Entrepreneurshipin the Early Development of the Telephone: How Did William Orton and Gardiner Hubbard Conceptualize this New Technology? W. Bernard Carlson Divisionof Technology,Culture, and Communication Universityof Virginia 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 Alexander 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 invention,and the first consumers,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 Smithsonian Institution 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 innovation 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 United States. Hubbard was Alexander Graham Bell'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 innovations.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 Western Union Let us lookfirst at William Ortonand his experiencesat Western Union. I will arguethat the mindsethe 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 New York City. In 1861,he waselected 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, monopoly 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