A brief history of...
When Nicola Tesla Tore Up His Contract With Westinghouse.
In 1884, Nicola Tesla, originally from Serbia, sailed into New York as a new immigrant, with just 4 cents to his name. He carried something else with him that would open the door of opportunities in America, a letter of recommendation addressed to Thomas Edison who hired him immediately upon meeting him. Tesla went to work for Edison General Electric for $18 a week. Unfortunately for the two men, the relationship soured rather quickly.
Edison offered Tesla $50,000 if he could improve by redesigning Edison's DC current electrical motor system. Tesla, the genius that he was, managed to do so in just two months. When Tesla went to collect his bonus, Edison refused and instead offered him a $10 a week raise, famously stating, 'You don't understand American humor'. Instead of taking the raise, Tesla quit and then went on to form the Tesla Electric Light & Manufacturing Company.
That venture eventually went bust but then Tesla formed the Tesla Electric Company in April, 1887 and things took a turn for the better. Within a few months, he would build and patent the Brushless Alternating Current Motor. His three-phase AC induction motor was superior to Edison's DC motor. and became his most significant invention. His motor was proven to be the most efficient way to convert electricity to mechanical power and became a great success, much to the detriment of Thomas Edison, who would purposely electrocute dogs, cats, horses and in one instance, an elephant to show people the dangers of AC current.
Try as he may to discredit Tesla, Edison would quickly lose out to Tesla's superior alternating current. AC can be transmitted for hundreds of kilometers at higher voltages while DC is very limited in transmission capacity. Tesla famously appeared at the 1893 Chicago World's Fair, also known as the World's Columbian Exposition, in honor of the 400th anniversary of Christopher Columbus' landing in the Americas. While electricity had been shown before, even at the 1889 Paris World's Fair, the pavillion was built with electrification the likes humans had never seen before. So dazzling, it became known as the 'White City', although it was all built to be temporary.
How was this made possible?
In 1888, Tesla met with George Westinghouse, founder and President of Westinghouse Electric And Manufacturing Company and the two men struck a deal to license his patents for $60,000, 150 shares in the company and here's the kicker, $2.50 royalty for every horsepower generated. That $60,000 lump sum is worth the approximate equivalent of $1.5 million today. The deal proved so lucrative that by 1890, thanks to his royalties alone, Nicola Tesla was now a full fledged millionaire.
When Westinghouse outbid newly formed Edison General Electric to electrify the Chicago World's Fair, they used Tesla's AC generators. On May 1, 1893, President Grover Cleveland pushed a button and instantly lit up almost 100,000 light bulbs Westinghouse had developed to counter Edison's DC bulb. It was also at this time that Edison showcased his kinetoscope which, for the first time, showed moving pictures.
The world was never quite the same after that. AC power became the dominant form of electricity for homes and businesses. For the next 20 years or so, Nicola Tesla became a superstar for his day and also incredibly wealthy. The same couldn't be said for Westinghouse and by 1907, the company was $10 million in debt and close to insolvency.
Tesla and George Westinghouse had formed a close friendship that would last the rest of their lives.When the Westinghouse company found itself in dire straits, Westinghouse informed Tesla of the situation and asked for a temporary reprieve of royalties in order to help the company get back on its feet. Tesla had always been grateful to his friend for having believed in his ideas and inventions. After all, his fabulous wealth could be attributed to his connections to Westinghouse. Instead of agreeing to a temporary reprieve of royalties, he tore up his old contract, catching his friend by surprise.
In that moment, Nicola Tesla permanently gave up the rights to his lucrative royalties from Westinghouse and single-handedly saved the company from ruin, although Westinghouse did pay him a lump sum of $216,000 for the perpetual rights to his AC patents (about $4.5 million today).
It is estimated his patents were worth about $12 million at the time or more that $300 million today. Had he held on to those rights, he would likely have become the world's first billionaire and would have generated billions for his heirs, right up to today. Instead, a series of failed projects eventually cost Tesla his personal fortune over the next 30 years. His mental health didn't fare well either and would eventually prefer spending time with and feeding pigeons in New York City rather than being in the company of other people.
By the time of his death on January 7, 1943 on the 33rd floor of the Hotel New Yorker, he was penniless and in debt. His old friend, George Westinghouse had never forgotten what Tesla did for him and was just as grateful to Tesla for his company's success and returned the favor by covering all expenses incurred by the hotel for the entire duration of his stay.
Over the years, people have wondered how things would have turned out for Tesla had he not torn up his contract with Westinghouse. While he did make a fortune in his day and eventually lost it, it's clear that he wanted to make the world a better place to live in for all humanity. His discovery of alternating current is a testament to his genius and his electricity has indeed transformed the world.
Nicola Tesla, his life, his inventions, have always fascinated me. He came forth with next to nothing in his pockets and would set out to transform the world and us with it. July 10th is officially Nicola Tesla day, in honor of his birthday in 1856. People were invited to visit Niagara Parks Power Station, the newest attraction at Niagara Falls (where I grew up) this summer. This isn't just any attraction. It was the first hydro-electrical generating station in the world and was only decommissioned in 1972 after the Sir Adam Beck generating stations came online. Only now are people allowed to walk through and see inside the Niagara Parks Power Station, Nicola Tesla's little baby!
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