- Historic Sites
10 Moments That Made American Business
How a debt-ridden banana republic became the greatest economic engine the world has ever known
February/March 2007 | Volume 58, Issue 1
With the development of the gasoline-powered automobile in the last decade of the nineteenth century, the demand for petroleum would soar. Today the American economy consumes 7.6 billion barrels of petroleum a year, 30 times the per capita consumption in 1900, and petroleum is one of the country’s largest and most capital-intensive industries. More, petroleum has become the linchpin of the world economy and thus of international politics. Armies march to defend or acquire its sources.
Thomas Edison is the very symbol of yankee ingenuity. While most great inventors are known for one invention—Alexander Graham Bell for the telephone, Charles Goodyear for vulcanized rubber—Edison is remembered for dozens of them. Among many others, he invented or made fundamental improvements to electric light, the phonograph, the stock ticker, the movie camera, and the telephone, each of which fathered or greatly facilitated major segments of the American economy.
But perhaps because it could not be patented, Edison is seldom remembered for what is probably the most significant of all his inventions, the industrial research laboratory. Edison in effect invented the industrialization of the process of invention, with consequences that continue to this day.
Already famous for his many contributions to the telegraph industry and not yet 30 years old, Edison was living in a brownstone in Newark, New Jersey, with his wife, father, and daughter and was manufacturing telegraph equipment. He needed more room and bought a house and two tracts of land in Menlo Park, New Jersey, then a farm town 25 miles southwest of New York City.
On a dirt road called Christie Street he ordered the construction of a building, two stories tall and 100 feet long by 30 wide. In it he installed a laboratory, machine shop, and carpentry shop. Equally important, he employed people able to turn his ideas into reality, including machinists, carpenters, and a glass blower. It was in Menlo Park that Edison would develop some of his most famous inventions, including electric light and the phonograph.
But even more important than the inventions themselves was the process. Laboratories in the past had mostly pursued pure research, with little or no regard for the practical applications that might flow from that research. Menlo Park was all about practical application, turning ideas into products that would have commercial potential.
In 1916 a Model T cost only $360, and Henry Ford sold 730,041 that year. By 1920 he was building half the cars in the world.
For instance, the light bulb by itself isn’t good for much; it needs a source of electricity. With the resources of Menlo Park, Edison was able not only to invent the light bulb but to design a complete system of generating plants, wires, and meters—in truth the modern electric power industry. Edison perfected the light bulb in 1879. By 1882, with his electrical generating plant on Pearl Street in lower Manhattan, he brought electric light to an urban neighborhood.
The new corporate giants that were emerging in the last two decades of the nineteenth century, such as General Electric, of which Edison was a founder, quickly adopted the idea of the industrial research laboratory. An incredible outpouring of inventions has resulted ever since. Just a few of the products to emerge from this process include artificial rubber and nylon (Du Pont), the transistor (AT&T), and the microprocessor (Texas Instruments and Intel).
Edison’s original idea, the systematizing of the process of research and development, has been the single most important factor behind American dominance of emerging technology in the twentieth century. The wholehearted embrace of the concept ensures that that dominance will continue. In 2006 the United States spent as much on research and development as did the European Union and Japan combined.
In 1893 the carburetor was invented in Europe. It was the last piece of the puzzle needed to make the automobile with a gasoline-powered internal-combustion engine a practical technology. Mechanics and amateur tinkerers in both Europe and America began building automobiles, essentially by hand. These vehicles were expensive and sold only to the rich.
By 1900 the United States was producing about 4,000 automobiles a year, and the companies producing them multiplied in a classic economic Darwinian competition. In 1903 alone no fewer than 57 car makers opened for business, and 27 went bankrupt. One of the automobile manufacturers that opened that year was the Ford Motor Company, whose principal owner (sole owner after 1915) was Henry Ford.
Ford’s father was a farmer near Dearborn, Michigan, and Henry received only a modest rural education. Ford hated farming, but he proved a born mechanic. In 1896 he built his first automobile in the carriage house behind his house, and in the next few years he built racecars that broke speed records. But Ford wasn’t really interested in racing or crafting cars for the wealthy. He wanted to produce cars for the average man.