol of the telegraphbusiness in the Midwest (hencethe name WesternUnion). In 1861, Sibley built the first transcontinental line to California and established Western Union as one of the major firms in the industry. In 1866, WesternUnion absorbedits two remainingrivals, U.S. Telegraphand American Telegraph,achieving, for all intentsand purposes, control of thetelegraph industry? Becauseof hissuccess in reorganizingU.S. Telegraph,Orton was namedpresident of WesternUnion in 1867. At once,Orton began to convertWestern Union from a confederationof independentcompanies and lines to a singleorganization and network. Orton established standardoperating procedures and disseminatedthem throughout the new nationwideorganization by creatingthe in-houseJournal of the Telegraph.Orton improved the efficiency and reliability of thenetwork by rebuildingpoor lines and installing better insulators, wire, and relays. To implementthese engineering improvements, Orton established the Officeof theChief Electrician and hired George Prescott to fill thispost [Reid, 1879,pp. 529-38]. As Ortonperfected the structure of WesternUnion, he formulated a market strategy. Orton noticedthat a significantnumber of the telegrams transmitted by the company were short business messages--marketquotes, buy and sell ordersto brokers,and brief instructionsto salesmenin the field. For thesemessages, business customerschose the telegraphbecause it was quickand reliable, and they werenot especiallyconcerned about price [Israel, 1992, p. 129]. Assumingthat businessmenwould sendmore and more of these messagesas they pursued the new national market made available by

•Forthe early history of WesternUnion see Thompson, 1947. Onehas to be somewhat carefulin claimingWestern Union had complete monopoly control of thetelegraph industry. First,like dominantfirms in otherindustries, Western Union found it usefulto permita few smallfirms to exist(for examplethe Franklin Telegraph Company). Second, as we shall see,it waspossible for newrivals to springup by buildingnew lines along major railroads. Entrepreneurshipin the Early Development of theTelephone / 165 the railroad, Orton decidedto have WesternUnion concentrateon sendingbusiness messages between cities. In doingso, Orton made a distinctchoice since he couldhave pursued several other markets. In severalEuropean countries, for example,the bulk of the telegraph messageswere eithersocial messages or long governmentreports. Likewise,Western Union could have also placed newspaper reports at the centerof its strategy;although he forgedan alliancewith the AssociatedPress, Orton never considered press despatches asimportant as shortbusiness messages. To controland expandthis businessmarket, Orton took two importantsteps. First, to secureinformation from capital and commoditymarkets for WesternUnion's business customers, Orton boughtcontrol of the Goldand Stock Telegraph Company. Gold and Stockhad establisheditself by erectinglocal telegraph networks for transmittingprices from stock and commodity markets to theoffices of brokersand investors. To make its serviceattractive, Gold and Stock encouragedThomas Edison and Elisha to developprinting telegraphsor stocktickers which brokers could easily read [Israel, 1992, pp. 125-7]. BecauseOrton saw Western Union in the long-distance, inter-citybusiness and Gold and Stock operating in the local,intra-city business,he left Goldand Stock as separate firm. Nevertheless,control of Gold and Stockwas valuableto WesternUnion becauseit gave Western Union access to the market information that business customers wanted. Second,in pursuingthe shortbusiness message market, Orton investedselectively in new technology.Although several inventors (includingEdison) had developed automatic telegraph systems which usedpunched tapes to sendand receive messages more quickly, Orton refusedto investin them. From Orton'sview, it was a wasteof time and moneyto preparea punchedtape for a shortmessage when an operator couldjust sendit. 6 Instead,Orton encouraged the developmentof deviceswhich could send multiple messages over a singlewire. By

6Edison'sefforts to developan automatic telegraphic are documented in Edison Papers, vol. 1. For Orton'sopposition to automatictelegraphy, see Israel, 1992, pp. 132-4. W. Bernard Carlson / 166 beingable to sendtwo, four,or evenmore messages over a singlewire, WesternUnion could increasethe volumeand speedof messages without havingto make heavy investmentsin stringingnew lines or hiringmore operators. Consequently, Orton purchased Joseph Steams' duplex(two message)patent in 1872 and he supportedEdison and Prescott'swork on a quadruplex(four message) system in 1874[Israel, 1992,pp. 135-40]. Thanksin partto the duplexand quadruplex, Orton was able to maintaina steadyannual profit while increasing the number of messages and decreasingthe cost per message(Table 1). By 1873, Western Union was conductingninety percent of the telegraphbusiness in the UnitedStates [Wolff, 1976,p. 41]. However,this does not mean that it was all smooth sailing for Western Union in the early . Simultaneouswith his efforts to establishWestern Union's strategy and structure,Orton had to fight off the dangersof a rival networkand a hostile takeover.

Table 1. Growth, Profits and Average Tolls of the Western Union Telegraph Company,in 1866-77

Year Miles of No. of No. of Profits Annual Decrease Line Offices Messages ($mil) in theAverage Sent(mil) Tollsper message(C) 1866 37,380 2,250 ...... 1867 46,270 2,565 5.9 2.6 1868 50,183 3,219 6.4 2.6 .5 1869 52,099 3,607 7.9 2.7 15.3 1870 54,109 3,972 9.2 2.2 13.8 1871 56,032 4,606 10.6 2.5 6.0 1872 62,033 5,237 12.4 2.8 3.3 1873 65,757 5,740 14.5 2.8 3.7 1874 71,585 6,188 16.3 2.5 7.7 1875 72,833 6,565 17.1 3.2 .9 1876 73,532 7,072 18.7 3.4 3.1 1877 76,955 7,500 21.2 3.1 7.3 Entrepreneurshipin the Early Development of theTelephone / 167

Onethreat came from Wall Street.Sibley and Orton had rapidly built up WesternUnion by erectinglines along railroads and placing telegraphoffices in railwaystations. However, this meant that as new transcontinentalrailroads were built, railroadfinanciers could create their own telegraphnetworks and not ally themselveswith Western Union. JayGould pursued this strategy twice, first in 1874-8and again in 1879-81. In the first episode,Gould used his controlof several railroadsto helpthe Atlantic and Pacific Telegraph Company quickly builda rivaltelegraph system. 7 To stealbusiness away from Western Union,the Atlantic and Pacific cut prices in January1877 and forced WesternUnion to follow suit. Unfortunately,while the reductionin pricesgenerated a large volume of businessfor Atlantic and Pacific, the firm lackeda sufficientnumber of lines to transmitthe messages quicklyand reliably. To copewith the message volume, Atlantic and Pacifictried usingGeorges D'Infreville's crude duplex and Edison's automaticsystem, and Gould convinced Edison to join thefirm briefly as its Chief Electrician. Despitethese steps, Atlantic and Pacific performedpoorly (it neverpaid a dividend),and Orton was able to force a mergerin thespring of 1878[Reid, 1879, pp. 586-7;Israel, 1992, pp. 146-7]. The other major challengefor Western Union came from Washington. No soonerhad WesternUnion achievednational dominancein 1867than individuals such as GardinerHubbard began attackingit as a threatto Americandemocracy. For Hubbardand others,Western Union was the first national monopoly, and they did not believethat this corporate giant would exercise any restraint in raising pricesor that it wouldserve the public interest. For thesecritics, the fact that WesternUnion was reluctant to cut pricesand indifferentto someinventions (such as automatic ) suggested that the firm waspursuing private gain at publicexpense. Critics were especially concerned that Western Union had accessto both market information as well as privatebusiness messages, and that the firm coulduse this

7Gouldwas apparently especially motivated in attackingWestern Union because it was controlledby hisrival William H. Vanderbilt;see Josephson, 1934, pp. 205-6. W. Bernard Carlson / 168 informationto manipulatemarkets in its favor and ruin individual businessmen.Finally, critics were worried that by transmittingnews for the AssociatedPress, Western Union could also interferewith freedom of the press[Sumner, 1879]. In responseto thesereal and perceivedproblems, critics of WesternUnion attempted to persuadeCongress to takeaction. Some thoughtthat the Post Office shouldbe permittedto erect its own telegraphlines and they cited the nationalization of telegraphlines in , , and Belgium as positive examples. Others, particularlyHubbard, thought the Federal government should guarantee competitionin the industryby underwritingthe creationof a second telegraphnetwork [Lindley, 1975]. (I will saymore about this proposed federally-subsidizednetwork in a momentwhen I discussHubbard's mindse0. Undoubtedlydrawing on his experiencein Washingtonas Commissionerof InternalRevenue and his ties to theRepublican Party, Ortonsuccessfully beat back these threats. To do so,Orton cultivated congressmenand regularly testified on CapitolHill. In histestimony, Ortondefended Western Union using a varietyof arguments,but he frequentlyreturned to two themes.First, he arguedthat the need to earn a returnon the hugecapital investment made by stockholdersdrove WesternUnion to build and operatean efficienttelegraph network. Second,Orton claimed that only a privateorganization could fully disciplineits workforceand prevent the violation of privatemessages or the misuseof marketinformation. In contrast,he suggestedthat a governmenttelegraph system would have operators who were politically appointedand this would leave inevitablyto mischief[Wells, 1873; Orton,1874]. Usingarguments such as these, Orton was able to stymie attemptsto eithernationalize the telegraph or createa rival. In doingso, Ortonhelped establish the generalpattern of telecommunicationsasa privateindustry which responds to Federalregulation.

The Potential for Innovation in the Telegraph Industry

In facing down challengesfrom Gould and Hubbard,Orton employedvarious tactics--price competition, political lobbying, and hostiletakeovers. In thisturbulent environment, though, technological Entrepreneurshipin the Early Development of theTelephone / 169 innovationcame to play a new and importantrole. To maintainits dominantposition, Western Union needed to adoptnew such as duplexand quadruplex. At the sametime, the challengers--Gould and Hubbard--alsorealized that innovationsmight be usedto gain a footholdin the industry.As an editorof the Telegrapherobserved in 1875, improvedapparatus has become of vital importance,and, consequently,telegraphic inventors who, for someyears past,have been regarded as bores and nuisances, suddenly find themselves in favor, and their claims to notice, recognitionand acceptance,listened to with respectful attention. All partiesare now desirousof securingthe advantageswhich may be derivedfrom a developmentof the greatercapacity of telegraphlines and apparatus. The facthas become recognized that the party which shall avail itselfto thesemost fully will possessa decided advantage overits competitoror competitors. That this state of telegraphicaffairs affordsthe opportunityfor the inventivetalent and geniusof the country which has hitherto been wanting, is unquestionable.8 By themid-1870s, the combination of WesternUnion's dominance and the possibilityof creatinga rival networkcreated a uniqueand novelmarket for telegraphinventions. In fact,one could argue there wasa demandfor "blockbuster"inventions or patentswhich could be usedby WesternUnion or its challengers.Thus, as Bell, Gray, and Edisonwere investigatingdevices that would become the telephone, they werenot workingin "normal"business environment but rathera "hothouse"environment that favored a breakthrough. The breakthroughsought by Orton,Hubbard, and othersin the telegraphindustry was the "next generation"of multiplemessage systems.In themid-1870s, several inventors in Europeand America begandesigning acoustic or harmonictelegraphs. Inspired partly by the

a"TheProgress of theTelegraphic Contest," The Telegrapher, 11 (30 Jan.1875), p. 28. W. Bernard Carlson / 170 workof the Germanphysicist , investigators thoughtit mightbe possibleto sendand receive several messages by assigninga separateacoustic tone to eachmessage. experimentedwith an acousticsystem beginning in thewinter of 1866-7 and he publiclydemonstrated a version in July 1874 in New York? Because Gray was chief electrician for the ManufacturingCompany and WesternElectric was one of Western Union'smajor suppliers, Orton quickly became aware of Gray'swork. In March 1875, Orton learnedthat anotherobscure inventor, AlexanderGraham Bell, wasworking on a similarharmonic scheme. At thatmoment, Orton was quite interested in newmultiple message systemssince Edison had goneover to work for Atlanticand Pacific, andit wasunclear who actually owned the quadmplex? ø Orton had Bell demonstratehis apparatus,only to find Bell'sarrangement inferior to Gray'sdesign? Nevertheless, Bell's work helped convince Orton that harmonic telegraphymight well be the next breakthrough. Consequently,when Edison sheepishly returned to work for Western Unionin July1875, Orton asked him to developan acoustic telegraph? 2 Althoughthere were technical reasons for why Orton turned down Bell in March 1875,strong personalities also played a part. Bell was promptly(but politely) escorted out of Orton'soffice the moment Orton learned that Bell was associatedwith his nemesis, Hubbard. To understandwhy the mere mentionof Hubbardled Ortonto refuseto workwith Bell, let usexamine Hubbard and his opposition to Western Union.

9Fora detaileddiscussion of Gray's work on the harmonic telegraph, see Gorman et. al., 1993. See alsoHounshell, 1975; 1976; 1981. løEdison'sworkon the quadruplex andhis complex relationships withWestem Union and Atlanticand Pacific are documented in EdisonPapers, vol. 2. nBellto Papaand Mama, 5 Marchand 22 March1875, Box 5, BellFamily Papers.

12Edison,"Reis Telephone Drawings," [July 1875] in EdisonPapers, vol. 2, pp.524-6. Entrepreneurshipin the Early Developmentof the Telephone/ 171

Hubbard and the PostalTelegraph

GardinerGreene Hubbard (1822-97) was born in Cambridge, Massachusettsto a distinguishedNew Englandfamily. He attended PhillipsAcademy (Andover), , and HarvardLaw School. Hubbardbuilt up a substantiallegal practice in . His practiceincluded some patent work, and he helpedGordon McKay securepatent coverage for his shoemakingmachinery. In the 1850s, Hubbard took a keen interestin using technologyto improve Cambridge,and he was instrumentalin establishinggas and water systemsas well asa horsecarrailway between Boston and Cambridge. •3 In 1868,Hubbard turned his attention to thetelegraph industry and questioningWestern Union's dominance. It is notclear why Hubbard took up thistopic, but he did sharewith CharlesFrancis Adams and other Bostoniansa suspicionof large-scaleorganizations, especially thosecontrolled by New York financiers? As he did with other causes, Hubbardundertook a massivestudy of the telegraphbusiness in Europe andAmerica. Through this research, Hubbard concluded that Western Union wasnot servingthe publicinterest: the companywas pursuing onlya businessmarket, it wasnot using the most up-to-date technology (such as automaticsystems), and it was not reducingits prices [Hubbard,1868]. For Hubbard,the solutionlay in rethinkingthe marketfor the telegraph.In Europe,telegraph networks handled a substantialvolume of socialmessages and government reports; why notbuild a systemto serve these markets as well as businessmen? To reach these additional groups,Hubbard proposed that telegraph offices be locatednot just in railwaystations (Western Union's common practice) but in postoffices which were much more convenientto the averagecitizen. Partly

I•[BiographicalSketch of GardinerHubbard], n.d., Box 16,Hubbard Family Papers.

InHubbardlinked his concernsabout Western Union with Adams' efforts to reform the railroad industryin Hubbard,1873, p. 84. On CharlesFrancis Adams' concerns about railroadsand large-scale organizations, see McCraw, 1984, p. 1-56. For a discussionof the concernsof otherBostonians in the post-CivilWar era,see Hall, 1984,pp. 261-70. W. Bernard Carlson / 172 becausethe telegraph offices would be placed in postoffices, Hubbard calledhis scheme the postal telegraph plan. Hubbardwas confident that therewas an enormouspotential market for socialand governmental messagesand that this demand could be used to lowerprices and expand telegraphservice to everytown andvillage in America. In doingso, Hubbardbelieved he was creatinga telegraphsystem which would betterserve the needs of theAmerican public and advance democracy [Hubbard,1890]. To create his alternativetelegraph system, Hubbard did not hesitateto seekgovernment support, for he had doneso with other causes. In the mid-1860s, concerned that deaf studentssuch as his daughterMabel were not receivingadequate public ,he convincedthe legislature to supporta schoolfor thedeaf. Hence, it is not surprisingthat Hubbardtook his idea for a postal telegraphsystem to Washingtonand sought funds from Congress in 1868. What is surprising,though, is that Hubbardasked Congress to providethe capital for a privatecorporation which would build the new network and in turn enter into a contract with the Post Office? This privatecorporation would be run by Hubbardand his associates.In proposingthat the Federalgovernment provide the capitalfor his company,Hubbard comes across as a genuinelypuzzling character, as botha graspingentrepreneur and high-minded reformer. Somehow he wasperfectly comfortable combining a crusadefor the publicgood (fightingthe Western Union monopoly) with pursuing private gain. •6 It is asif onecombined Ralph Nader with Lee Iaccoca. With greatenergy, Hubbard lobbied and persuaded Congressmen to introducebills for a postaltelegraph scheme in sessionsfrom 1868to 1876 [Lindley, 1975]. Ortonvigorously fought back, and the annual

l•Justas the Post Office contracted with private railroads, reasoned Hubbard, so the Post Officecould contract with his new companyto transmittelegrams.

•6Elsewhere,Hubbard has been seen solely as a graspingentrepreneur and his reform efforts asinsincere; see Lindley, 1975. Entrepreneurshipin the Early Developmentof the Telephone/ 173 hearingsfor the postaltelegraph bill cameto be knownas the "Wm. Ortonand Gardiner Hubbard Debating Society. "•7 Although the postal telegraphbill wasnever passed, Hubbard never gave up hisbelief in the needfor an alternativetelegraph system and he insteadlooked for other waysto forceWestern Union to change[Hubbard, 1890].

Hubbard, Bell, and the Telephone

Hubbardfound a new way to challengeWestern Union in the creativeideas of AlexanderGraham Bell. Bell wasa youngScotsman whohad emigrated with hisparents to NorthAmerica to helppromote his father'ssystem of visiblespeech. was a systemin whichthe deaf were taught to associatedifferent sounds with symbols andthus taught to speak.Anxious to securethe best possible teaching techniquesfor his daughterand other deaf children, Hubbard invited Bell in 1872to comeMassachusetts to teach visible speech. Bell taught first at the state-sponsoredschool for the deaf and then secureda professorshipat . Although a dutiful son,Bell did not wish to devotehis life to advancinghis father's system. In 1872,he turnedto inventionto make his mark on the world. Bell may haveread how WesternUnion had purchasedSteams' duplex, and this led him to decideto develophis own multiplemessage telegraph [Bruce, 1973, p. 93]. Drawingon the extensiveknowledge of acousticshe hadacquired in teachingvisible speech,Bell investigateda harmonictelegraph. In thefall of 1874,after he had begun courting Hubbard's daughter Mabel,Bell toldHubbard of histelegraph experiments. Hubbard took animmediate interest in Bell'sefforts and encouraged him to perfecthis harmonicscheme as quickly as possible. Hubbard knew that he could usethe invention of a bettermultiple telegraph to bringabout change in the telegraphindustry [Bruce, 1973, pp. 125-7]. AlthoughBell tried a dozendifferent arrangements, he was never able to get his harmonictelegraph to work properly[Gorman et al.,

"Congressand the Telegraph," The Telegrapher,10 (6 June1875), p. 135. W. Bernard Carlson / 174

1993,pp. 5-14]. Bell realized,in part,that he was not succeeding becausehe lackedthe manual skills to implementhis ideas; however, ratherthan give up, Bell concentratedon being a "theoreticalinventor" andperfecting the theory behind his multiple telegraph [Bell, 1876,p. 8]. In the courseof histheoretical musings, Bell cameto be far more interestedin not just sendingindividual tones electrically but the possibilityof sendingcomplex sounds (such as the voice) over a telegraphwire. In February1876, Bell fileda patentfor hisharmonic telegraphscheme which included claims for a speakingtelegraph. is Six weekslater, Bell succeededin transmittingthe voice and thus inventing thetelephone.49 AlthoughHubbard was muchmore interested in gettingBell to completehis multiple telegraph,he followed Bell's telephone experimentsand he arrangedfor Bell to exhibithis inventionsat the PhiladelphiaCentennial Exhibition in the summerof 1876. At the Centennial,scientists, inventors, and other dignitaries were fascinated moreby Bell'stelephone than his multiple telegraph, and Bell beganto focus more attentionon perfectinghis telephone. Throughthe remainderof 1876,Bell testedon his telephone on increasinglylonger telegraphlines and he begangiving lecturesdemonstrating the telephone [Bruce, 1973, pp. 188-214]. For Bell and other scientifically-mindedpeople, the telephone was a discoveryremarkable in illustratingthe relationship between sound and .

Groping toward a Strategyfor the Telephone,1876-7

For almosta year(March 1876-February 1877), neither Hubbard nor Bell gave muchthought about how to introducethe telephone commercially.In fact,Hubbard at firstthought it bestto sellthe Bell's

•SAlexanderGraham Bell, "Improvement in Telegraphy," U.S. Patent 174,465 (filed 14 Feb. 1876,granted 7 March 1876).

19AlexanderGraham Bell, Entry for 8 March1876, "Experiments made by A. GrahamBell. (Vol. I)," Notebook,Box 258, Bell FamilyPapers. Entrepreneurshipin the Early Developmentof the Telephone/ 175 telegraph,harmonic telegraph and telephone to WesternUnion. Perhaps Hubbardnaively thought that WesternUnion lackedthe technology neededto reformitself, and that if providedwith breakthroughssuch as the harmonictelegraph and telephone,the companycould change. Hubbardmay also have wanted to seehis futureson-in-law established financially,and he couldaccomplish this by gettinga goodprice for Bell's inventions.Accordingly, in the fall of 1876, Hubbardoffered Bell'spatents to Ortonfor $100,000.2ø Much to the amazementof later historians,Orton apparently turned down Hubbard's offer. Orton's decision makes sense in terms of his mindsetand the resourceshe had at his disposalin the fall of 1876. From Orton'sviewpoint, the telephonewas not suitablefor Western Union'score business of sendingshort business messages between cities quicklyand reliably. Bell's telephone in 1876did notwork reliably on circuits more than twenty miles and transmissionswere somewhat muffledand indistinct? l Moreover, even though Bell inventedit while pursuinga multipletelegraph, the telephonefunctioned in exactlythe oppositeway--rather than permitting several messages to be sentover a singlewire, the telephoneused an entirewire for oneconversation. Hence,to Orton,the telephonewould have reduced the throughputof his networkrather than increasing it. In the fall of 1876,Bell's technology portfolio was also not very impressive: all that Hubbardcould showOrton were a few crude

2øHubbard'sefforts to interest Western Union in Bell's inventions are mentioned in two lettersto his wife, Gertrude,16 Oct. and 16 Dec. 1876,Hubbard Papers. In theseletters, Hubbardspoke of takingBell's "inventions" to WesternUnion, meaning presumably both his harmonictelegraph and his telephone.These letters do notmention specifically that Hubbardoffered Bell's patent for $100,000;this figure comes from Thomas A. Watsoh's [1926,p. 107]later recollections. See also Bruce, 1973, p. 229.

21Hubbarddescribed using Bell's telephone in thefollowing way: "Conversations can be easily carriedon after slightpractice and with the occasionalrepetition of a word or sentence.On first listeningto the Telephone,though the soundis perfectlyaudible, the articulationseems to be indistinct;but after a few trials the ear becomesaccustomed to the peculiarsounds and finds little difficulty in understandingthe words."From "The Telephone,"printed handbill, May 1877,Box 1097,AT&T HistoricalCollections. W. Bernard Carlson / 176 instrumentswhich were covered by threepatents? Of course,Orton hadalready seen Bell's harmonic telegraph eighteen months earlier and hadconcluded then that Bell's work was inferior to Gray's.Accustomed to the high-qualityinstruments developed by Edison,Gray, and other inventorsand knowingthe importanceof carefullyphrased patents, Ortonprobably found it difficultto take Hubbard'soffer seriously. Orton decided that it would not be difficult to have Edison to continue his work on harmonictelegraphy, create a betterdevice, and secure patentswhich could beat Bell in court.Consequently, atthe end of 1876 Ortonasked Edison to stepup his investigationof harmonictelegraphy at Menlo Park. In March 1877, Edisonsigned a new contractwith WesternUnion promisingto developnew telephonepatents [Israel, 1992,p. 141]. Rejectedby WesternUnion, Hubbardnext tried to convince severalwealthy businessmen to form a companywhich would exploit Bell'spatent [Bruce, 1973, p. 229]. In courtingthese investors, Hubbard arguedthat the telephonehad the potentialto remakethe telegraph industry. Hubbardsuggested that by substitutingthe telephonefor Morsekeys and sounders, telegraph operators could send and receive messagesmuch more quickly. "An operator by theMorse instrument ordinarilytransmits about fifteen words a minute,"he claimed,"while he canspeak & thereforetransmit by Telephonefrom one hundred & fifty to twohundred" words per minute. 23 Likewise, Hubbard suggested thatthe telephone could be usedon privatelines to link two locations. Hubbardhad already heard from a numberof individualswho wanted

22Thecrude of Bell'searly when compared with Edison's telegraph devices wasmade apparent to Mike Gormanand me in thecourse of studyingartifacts from both inventorsin the AT&T HistoricalCollections, Warren, NJ. In the fall of 1876, Hubbard would havehad threepatents to offer Orton:Bell's patent for harmonictelegraph and telephone(174, 465); "Improvementsin Transmittersand Receiversfor Electric Telegraphs,"U.S. Patent161,739 (filed 6 March 1875, granted6 April 1875); and "TelephonicTelegraph Receivers," U.S. Patent 178,399 (filed 8 April 1876,granted 6 June 1876).

23Hubbardto JohnPonton, 21 Feb. 1877, PontonCollection. Seealso Hubbard to Bell, 22 Feb. 1877,Hubbard Family Papers. Entrepreneurshipin the Early Developmentof the Telephone/ 177 to setup telephonesbetween their homes and business establishments or betweendowntown offices and outlying factories. On theseprivate lines, Hubbardbelieved that the telephonewould be cheaperand quickerthan printing telegraphs which often cost $250 each. The first private line telephonewas purchasedby Charles Williamswho connected his shop in downtownBoston (where Bell had first experimentedon his telephone)to his home in the suburbof Somervillein May 1877. Withina few months,Hubbard was contacted by entrepreneurswho wantedlicenses to installsimilar private lines. Severalof theseentrepreneurs wanted to imitateexisting messenger, burglar,and fire alarm telegraphcompanies and connectall of the telephonesto a switchboardin a centraloffice. The first of these exchangeswas establishedin Bostonin May 1877 by E.T. Holmes. Holmeshad started a burglaralarm network and he added telephones as a secondservice for his customers[Rhodes, 1929, pp. 147-8]. Holmes foundthat his telephone business grew quickly because a portionof his network serveda neighborhoodin which many "large grocers, confectioners,and cookery merchants"were located, and these businessmenfound it convenientto use the telephoneto conduct transactionsamong themselves. 24 Hubbardfollowed with greatinterest the effortsof Holmesand other local entrepreneursas they struggledto installtelephones on private lines and set up exchanges.These developments convinced Hubbardthat therewas indeeda marketfor telephonesfor usewithin cities.Rather than sell the telephone patent to othercapitalists, Hubbard and his associatesdecided in July 1877 to form the Bell .This company was to holdthe Bell patents and issue licenses to individualswho wanted to setup localtelephone exchanges. Named asthe company's trustee, Hubbard took it uponhimself to promotethe establishmentof local telephone companies? In thesummer of 1877,

24GertrudeM. Hubbardto Mabel[Bell], 19 Oct. 1877, Hubbard Family Papers.

25AmericanTelephone and Telegraph Co., "TheEarly Corporate Development of the Telephone,"printed pamphlet, [dated after 1935], Box 71, WesternUnion Collection, pp. 8-12. W. Bernard Carlson / 178

Hubbardtraveled across the United Statesas a memberof the Special Commissionon RailwayMail Transportation.26 During this trip, Hubbardcarried two telephonesin his suitcaseand enthusiastically demonstratedthem to businessmenat every stop. As Hubbardtoured cross country and demonstrated the telephone, one wondershow he reconciledthis new campaignwith his larger struggleagainst Western Union. How didhis emerging market strategy meshwith hismindset of the telegraphindustry? Hubbard's new efforts withthe telephone make sense if onethinks of hisopposition in terms of Western Union as an intermediarybetween individualsand information. For Hubbard,the successof Americandemocracy and businesshinged on the ability of individualsto securenews and market prices.The problem with Western Union was that it wastoo large and intrusive,potentially preventing people from gettingthe information theyneeded. One way to minimizethe intermediarywas to placethe technologysquarely in thehands of theuser and eliminate the telegraph operatorwho controlledmessages by encodingthem. Since the telephonewas literally in the handsof the user, controlledand manipulatedby him, Hubbardmay have felt that the telephone eliminatedthe evils of the intermediary. Moreover,Hubbard also believedthat the telephonewould be usedfor domesticand social purposes,and thus a telephonenetwork would be basedon a more personaland democratic basis than Western Union's business-oriented telegraphsystem. In his correspondenceand promotionalefforts, Hubbardtold of howmiddle and upper middle class people would use the telephoneto coordinateservants, order groceries, and respond to socialinvitations. Although Hubbard saw the business applications for thetelephone, it was the domestic uses that fired his imagination? ?

26Ithink that President Hayes appointed Hubbard to thiscommission as an attemptto get Hubbardto stopagitating for hispostal telegraph scheme.

2?Foran early discussion of thedomestic and social uses of thetelephone, see Field, 1878. Entrepreneurshipin the Early Development of the Telephone/ 179

Orton and Hubbard Meet Again

By the fall of 1877,both Hubbard and Orton had realized that the telephonehad genuine commercial potential. Hubbard was delighted with the numberof entrepreneurssetting up local companiesand orderingtelephones from the Bell Companyin Boston. Hopingto discouragethe manufacture of counterfeittelephones, Hubbard insisted on leasingrather than sellingtelephones outright. By year'send, Hubbardestimated that the companyhad leased5000 telephones. Althoughthe tiny Bell Companywas hard pressed for the cashneeded to manufacturethese telephones, Hubbard was optimistic that leasing wouldeventually provide a steadyflow of income? At WesternUnion, Ortonwas pleasedwith Edison'sefforts at developingan improvedtelephone. During the springand summer of 1877, Edison and his associatesat Menlo Park sketcheddozens of designsbut came to focus on a loudspeakingcarbon [Carlson,1993]. At the endof August,Orton asked Edison to complete hisdesign and produce 150 telephones? At thesame time, Orton asked electricalexpert Franklin Pope to do an extensivereview of andelectricity and recommend what patents were needed to controlthe fields of harmonic telegraphy and . On Pope's recommendation,Western Union purchased Gray's harmonic telegraph patents[Wolff, 1976,p. 50]. For goodmeasure, Orton also secured a patent from , a Tufts College professorwho had developedan improvedversion of Bell'sinstrument. Armed with Edison'stelephone and patentsfrom Gray and Dolbear,Orton decided to call Hubbardin for a conference.Orton did sofor two reasons.First, Orton wanted to havethese inventors finish (if possible)the "next generation" multiple-message system so that it could

28Hubbardto Bell, 20 Nov. 1877;Hubbard to Bell,4 Dec.i 877;and Gertrude Hubbard to Mabel Bell, 30 Nov. 1877,Hubbard Family Papers.

2øEdisonand Charles Batcheior toFranklin Badger, i 7 Sept.1877, Edison microfilm edition, reel 28, frames 162-3. W. Bernard Carlson / 180 be introducedon WesternUnion lines. Ortonappears to haveseen the harmonictelegraph and telephone as being closely related, and so if he wantedto securethe harmonic telegraph for WesternUnion, he needed to talkwith Hubbard about Bell's patents for both inventions 3ø Burned by his experiencein fightingwith Atlantic and Pacific over the ownershipof thequadruplex, Orton was probably determined to secure completecontrol of harmonictelegraphy before proceeding. Second,Orton met with Hubbard in orderto protectthe Gold and StockCompany. Like Hubbard,Orton realized that the telephone had greatpotential in the intracitymarket. Justas Holmeswas installing telephoneson hisburglar alarm network in Boston,so Orton realized thatGold and Stock could add telephones to itsstock ticker networks in variouscities. Becauseimproved stock tickers used fewer wires (new versionsused three instead of five wires),Gold and Stock may have had excessline capacity. The telephone was receiving extensive newspaper coverage,and Orton may have felt thatthis popular invention might attract more business customers to the Gold and Stock networks and henceto WesternUnion. Consequently,rather than let Hubbardget a toeholdin Goldand Stock's market, Orton probably decided that it was betterto useEdison and Gray's work to forceHubbard into cooperating with Western Union. As a result,Hubbard met severaltimes with Orton, Gray, and variousWestern Union officials in the fall of 1877. Hubbardagreed to meetwith theopposition because he was aware that the Bell company lackedthe resourcesto introducethe telephonein citiesacross the country? WesternUnion possessed such resources, and Hubbard perhapsbelieved that if WesternUnion built telephone exchanges, the new technologywould make electrical communications cheaper and availableto morepeople.

3øCheeverto Norvin Green, 4 Feb.1878, Hubbard Family Papers.

3•Hubbardto Gertrude Hubbard, 15 Sept. 1877; Gertrude Hubbard to Mabel [Bell], 21 Sept. 1877;Hubbard to Bell, 18 Oct. 1877;and Cheever to Norvin Green,4 Feb. 1878, Hubbard FamilyPapers. Entrepreneurshipin the Early Development of theTelephone / 181

Hubbard, however, refused to be intimidatedby Orton's technologyportfolio. He refusedto concedethat Edison's loudspeaking telephonewas better than Bell's, claiming insteadthat Edison's instrumentfailed to reproducethe voicedistinctly. Hubbard insisted that Bell alonehad inventedthe telephoneand that his single1876 patentbroadly covered the field. For a time, Hubbardand Orton discussedcreating a thirdcompany which would be jointly controlled byBellTelephone and Western Union and which would pool the patents andresources of thetwo firms. 32 However, they could not agree on the exactproportions of ownership,and Hubbard may have demanded too muchin termsof guaranteedroyalties. Moreover, both sides refused to giveany ground on the question of whoreally possessed patent control of the telephone. Sensingthat there was substantialdemand for telephones,both Hubbard and Orton decided to settlethe issue through competitionin themarketplace and in thecourts. Accordingly,Orton organized the American Speaking Telephone Companyin December1877. Thisfirm installedtelephones on Gold andStock networks in thecities throughout the U.S. 33 Ortonpushed Edisonto improvethe articulation of hiscarbon transmitter by offering him additionalresources? In April 1878,with amplenewspaper coverage,Edison demonstrated his improved carbon telephone for Orton and othertelegraph industry leaders. To confirmthat his telephone worked better than Bell's in actual commercialoperation, Edison conductedthe test on theNew York-to-Philadelphialine, which was the busiest line in the Western Union network? Based on this

32Hubbardto Gertrude Hubbard, 22 Aug. 1877;Gertrude Hubbard to Mabel,[Sept. 1877]; andCheever to Norvin Green,4 Feb. 1878,Hubbard Family Papers.

33"TheAmerican Speaking Telephone Company," Journal of the Telegraph,10 (1 Dec. 1877),p. 357.

34GertrudeHubbard to Mabel[Bell], 23 Nov.and 21 Dec.1877, Hubbard Family Papers.

•5"Edison'sCarbon Telephone," Journal of theTelegraph, 11 (16 April 1878),p. 114. W. Bernard Carlson / 182 demonstration,American Speaking Telephone pressed ahead and began installingtelephones and settingup exchanges?In manycases, AmericanSpeaking Telephone raced with the local Bell agentsto bethe first to openan exchangein variouscities. While thisnew business went slowlyfor AmericanSpeaking Telephone during the springof 1878,business picked up, and eventually the company installed 56,000 telephonesin 55 cities??

Hubbard Takes the Telephoneto Court

In the meantime,Hubbard and Bell Telephonestruggled to keep up with AmericanSpeaking Telephone. Although Hubbard doubted that Edisoncould secure a patenton his carbontransmitter without infringingon Bell's existing patent, the company nonetheless purchased a patentfor a carbontransmitter from . 38 To raisecapital to covertheir manufacturingcosts, Hubbard and his associateswere forced in July 1878 to reorganizeBell Telephoneas joint-stock companyand to beginselling shares [Bruce, 1973, p. 259]. Facedwith vigorous competition and difficulty raising sufficient capital,Hubbard was forced to play histrump card. In August1878, Bell Telephonesued WesternUnion for infringingBell's patent. Specifically,Bell Telephoneaccused Peter Dowd, a WesternUnion agentin Springfield,Massachusetts, of illegally installing telephones whichused Bell's patented principle. Suing Dowd for infringementwas risky sinceneither Hubbard nor anyone else knew whether the courts would fully back Bell's broadclaims to the telephone.Moreover, WesternUnion possessed the lawyersand resources to pursuelengthy

36Hubbardto GertrudeHubbard, 11 Juneand September 1878, Hubbard Family Papers.

3?Thenumber of telephonesand exchanges is basedon the terms of theDowd settlement; seeBrooks, 1975, p. 71. I havebeen unable to find an estimatefor howmany telephones andexchanges were installed by BellTelephone in 1878-9,but I wouldguess it wason the orderof 20,000 to 30,000 instruments.

38Hubbardto GertrudeHubbard, [May?] 1878, Hubbard Family Papers. Entrepreneurshipin the Early Developmentof the Telephone/ 183 litigationwhile Bell Telephone'sresources were quite limited [Brooks, 1975,pp. 69-70]. Overthe next fourteen months, both sides amassed a huge amount of testimonyand supporting evidence? George Gifford and the other attorneysfor WesternUnion organized their case around Gray's work on the harmonictelegraph and telephone, arguing that Gray had covered muchof the sameground as Bell hadin 1875-6. Bell Telephonebuilt their casearound the testimonyof Bell himself,who provedto be a superbwitness. Bell providedample detailed testimony in whichhe carefullynarrated each step of how he developedthe telephone. The actualcourt hearing for theDowd case was scheduled for the fall of 1879, but as the startingdate drew near, a seriesof eventsled WesternUnion to offerto settleout of court.In April 1878,Orton died suddenly,leaving Western Union without strong leadership. Orton was succeededby NorvinGreen who lackedOrton's commitment to using technologicalinnovation strategically [Israel, 1992, p. 143]. In the springof 1879, Gouldlaunched a secondtakeover attack on Western Union. Gouldformed a newcompany, American Union Telegraph, and usedhis formidableclout in the railroadindustry to persuadeseveral major railroads to let American Union erect lines along their right-of-ways.Gould ultimately gained control of WesternUnion in 1881,but of course,his victory was not assuredin 1879 [Asmann,1980, pp. 97-8;Israel, 1992, pp. 147-9]. Nevertheless,based on the previous episodewith Atlanticand Pacific, Green probably knew in 1879that competitionwith American Union would be costly and require much of his attention.And finally, as Giffordand the WesternUnion lawyers listenedto Bell andother witnesses give their depositions, they became increasinglyconvinced that the courtwould probablysustain Bell's broadpatent. In of these developments,Gifford recommendedthat Western Union settle with Bell Telephoneout of court, and he negotiatedan agreementbetween the two partiesin the fall of 1879.

39AmericanBell Tel. Co. v. Peter•. Dowd;a Bill (No. 1040)in equityfiled 12 September 1878in theU.S. CircuitCourt, District of Massachusetts.Part I, Pleadingsand Evidence; Part II, Exhibits (Boston,1880). Copiesare availablein Bell Family Papersand at the EdisonNational Historic Site, West Orange, NJ. W. Bernard Carlson / 184

WesternUnion agreedto withdrawfrom the telephonefield, let Bell Telephoneuse the patentsof Gray and Edison,and sell its existing telephoneexchanges to Bell Telephone. In return Bell Telephone agreedto leave the telegraphfield, particularlythe long-distance, intercitymarket. Bell Telephoneagreed to payWestern Union a royalty of twenty percentof the telephonerentals from AmericanSpeaking Telephone'sformer exchanges for seventeenyears [Rhodes, 1929, pp. 52-3]. Estimatesof thisroyalty income vary, but Western Union earned between$3.5 and 7 millionon this agreement [Josephson, 1959, p. 148; Wolff, 1976, p. 51]. For Bell Telephone,the settlementof the Dowd caseeliminated its mostformidable rival andgave it a decadeor soto firmly establishthe telephone business. WesternUnion's decision to abandonthe telephone field has often beenregarded as a terriblemistake. In accusingWestern Union of a blunder,one is faultingWestern Union for failingto seethe futureof telephonein 1879,and the widespreadsuccess of the telephonelay at least30 yearsinto the future.4ø As suggestedhere, the commercial potential of telephonewas not obviousin the early years, and entrepreneurssuch as Hubbardand Orton spentmuch time puzzling overhow to introducethe telephone. WesternUnion's decision to abandonthe telephone in 1879made sensein termsof Orton'sstrategy. The telephonewas not usefulin termsof WesternUnion's core market--sending short business messages betweencities. Bell'stelephone did not work well on long-distance lines;moreover, from WesternUnion's standpoint, Bell's instrument wouldhave been a wastefulway to deploylong-distance lines since only one telephonemessage could be sentover eachwire. In 1879, the telephone'spotential lay in the intracitymarket as an adjunctto the stockticker. Orton recognizedthe value of this marketfor Western Union'ssubsidiary Gold and Stock, and he triedto convinceHubbard in 1877 to sharethis market with him. However, WesternUnion did not view the intracitymarket as being as importantor lucrativeas the

4øHereI am implying that the telephone does not prove to bea genuinerival to thetelegraph until TheodoreVail took overAmerican Telephone & Telegraphin 1907. As Galambos [1992]has demonstrated, it was Vail who createdthe nationwide telephone system that we havetoday. Entrepreneurshipin the Early Developmentof the Telephone/ 185 long-distancemarket, and when pressed by othercircumstances, Green waswilling to let Hubbardhave a portionof the intracitybusiness. Of course,the circumstancethat led Greennot to defendthe intracity' marketwas Gould's second attack. Knowing that Gould's attack could bea longbattle for control of thelong-distance market, Green sensibly woundup the fight with Bell Telephonein orderto devoteWestern Unions'full resourcesto holdingoff AmericanUnion. Finally,Green mighthave guessed that competition with American Union would mean reducedrevenues, and so he probably concluded that it wasbest to use WesternUnion's portfolio of telephonepatents to generatesome income. One can criticizeGreen for takingan undulynarrow view of WesternUnion's business and for failingto seehow intracity telephone exchangescould complementWestern Union's intercity telegraph network.However, I wouldsuggest that the enormous energy and effort requiredto createa successfulnationwide telegraph network effectively limitedOrton, Green, or anyof theother Western Union managers from beingable to thinkabout the telephone in newways; far toomuch of their businessexpertise was wrappedup in the existingtelegraph technology.Hence, based on the strategy,structure, and technology broughttogether by Orton,it madesense for WesternUnion to let Bell Telephoneassume the risks of introducingthe telephone?

Conclusion

Thispaper has shown that the "enduse" of thetelephone did not automaticallyspring from Bell's inventionin 1876. Rather, the introductionof the telephonewas stronglyshaped by leadersof the telegraphindustry in the 1870s.In particular,two men,William Orton and GardinerHubbard, fought over the telephoneand defined how it wasdeployed in theUnited States. In battlingover the telephone, Orton and Hubbard were guided by the business-technologicalmindsets they had developedabout the

n•David[1991] developed a similar argument about Edison's decision to leavethe electric powerindustry in the late . W. Bernard Carlson / 186 telegraphindustry in the early 1870s. Ortonbelieved that the major applicationfor the telegraphwas sendingshort business messages betweencities, and he directedthe structure, strategy, and technology of WesternUnion towardthat goal. For Orton,multiple-message telegraphywas the "cuttingedge" technology which would permit WesternUnion to maintainand expandits controlof the business messagemarket. The telephonewas simplya curiousspinoff to multiplemessage telegraphy, and Orton only took an interestin it in 1877 when he was trying to consolidatehis control of harmonic telegraphy.Orton and his successor Green also had to fightoff hostile financierssuch as Jay Gould; when confronted in 1879with the choice of fightingthe puny Bell Telephoneor themighty Gould, Green chose to concentrateon the largerfight for the intercitybusiness market. In notswitching from the telegraph to thetelephone, Orton and Green were workingwithin their mindsetof protectingWestern Union's core business. WhileOrton's mindset saw telegraphy as a technologyto be used byprivate interests to servethe businessman, Hubbard saw telegraphy aspublic technology which should serve the average citizen. Hubbard opposedWestern Union because he sawthe company coming between citizensand the and information they needed. Initially, Hubbard triedto redressthe problems with telegraphyby lobbyingCongress to createan alternativetelegraph system, only to be stoppedby Orton. Consequently,Hubbard turned to a technologicalsolution, the telephone inventedby his son-in-law. In the telephone,Hubbard was able to createa telecommunicationssystem that overcame the defectshe saw in WesternUnion. Literally in the handsof the user,the telephone seemedto eliminateWestern Union and its operatorsas a meddlesome intermediary.Installed in homes,shops, and offices, individuals could usethe telephone for bothsocial and business messages. And finally, Hubbardeagerly encouraged entrepreneurs to setup localexchanges. In doingso, Hubbard may have felt he was aiding democracy by taking a "grassroots" approach and letting individuals deploy the telephone in wayssuitable to theircommunities. Clearly, Hubbardplayed a pioneeringrole in defining the telephone. It was Hubbardwho closelymonitored Bell's early experimentsand pushed him to patenthis inventions.It wasHubbard Entrepreneurshipin the Early Developmentof the Telephone/ 187 who sortedthrough a rangeof marketingpossibilities--such asselling the patentsto WesternUnion, buildingprivate lines, sellingversus leasingtelephones, or establishingexchanges. Hubbard was a classic entrepreneurwho coordinatedthe resourcesnecessary for promoting telephoneexchanges. He recruitedlocal agents,convinced Charles Williams to manufacturetelephones, raised capital from otherNew Englandbusinessmen, and helped found the Bell TelephoneCompany. Endlesslyoptimistic about the telephone, Hubbard's enthusiasm infected localentrepreneurs and Boston investors, and permitted the Bell group to getan earlylead in 1877over Western Union in installingtelephones. One lessonthat may be drawnfrom Hubbard'sefforts is to note theubiquitous role of the state. Throughouthis strugglewith Western Union,Hubbard employed different elements of the state. He lobbied Congressfor hispostal telegraph scheme, promoted the telephone while travelingon governmentbusiness, and of course,resorted to thecourts to protectBell's patent monopoly. Significantly, Hubbard did not see the governmentas an externalitywith whichhe hadto copebut rather asa setof resourceswhich he couldpartly control and direct toward his goals.Although it is temptingto seenineteenth century America as an unregulated,free-market paradise in whichheroic individuals built great technologicalsystems and business empires without interference from the government,the earlydevelopment of the telephonereveals that major technologicalchanges were intimately bound up with the evolvingpolitical and legalenvironment. Consequently, if we are to understandhow inventorsand entrepreneurs created the technology of the SecondIndustrial Revolution, then we mustpay moreattention to howentrepreneurs interacted with the state. 42 Givenall thatHubbard did, why then consider Orton in thispaper? Orton is importantbecause he providesthe storywith a senseof contingency.It is veryeasy to assumethat the telephone obviously had to be developed,and that Hubbardand Bell wouldprevail. Yet, the story of the telephonecould well have turnedout differently,had "normal"business thinking predominated. Orton's mindset is the typical

42Galamboshas consistentlyencouraged historians to examinehow managersand entrepreneurshave interacted with the political environment; see his history of businessand governmentrelations with Pratt[1988] aswell ashis paper with Abrahamson[1994]. W. Bernard Carlson / 188 wayAmerican businessmen look at innovation,in thesense of narrowly consideringhow an inventionwill or will not supportthe existing structureand strategy of a firm. Ortonand Green's decision to "stickto theirknitting" and concentrate on WesternUnion's core business is the usualway that businessmenrespond to new technology.Hence, by comparingthe mindsets of Ortonand Hubbard, we areable to seejust how difficult and risky it was for Hubbardto conceptualizethe telephonein newways. But even more contingency,the juxtapositionof Orton and Hubbardunderline the importanceof individualaction, of agency,in narrativesof businessand technological change. As suggestedby Paul David [1985; 1988], economistsand historianshave begunto use path-dependentmodels which permit individuals to makechoices and definethe path or trajectoryof an innovation.These models, however, assumethat once the path is chosen,but powerful economic or technical forcestake over and shape the course of an innovation.In contrast,the storyof Ortonand Hubbardsuggests that individualsmay not only definethe path of an innovationat theoutset but continue to influence thepath by alteringthe economic, political, and social environment. To be sure,there are economicand technical constraints informing any technologicaldesign or businessdecision, but the case of thetelephone revealsthe need for conceptualframeworks which better balance broad structuralforces and individual agency. Indeed, I wouldargue that this is thelarger theoretical task which new case studies of canhelp address. As the twentiethcentury draws to a close,Americans often wish their societywas as creativeas it was at the end of the nineteenth century.In doingso, Americans often fantasize that individuals driven by personalambition should somehow come up withnew technologies that will automaticallymake Americanbusiness more efficientand competitivein the global economy. However, I would caution Americansagainst concentrating too much on the mysterious forces of motivation. What we need to understand are the skills and mindsets usedby individualsto shapevague inventions into successful products. We alsoneed to comprehendthe balance of individualeffort and broad political,economic, and technological forces. For thesereasons, the time is ripe for businesshistorians to revisitthe entrepreneurand Entrepreneurshipin the Early Development of theTelephone / 189 examinethe mindsetshe (or she) usesto createnew marketsfor technology.43

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