The master switch tim wu pdf

Review Of Reading Of Part I, The Master Switch By Tim Wu

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THIS IS A BORZOI BOOK

PUBLISHED BY ALFRED A. KNOPF

Copyright © 2010 by Tim Wu

All rights reserved. Published in the United States by Alfred A. Knopf, a division of Random House, Inc., New

York, and in Canada by Random House of Canada Limited, Toronto.

www.aaknopf.com

Knopf, Borzoi Books, and the colophon are registered trademarks of Random House, Inc.

Library of Congress Cataloging-in-Publication Data

Wu, Tim.

The master switch : the rise and fall of information empires / Tim Wu.

p. cm.

eISBN: 978-0-307-59465-5

1. Telecommunication—History. 2. Information technology—

History. I. Title.

HE7631.W8 2010

384′.041—dc22 2010004137

v3.1

For Kate

At stake is not the First Amendment or the right of free speech, but exclusive custody of the master

switch.

—FRED FRIENDLY

Every age thinks it’s the modern age, but this one really is.

—TOM STOPPARD, The Invention of Love

http://www.aaknopf.com/
Contents

Cover

Title Page

Copyright

Dedication

Epigraph

Introduction

PART I The Rise

1. The Disruptive Founder

2. Radio Dreams

3. Mr. Vail Is a Big Man

4. The Time Is Not Ripe for Feature Films

5. Centralize All Radio Activities

6. The Paramount Ideal

PART II Beneath the All-Seeing Eye

7. The Foreign Attachment

8. The Legion of Decency

9. FM Radio

10. We Now Add Sight to Sound

PART III The Rebels, the Challengers, and the Fall

11. The Right Kind of Breakup

12. The Radicalism of the Internet Revolution

13. Nixon’s Cable

14. Broken Bell

15. Esperanto for Machines

PART IV Reborn Without a Soul

16. Turner Does Television

17. Mass Production of the Spirit

18. The Return of AT&T

PART V The Internet Against Everyone

19. A Surprising Wreck

20. Father and Son

21. The Separations Principle

Acknowledgments

Notes

About the Author

Introduction

On March 7, 1916, Theodore Vail arrived at the New Willard Hotel in Washington,

D.C., to attend a banquet honoring the achievements of the Bell system. 1

Hosted by

the National Geographic Society, the festivities were of a scale and grandeur to match

American Telephone and Telegraph’s vision of the nation’s future.

The Willard’s dining room was a veritable cavern of splendor, sixty feet wide and a

city block long. At one end of the room was a giant electrified map showing the

extent of AT&T’s “long lines,” and before it sat more than eight hundred men in stiff

dinner clothes at tables individually wired with telephones. Private power mingled

with public: there were navy admirals, senators, the founders of Bell, and all of its

executives, as well as much of Woodrow Wilson’s cabinet. “From the four corners of

the country had come a country’s elite” wrote the Society’s magazine, “to crown with

the laurels of their affection and admiration the brilliant men whose achievements had

made possible the miracles of science that were to be witnessed.”

Then seventy-one years old, his hair and mustache white, Vail was the incarnation

of Bell, the Jack Welch of his time, who had twice rescued his colossal company from

collapse. As Alan Stone, Bell’s chronicler, writes, “Few large institutions have ever

borne the imprint of one person as thoroughly as Vail’s on AT&T.” In an age when

many industrial titans were feared or hated, Vail was widely respected. He styled

himself a private sector Theodore Roosevelt, infusing his imperial instincts with a

sense of civic duty. “We recognize a ‘responsibility’ and ‘accountability’ to the public

on our part,” wrote Vail, as the voice of AT&T, “which is something different from

and something more than the obligation of other public service companies not so

closely interwoven with the daily life of the whole community.” Serving whatever

good, his taste for grandeur was unmistakable. “He could do nothing in a small way,”

writes his biographer, Albert Paine. “He might start to build a squirrel cage, but it

would end by becoming a menagerie.” Thomas Edison said of him, simply, “Mr. Vail

is a big man.” 2

“Voice voyages” was the theme of the Bell banquet. It would be a riveting

demonstration of how AT&T planned to wire America and the world as never before,

using a technological marvel we now take for granted: long distance telephone calls.

After dinner, the guests were invited to pick up their receivers from the phones

resting on the table. They would travel over the phone line to El Paso, on the Mexican

border, to find General John Pershing, later to command the American forces in

World War I.

“Hello, General Pershing!”

“Hello, Mr. Carty!”

“How’s everything on the border?”

“All’s quiet on the border.”

“Did you realize you were talking with eight hundred people?”

“No, I did not,” answered General Pershing. “If I had known it, I might have

thought of something worthwhile to say.”

The audience was visibly stunned. “It was a latter-day miracle,” reported the

magazine. “The human voice was speeding from ocean to ocean, stirring the electric

waves from one end of the country to the other.”

The grand finale was a demonstration of Bell’s newest and perhaps most

astonishing invention yet: a “wireless telephone,” the ancestor of our mobile phone, of

which, by 1916, Bell already had a working prototype. To show it off, Bell mounted

what might be called one of history’s first multimedia presentations, combining radio,

the phonograph, the telephone, and the motion picture projector—the most dazzling

inventions of the early twentieth century.

Miles away, in a radio station in Arlington, a record player began “The Star-

Spangled Banner.” The sound came wirelessly to the Willard banquet hall over the

eight-hundred receivers, while a motion picture projector beamed a waving Old Glory

onto a screen. The combination of sight and sound “brought the guests to their feet

with hearts beating fast, souls aflame with patriotism, and minds staggered.” AT&T, it

seemed, had powers to rival the gods: “Perhaps never before in the history of

civilization,” opined National Geographic, had “there been such an impressive

illustration of the development and power of the human mind over mundane matter.”

It may seem a bit incongruous to begin a book whose ultimate concern is the future of

information with a portrait of Theodore Vail, the greatest monopolist in the history of

the information industries, basking in the glories of the nation’s most vital

communications network under his absolute control. After all, these are far different

times: our own most important network, the Internet, would seem to be the antithesis

of Vail’s Bell system: diffusely organized—even chaotic—where his was centrally

controlled; open to all users and content (voice, data, video, and so on.) The Internet

is the property of no one where the Bell system belonged to a private corporation.

Indeed, thanks mainly to this open character of the Internet, it has become a

commonplace of the early twenty-first century that, in matters of culture and

communications, ours is a time without precedent, outside history. Today information

zips around the nation and around the globe at the speed of light, more or less at the

will of anyone who would send it. How could anything be the same after the Internet

Revolution? In such a time, an information despot like Vail might well seem

antediluvian.

Yet when we look carefully at the twentieth century, we soon find that the Internet

wasn’t the first information technology supposed to have changed everything forever.

We see in fact a succession of optimistic and open media, each of which, in time,

became a closed and controlled industry like Vail’s. Again and again in the past

hundred years, the radical change promised by new ways to receive information has

seemed, if anything, more dramatic than it does today. Thanks to radio, predicted

Nikola Tesla, one of the fathers of commercial electricity, in 1904, “the entire earth

will be converted into a huge brain, as it were, capable of response in every one of its

parts.” The invention of film, wrote D. W. Griffith in the 1920s, meant that “children

in the public schools will be taught practically everything by moving pictures.

Certainly they will never be obliged to read history again.” In 1970, a Sloan

Foundation report compared the advent of cable television to that of movable type:

“the revolution now in sight may be nothing less … it may conceivably be more.” As

a character in Tom Stoppard’s The Invention of Love, set in 1876, remarks, “Every

age thinks it’s the modern age, but this one really is.” 3

Each of these inventions to end all inventions, in time, passed through a phase of

revolutionary novelty and youthful utopianism; each would change our lives, to be

sure, but not the nature of our existence. For whatever social transformation any of

them might have effected, in the end, each would take its place to uphold the social

structure that has been with us since the Industrial Revolution. Each became, that is, a

highly centralized and integrated new industry. Without exception, the brave new

technologies of the twentieth century—free use of which was originally encouraged,

for the sake of further invention and individual expression—eventually evolved into

privately controlled industrial behemoths, the “old media” giants of the twenty-first,

through which the flow and nature of content would be strictly controlled for reasons

of commerce.

History shows a typical progression of information technologies: from somebody’s

hobby to somebody’s industry; from jury-rigged contraption to slick production

marvel; from a freely accessible channel to one strictly controlled by a single

corporation or cartel—from open to closed system. It is a progression so common as

to seem inevitable, though it would hardly have seemed so at the dawn of any of the

past century’s transformative technologies, whether telephony, radio, television, or

film. History also shows that whatever has been closed too long is ripe for ingenuity’s

assault: in time a closed industry can be opened anew, giving way to all sorts of

technical possibilities and expressive uses for the medium before the effort to close

the system likewise begins again.

This oscillation of information industries between open and closed is so typical a

phenomenon that I have given it a name: “the Cycle.” And to understand why it

occurs, we must discover how industries that traffic in information are naturally and

historically different from those based on other commodities.

Such understanding, I submit, is far from an academic concern. For if the Cycle is

not merely a pattern but an inevitability, the fact that the Internet, more than any

technological wonder before it, has truly become the fabric of our lives means we are

sooner or later in for a very jarring turn of history’s wheel. Though it’s a cliché to say

so, we do have an information-based economy and society. Our past is one of far less

reliance on information than we experience today, and that lesser reliance was served

by several information industries at once. Our future, however, is almost certain to be

an intensification of our present reality: greater and greater information dependence in

every matter of life and work, and all that needed information increasingly traveling a

single network we call the Internet. If the Internet, whose present openness has

become a way of life, should prove as much subject to the Cycle as every other

information network before it, the practical consequences will be staggering. And

already there are signs that the good old days of a completely open network are

ending.

To understand the forces threatening the Internet as we know it, we must

understand how information technologies give rise to industries, and industries to

empires. In other words, we must understand the nature of the Cycle, its dynamics,

what makes it go, and what can arrest it. As with any economic theory, there are no

laboratories but past experience.

Illuminating the past to anticipate the future is the raison d’être of this book.

Toward that end, the story rightly begins with Theodore Vail. For in the Bell system,

Vail founded the Ur—information network, the one whose working assumptions and

ideology have influenced every information industry to follow it.

Vail was but one of many speakers that evening at the Willard, along with Alexander

Graham Bell and Josephus Daniels, secretary of the navy. But among these important

men, Vail was in a class by himself. For it was his idea of enlightened monopoly in

communications that would dominate the twentieth century, and it is an idea whose

attraction has never really waned, even if few will admit to their enduring fondness

for it. Vail believed it was possible to build a perfect system and devoted his life to

that task. His efforts and the history of AT&T itself are a testament to both the

possibilities and the dangers of an information empire. As we shall see, it is the

enigma posed by figures like Vail—the greatest, to be sure, but only the first of a long

line of individuals who sought to control communications for the greater good—that

is the preoccupation of this book.

Vail’s ideas, while new to communications, were of his times. He came to power in

an era that worshipped size and speed (the Titanic being among the less successful

exemplars of this ideal), and in which there prevailed a strong belief in both human

perfectibility and the unique optimal design of any system. It was the last decades of

Utopia Victoriana, an era of faith in technological planning, applied science, and

social conditioning that had seen the rise of eugenics, Frederick Taylor’s “scientific

management,” socialism, and Darwinism, to name but a few disparate systematizing

strains of thought. In those times, to believe in man’s ability to perfect

communications was far from a fantastical notion. In a sense, Vail’s extension of

social thinking to industry was of a piece with Henry Ford’s assembly lines, his vision

of a communications empire of a piece, too, with the British Empire, on which the sun

never set. 4

Vail’s dream of a perfected, centralized industry was predicated on another

contemporary notion as well. It may sound strange to our ears, but Vail, a full-

throated capitalist, rejected the whole idea of “competition.” He had professional

experience of both monopoly and competition at different times, and he judged

monopoly, when held in the right hands, to be the superior arrangement.

“Competition,” Vail had written, “means strife, industrial warfare; it means

contention; it oftentime means taking advantage of or resorting to any means that the

conscience of the contestants … will permit.” His reasoning was moralistic:

competition was giving American business a bad name. “The vicious acts associated

with aggressive competition are responsible for much, if not all, of the present

antagonism in the public mind to business, particularly to large business.” 5

Adam Smith, whose vision of capitalism is sacrosanct in the United States, believed

that individual selfish motives could produce collective goods for humanity, by the

operation of the “invisible hand.” But Vail didn’t buy it. “In the long run … the public

as a whole has never benefited by destructive competition.” Smith’s key to efficient

markets was Vail’s cause of waste. “All costs of aggressive, uncontrolled competition

are eventually borne, directly or indirectly, by the public.” In his heterodox vision of

capitalism, shared by men like John D. Rockfeller, the right corporate titans,

monopolists in each industry, could, and should, be trusted to do what was best for the

nation. 6

But Vail also ascribed to monopoly a value beyond mere efficiency and this was

born of a high-mindedness that was his own. With the security of monopoly, Vail

believed, the dark side of human nature would shrink, and natural virtue might

emerge. He saw a future free of capitalism’s form of Darwinian struggle, in which

scientifically organized corporations, run by good men in close cooperation with the

government, would serve the public best.

Henry Ford wrote in My Life and Work that his cars were “concrete evidence of the

working out of a theory of business”; and so was the Bell system the incarnation of

Vail’s ideas about communications. AT&T was building a privately held monopoly

yet one that pledged commitment to the public good. It was building the world’s

mightiest network, yet it promised to reach even the humblest American with a

telephone line. Vail called for “a universal wire system for the electrical transmission

of intelligence (written or personal communication), from every one in every place to

every one in every other place, a system as universal and as extensive as the highway

system of the country which extends from every man’s door to every other man’s

door.” As he correctly foretold at that dinner, one day “we will be able to telephone to

every part of the world.” 7

As he spoke at the National Geographic banquet, Vail was just four years from

death. But he had already realized an ideology—the Bell ideology—and built a

system of communications that would profoundly influence not just how people spoke

over distances, but the shape of the television, radio, and film industries as well: in

other words, all of the new media of the twentieth century.

To see specifically how Vail’s ideology shaped the course of telephony and all

subsequent information industries—serving as, so to speak, the spiritual source of the

Cycle—it will be necessary to tell some stories, about Vail’s own firm and others.

There are, of course, enough to fill a book about each, and there have been no few

such volumes. But this book will focus on chronicling the turning points of the

twentieth century’s information landscape: those particular, decisive moments when a

medium opens or closes. The pattern is distinctive. Every few decades, a new

communications technology appears, bright with promise and possibility. It inspires a

generation to dream of a better society, new forms of expression, alternative types of

journalism. Yet each new technology eventually reveals its flaws, kinks, and

limitations. For consumers, the technical novelty can wear thin, giving way to various

kinds of dissatisfaction with the quality of content (which may tend toward the

chaotic and the vulgar) and the reliability or security of service. From industry’s

perspective, the invention may inspire other dissatisfactions: a threat to the revenues

of existing information channels that the new technology makes less essential, if not

obsolete; a difficulty commoditizing (i.e., making a salable product out of) the

technology’s potential; or too much variation in standards or protocols of use to allow

one to market a high quality product that will answer the consumers’ dissatisfactions.

When these problems reach a critical mass, and a lost potential for substantial gain

is evident, the market’s invisible hand waves in some great mogul like Vail or band of

them who promise a more orderly and efficient regime for the betterment of all users.

Usually enlisting the federal government, this kind of mogul is special, for he defines

a new type of industry, integrated and centralized. Delivering a better or more secure

product, the mogul heralds a golden age in the life of the new technology. At its heart

lies some perfected engine for providing a steady return on capital. In exchange for

making the trains run on time (to hazard an extreme comparison), he gains a certain

measure of control over the medium’s potential for enabling individual expression

and technical innovation—control such as the inventors never dreamed of, and

necessary to perpetuate itself, as well as the attendant profits of centralization. This,

too, is the Cycle.

Since the stories of these individual industries take place concurrently and our main

purpose in recounting them is to observe the operations of the Cycle, the narrative is

arranged in the following way:

Part I traces the genesis of cultural and communications empires, the first phase of

the Cycle, and shows how each of the early twentieth century’s new information

industries—telephony, radio broadcast, and film—evolved from a novel invention.

By the 1940s, every one of the twentieth century’s new information industries, in

the United States and elsewhere, would reach an established, stable, and seemingly

permanent form, excluding all potential entrants. Communications by wire became

the sole domain of the Bell system. The great networks, NBC and CBS, ruled radio

broadcasting, as they prepared, with the help of the Federal Communications

Commission, to launch in their own image a new medium called television. The

Hollywood studios, meanwhile, closed a vise grip on every part of the film business,

from talent to exhibition. And so in Part II, we will focus on the consolidation of

information empire, often with state support, and the consequences, particularly for

the vitality of free expression and technical innovation. For while we may rightly feel

a certain awe for what the information industries manage to accomplish thanks to the

colossal centralized structures created through the 1930s, we will also see how the

same period was one of the most repressive in American history vis-à-vis new ideas

and forms.

But as we have said, that which is centralized also eventually becomes a target for

assault, triggering the next phase of the Cycle. Sometimes this takes the form of a

technological innovation that breaks through the defenses and becomes the basis of an

insurgent industry. The advent of personal computing and the Internet revolution it

will eventually beget are both instances of such game-changing developments. And

though less endowed with the romantic lore of invention, so too is the rise of cable

television. But sometimes it is not invention—or invention alone—that drives the

Cycle, but rather the federal government suddenly playing the role of giant-slayer of

information cartels and monopolies that it had long tolerated. In Part III, we explore

the ways in which the stranglehold of information monopoly is broken after decades.

Through the 1970s each of the great information empires of the twentieth century

was fundamentally challenged or broken into pieces, if not blown up altogether,

leading to a new period of openness. And a new run of the Cycle. The results were

unmistakably invigorating for both commerce and culture. But like the T-1000 killer

robot of Terminator 2 the shattered powers would reconstitute themselves, either in

uncannily similar form (as with AT&T) or in the guise of a new corporate species

called the conglomerate (as with the revenge of the broadcasters and of Hollywood).

In Part IV we will see how the perennial lure of size and scale that led to the original

information leviathans in the first half of the century spawned a new generation in the

latter part.

By the dawn of the twenty-first century, the second great closing will be complete.

The one exception to the hegemony of the latter-day information monopolists will be

a new network to end all networks. While all else was being consolidated, the 1990s

would also see the so-called Internet revolution, though amid its explosive growth no

one could see where the wildly open new medium would lead. Would the Internet

usher in a reign of industrial openness without end, abolishing the Cycle? Or would it,

despite its radically decentralized design, become in time simply the next logical

target for the insuperable forces of information empire, the object of the most

consequential centralization yet? Part V will lead us to that ultimate question, the

answer to which is as yet a matter of conjecture, for which, I argue, our best basis is

history.

Reading all this, you may yet be wondering, “Why should I care?” After all, the flow

of information is invisible, and its history lacks the emotional immediacy of, say, the

Second World War or the civil rights movement. The fortunes of information empires

notwithstanding, life goes on. It hardly occurred to anyone as a national problem

when, in the 1950s, a special episode of I Love Lucy could attract more than 70

percent of households. And yet, almost like the weather, the flow of information

defines the basic tenor of our times, the ambience in which things happen, and,

ultimately, the character of a society.

Sometimes it takes an outsider to make this clear. Steaming from Malaysia to the

United States in 1926, a young English writer named Aldous Huxley came across

something interesting in the ship’s library, a volume entitled My Life and Work, by

Henry Ford. 8

Here was the vivid story of Ford’s design of mass production techniques

and giant centralized factories of unexampled efficiency. Here, too, were Ford’s ideas

on things like human equality: “There can be no greater absurdity and no greater

disservice to humanity in general than to insist that all men are equal.” 9

But what

really interested Huxley, the future author of Brave New World, was Ford’s belief that

his systems might be useful not just for manufacturing cars, but for all forms of social

ordering. As Ford wrote, “the ideas we have put into practice are capable of the

largest application—that they have nothing peculiarly to do with motor cars or

tractors but form something in the nature of a universal code. I am quite certain that it

is the natural code …”

When Huxley arrived in the States, Ford’s ideas fresh in mind, he realized

something both intriguing and terrifying: Ford’s future was already becoming a

reality. The methods of the steel factory and car assembly plant had been imported to

the cultural and communications industries. Huxley witnessed in the America of 1926

the prototypes of structures that had not yet reached the rest of the world: the first

commercial radio networks, rising studios for film production, and a powerful private

communications monopoly called AT&T.

When he returned to England, Huxley declared in an essay for Harper’s Magazine

called “The Outlook for American Culture” that “the future of America is the future

of the World.” He had seen that future and been more than a little dismayed by it.

“Mass production,” he wrote, “is an admirable thing when applied to material objects;

but when applied to the things of the spirit it is not so good.” 10

Seven years later, the question of the spirit would occur to another student of

culture and theorist of information. “The radio is the most influential and important

intermediary between a spiritual movement and the nation,” wrote Joseph Goebbels,

quite astutely, in 1933. “Above all,” he said, “it is necessary to clearly centralize all

radio activities.” 11

It is an underacknowledged truism that, just as you are what you eat, how and what

you think depends on what information you are exposed to. How do you hear the

voice of political leaders? Whose pain do you feel? And where do your aspirations,

your dreams of good living, come from? All of these are products of the information

environment.

My effort to consider this process is also an effort to understand the practical

realities of free speech, as opposed to its theoretical life. We can sometimes think that

the study of the First Amendment is the same as the study of free speech, but in fact it

forms just a tiny part of the picture. Americans idealize what Justice Oliver Wendell

Holmes called the “marketplace of ideas,” a space where every member of society is,

by right, free to peddle his creed. Yet the shape or even existence of any such

marketplace depends far less on our abstract values than on the structure of the

communications and culture industries. We sometimes treat the information industries

as if they were like any other enterprise, but they are not, for their structure

determines who gets heard. It is in this context that Fred Friendly, onetime CBS News

president, made it clear that before any question of free speech comes the question of

“who controls the master switch.”

The immediate inspiration for this book is my experience of the long wave of easy

optimism created by the rise of information technologies in the late twentieth and

early twenty-first centuries, a feeling of almost utopian possibility and idealism. I

shared in that excitement, both working in Silicon Valley and writing about it. Yet I

have always been struck by what I feel is too strong an insistence that we are living in

unprecedented times. In fact, the place we find ourselves now is a place we have been

before, albeit in different guise. And so understanding how the fate of the

technologies of the twentieth century developed is important in making the twenty-

first century better.

The Rise

CHAPTER 1

The Disruptive Founder

Exactly forty years before Bell’s National Geographic banquet, Alexander Bell was in his laboratory in the attic of a machine shop in Boston, trying once more to

coax a voice out of a wire. His efforts had proved mostly futile, and the Bell Company

was little more than a typically hopeless start-up. *

Bell was a professor and an amateur inventor, with little taste for business: his

expertise and his day job was teaching the deaf. His main investor and the president of

the Bell Company was Gardiner Green Hubbard, a patent attorney and prominent

critic of the telegraph monopoly Western Union. It is Hubbard who was responsible

for Bell’s most valuable asset: its telephone patent, filed even before Bell had a

working prototype. Besides Hubbard, the company had one employee, Bell’s

assistant, Thomas Watson. That was it. 1

If the banquet revealed Bell on the cusp of monopoly, here is the opposite extreme

from which it began: a stirring image of Bell and Watson toiling in their small attic

laboratory. It is here that the Cycle begins: in a lonely room where one or two men are

trying to solve a concrete problem. So many revolutionary innovations start small,

with outsiders, amateurs, and idealists in attics or garages. This motif of Bell and

Watson alone will reappear throughout this account, at the origins of radio, television,

the personal computer, cable, and companies like Google and Apple. The importance

of these moments makes it critical to understand the stories of lone inventors.

Over the twentieth century, most innovation theorists and historians became

somewhat skeptical of the importance of creation stories like Bell’s. These thinkers

came to believe the archetype of the heroic inventor had been over-credited in the

search for a compelling narrative. As William Fisher puts it, “Like the romantic ideal

of authorship, the image of the inventor has proved distressingly durable.” 2

These

critics undeniably have a point: even the most startling inventions are usually arrived

at, simultaneously, by two or more people. If that’s true, how singular could the

genius of the inventor really be?

There could not be a better example than the story of the telephone itself. On the

very day that Alexander Bell was registering his invention, another man, Elisha Gray,

was also at the patent office filing for the very same breakthrough. *

The coincidence

takes some of the luster off Bell’s “eureka.” And the more you examine the history,

the worse it looks. In 1861, sixteen years before Bell, a German man named Johann

Philip Reis presented a primitive telephone to the Physical Society of Frankfurt,

claiming that “with the help of the galvanic current, [the inventor] is able to reproduce

at a distance the tones of instruments and even, to a certain degree, the human voice.”

Germany has long considered Reis the telephone’s inventor. Another man, a small-

town Pennsylvania electrician named Daniel Drawbaugh, later claimed that by 1869

he had a working telephone in his house. He produced prototypes and seventy

witnesses who testified that they had seen or heard his invention at that time. In

litigation before the Supreme Court in 1888, three Justices concluded that

“overwhelming evidence” proved that “Drawbaugh produced and exhibited in his

shop, as early as 1869, an electrical instrument by which he transmitted speech.…” *

3

There was, it is fair to say, no single inventor of the telephone. And this reality

suggests that what we call invention, while not easy, is simply what happens once a

technology’s development reaches the point where the next step becomes available to

many people. By Bell’s time, others had invented wires and the telegraph, had

discovered electricity and the basic principles of acoustics. It lay to Bell to assemble

the pieces: no mean feat, but not a superhuman one. In this sense, inventors are often

more like craftsmen than miracle workers.

Indeed, the history of science is full of examples of what the writer Malcolm

Gladwell terms “simultaneous discovery”—so full that the phenomenon represents

the norm rather than the exception. Few today know the name Alfred Russel Wallace,

yet he wrote an article proposing the theory of natural selection in 1858, a year before

Charles Darwin published The Origin of Species. Leibnitz and Newton developed

calculus simultaneously. And in 1610 four others made the same lunar observations as

Galileo. 4

Is the loner and outsider inventor, then, merely a figment of so much hype, with no

particular significance? No, I would argue his significance is enormous; but not for

the reasons usually imagined. The inventors we remember are significant not so much

as inventors, but as founders of “disruptive” industries, ones that shake up the

technological status quo. Through circumstance or luck, they are exactly at the right

distance both to imagine the future and to create an independent industry to exploit it.

Let’s focus, first, on the act of invention. The importance of the outsider here owes

to his being at the right remove from the prevailing currents of thought about the

problem at hand. That distance affords a perspective close enough to understand the

problem, yet far enough for greater freedom of thought, freedom from, as it were, the

cognitive distortion of what is as opposed to what could be. This innovative distance

explains why so many of those who turn an industry upside down are outsiders, even

outcasts.

To understand this point we need grasp the difference between two types of

innovation: “sustaining” and “disruptive,” the distinction best described by innovation

theorist Clayton Christensen. Sustaining innovations are improvements that make the

product better, but do not threaten its market. The disruptive innovation, conversely,

threatens to displace a product altogether. It is the difference between the electric

typewriter, which improved on the typewriter, and the word processor, which

supplanted it. 5

Another advantage of the outside inventor is less a matter of the imagination than

of his being a disinterested party. Distance creates a freedom to develop inventions

that might challenge or even destroy the business model of the dominant industry. The

outsider is often the only one who can afford to scuttle a perfectly sound ship, to

propose an industry that might challenge the business establishment or suggest a

whole new business model. Those closer to—often at the trough of—existing

industries face a remarkably constant pressure not to invent things that will ruin their

employer. The outsider has nothing to lose.

But to be clear, it is not mere distance, but the right distance that matters; there is

such a thing as being too far away. It may be that Daniel Drawbaugh actually did

invent the telephone seven years before Bell. We may never know; but even if he did,

it doesn’t really matter, because he didn’t do anything with it. He was doomed to

remain an inventor, not a founder, for he was just too far away from the action to

found a disruptive industry. In this sense, Bell’s alliance with Hubbard, a sworn

enemy of Western Union, the dominant monopolist, was all-important. For it was

Hubbard who made Bell’s invention into an effort to unseat Western Union.

I am not saying, by any means, that invention is solely the province of loners and

that everyone else’s inspiration is suppressed. But this isn’t a book about better

mousetraps. The Cycle is powered by disruptive innovations that upend once thriving

industries, bankrupt the dominant powers, and change the world. Such innovations are

exceedingly rare, but they are what makes the Cycle go.

Let’s return to Bell in his Boston laboratory. Doubtless he had some critical assets,

including a knowledge of acoustics. His laboratory notebook, which can be read

online, suggests a certain diligence. But his greatest advantage was neither of these. It

was that everyone else was obsessed with trying to improve the telegraph. By the

1870s inventors and investors understood that there could be such a thing as a

telephone, but it seemed a far-off, impractical thing. Serious men knew that what

really mattered was better telegraph technology. Inventors were racing to build the

“musical telegraph,” a device that could send multiple messages over a single line at

the same time. The other holy grail was a device for printing telegrams at home. *

Bell was not immune to the seduction of these goals. One must start somewhere,

and he, too, began his experiments in search of a better telegraph; certainly that’s

what his backers thought they were paying for. Gardiner Hubbard, his primary

investor, was initially skeptical of Bell’s work on the telephone. It “could never be

more than a scientific toy,” Hubbard told him. “You had better throw that idea out of

your mind and go ahead with your musical telegraph, which if it is successful will

make you a millionaire.” 6

But when the time came, Hubbard saw the potential in the telephone to destroy his

personal enemy, the telegraph company. In contrast, Elisha Gray, Bell’s rival, was

forced to keep his telephone research secret from his principal funder, Samuel S.

White. In fact, without White’s opposition, there is good reason to think that Gray

would have both created a working telephone and patented it long before Bell. 7

The initial inability of Hubbard, White, and everyone else to recognize the promise

of the telephone represents a pattern that recurs with a frequency embarrassing to the

human race. “All knowledge and habit once acquired,” wrote Joseph Schumpeter, the

great innovation theorist, “becomes as firmly rooted in ourselves as a railway

embankment in the earth.” Schumpeter believed that our minds were, essentially, too

lazy to seek out new lines of thought when old ones could serve. “The very nature of

fixed habits of thinking, their energy-saving function, is founded upon the fact that

they have become subconscious, that they yield their results automatically and are

proof against criticism and even against contradiction by individual facts.” 8

The men dreaming of a better telegraph were, one might say, mentally warped by

the tangible demand for a better telegraph. The demand for a telephone, meanwhile,

was purely notional. Nothing, save the hangman’s noose, concentrates the mind like

piles of cash, and the obvious rewards awaiting any telegraph improver were a

distraction for anyone even inclined to think about telephony, a fact that actually

helped Bell. For him the thrill of the new was unbeatably compelling, and Bell knew

that in his lab he was closing in on something miraculous. He, nearly alone in the

world, was playing with magical powers never seen before.

On March 10, 1876, Bell, for the first time, managed to transmit speech over some

distance. Having spilled acid on himself, he cried out into his telephone device,

“Watson, come here, I want you.” When he realized it had worked, he screamed in

delight, did an Indian war dance, and shouted, again over the telephone, “God save

the Queen!” *

9

THE PLOT TO DESTROY BELL

Eight months on, late on the night of the 1876 presidential election, a man named

John Reid was racing from the New York Times offices to the Republican campaign

headquarters on Fifth Avenue. In his hand he held a Western Union telegram with the

potential to decide who would be the next president of the United States.

While Bell was trying to work the bugs out of his telephone, Western Union,

telephony’s first and most dangerous (though for the moment unwitting) rival, had,

they reckoned, a much bigger fish to fry: making their man president of the United

States. Here we introduce the nation’s first great communications monopolist, whose

reign provides history’s first lesson in the power and peril of concentrated control

over the flow of information. Western Union’s man was one Rutherford B. Hayes, an

obscure Ohio politician described by a contemporary journalist as “a third rate

nonentity.” But the firm and its partner newswire, the Associated Press, wanted Hayes

in office, for several reasons. Hayes was a close friend of William Henry Smith, a

former politician who was now the key political operator at the Associated Press.

More generally, since the Civil War, the Republican Party and the telegraph industry

had enjoyed a special relationship, in part because much of what were eventually

Western Union’s lines were built by the Union army.

So making Hayes president was the goal, but how was the telegram in Reid’s hand

key to achieving it?

The media and communications industries are regularly accused of trying to

influence politics, but what went on in the 1870s was of a wholly different order from

anything we could imagine today. At the time, Western Union was the exclusive

owner of the only nationwide telegraph network, and the sizable Associated Press was

the unique source for “instant” national or European news. (Its later competitor, the

United Press, which would be founded on the U.S. Post Office’s new telegraph lines,

did not yet exist.) The Associated Press took advantage of its economies of scale to

produce millions of lines of copy a year and, apart from local news, its product was

the mainstay of many American newspapers.

With the common law notion of “common carriage” deemed inapplicable, and the

latter-day concept of “net neutrality” not yet imagined, Western Union carried

Associated Press reports exclusively. 10

Working closely with the Republican Party and

avowedly Republican papers like The New York Times (the ideal of an unbiased press

would not be established for some time, and the minting of the Times’s liberal bona

fides would take longer still), they did what they could to throw the election to Hayes.

It was easy: the AP ran story after story about what an honest man Hayes was, what a

good governor he had been, or just whatever he happened to be doing that day. It

omitted any scandals related to Hayes, and it declined to run positive stories about his

rivals (James Blaine in the primary, Samuel Tilden in the general). But beyond

routine favoritism, late that Election Day Western Union offered the Hayes campaign

a secret weapon that would come to light only much later.

Hayes, far from being the front-runner, had gained the Republican nomination only

on the seventh ballot. But as the polls closed his persistence appeared a waste of time,

for Tilden, the Democrat, held a clear advantage in the popular vote (by a margin of

over 250,000) and seemed headed for victory according to most early returns; by

some accounts Hayes privately conceded defeat. But late that night, Reid, the New

York Times editor, alerted the Republican Party that the Democrats, despite extensive

intimidation of Republican supporters, remained unsure of their victory in the South.

The GOP sent some telegrams of its own to the Republican governors in the South

with special instructions for manipulating state electoral commissions. As a result the

Hayes campaign abruptly claimed victory, resulting in an electoral dispute that would

make Bush v. Gore seem a garden party. After a few brutal months, the Democrats

relented, allowing Hayes the presidency—in exchange, most historians believe, for

the removal of federal troops from the South, effectively ending Reconstruction.

The full history of the 1876 election is complex, and the power of the Western

Union network was just one factor, to be sure. But while mostly studied by historians

and political scientists, the dispute should also be taken as a crucial parable for

communications policy makers. More than anything, it showed what kind of political

advantage a discriminatory network can confer. When the major channels for moving

information are loyal to one party, its effects, while often invisible, can be profound.

It also showed how a single communications monopolist can use its power not just

for discrimination, but for outright betrayal of trust, revealing for the first time why

what we now call “electronic privacy” might matter. Hayes might never have been

president but for the fact that Western Union provided secret access to the telegrams

sent by his rivals. Western Union’s role was a blatant instance of malfeasance: despite

its explicit promise that “all messages whatsoever” would be kept “strictly private and

confidential,” the company regularly betrayed the public trust by turning over private,

and strategically actionable, communications to the Hayes campaign.

Today Western Union’s name remains familiar, but the company that survives is

the shriveled rump of what was in 1876 among the most powerful corporations on

earth. But power is never entirely secure in any tyranny. Western Union, despite its

size, had come under episodic attack from speculators, putting into question whether

it was really a “natural” monopoly. And in two years’ time Bell’s three-man

company, though embryonic, would pose an even more devastating threat to the

firm’s rule over American communications.

In antiquity, Kronos, the second ruler of the universe according to Greek mythology,

had a problem. The Delphic oracle having warned him that one of his children would

dethrone him, he was more than troubled to hear his wife was pregnant. He waited for

her to give birth, then took the child and ate it. His wife got pregnant again and again,

so he had to eat his own more than once.

And so derives the Kronos Effect: the efforts undertaken by a dominant company to

consume its potential successors in their infancy. Understanding this effect is critical

to understanding the Cycle, and for that matter, the history of information technology.

It may sometimes seem that invention and technological advance are a natural,

orderly process, but this is an illusion. Whatever technological reality we live with is

the result of tooth-and-claw industrial combat. And the battles are more decisive than

those in which the dominant power attempts to co-opt the technologies that could

destroy it, Goliath attempting to seize the slingshot.

Western Union, despite its great size and scale, was vulnerable to the same force as

every other business: disruptive innovation. No sooner had the firm realized the

potential of the Bell company’s technology to overthrow the telegraph monopoly than

it went into Kronos mode, attempting to kill or devour Bell. It did not happen

instantaneously. At the very beginning, in 1877, the Bell Company probably seemed

more a source of comic relief than a threat to Western Union. Bell’s very first

advertisement for the telephone, in May 1877, betrays a distinct lack of confidence in

the product:

The proprietors of the Telephone … are now prepared to furnish Telephones for the transmission of

articulate speech through instruments not more than twenty miles apart. Conversation can be easily carried

on after slight practice and with the occasional repetition of a word or sentence. On first listening to the

Telephone … the articulation seems to be indistinct; but after a few trials the ear becomes accustomed to

the peculiar sound. 11

Bell’s first telephone simply did not work very well. The Bell Company’s most

valuable asset would remain, for some time, the principal patent, for actual telephones

were more like toys than devices adults could depend on. Finding investors, let alone

customers, was such tough going that at one point, according to most accounts,

Hubbard, acting as Bell’s president, offered Western Union all of Bell’s patents for

$100,000. William Orton, president of Western Union, refused, in one of history’s

less prudent exercises of business judgment. 12

In a year, however, as Bell began to pick up customers, Western Union realized its

mistake. In 1878 it reversed course and proceeded full steam into the phone business.

Against tiny Bell, Western Union brought overwhelming advantages: capital, an

existing nationwide network of wires, and a close relationship with newspapers,

hotels, and politicians. “With all the bulk of its great wealth and prestige,” as the

historian Herbert N. Casson wrote in 1910, “it swept down upon Bell and his little

bodyguard.” The decision, once taken, was implemented quickly. Ignoring Bell’s

shoddy equipment, Western Union commissioned a promising young inventor named

Thomas Edison to design a better telephone. Edison’s version would prove a major

advance over Bell’s, including a much more sensitive transmitter that didn’t require

one to shout. For that reason, depending on how you define “invention,” there is a

strong case to be made for giving Bell and Edison, at a minimum, joint credit.

By the end of 1878 Western Union had deployed 56,000 telephones, rendering Bell

a bit player. 13

For a brief moment, the telephone industry came under domination by

Western Union’s subsidiary, the American Speaking Telephone Company. In an 1880

Scientific American article we see a drawing of an AST exchange in New York,

staffed by boys with Edison phones. In some alternate universe, AST, rather than Ma

Bell, would go on to rule communications by wire.

We can stop here to imagine that future. The telephone could easily have been born

as what Harvard professor Jonathan Zittrain calls a tethered technology: that is, a

technology tied directly to its owner, and limited in what it might do. 14

Western

Union’s telephone network was designed not to pose any threat to the telegraph

business. In an oft-exampled way, a dominant power must disable or neuter its own

inventions to avoid cannibalizing its core business. In the 1980s and 1990s, General

Motors, famously, was fully equipped to take over the electric car market, but was

restrained by disinclination to create a rival to the internal combustion engine, its

main business.

Western Union’s version of the telephone would have remained a feeder business

for the telegraph, and another tool for discrimination. Most likely we would have seen

a telephone system that was primarily local, used to call in telegraph messages for

nationwide communications, and as such always a complement to the telegraph, not a

substitute for it. Alexander Bell would be as obscure as the inventors of cable or

broadcast television, to name two other initially suppressed inventions—but let us not

get ahead of ourselves. For now it is enough to imagine how the retardation of

telephony in an alternative run-through of history might have altered the narrative. It

might even have affected the development of American economic supremacy, if other

nations better grasped the importance of the telephone.

In 1878 the future so described was likelier than not. For months, Bell suffered

under the onslaught of Western Union. As if mourning his company, Alexander Bell

became a bedridden invalid, in the grip of such a depression that he checked himself

in to Massachusetts General Hospital. 15

CYCLES OF BIRTH AND DEATH

The struggle between Bell and Western Union over the fate of the telephone was, in

retrospect, a match to the death. The victor would go on to prosper, while the loser

would wilt away and die. This is how the Cycle turns. No thinker of the twentieth

century better understood that such winner-take-all contests were the very soul of the

capitalist system than did the economist Joseph Schumpeter, the “prophet of

innovation.”

Schumpeter’s presence in the history of economics seems designed to displease

everyone. His prose, his personality, and his ideas were infuriatingly provocative and

confounding, and quite deliberately so. He bragged of sexual exploits at faculty

meetings, and while living in the United States during World War II, he voiced

support for Germany, supposedly out of dislike for Russians.

Nonetheless, Schumpeter is the source of a very simple economic theory that has

proved itself particularly virulent. At the most basic level, Schumpeter believed that

innovation and economic growth are one and the same. Countries that innovated

would grow wealthier; those that did not would stagnate. And in Schumpeter’s vision

innovation was no benignly gradual process, but a merciless cycle of industrial

destruction and birth, as implacable as the way of all flesh. This dynamic was, to

Schumpeter, the essence of capitalism. 16

He described innovation as a perennial state of unrest: a “process of industrial

mutation … that incessantly revolutionizes the economic structure from within,

incessantly destroying the old one, incessantly creating a new one.” In the age of

carts, what mattered was not a cheaper cart, but the Mack truck that runs the cart over.

Bell’s telephone was a quintessentially Schumpeterian innovation: it promised not

improvement of the telegraph industry, but rather its annihilation.

To understand Schumpeter we need to reckon with his very peculiar idea of

“competition.” He had no patience for what he deemed Adam Smith’s fantasy of price

warfare, growth through undercutting your competitor and improving the market’s

overall efficiency thereby. “In capitalist reality as distinguished from its textbook

picture, it is not that kind of competition which counts,” argued Schumpeter, but

rather, “the competition from the new commodity, the new technology, the new

source of supply, the new type of organization.” It is a vision to out-Darwin Darwin:

“competition which commands a decisive cost or quality advantage and which strikes

not at the margins of the profits and the outputs of the existing firms but at their

foundations and their very lives.” Schumpeter termed this process “creative

destruction.” As he put it, “Creative Destruction is the essential fact about capitalism.

It is what capitalism consists in and what every capitalist concern has got to live in.” *

Schumpeter’s cycle of industrial life and death is an inspiration for this book. His

thesis is that in the natural course of things, the new only rarely supplements the old;

it usually destroys it. The old, however, doesn’t, as it were, simply give up but rather

tries to forestall death or co-opt its usurper—à la Kronos—with important

implications. In particular Schumpeter’s theory did not account for the power of law

or the government to stave off industrial death, and (for our particular purposes) arrest

the Cycle. As we shall see in future chapters, allying itself with the state, a dominant

industrial force can turn a potentially destructive technology into a tool for

perpetuating domination and delaying death.

But before describing such corporate contortions, let us return to the sorrows of Mr.

Bell.

ENTER VAIL

In 1878, Theodore Vail was an ambitious and driven thirty-three-year-old working at

the U.S. Post Office. He was very good at his job—he pioneered a more efficient form

of railroad mail, and he supervised more than thirty-five hundred men—but he was

obviously bored. And so when Gardiner Hubbard, Bell’s founding father, legal

counsel, and first president, showed him the Bell prototype, Vail spied the chance of a

lifetime. He was in precisely the position of anyone who leaves a steady job for the

promise held out by some start-up. “I can scarce believe that a man of your sound

judgment,” wrote his boss, “should throw it up for a damned old Yankee notion called

a telephone!” It would have seemed imprudent, in a time when Americans did not

change jobs as regularly as they do today, to leave a secure situation and hitch one’s

wagon to what seemed a novelty item, and a rather buggy one. Yet something in

Vail’s nature allowed him to see the grand potential of the telephone, and the lure was

irresistible to him. 17

We must try to understand Theodore Vail, for his basic character type recurs in

other “Defining Moguls,” the men who drive the Cycle and populate this book.

Schumpeter theorized that men like Vail were rare, a special breed, with unusual

talents and ambitions. Their motivation was not money, but rather “the dream and the

will to found a private kingdom”; “the will to conquer: the impulse to fight, to prove

oneself superior to others”; and finally the “joy of creating.” Vail was that type. As

his biographer put it, “he always had a taste for conquest … here was a new world to

subjugate.” 18

When Vail arrived at Bell, Hubbard soon recognized where his potential lay and

made him general manager of the company. In that role Vail, like a man who tastes

combat for the first time, discovered his natural aptitude for industrial warfare. He

applied himself vigorously, reorganizing the firm and putting the fight in Bell’s

employees, agents, and partners. In internal letters he called on the Bell side to give

their all; for this battle, he believed, was the very test of their manhood. “We have

organized and introduced the business,” he declared, “and we do not propose to have

it taken from us by any corporation.” To an agent who was wavering, Vail wrote, “we

must organize companies with sufficient vitality to carry on a fight,” for “it is simply

useless to get a company started that will succumb to the first bit of opposition it may

encounter.” 19

Vail’s efforts surely helped morale, and some have credited them with preventing

Bell’s premature capitulation. But in truth the key to the fight was with Hubbard. Bell

was overmatched in every area—finances, resources, technology—except one: the

law, where it held its one all-important patent. And so, as the firm’s eponymous

founder lay in the hospital, Hubbard, an experienced patent attorney himself, retained

a team of legal talent to launch Bell’s only realistic chance of survival: a hard-hitting

lawsuit for patent infringement. The papers were filed in September 1878. If Western

Union was a figurative Goliath, the lawsuit was David’s one slingshot stone.

The importance of Bell’s lawsuit shows the central role that patent plays in the

Cycle, and it is a role somewhat different than is usually understood by legal scholars.

Patents are, by tradition, justified as rewards for invention. Owning a patent on the

lightbulb, or a cure for baldness, means that only you (or your licensee) can profit

from its sale. The attendant gains are meant to encourage investment in invention. But

in the hands of an outside inventor, a patent serves a different function: as sort of

corporate shield that can prevent a large industrial power from killing you off or

seizing control of your company and the industry. In that oblique sense, a strong

patent can sow the seeds of creative destruction.

The Bell patent is an example, perhaps the definitive example, of such a seeding

patent. Had it not existed, there would never have been a telephone industry

independent of the telegraph.

Yet it was hardly a foregone conclusion that Bell’s patent would be its salvation.

The validity of the license was somewhat in question: Elisha Gray, remember, had

filed a similar patent, arguing, not without foundation, that Alexander Bell had stolen

from his design the features that made the telephone actually work. Western Union,

meanwhile, held various patents of its own relating to communication over wires, as

well as to all of Edison’s improvements to the telephone, which rights Bell was

probably infringing. Western Union had the further advantage of the deep pockets

required to wage a long legal battle. They could well have starved Bell out of

existence or forced Bell to license its patent—also an effective death sentence, albeit

at least a compensated one.

So how did puny Bell prevail against the mighty Western Union? If the story were

a film or novel, one would have to charge the author with abuse of deus ex machina.

For right at Bell’s darkest hour it was saved by an unlikely and unexpected cavalry

charge. Western Union came under attack from the financier Jay Gould, “King of the

Robber Barons,” who had been quietly acquring stock and preparing a hostile

takeover. Now fighting for its own independence, Western Union was forced to look

upon its tussle over the telephone as a lesser skirmish, one it no longer had the luxury

of fighting.

Thanks to Jay Gould’s blindsiding attack, and good old-fashioned corporate

ineptitude on its own part, Western Union broke down and gave up on its imperial

plans. Instead of dominating a business it could have bought for $100,000, the

company entered into negotiations with Vail, who struck a tough bargain. Western

agreed to abandon telephony forever, in exchange for 20 percent of rental income on

the Edison telephone and a promise from Bell never to enter the telegraph market or

offer competition to the Associated Press. 20

Historians and business school professors have ever since puzzled over how a

behemoth like Western Union could have submitted to such a raw deal so easily. One

is tempted to fall back on the cliché “the harder they fall,” but there were plenty of

factors that made a difference.

Perhaps Western Union’s leadership, without the benefit of Schumpeter’s work (he

was just about to be born), never fully understood that the telephone was not just a

new and promising market but an existential threat. Such things can be difficult to see.

Who, in the 1960s, would have imagined the computer industry would one day

threaten the music industry? While it may seem obvious to us, Western Union might

not have fully realized that the telephone would actually replace, not just complement,

the telegraph. Recall that telephone technology was at the time both primitive and a

luxury. For that reason, it is possible that Western Union thought it wasn’t such a big

deal to let Bell establish a phone service, imagining it was simply letting Bell run a

complementary but unrelated monopoly.

Horace Coons, the communications chronicler, writing in 1939, lends some support

to this idea. He attributes Western Union’s retreat to its realization that staying in

telephony would likely mean competing with Bell on an ongoing basis. As he wrote,

“no one in the communications field was fond of the idea of competition. They had all

experienced competition and they did not like it.… Both the telephone and the

telegraph monopolies offered magnificent opportunities, [but] were not worth very

much unless they were opportunities to be monopolies.” 21

For the purposes of our story, however, it is more significant to contemplate the

counterfactual outcome. We all recognize how much a nation is shaped by its literal

wars, yet a nation’s large-scale industrial wars also inform its identity to a degree we

don’t always acknowledge. An America that had entered the twentieth century with

Western Union as its single wire monopolist—a decidedly different arrangement from

the one that came to be and one that would shape not just our telephone

communications, but, as we shall see, radio and television broadcasting and ultimately

the Internet—would likely have been, culturally, politically, economically, in

innumerable ways great and small, an America significantly different from the one we

know.

Instead, Bell, now grandly styled the National Bell Telephone Company, was left

with the telephone market and began to lay the foundations of what is called the First

Bell Monopoly. It was, however, far from what we’d recognize today as the telephone

system. The First Bell Monopoly was a service for the rich, operating mainly in major

cities in the East, with limited long distance capacity. The idea of a mass telephone

service connecting everyone to everyone else was still decades away.

Meanwhile, in 1884, the Bell Company put Vail in charge of a new subsidiary

meant to build its “long lines.” Vail named the subsidiary the American Telephone

and Telegraph Company—AT&T for short—a name that, one way or another, has

figured centrally in the story of American communications ever since.

* I use “the Bell Company,” “Bell,” and “AT&T” interchangeably in this book. The Bell Company was the

name of the company founded by Alexander Bell and his financiers in 1877. The American Telephone and

Telegraph Company (AT&T) was created in 1884, as a subsidiary of Bell to provide long distance services.

In 1903, after a reorganization, AT&T became a holding company for what were by then dozens of “Bell

Companies,” with names like Northeastern Bell and Atlantic Bell, that offered local service. That basic

structure lasted until the breakup of 1984.

* Consequently, many books have been dedicated to the question of who actually invented the telephone.

and the majority seem to side against Bell, though of course to do so furnishes a revisionist the more

interesting conclusion. Most damning to Bell is the fact that his telephone, in its specifications, is almost

identical to the one described in Gray’s patent. On the other hand, Bell was demonstrably first to have

constructed a phone that was functional, if not yet presentable enough to patent. A final bit of evidence

against Bell: the testimony of a patent examiner, Zenas F. Wilbur, who admitted to accepting a $100 bribe

to show Gray’s design to one of Alexander Bell’s lawyers. (New York Times, May 22, 1886.)

* Unfortunately for Drawbaugh, four Justices found his testimony and that of his seventy witnesses not

credible and dismissed his case. The dissenting Justices accused the majority of siding with Bell, essentially

owing to his fame. “It is perfectly natural for the world to take the part of the man who has already achieved

eminence.… It is regarded as incredible that so great a discovery should have been made by the plain

mechanic, and not by the eminent scientist and inventor.”

* In this yearning for “home telegraphs” was the first intimation of what would one day flower as email and

text messages.

* This second statement has been omitted from most American histories of the telephone.

* All this may make Schumpeter sound like a hero to free market libertarians, but he is not so easily

domesticated. His most famous work, Capitalism, Socialism, and Democracy, published in 1942, reads, in

part, as a repudiation of the market and a lauding of socialism. He praises Marx and asks, “Can capitalism

survive?” His answer: “No. I do not think it can.” It may seem paradoxical that an icon of capitalism should

be praising Marx and predicting the success of socialism. As with the end of Shakespeare’s The Taming of

the Shrew, a plain reading of the text has caused Schumpeter’s fans much discomfort. Whether

Schumpeter’s true purpose was to praise or to bury capitalism, or to leave his main point so perversely

ambiguous, is an indication of the maddening nature of the man.

CHAPTER 2

Radio Dreams

One July afternoon in 1921, J. Andrew White paused before speaking the words that would make him the first sportscaster in history. White, an amateur boxing fan

who worked for the Radio Corporation of America, stood ringside in Jersey City,

surrounded by more than ninety thousand spectators. The boxing ring was but a tiny

white square in a teeming sea of humanity. Everyone was waiting for the “fight of the

century” to begin. 1

In the ring the fighters looked mismatched. The larger was Jack Dempsey, the

“Manassa Mauler,” the reigning heavyweight champion, 2

who had grown widely

unpopular for refusing to serve in World War I. Georges Carpentier, his opponent,

had entered the ring to the strains of “La Marseillaise” and deafening cheers. The

French war hero was obviously the crowd favorite.

In White’s hand was something unexpected: a telephone. It was fitted with an

extremely long wire that ran out of the stadium and all the way to Hoboken, New

Jersey, to a giant radio transmitter. To that transmitter was attached a giant antenna,

some six hundred feet long, strung between a clock tower and a nearby building. The

telephone White was holding served as the microphone, and the rickety apparatus to

which it was connected would, with a bit of luck, broadcast the fight to hundreds of

thousands of listeners packed for the day into “radio halls” in sixty-one cities.

What was planned now sounds quite ordinary, but at the time it was revolutionary:

using the technology of radio to reach a mass audience. Today we take it for granted

that the TV or radio audience for some performance or sporting event is larger than

the live audience, but before 1921 such a situation had never occurred. This fight, in

fact, would mark the first time that more people would experience an event remotely

than locally. That is, if everything went according to plan.

The idea to broadcast the fight came from a young man named Julius Hopp,

manager of concerts for Madison Square Garden as well as an amateur radio

enthusiast. He wanted to experiment with an application of radio technology that

heretofore only hobbyists had played with—something they called “radio

broadcasting.”

Hopp could not do it alone. He found important backing, financial and technical, at

the Radio Company of America (RCA), predominantly a military contractor,

including its vice president, Andrew White, and more important, David Sarnoff, an

ambitious young executive and enigmatic personality who would figure centrally in

the history of radio. A Russian Jew who had immigrated as a youth, Sarnoff had an

eye for promising ideas, coupled with a less admirable tendency to claim them as his

own. Having managed to funnel several thousand dollars of RCA money to Hopp, he

and White focused their combined energies on the Dempsey broadcast. 3

The scale of the effort was unprecedented. But to be absolutely clear: Sarnoff,

White, and Hopp were in no sense inventing radio broadcasting. They were, rather,

trying to bring to the mainstream an idea that amateurs had been fiddling with for

years. Just as email had been around since the late 1960s, though reaching the general

public only in the 1990s, broadcasting in some form had been occurring since as early

as 1912, and perhaps even earlier.

It was amateurs, some of them teenagers, who pioneered broadcasting. They

operated rudimentary radio stations, listening in to radio signals from ships at sea,

chatting with fellow amateurs. They began to use the word “broadcast,” which in

contemporary dictionaries was defined as a seeding technique: “Cast or dispersed in

all directions, as seed from the hand in sowing; widely diffused.” 4

The hobbyists

imagined that radio, which had existed primarily as a means of two-way

communication, could be applied to a more social form of networking, as we might

say today. And the amateur needed no special equipment: it was enough simply to

buy a standard radio kit. As The Book of Wireless (1916) explains, “any boy can own

a real wireless station, if he really wants to.” 5

If the amateur pioneers had a leader, it was the inventor Lee De Forest, who by

1916 was running his own radio station, 2XG, in the Bronx. 6

He broadcast the results

of the 1916 presidential election, and also music and talk for an hour or so each day.

QST Magazine, the publication of the America Radio Relay League, reported in 1919

of De Forest’s station, “we feel it is conservative to estimate that our nightly audience

is in excess of one thousand people.” 7

Back in Jersey City, as the bout began, Dempsey ran at Carpentier, punching hard

(you can watch the bout on the Internet), and while Carpentier puts up a spirited fight,

the larger Dempsey clearly dominates. In the second round, Carpentier breaks his

thumb, yet fights on. By round four, Dempsey is insuperable, landing blows to the

body and head, seemingly at will, as the Frenchman stoops forward, barely able to

stand. Then, in White’s words: “Seven … eight … nine … ten! Carpentier is out! Jack

Dempsey is still the world’s champion!”

The broadcasters were in fact lucky it was over in just four rounds, for soon

thereafter, their equipment blew up. Still it had held together long enough for more

than three hundred thousand listeners to hear the fight in the radio halls. As Wireless

Age put it: “Instantly, through the ears of an expectant public, a world event had been

‘pictured’ in all its thrilling details.… A daring idea had become a fact.” 8

What is so interesting about the Dempsey broadcast is that it revealed an emerging

medium to be essentially up for grabs. It was in retrospect one of those moments

when an amateur or hobbyist’s idea was about to emerge from relative obscurity, with

the same force, one might say, as Dempsey’s blows raining down on Carpentier. And

while not the cause of the extraordinary radio boom to follow, the Dempsey fight,

which had taken so many ears by surprise, was in some sense its herald. While

records are spotty, the number of broadcasting stations jumped from 5 in 1921 to 525

in 1923, and by the end of 1924, over 2 million broadcast-capable radio sets had been

sold. 9

Early radio was, before the Internet, the greatest open medium in the twentieth

century, and perhaps the most important example since the early days of newspaper of

what an open, unrestricted communications economy looks like. Having begun among

some oddballs as a novelty aimed at bringing one’s voice and other sounds to

strangers via the airwaves, broadcasting was suddenly in the reach of just about

anyone, and very soon all sorts of ideas as to what shape it should take, from the

rather banal to the most utopian, were in contention.

THE OPEN AGE OF AMERICAN RADIO

When in the course of human affairs things go wrong, the root cause is often

described as some failure to communicate, whether it be between husband and wife, a

general and a front-line commander, a pilot and a radio controller, or among several

nations. Better communications, it is believed, lead to better mutual understanding,

perhaps a recognition of a shared humanity, and the avoidance of needless disaster.

Perhaps it is for this reason that the advent of every new technology of

communication always brings with it a hope for ameliorating all the ills of society.

The arrival of mass broadcasting inspired, in the United States and around the

world, an extraordinary faith in its potential as the benefactor, perhaps even a savior,

of mankind. And while the reason may not be readily apparent, such belief is crucial

to understanding the long cycles in the development of information media. For it is

not just the profit motive that drives the opening up of a medium—there is typically a

potent mix of both entrepreneurial and humanitarian motives.

Those who grew up in the late twentieth century have known the latter sort of

idealism mainly as it manifests itself on the Internet in grand collaborative projects

such as the blogosphere or Wikipedia and also in such controversial undertakings as

Google’s digitization of great libraries. This impulse is part of what has attracted

thinkers like Lawrence Lessig, originally a constitutional theorist, to Internet studies,

examining the anthropological and psychological consequences of complete openness

and the promise it holds. Scholars such as Harvard’s Yochai Benkler, Eben Moglen,

and many others have devoted considerable attention to understanding what moves

men and women to produce and share information for the sake of some abstract good.

Of course the human urge to speak, create, build things, and otherwise express

oneself for its own sake, without expectation of financial reward, is hardly new. In an

age that has radically commoditized content, it is well to remember that Homer had

no expectation of royalties. Nor has the fact of payment for many types of

information—books, newspapers, music—extinguished the will to communicate

unremunerated. Well before the Internet, in a world without paid downloads, before

even commercial television, the same urge to tinker and to connect with others for the

pure good of it gave birth to what we now call broadcasting and practically defined

the medium in its early years. In the magazines of the 1910s you can feel the

excitement of reaching strangers by radio, the connection with thousands and the

sheer wonder at the technology. What you don’t hear is any expectation of cashing in.

Here is Lee De Forest addressing young people on the joys of the wireless:

If you haven’t a hobby—get one. Ride it. Your interest and zest in life will triple. You will find common

ground with others—a joy in getting together, in exchange of ideas—which only hobbyists can know.

Wireless is of all hobbies the most interesting. It offers the widest limits, the keenest fascination, either

for intense competition with others, near and far, or for quiet study and pure enjoyment in the still night

hours as you welcome friendly visitors from the whole wide world. 10

What exactly were the hopes for radio? In the United States, where broadcasting

began, many dreamed it could cure the alienating effects of a remote federal

government. “Look at a map of the United States and try to conjure up a picture of

what home radio will eventually mean,” wrote Scientific American’s editor Waldemar

Kaempffert in 1924. 11

All these disconnected communities and houses will be united through radio as they were never united by

the telegraph and the telephone. The President of the United States delivers important messages in every

home, not in cold, impersonal type, but in living speech; he is transformed from what is almost a political

abstraction, a personification of the republic’s dignity and power, into a kindly father, talking to his

children.

There was even, perhaps unexpectedly for an electronic medium, hope for the

elevation of verbal discourse. “There is no doubt whatever that radio broadcasting

will tend to improve the caliber of speeches delivered at the average political

meeting,” read a column from the 1920s in Radio Broadcast. 12

“The flowery nonsense

and wild rhetorical excursions of the soap box spellbinder are probably a thing of the

past if a microphone is being used. The radio listener, curled comfortably in his

favorite chair is likely to criticize the vituperations of the vote pleader quite severely.

Woe be unto the candidate who depends for public favor upon wild rantings and

tearings of hair.”

There was even the hope for a more cultured society. “A man need merely light the

filaments of his receiving set and the world’s greatest artists will perform for him,”

said Alfred N. Goldsmith, the director of research at RCA, in 1922. 13

Whatever he most desires—whether it be opera, concert, or song, sporting news or jazz, the radio

telephone will supply it. And with it, he will be lifted to greater appreciation. We can be certain that a new

national cultural appreciation will result.… The people’s University of the Air will have a greater student

body than all of our universities put together.

All of these early aspirations partake of the idealistic expectation that a great social

interconnectedness via the airwaves would perforce ennoble the individual, freeing

him from his baser unmediated impulses and thus enhancing the fellowship of

mankind. Such an intuition, of course, is not limited to communications technologies;

it is a tenet of many religions that the distance between the individual and his fellows

is an unnatural source of suffering, to be overcome. Perhaps this is why some were

prepared to ascribe the miraculous potential of the new medium not to human

cleverness but to Providence. “Radio proves the truth of the omnipotence of the

Almighty,” wrote Radio Dealer editor Mark Caspar in 1922. 14

“When the Bible tells

us God is omnipresent and sees all we do and knows all our thoughts—we can now

better realize that if we, mere humans, can ‘listen in’ and hear people talk all over the

earth with a radio set, a foot or two long, what power must we ascribe to the

Almighty? Can we longer doubt his omnipresence and omnipotence? Behold, the all-

seeing eye!”

The power of an open technology like radio broadcasting to inspire hope for

mankind by creating a virtual community is the more remarkable considering that

radio was yet far from reaching its full potential as a communications medium. In

fact, what it seemed to promise was, if anything, more thrilling than the present

wonders. In De Forest’s words, radio “is the coming Science, is moving ahead faster,

possibly, than any other.” 15

He urged young men to “take up Radio work because it

offers a means of entertainment second to no other; gives useful instruction that can

be made to produce tangible results later on; keeps everyone interested; enables you

to get the news of the world by wireless and provides a pastime and hobby that will

get the busy man’s mind into other channels.”

One must stress that it was not merely technological wizardry that set people

dreaming: it was also the openness of the industry then rising up. The barriers to entry

were low. Radio in the 1920s was a two-way medium accessible to most any

hobbyist, and for a larger sum any club or other institution could launch a small

broadcast station. Compare the present moment: radio is hardly our most vital

medium, yet it is hard if not impossible to get a radio license, and to broadcast without

one is a federal felony. In 1920, De Forest advised, “Obtaining the license is a very

simple matter and costs nothing.” As we shall see, radio becomes the clearest example

of a technology that has grown into a feebler, rather than a stronger, facilitator of

public discourse, the vaunted vitalities of talk radio notwithstanding.

But let us not exaggerate the “purity” of early radio: its founders and commercial

partners had a variety of motives, not excluding profit. In the early 1920s,

publications such as Radio News published lists of all the radio stations in operation,

with their frequencies and what one might expect to hear on them—a forerunner of

the once hugely profitable TV Guide.

Such listings show that many early stations were run by radio manufacturers such

as Westinghouse, the pioneer of the ready-to-plug-in model, and RCA, both of which

had an obvious interest in promoting the medium. Still many stations were run by

amateurs, “radio clubs,” universities, churches, hotels, poultry farms, newspapers, the

U.S. Army and Navy; one was run by the Excelsior Motorcycle Company of Seattle.

The choices were dizzying. “A list of all that can be heard with a radio receiver

anywhere within three hundred miles of Greater New York would fill a book,”

explained one publisher of listings. “At any hour of the day or night, with any type of

apparatus, adjusted to receive waves of any length, the listener will hear something of

interest.” A whole class of stations arose—for instance, just to broadcast jazz, which

was otherwise inaccessible to most middle-class fans outside the urban centers where

the art developed. 16

As few recordings of radio in the 1920s survive, however, one must not

romanticize the medium by supposing a quality of offerings to rival the diversity.

Station schedules extended but a few hours a day. Content was limited to whatever

broadcasters could wangle, whether starving musicians, gramophone recordings, or

opinionated talkers. Yet we can imagine the wonder of simply tuning in, never

knowing quite what we might hear—surfing the untamed world of the dial.

By its nature, early American radio was local, and hence the roots of “localism” in

broadcasting. With an average range of thirty miles or so, an amateur radio station in,

say, Seattle was not likely to have a national listenership. Stations that could reach the

far corners of the country did not yet exist. The outer limit was represented by an

event like the Dempsey-Carpentier fight, a sensation with a maximum signal range of

two hundred miles. And so with no means to connect to other stations, and limited

broadcast wattage, radio stations made a virtue of the necessity to be local. No

baseball game or concert taking place nearby was too small to be a broadcast event. A

local pastor could always count on his sermon being heard by more individuals than

those sitting in the pews before him. There was no such thing as national radio, public

or private. And for as long as such limitations persisted, so did the idealism

surrounding radio. Even David Sarnoff, the future president of RCA, remarked, “I

regard radio broadcasting as a sort of cleansing instrument for the mind, just as the

bathtub is for the body.” 17

THE IDEALS OF BRITISH BROADCASTING

In 1922, John Reith, the youngest son of a Scottish minister, was appointed general

manager of the newly formed British Broadcasting Company. At age thirty-three, he

had no relevant experience—though admittedly individuals with credentials in

broadcasting were few at the time—and so his selection was something of a mystery,

even to him. As Reith wrote in his diary, “I am profoundly grateful to God for His

goodness in this manner. It is all His doing.” 18