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Tesla, Westinghouse and Electrification

One-hundred twenty-five years ago, foundational invention culminated with the arrival of alternating electrical current’s successful generation, transmission and use. This success set a technological standard, sparked dynamic competition and led to a marked increase in the standard of living.

All this thanks to secure, reliable, private property rights — particularly the exclusive right to one’s inventions for the limited duration of a patent.

Inventor Nikola Tesla and inventor-industrialist George Westinghouse applied and built on the knowledge and the earlier work of scientists such as Alessandro Volta and America's beau ideal Renaissance man Benjamin Franklin. Tesla invented the foundational technology, while Westinghouse provided the resources — R&D lab, industrial, financial, business savvy — vital to commercialization of inventions.

They won out on the type of electrical current transmitted, overcoming direct-current advocate Thomas Edison in the “War of the Electric Currents.” AC conveys electricity longer distance than does DC. AC became the standard for electrification.

Tesla and Westinghouse successfully connected their Niagara Falls hydroelectric station with the city of Buffalo, N.Y. They had worked out the practical application with its countless little, but important details, with associated inventions and improvements along the way.

Commercializing the AC-based electrical inventions was made possible by the protection of private property rights that Tesla’s patents secured. Relying on the property rights in the patents, the allies could pursue business arrangements to monetize their commercialization efforts.

Strong patents ensured that Tesla and Westinghouse could assert their patent rights and enforce their patents against infringers and other disrespecters of property rights. Such patent potency added to the value of patents as intangible assets. Reliable patents are more attractive to investors of venture capital.

They formed the Niagara Falls Power Company as the business entity for their novel power generation using Niagara Falls waters to produce electricity. Its first customer was Buffalo’s Cataract Power and Conduit Company. In turn, Cataract’s first customer for electricity was the city streetcar company.

NFPC built the 26-mile infrastructure from Niagara Falls to Buffalo. On November 16, 1896, power plant transformer switches were thrown at Niagara Falls. Within a second or two, alternating electrical current shooting through the power lines reached Cataract’s transformer and on to juicing Buffalo streetcars. A newspaper called this result “the journey of God’s own lightning bound over to the employ of man.”

On January 12, 1897, Tesla and others attended a celebratory dinner in Buffalo. Some 300 Buffalo citizens, 50 leading scientists and electrical engineers, and a group of industrialists and investors gathered to celebrate the achievement. It had taken 8 years and about $200.9 billion (in 2022 dollars) in venture capital just to build Niagara Falls Power and complete the Buffalo electrical connection.

The rest is history. AC electrification displaced small, local electrical systems. AC electricity was more efficient, cheaper and abundant. The Tesla-Westinghouse inventions, patents and commercialization efforts and AC’s proliferation have benefited people, communities, industries, businesses and multiple aspects of life.

New markets sprung forth implementing countless uses and applications of widespread electrical availability. Implementers have ridden on the rails of the foundational innovation. Numerous new companies have been created around implementing inventions that use electricity for untold applications of this abundant, cheap power coming into homes, shops, factories, hospitals and elsewhere.

That’s what dynamic competition looks like. It comes from the exclusive property right in one’s inventions of foundational technologies and their standardization. Exclusivity and reliable patents electrify innovation and spark the creation of new wealth and jobs.

This holds for today's great inventors, such as Moderna, Pfizer and BioNTech in biopharma and Qualcomm and InterDigital in wireless telecom.

We should never lose sight of the remarkable benefits across society that foundational, standardized inventions spark and how absolutely vital it is that all inventions enjoy secure, exclusive, private intellectual property rights.

(See Jill Jonnes, Empires of Light: Edison, Tesla, Westinghouse, and the Race to Electrify the World for a full account.)

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