The War of Currents was a great science and technology feud in the late 1800s between the Edison Electric Light Company and Westinghouse Electric Company over what electric power transmission system should be used. The Westinghouse Electric Company supported AC (alternating current) and the Edison Electric Light Company supported DC (direct current).
The internet loves to portray the battle as one between rival inventors Thomas Edison and Nikola Tesla. It makes for a good story of the hero, Tesla, defeating his rival, Edison. Both Edison and Tesla were well known at the time, and both a bit crazy.Thomas Edison was a well known inventor riding his success and media attention for inventing the phonograph. Edison leveraged his name and fame to start building DC power plants in New York City. Westinghouse, unlike his rival Edison, did not seek media attention, and was a very private person.
The battle for public opinion over which system should be used to power America turned into a nasty smear campaign by Edison. An inventor and electrical engineer named Harold Brown became the front man for a campaign to show the world the dangers of alternating current. Stories are told of how Brown paid local children to collect stray dogs off the street that he used for experiments showing the dangers of alternating current. Despite publicly denouncing capital punishment, Edison secretly financed the alternating current electric chair developed by Brown. Edison launched a media campaign telling the world AC was deadly, using the word "Westinghoused" to describe an execution by electrocution.
The concept of AC power distribution was not a new concept for Westinghouse, he was also an inventor in the gas industry. Westinghouse believed that AC was a better method of power distribution, and believed that electric company founded by his rival Thomas Edison was structurally flawed in its beliefs of using DC power. In 1885 Westinghouse became interested in the inventions of European Inventors Gaulard and Gibbs and purchased the American rights to their patents for AC current transformers. Westinghouse and his staff worked on improving and redesigning the transformers, and the Westinghouse Electric Company was started in 1886.
The Tesla and Westinghouse partnership
In 1888 Nikola Tesla presented to the American Institute of Electrical Engineers his polyphase alternating current system in the report A New System of Alternating Current Motors and Transformers. When Westinghouse heard of Nikola Tesla and the Tesla Polyphase System, he knew that could be the final piece he needed in building a better system than Edison's.
George Westinghouse was working with AC for years before meeting up with Tesla. Westinghouse was a systems thinker, he also had a knack for spotting good ideas and people and bringing them into his fold, and he knew AC power distribution was a good idea. Westinghouse was impressed with Tesla's work and approached him about joining forces. Westinghouse purchased Tesla's alternating current patents on the electric systems and paid Tesla to work with him until they were fully implemented.
The first major event in Tesla's victory over Edison in the War of Currents happened when Tesla joined forces with George Westinghouse. Over the next few years Tesla and Westinghouse would work together and two major accomplishments would mark their victory in the War of Currents over Edison.
In 1892, after a fierce battle versus Edison, Westinghouse won the contract to power the Columbian Exposition. On May 1, 1893, President Grover Cleveland pushed a button and a hundred thousand incandescent lamps illuminated the Columbian Exposition. The success of the Tesla Polyphase System installed at the exposition would help Westinghouse in their next major victory in being awarded the initial Niagara Falls contract.
Since his childhood, Tesla had dreamed of harnessing the power of the great natural wonder Niagara Falls. In October 1893, Tesla's dream became a reality, when Westinghouse was awarded the Niagara Falls Power contract to create the powerhouse. The Westinghouse company, with Tesla's guidance, had won the War of Currents.
Adding insult to his defeat in the War of Currents, Edison would also lose control of his electric power business in 1892. Notorious financier J.P. Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric.
How much money did Tesla get?
The saga of Nikola Tesla talks about the man who died broke and alone in a New York hotel, but the Tesla and Westinghouse partnership would make Tesla a millionaire.
Various versions of the story tell of how the deal went down and how the two men met. The generally accepted story states that Westinghouse paid Tesla around $60,000 for his patents for AC motors and generators, that's roughly the equivalent of $1.4 million in today's dollars. Tesla was also given a $2000 a month salary to work for Westinghouse, the equivalent of $48,000 per month today.
One condition of the Tesla and Westinghouse partnership was that Tesla received royalties of $2.50 per horsepower of electrical capacity sold. As AC power slowly became more widely adopted, Westinghouse paid Tesla hundreds of thousands of dollars in royalties each year. By 1890, one year before his 35th birthday, Tesla had become a millionaire.
Another part of the financial arrangement of the Tesla and Westinghouse partnership that often gets skewed when the story is told is Tesla's agreement to terminate the ongoing royalties on the power being generated. Westinghouse was having some cash flow issues and he asked Tesla if he could suspend payments for a while. As the story goes Tesla was grateful for the opportunities that Westinghouse had given him, and tore up the contract for the ongoing royalties.
Tesla did not simply walk away from the contract and get nothing in return. According to the book "Tesla: Man Out of Time" by Margaret Cheney, the Westinghouse Company's annual report of 1897 states that Tesla was paid $216,600 for the outright purchase of his patents. The relative value of $216,000.00 from 1897 in current purchasing power is over $6 million dollars. We have listed here the dollar amounts as they were paid in the 1890s and given some conservative estimates in modern dollars for comparison to put the amounts into perspective. For example, using a simple Purchasing Power Calculator, multiplying $216,000 by the percentage increase in the Consumer Price Index from 1897 to 2013, gives a relative value of over $6.2 million.
Regardless of the methods used to calculate the numbers, when Tesla walked away from his partnership with Westinghouse, he had built up a nice nest egg.
After the War of Currents
Nikola Tesla was very much a working partner with George Westinghouse in defeating Thomas Edison in the War of Currents. Tesla had the visions, he could see the problems and solve them in his head. Westinghouse had the business and management skills to build the team to accomplish the mission. Tesla and Westinghouse made a good team, but Tesla moved on after the War of Currents.
The success of Tesla and Westinghouse working together as a team also illustrates the reason for many of Tesla's future failures. Without good business and management skills Tesla would burn through his entire personal fortune on failed projects in the years that followed. In the PBS documentary "Tesla Master of Lightning" Tesla's grand-nephew William Terbo explains the downfall of Nikola Tesla, "He was totally disinterested in business. He did not make the relationship between the importance of business and the importance of his invention and discovery."
Tesla seemed to respect the part that Westinghouse played in their victory in the War of Currents. According to the Westinghouse website Nikola Tesla said, "George Westinghouse was, in my opinion, the only man on this globe who could take my alternating-current system under the circumstances then existing and win the battle against prejudice and money power. He was one of the world's true noblemen, of whom America may well be proud and to whom humanity owes an immense debt of gratitude."
George Westinghouse died in 1914. Here just a few of the words from Tesla about Westinghouse as they appeared March 21, 1914 in Electrical world. "His was a wonderful career filled with remark- able achievements. He gave to the world a number of valuable inventions and improvements, created new industries, advanced the mechanical and electrical arts and improved in many ways the conditions of modem life. He was a great pioneer and builder whose work was of far reaching effect on his time and whose name will live long in the memory of men."
Various accounts claim different reasons for the Westinghouse Corporation coming to Tesla's rescue later in his life when he was broke and alone. Tesla would move to the Hotel New Yorker in 1934, with the room paid for by the Westinghouse Corporation. One story is that Tesla was hit by a taxi on the streets of New York and was injured. Westinghouse executives hearing that he was in need of help, agreed to pay his room and board for the remainder of his life.
George Westinghouse was involved in the founding of many companies using the Westinghouse name. Many of the original Westinghouse companies have merged with various other companies over the years. The company that started out as the Westinghouse Electric Corporation founded in 1886 has evolved into two large global companies,CBS, an American broadcast network, and Westinghouse Electric Company LLC, a nuclear power business.
The ultimate irony
Thomas Edison's greatest defeat in business and technology was losing the “War of Currents” to George Westinghouse. In 1911 George Westinghouse received the AIEE's Edison Medal "For meritorious achievement in connection with the development of the alternating current system."
The IEEE Edison Medal is presented by the Institute of Electrical and Electronics Engineers is most coveted medal in this field of engineering in the United States and is named after the inventor Thomas Edison.
From the realms of geek history is George Westinghouse receiving the Edison Medal is the ultimate irony.