June/july 1985 | Volume 36, Issue 4
Late in 1876, William Orton, president of the Western Union Telegraph Company, rejected an opportunity to purchase from Alexander Graham Bell and his associates all patents relating to Bell’s telephone for $100,000. Since Bell’s patents are generally considered the most valuable ever issued by the United States Patent Office, Orton’s refusal to buy them earned him an odd immortality: he is the man who made the worst decision in American business history.
Few things are more amusing than the failure of our ancestors to foresee the future. Generous souls might refrain from making fun of Orton, but I do not think we should spare him. He goofed, and though any of us might have goofed as badly, that does not excuse him. Our children will not deprive themselves of the opportunity to laugh at our mistakes, so why should we deprive ourselves of an opportunity to laugh at the mistakes of others?
How could Orton have been so blind? The answer is that he was not blind at all: he saw all too clearly, and what he saw was the visible world of 1876. It was a world in which Western Union seemed as solidly entrenched as AT&T or IBM seems today. Founded in 1851 as the New York & Mississippi Valley Printing Telegraph Company, by 1876 Western Union had opened more than seven thousand telegraph offices in the United States, strung 185,000 miles of telegraph wire, and accumulated assets with a book value of fifty-five million dollars. Nearly twenty million messages passed over its wires in 1876, an increase of more than 300 percent in a decade.
As the president of this nineteenthcentury colossus, William Orton was in the corporate catbird seat. He is said to have rejected the opportunity to buy Bell’s patents with the words, “What use could this company make of an electrical toy?”
Orton was not alone in failing to appreciate the commercial potential of the telephone. At about the same time that he made his immortal blunder, officials of the British Post Office turned down the chance to buy Bell’s English patent. Elisha Gray, a rival inventor who came within hours of beating Bell to the Patent Office, might have run faster if he had realized how much was at stake. As late as 1875, however, he wrote to his attorney: “Bell seems to be spending all his energies on [the] talking telegraph. While this is very interesting scientifically, it has no commercial value at present.…”
Gray’s view was echoed by an assistant postmaster general of the United States in 1878, when a valued subordinate gave up a promising career with the Post Office to accept a job as general manager of the telephone company: “My only wish is that you may have … a telephone tube fastened to your ear and another connecting at the top of your head.… Listen to the prophesy of an old fool to a friend. One or two years hence there will be more Telephone companies in existence than there are sewing machine companies today.… I can scarcely believe that a man of your sound judgment, one who holds an honorable … position … should throw it up for a d——d old Yankee notion … called a telephone!”
The recipient of this good advice was Theodore Vail, who became the most important executive in the history of AT&T. Vail was fortunate to have a friend who did not mind telling him plainly that his plan failed the test of common sense, and even more fortunate to have had the uncommon sense to ignore the warning.
Hindsight is better than no sight, but it has its limits. For one thing, since it knows what happened and what did not, it is easy for hindsight to pretend to understand more than it actually does.
For anyone who wants to think about hindsight and foresight in a clear-sighted way, a wealth of fascinating material is available in The Social Impact of the Telephone , an anthology of essays based on seminars conducted at MIT in 1976 in celebration of the telephone’s centennial.
To us, nothing seems more obvious than the usefulness of the telephone as an instrument of two-way communication. As contributors to the anthology make clear, however, we tend to miss what was obvious to many people a century ago—the potential of the telephone as a one-way broadcasting medium.
At the celebration of the nation’s centennial in Philadelphia in June 1876, Alexander Graham Bell impressed the judges not with a demonstration of a two-way conversation but rather with a telephonic recitation of Hamlet’s soliloquy. Later, in the first telephone transmission from Boston to New York, “Yankee Doodle” was played on an organ in Boston, while an audience listened in New York.
In a world without radio and television, it was natural for men of vision to pursue what has been called “the radio concept of telephony.” An author of the late nineteenth century who specialized in foresight and hindsight, Edward Bellamy, peered into the future and saw delightful possibilities: “You stay at home and send your eyes and ears abroad for you. Wherever the electric connection is carried … be it the mid-air balloon or mid-ocean float of the weather watchman, or the ice-crusted hut of the polar observer … it is possible in slippers and dressing gown for the dweller to take his choice of the public entertainments given that day in every city of the earth.”
One of the most interesting demonstrations of the radio concept of telephony occurred in Hungary, where in 1893 an entrepreneur named Theodore Puskas established a telephone-newspaper that eventually gained more than six thousand subscribers. The daily program available over the telephone included news and sports reports, stock market quotations, reports on proceedings in Parliament, and, in the evenings, theater, concerts, and lectures.
“The Pleasure Telephone opens out a vista of infinite charm,” wrote an enchanted contemporary of Puskas. Hungary in the last decade of the nineteenth century even provides us with a remarkable foreshadowing of our modern video-cassette recorders. To accommodate subscribers to the telephone-newspaper, a phonograph was attached to the telephone receiver “in such a way that the first sound over the wire would start the phonograph, which would then record the news, and make it available for the subscriber at his convenience.”
Today the telephone-newspaper survives in a minor way in the recorded announcements that provide telephone subscribers with the time, the weather, and the latest sports results. The “pleasure telephone” survives in services such as Dial-A-Joke and Dial-A-Poem. In times of spiritual crisis, telephone subscribers can Dial-A-Prayer. A few years ago, New Yorkers in need of sympathy could Dial a Shoulder, but that service has been discontinued.
In general, however, the telephone as a one-way broadcasting medium turned out to be a dead end—unknown to everyone except historians who concern themselves with what the English historian Asa Briggs has called “the rejected alternatives of communications history.” Radio itself doomed the radio concept of telephony.
If he were alive today, William Orton might derive some comfort from a perusal of The Experts Speak , a compendium of “expert misinformation, disinformation, misunderstanding, miscalculation, … and occasional just plain lies” edited by Christopher Cerf and Victor Navasky. Here we learn that though Orton may have made the worst decision in American business history, as a prophet he had some impressive competition.
In 1845 the U.S. Postmaster General rejected an opportunity to purchase the rights to Samuel Morse’s telegraph for $100,000 with the comment that he doubted that “under any rate of postage that could be adopted, its revenues could be made equal to its expenditures.”
An investigating committee established by the British Parliament found Edison’s work on the electric light “unworthy of the attention of practical or scientific men.” Edison himself thought his phonograph “not of any commercial value.”
The renowned British physicist Lord Kelvin announced in 1897 that “radio has no future.” A decade later a business executive told radio pioneer Lee De Forest that he could put in a single room “all the radiotelephone apparatus that the country will ever need.” De Forest himself announced in 1926 that, “while theoretically and technically television may be feasible, commercially and financially I consider it an impossibility, a development of which we need waste little time dreaming.”
So it goes: Year after year, decade after decade, century after century, our ancestors have made fools of themselves. We always laugh at the electrical toy; van Gogh never sells his paintings; Melville always dies unrecognized. The only safe prediction is that people will go on making dumb predictions.
Santayana’s famous warning that those who forget the past are doomed to repeat it is accurate but incomplete. Those who remember the past are also doomed to repeat it, but not in ways that anyone can foresee. In outwitting ourselves we display endless ingenuity. Sometimes we misremember; sometimes we misinterpret; sometimes we misapply the lessons we imagine we have learned.
“We should not be too harsh about forecasters,” wrote the late Ithiel de Sola Pool, the former director of MIT’s Research Program on Communications Policy. “We have the benefit of hindsight now, yet it is not much easier to answer the questions about the past than about the present or future. Postdiction is almost as hard as prediction; aftcasts almost as hard as forecasts.” We can remember some of the past some of the time, but we can’t remember all of it—not ever—and we’re never quite sure that we understand the part we remember.
John Wanamaker once said, “Half the money I spend on advertising is wasted, and the trouble is I don’t know which half.” So it is with the study of history, and so it is with prophecy. History tells us that half of what we learn from history is wrong, and it tells us that half our current prophecies are wrong, but it does not tell us which half. Whether we look forward or backward, we see as through a glass darkly. Into the future we stumble, with William Orton as our guide.