What Use is the Telephone, the Electrical Toy?
SHOULD WE BUY THIS INVENTION?
Executive: William Orton, president of the Western Union Telegraph Company in 1876.
Background: In 1876, Western Union had a monopoly on the telegraph, the world’s most advanced communications technology. This made it one of America’s richest and most powerful companies, "with $41 million in capital and the pocketbooks of the financial world behind it." So when Gardiner Greene Hubbard, a wealthy Bostonian, approached Orton with an offer to sell the patent for a new invention Hubbard had helped to fund, Orton treated it as a joke. Hubbard was asking for $100,000!
Decision: Orton bypassed Hubbard and drafted a response directly to the inventor. "Mr. Bell," he wrote, "after careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities… What use could this company make of an electrical toy?"
Impact: The invention, the telephone, would have been perfect for Western Union. The company had a nationwide network of telegraph wires in place, and the inventor, 29-year-old Alexander Graham Bell, had shown that his telephone worked quite well on telegraph lines. All the company had to do was hook telephones up to its existing lines and it would have had the world’s first nationwide telephone network in a matter of months.
Instead, Bell kept the patent and in a few decades his telephone company, "renamed American Telephone and Telegraph (AT&T), had become the largest corporation in America … The Bell patent - offered to Orton for a measly $100,000 - became the single most valuable patent in history."
Ironically, less than two years of turning Bell down, Orton realized the magnitude of his mistake and spent millions of dollars challenging Bell’s patents while attempting to build his own telephone network (which he was ultimate forced to hand over to Bell.) Instead of going down in history as one of the architects of the telephone age, he is instead remember for having made one of the worst decisions in American business history.
SHOULD WE BUY THIS INVENTION?
Executive: William Orton, president of the Western Union Telegraph Company in 1876.
Background: In 1876, Western Union had a monopoly on the telegraph, the world’s most advanced communications technology. This made it one of America’s richest and most powerful companies, "with $41 million in capital and the pocketbooks of the financial world behind it." So when Gardiner Greene Hubbard, a wealthy Bostonian, approached Orton with an offer to sell the patent for a new invention Hubbard had helped to fund, Orton treated it as a joke. Hubbard was asking for $100,000!
Decision: Orton bypassed Hubbard and drafted a response directly to the inventor. "Mr. Bell," he wrote, "after careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities… What use could this company make of an electrical toy?"
Impact: The invention, the telephone, would have been perfect for Western Union. The company had a nationwide network of telegraph wires in place, and the inventor, 29-year-old Alexander Graham Bell, had shown that his telephone worked quite well on telegraph lines. All the company had to do was hook telephones up to its existing lines and it would have had the world’s first nationwide telephone network in a matter of months.
Instead, Bell kept the patent and in a few decades his telephone company, "renamed American Telephone and Telegraph (AT&T), had become the largest corporation in America … The Bell patent - offered to Orton for a measly $100,000 - became the single most valuable patent in history."
Ironically, less than two years of turning Bell down, Orton realized the magnitude of his mistake and spent millions of dollars challenging Bell’s patents while attempting to build his own telephone network (which he was ultimate forced to hand over to Bell.) Instead of going down in history as one of the architects of the telephone age, he is instead remember for having made one of the worst decisions in American business history.
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