The Master Switch E-Book

Tim Wu

• Herausgeber: Atlantic Books
• Kategorie: Geisteswissenschaft
• Sprache: Englisch
• Veröffentlichungsjahr: 2010

Beschreibung

Winner of the 2011 Business Book of the Year Award The Internet Age: on the face of it, an era of unprecedented freedom in both communication and culture. Yet in the past, each major new medium, from telephone to satellite television, has crested on a wave of similar idealistic optimism, before succumbing to the inevitable undertow of industrial consolidation. Every once free and open technology has, in time, become centralized and closed; as corporate power has taken control of the 'master switch.' Today a similar struggle looms over the Internet, and as it increasingly supersedes all other media the stakes have never been higher. Part industrial exposé, part examination of freedom of expression, The Master Switch reveals a crucial drama - full of indelible characters - as it has played out over decades in the shadows of global communication.

Leseprobe

The Master Switch

Tim Wu is an author, a policy advocate, and a professor at Columbia University. A veteran of Silicon Valley, in 2006 he was recognized as one of fifty leaders in science and technology by Scientific American magazine. He won the Lowell Thomas gold medal for Travel Journalism, and has contributed to the New Yorker, the New York Times and Forbes. He is also a fellow of the New America Foundation and the chairman of the media reform organization Free Press. He lives in New York.

Copyright

First published in the United States of America in 2010 by Alfred A. Knopf, a division of Random House Inc., New York, and in Canada by Random House of Canada Ltd., Toronto.

First published in Great Britain in hardback and airport and export trade paperback in 2011 by Atlantic Books, an imprint of Atlantic Books Ltd.

Copyright © Tim Wu, 2010

The moral right of Tim Wu to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act of 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of both the copyright owner and the above publisher of this book.

Every effort has been made to trace or contact all copyright holders. The publishers will be pleased to make good any omissions or rectify any mistakes brought to their attention at the earliest opportunity.

ISBN: 978-0-857-89212-6

Atlantic Books

An Imprint of Atlantic Books Ltd

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26–27 Boswell Street

London WC1N 3JZ

www.atlantic-books.co.uk.

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

Contents

Cover

The Master Switch

Copyright

Introduction

PART I: The Rise

CHAPTER 1: The Disruptive Founder

CHAPTER 2: Radio Dreams

CHAPTER 3: Mr. Vail Is a Big Man

CHAPTER 4: The Time Is Not Ripe for Feature Films

CHAPTER 5: Centralize All Radio Activities

CHAPTER 6: The Paramount Ideal

PART II: Beneath the All-Seeing Eye

CHAPTER 7: The Foreign Attachment

CHAPTER 8: The Legion of Decency

CHAPTER 9: FM Radio

CHAPTER 10: Now We Add Sight to Sound

PART III: The Rebels, the Challengers, and the Fall

CHAPTER 11: The Right Kind of Breakup

CHAPTER 12: The Radicalism of the Internet Revolution

CHAPTER 13: Nixon’s Cable

CHAPTER 14: Broken Bell

CHAPTER 15: Esperanto for Machines

PART IV: Reborn Without a Soul

CHAPTER 16: Turner Does Television

CHAPTER 17: Mass Production of the Spirit

CHAPTER 18: The Return of AT&T

PART V: The Internet Against Everyone

CHAPTER 19: A Surprising Wreck

CHAPTER 20: Father and Son

CHAPTER 21: The Separations Principle

Acknowledgments

Notes

Index

A Note on the Type

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 het-erodox 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 the rise 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 acquiring 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.