Tesla is why there are no major companies named after him. Given the revolutionary nature of his alternating current (AC) motor and his pioneering work with electromagnetic waves, one might expect that a corporation named after him would have been formed in order to develop and manufacture these important inventions. Certainly, Tesla\u2019s rivals\u2014Thomas Edison and Guglielmo Marconi\u2014formed companies with their name in the title and versions of these companies\u2014such as Consolidated Edison in New York or Marconi plc in Britain--have endured to this day. Notwithstanding the recently formed Tesla Motors\u2014 which has no direct connection with the inventor\u2014why is that there are no major companies that carry Tesla\u2019s name?1

The answer to this question, I would suggest, lies with the business strategy used by Tesla to introduce his new inventions. Previously, historians have generally assumed that most inventors in late nineteenth-century America earned money from their inventions by establishing new companies to manufacture and market their creations. While Edison and Alexander Graham Bell certainly pursued this manufacturing- oriented strategy, Tesla and his backers instead pursued a promotion-oriented strategy.

Rather than set up new companies to manufacture his creations, Tesla promoted his inventions to investors and the public and then licensed or sold the patents to manufacturers. Using the money gained from licensing or selling his patents, Tesla was then able to move on to new creative projects. While this promotion- oriented strategy was viable for Tesla and other inventors, it did have the consequence that no long-lasting company would necessarily be named after him. In this paper, then, I wish to explore how Tesla used promotion as a strategy by investigating how Tesla evolved this strategy while working with several different backers from 1885 to 1905.

I will look at how these entrepreneurs helped Tesla secure patents and negotiate deals while Tesla contributed to this strategy through his spectacular public demonstrations, lively newspaper interviews, and ambitious scientific articles. While promotion as a strategy succeeded with Tesla\u2019s AC motor in the late 1880s, I will describe how Tesla struggled to make this strategy work with his inventions related to wireless light and power in the 1890s. Overall, in narrating Tesla\u2019s approach to the business of invention, I hope to show that he was not a technical wizard who lacked business sense but rather a highly talented inventor who demonstrated creativity not only in the laboratory but also in the ways he promoted and funded his research.

Before plunging into the AC motor, we need first to understand something about Tesla\u2019s business model\u2014that is, how he expected to make money from his electrical inventions. It is easy to imagine invention to be a cost-free activity in which great ideas are supposed to come to individuals while they experiment in their garages or attics. In reality, invention can be a costly and time-consuming activity requiring special equipment, numerous test models, and the help of skilled technicians.2To cover these costs, inventors and their patrons need to convert an invention into a business proposition as quickly as possible, and it is for this reason that inventors secure patents on their ideas.

In late nineteenth-century America, once inventors had patents, they could pursue one of three basic strategies for making money from them:

\u2022First, they could use the patents to create their own new business to manufacture or use their inventions. Because patents prevented others from manufacturing the product or using the process, the inventor earned a profit from his monopoly position. An example of this strategy is how

Bernard Carlson, \u201cAt Arm's Length or Close to the Vest? A Historical Look at How Companies Locate Technological Innovation,\u201d International Economic History Association Congress, Helsinki, August 2006.

\u2022Second, inventors could grantlicenses to an established manufacturer. Under the license, the manufacturer might be required to pay inventors royalties for each item manufactured. For instance, after securing a patent for a \u201croad engine\u201d in 1895, George B. Selden collected from automakers a fee of $15 for each automobile manufactured in the United States. Selden was eventually defeated in court in 1911 by Henry Ford;4and

\u2022Third, they couldsell their patents outright to another entrepreneur or business enterprise. The inventor would realize an immediate profit and would avoid the risks of having to manufacture and market his invention. Elmer Sperry, for example, developed an electrolytic process for white lead in 1904 that he sold outright to the Hooker Electrochemical Company.5

For the most part, historians of technology have assumed that inventors followed the first strategy, largely because that strategy led to creation of long-enduring firms such as General Electric or Eastman Kodak. However, for the average nineteenth-century inventor, this strategy was highly risky, capital-intensive, and likely to pay off only over the long run. Moreover, it required that the inventor master the intricacies of manufacturing and marketing, and many inventors lacked these business skills. I suspect that some inventors only decided to set up businesses for manufacturing or using their inventions after they had exhausted the possibilities for selling or licensing their patents. For instance, Bell and his backers initially tried to sell the telephone patent to Western Union in 1876, and it was only after Western Union declined to buy it that they set up the American Bell Telephone Company and began building exchanges.6

Given the risks associated with manufacturing, many nineteenth-century inventors preferred to either sell or license their patents. During the 1870s, Munn & Company, the patent agency affiliated with Scientific American, urged its inventor clients to pursue a licensing strategy.7In particular, licensing

was seen as being highly profitable since one could grant a large number of licenses to different firms or for use in different territories. With his incandescent lighting system, Edison and the Edison Electric Light Company made a handsome profit by granting licenses to central station companies in dozens of cities. As a strategy, though, licensing had a downside in that the inventor had to be ever vigilant against competitors infringing his patents, lest the licenses lose their monopoly power. By not aggressively defending its patents in the mid-1880s, the Edison Electric Light Company inadvertently allowed several competitors to spring up, and one of those competitors, the Thomson- Houston Electric Company, eventually took over the Edison Company to form General Electric in 1892.8

It was within this context that Tesla and his backers crafted their business model for invention. As Tesla came up with new electrical inventions, he would seek to patent them. His backers provided the money necessary to cover laboratory expenses and patent fees. However, to earn a profit on their investment, his backers sought to sell or license his patents to either established manufacturers or other investors who planned to set up new companies. Hence, the name of the game for Tesla and his backers was not manufacturing his inventions but rather selling or licensing them.

Significantly, the strategy of selling or licensing patents poses its own challenges for the inventor and his backers. One has to know people in the industry who might be looking for new technology, then one has to generate interest and excitement in the patents that are for sale, and finally one has to negotiate favorable terms. These negotiations involve much bargaining since the seller (i.e., the inventor) asks the highest possible price in order to recover the costs of invention while the buyer seeks to minimize his risk (how much will it cost to convert the invention to a product? will the product sell?) by keeping the price low. At the same time, the inventor also has to keep in mind that he may not have the only patents for sale and that too high an asking price may send the buyer to other inventors. Hence, to get the best possible price and not drive away the buyer, the inventor and his backers may use all sorts of arguments to persuade the buyer that the invention in question is the best possible version and offers the greatest potential. For the inventor and his backers, then, the art of persuasion is often the best hedge in the risky business of selling or licensing patents.9

Having suggested that Tesla\u2019s business model was to sell or license his patents, let\u2019s examine how this strategy played out in the development of his AC motor in the late 1880s.

Rethinking the Role of Agency in the History of Technology,\u201d Society for the History of Technology, Minneapolis, November 2005.

Tesla first became interested in developing an electric motor while studying at the Joanneum Polytechnic School in Graz, Austria in 1876-7. There he eagerly attended the lectures in physics given by Professor Jacob Poeschl. While watching his professor trying to control the sparking caused by a commutator on a direct current (DC) motor, Tesla suggested that it might be possible to design a motor without a commutator.

Annoyed by Tesla\u2019s impudence, Poeschl lectured on the impossibility of creating such a motor, concluding \u201cMr. Tesla may accomplish great things, but he certainly never will do this.\u201d10

Poeschl intended that his remarks should curb Tesla\u2019s flights of fancy but they instead stoked the fires of his ambition. As he pursued his studies in Graz and then Prague, Tesla puzzled about how to make a spark-free motor.11

In 1882, Tesla went to Budapest, hoping to work for friends of his family, Tivadar and Ferenc Pusk\u00e1s. While Tivadar had traveled to America to secure the rights to several of Edison\u2019s inventions, Ferenc in Budapest was planning a telephone exchange using Edison\u2019s improved telephone. Unfortunately, Ferenc was unable to give Tesla a job at once, and while waiting, Tesla became deeply depressed. Convinced he was going to die, Tesla only recovered with the help of a new friend, Anthony Szigeti. To help Tesla regain his strength, Szigeti encouraged Tesla to walk each evening in the City Park.12

It was during one of these walks with Szigeti that Tesla hit upon the perfect idea for his motor. While admiring the sunset and reciting poetry, Tesla suddenly envisioned the idea of using a rotating magnetic field in his motor.13Up to this time, inventors had designed DC motors in which the magnetic field of the stator was kept constant and the magnetic field in the rotor was changed by means of a commutator. Tesla\u2019s insight was to reverse standard practice: rather than changing the magnetic poles in the rotor, why not change the magnetic field in the stator? This would eliminate the need for the sparking commutator. Tesla saw that if the

became quite close, and Szigeti worked with Tesla in Paris,
Strasbourg and New York. Around 1890, Szigeti left Tesla, and his
departure deeply upset Tesla. See NT testimony inComplaint's

magnetic field in the stator rotated, it would induce an opposing electric field in the rotor, thus causing the rotor to turn. Tesla surmised that the rotating magnetic field could be created using AC instead of DC, but at the time he did not know how to accomplish this.

Over the next five years, Tesla struggled to acquire the practical knowledge needed to realize his motor. After helping build the telephone exchange in Budapest, Tesla joined Tividar Puskas in Paris where they both went to work for the Edison Company installing incandescent lighting systems.14

There, Tesla had little personal contact with Edison and was assigned the task of designing an arc lighting system. When the Edison Company decided not to pay him a bonus for his design, Tesla quit in disgust.16Tesla went on to develop his arc lighting system with backers from Rahway, New Jersey, but once the arc lighting system was up and running, they fired Tesla.17 Abandoned by his patrons, Tesla was forced to work as a ditch-digger.18

In the midst of hardship, however, Tesla mustered the energy needed to file a patent application for a thermo- magnetic motor in March 1886. Although his idea for a motor powered by heating and cooling magnets proved unworkable, this patent gained him an introduction to Charles F. Peck. Peck had made a fortune on Wall Street by organizing the Mutual Union Telegraph Company in the early 1880s as a competitive threat to Western Union and then forcing the robber baron Jay Gould to buy Mutual Union in order to protect his holdings in Western Union.19

Intrigued by the thermo-magnetic motor, Peck offered to underwrite Tesla\u2019s efforts at invention. Because he was not a technical expert, Peck invited Alfred S. Brown, a superintendent at Western Union, to join him in supporting Tesla.

To permit Tesla to work on his inventions, Peck and Brown rented a laboratory for him on Liberty Street in New York\u2019s financial district in the fall of 1886. They agreed to share any

said nothing about working on the arc lighting system and instead explained that he quit when he was not paid $50,000 he thought he had been promised for redesigning the dynamos.

York: Ives Washburn, 1944), 65 and NT to Institute of Immigrant
Welfare, 12 May 1938 in John T. Ratzlaff, comp., Tesla Said
(Millbrae, California: Tesla Book Co., 1984), 280.