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The Rise and Fall of a Great Inventor

Recently I finished the book “Tesla: Inventor of Electrical Age” by W. Bernard Carlson and I highly recommend this book. I will write multiple blogs about the book and this first one will focus on historical facts and my thoughts on the rise and fall of Tesla.

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Nikola Tesla was born in 1856 in the Austra-Hungarian empire. He came to the US in June 1884 to work for Edison Machine Works and left the company after a short-stay of 6 months. Later, he was approached by businessmen Benjamin A. Vail and Robert Lane to form a company but the two persons abandoned Telsa after a year. In the fall of 1886, Tesla was rescued by two other business partners Peck and Brown, who underwrote Tesla’s efforts to develop inventions into practical devices. On July 7, 1888, Peck and Brown sold the Tesla patents to Westinghouse for a lucrative deal and Tesla started to serve as a consultant for Westinghouse. Tesla left Westinghouse in August 1889 and in 1891 Westington tore apart the contract with Tesla under the pressure of investors. From 1892, Tesla started to give consultation on the Niagara fall powerhouse project, which finished in 1895 and established Tesla’s reputation as one of America’s leading inventors.

During 1895 and 1898, Tesla investigated some other things, like X-ray and radio-controlled boats. In 1899 and 1900, Tesla stayed in Colorado to perfect the wireless transmission system. In Nov 1900, Tesla was able to meet with the most powerful man on Wall Street, J.P. Morgan, and convinced Morgan to loan him $150,000 to support his wireless network. Around the same time, the Italian inventor Marconi was also working on a competing technology. In Dec 1901, Marconi finished the transmission of Telegraphy through Atlantic. The loss of the competition with Marconi forced Tesla to bet all-in on an even bolder project of wireless transmission of power. After the project failed in 1905, the life of Tesla as a bold inventor came as an end. Tesla spent most of this remaining life as a recluse in a New York hotel and was forgotten soon.

Telsa’s inventor career could be divided into three stages: Rise, Plateau, and Downfall stages. The first phase (Rise) is from when Tesla started to work for the Edison company and ended at the time when his sponsor Peck died. In this stage, Tesla, as a young immigrant, challenged the industry with his innovative thoughts of AC transmission. Tesla built his reputation by showing many magical demonstrations of electricity. Despite the dramatic promotion, Tesla’s work at this stage was pretty practical.

After Peck’s death that marked the start of the second stage (plateau), Tesla struggled to create a project that had commercial potential. Different from the first stage, Tesla at this time had more resources and still did a lot of amazing demonstrations to the public. However, a lot of his efforts like X-ray and Radio-controlled boats went nowhere. The biggest achievement this time is Niagara fall. However, Tesla’s role in the project is only a consultant and this is more a continuation of his work in the first stage. The lack of evidence to bring his innovative ideas to concrete commercial success restricted his ability to find patrons. 

The third stage is when Tesla got into the building the wireless energy transmission. He was able to secure some funding from patrons (like Astron and JP morgan) to pursue his dream thanks to his fame. However, none of his patrons at this stage was as serious and devoted as Peck and Brown were. To make matter worse, Tesla had to make bolder and bolder claims because he couldn’t catch up with new innovators like Marconi. The claims he made (like establishing a global wireless energy network) eventually backfired and cost him the credibility that was essential for him to raise funding.

Like everything in this world, the rise and the fall of Tesla are likely to be caused by many factors. I want to mention two of them in this blog:

A fundamental reason is that Tesla changed from a challenger to be a defender.  The rise of Tesla is because of his great contribution to Alternating Current (AC) technology. When Tesla first came to the US, Direct Current (DC) was more popular because it had a headstart in both research and industry. Notably, Edison was an ardent supporter of DC. However, AC had technical advantages over DC for long-distance transmission of electricity. Edison probably also realized the potential of AC. However, as the stakeholder of the Edison electric company (later became GE), which had already invested heavily in DC, Edison had to defend his commercial interests. In contrast, As a penniless immigrant, Tesla had no such burden so he chose to focus on the less-popular AC technology. In addition, like Steve Jobs, Tesla had the ability to create a Reality distortion field around him and to change people’s views. For example, Peck and Brown initially wanted Tesla to focus on DC that already had a market. Tesla organized a dramatic demonstration of using AC to make a copper egg spin by themselves that turned Peck and Brown into ardent supporters of AC. Through those demonstrations and continuous improvement of the technology, Tesla successfully challenged the status of DC.

The situation became completely different when Tesla was competing with Marconi for wireless technology. Similar to Edison in the 1980s, Tesla has been blinded by the sunk cost. Tesla’s long-term success in using electricity as a medium of energy transmission made him unable to realize the significance of wireless communication. Although he did propose a plan of using his technology for information transmission, it was mostly a strategy to secure funding and energy was still the main focus. Eventually, Tesla failed in the competition because of the complexity of wireless energy transmission. The newcomer Marconi didn’t have this burden and set wireless communication as the primary focus from day one. 

Another reason is that Tesla couldn’t find another strong business partner to fill the gap after Peck’s death. It was Peck who helped Tesla set up the strategy of patent-promote-sell that Tesla used throughout his career. However, the recipe wouldn’t work without any of the three ingredients. Tesla is very good at innovating and patenting. However, Tesla lacks the business acumen to execute the promotion and sales strategies.

Undoubtedly Tesla has a great talent for showmanship. However, the key to promotion in this context is to establish credibility among the professionals and managers in the electrical industry, who are the decision-makers for Tesla’s patents. Peck knew it very well so he tried to secure the endorsement of Professor Anthony, a well-established figure in the community, as the first step of the promotion campaign. After Peck passed away, Tesla relied mostly on mass media, which eventually portrayed him as a magician instead of a serious inventor. The mass media coverage helped Tesla in the beginning but eventually backfired and made him harder to secure financial support. Tesla also lacked sales and negotiation skills. For example, Peck helped Tesla negotiate the deal with Westinghouse, which was very favorable to Tesla himself, but Tesla allowed Westinghouse to tear it apart in 1891 after Peck passed away. Later, Tesla negotiated a very unfavorable deal with J.P. Morgan, which allowed Morgan to take the majority stake without a clear clarification of Morgan’s duty in the partnership. The ambiguity eventually damaged the partnership and the deal became a blocking stone when Tesla tried to raise funding from other investors.

Despite the enormous legacy he has left us, Tesla was forgotten for a long time. It was only in recent years that he re-entered people’s attention thanks to the electric car brand named after him. Interestingly, the founder of Tesla Motors, Elon Musk, shares a lot of characteristics with Tesla. Both are bold innovators and are good at showmanship. As a great disruptive innovator, Tesla and his story are still relevant in our contemporary world. 

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