Edison's 138-Year-Old Light Bulb Business Is Being Sold. Its Biggest Contribution Wasn't Lighting | QDaily Business History

Without the spread of the light bulb, home appliances could not exist.

The light bulb business Edison started is coming to an end after 138 years.

This past April, General Electric hired an investment bank to weigh the sale of its consumer lighting business, for an estimated $500 million. Under the plan, only one piece would be kept: a commercial LED lighting unit called Current.

The commercial history of the light bulb begins in 1879. That winter, train after train steamed out of New York into Menlo Park, New Jersey. Passengers came in a steady stream, from far away, to see Thomas Edison's newest scientific result — the incandescent bulb. There were so many that the railway had to add extra cars.

The night was pitch black the whole way, and snow was falling. But as the train pulled slowly into the station, the passengers saw more than 20 glowing incandescent bulbs strung along the tracks.

Today that would be unremarkable. At the time this station was the only one of its kind in the world — dim, fume-producing gas lamps were still the main tool for lighting, and no one had ever seen an electric light that could be used on a large scale and burn without stopping.

Four years later the scene was no longer a performance. Edison laid the world's first power grid in Manhattan. Following the light bulb's logic, more household appliances were invented. Electricity is still the main energy source of modern society, as necessary to human life as water and air. Transport, heating, communication, farming — no kind of production can do without it.

The incandescent bulb also became a business that lasted a century. In 1889 several of Edison's companies were reorganized and merged under the name Edison General Electric Company, and over the 20th century grew into a giant spanning energy, appliances, broadcasting and more. As late as 2005, General Electric (GE) was still the most valuable company in America.

What happened over those hundred-odd years?

Edison Didn't "Invent" the Light Bulb — He Did Something More Important

Countless textbooks, books and historical records say Edison invented the incandescent bulb. The claim is not accurate. Edison's greatest contribution was improving the incandescent bulb and turning it into a product — but he never "invented" the light bulb.

Before the incandescent bulb, most people lit their homes with kerosene lamps. Electricity's only use in lighting was the arc lamp, and its glare made it fit only for outdoor public spaces.

In 1841 the Englishman Frederick de Moleyns took out the world's first patent on an incandescent lamp, having found that a metal filament glows when current runs through it. Edison had not yet been born.

The British electrical engineer Sir Joseph Wilson Swan built the first prototype incandescent bulb at home in 1860, using carbon for the filament in a partly evacuated bulb. Eighteen years later, after the vacuum pump appeared, Swan took up the work again and produced the first fully evacuated incandescent bulb.

Edison read about it in Scientific American and saw that the light bulb could be a business. He decided that the key to a longer-lasting bulb was not vacuum technology but a cheap, heat-resistant material for the filament.

By then Edison was already famous, and carried the titles "inventor" and "magician." The invention that made his name was the phonograph, and he had set up a phonograph company.

After buying a light bulb patent, Edison announced a grand plan in 1878: he would improve the bulb and make it last. He also meant to replace gas, the dominant energy source of the day, with an electric grid. Gas stocks fell in the short term; the United States then had more than 400 gas lighting companies.

To raise money Edison set up the Edison Electric Light Company in New York; his backers included the financier J.P. Morgan. This was the predecessor of General Electric.

Development, promised in "a few weeks," dragged on for a year, and Edison seemed to get nowhere. The $50,000 budget ran out quickly and some shareholders lost their nerve; Edison talked them round, and they put in another $50,000.

A team of 20 in the lab at Menlo Park, New Jersey, tested more than 1,600 materials, designed dozens of bulb prototypes, and filled 200 notebooks.

In the small hours of October 22, 1879, Edison fitted a carbonized cotton-thread filament into a vacuum bulb, and it burned for a record 13.5 hours. "If it can burn that long, I'm sure it can burn for 100 hours," Edison said in an interview at the time.

He then did what he did best with the press, and staged public demonstrations. Hundreds of people poured into Menlo Park, and the New York Herald reported: "Electric lighting has been proven a success."

The technology kept improving. Carbonized bamboo filament replaced cotton thread, and set a record of 1,200 hours of continuous light.

To make sure the bulb could be sold, Edison also had to settle the patent question. He filed in 1880, but a fight soon broke out over who had invented the light bulb, and the U.S. Patent Office ruled that his patent only modified earlier inventions. After six years of litigation, Edison's incandescent bulb was finally held to be a valid patent.

In Britain, Edison and Swan set up a joint venture called Ediswan to sell bulbs, again to head off possible lawsuits.

It looked as though the bulb could now be made in quantity. But there was a problem: people's homes had no electricity.

The Light Bulb's Biggest Contribution Was Spreading the Power Grid

People remember Edison the inventor, but from the moment he decided to improve the light bulb he behaved more like a businessman. That is what pushed him to produce another contribution — arguably bigger than the bulb itself — the power grid.

Like most technology products, the light bulb's first customers were not ordinary people. Once the improved incandescent bulb appeared, Edison installed a complete small power system in the mansion of his investor J.P. Morgan, at Morgan's request, with the generator in the basement.

This was another demonstration, and its effect may have matched the first iPhone launch. Morgan invited his friends to see the astonishing sight of 30 bulbs lighting at once. Over the next few years these rich men, who could afford private power systems, became Edison's main customers for light bulbs — and became his investors too, among them Morgan's firm, Park Bank and the Drexel syndicate.

A toy for a few rich men was never going to be a big business. From the start Edison wanted the grid to reach every household so he could sell them light bulbs.

In February 1881 Edison left the Menlo Park lab and moved his family and his business to Fifth Avenue in New York, setting up the headquarters of the Edison Electric Light Company. He was making good on another boast from two years earlier: to build the world's first power grid and bring electricity to every building in Manhattan.

The plan was for Edison's company to supply a one-square-mile district in Lower Manhattan, where every subscribing household and business need only flip a switch to get light.

Two adjacent warehouses were turned into a power station holding six steam generator sets, each weighing 30 tons. A thousand-odd bulbs for performance testing were lined up on panels.

Outdoors, workers tore up more than 14 miles of pavement to lay 100,000 feet of copper wire underground.

Today this looks ordinary; at the time it was a complicated undertaking. Besides getting permission from local government to dig up the streets, Edison had to manufacture parts in bulk — meters, cables, light sockets and more.

No one had done any of it before. The grid was a whole industrial chain, and Edison's role in it went past inventor to sales, marketing, administration, manufacturing and the rest.

The grid was switched on at last on the night of September 4, 1882. The station on Pearl Street started up, sending 110 volts of direct current through the district; light covered the streets and the rooms, and the world's first power grid was born.

Edison's direct-current grid soon covered most of Manhattan, and countless New York homes shone with light. Electricity still travels on the same basic principle today.

But It Wasn't Edison's Direct Current That Truly Spread the Grid

As Edison's lighting company grew, the limits of direct current grew with it. A generating station could reach only about a mile in any direction, and current leaked away as it travelled. The only fix was to add stations at intervals, which cost a great deal.

Another important figure in the history of electricity now appeared. In 1884 the young Nikola Tesla, from Serbia, went to work for Edison, redesigning his direct-current equipment.

But Tesla did not believe in direct current, and Edison paid him little attention.

Two years later the two parted ways, and Tesla founded his own company, Tesla Electric Light & Manufacturing. George Westinghouse backed it — Westinghouse owned an alternating-current company, Westinghouse Electric, which filed for bankruptcy this past March after a failed bet on nuclear power — and together they built an alternating-current grid in Pittsburgh.

Alternating current spread far faster. Edison built just 18 power stations in two years. Tesla's company built 36 in one.

Edison then used his standing as a public figure to attack alternating current, almost fanatically, playing up its dangers and setting off the "War of the Currents."

The most extreme moment in the story: Edison had a Westinghouse generator rebuilt into an alternating-current electric chair, and worked with a New York State prison to execute a convict, burning the man alive. The press made the sight public.

J.P. Morgan tried to rescue the company's reputation with the Niagara Falls hydroelectric project, but the bid failed and Tesla won it. Morgan finally saw that alternating current was the future, dropped direct current, and bought the Thomson-Houston Electric Company to get into the AC business.

Edison had bet on the wrong future and lost the War of the Currents. But one change the light bulb brought was already complete: electricity had replaced gas as the dominant energy source, and holds that place still.

More Appliances Followed the Light Bulb Into the Home, and Freed Up People's Time

The light bulb's biggest contribution was not lighting. It was spreading electricity.

The bulb brought power into tens of thousands of homes and businesses, and on that base household appliances sprang up everywhere from the early 20th century on — clumsy and expensive though they were at first.

In 1880 Schuyler Wheeler fixed blades to an electric motor; switched on, the blades spun fast and threw off gusts of cool air. This was the world's first electric fan.

Then the vacuum cleaner: the one Hoover made in 1905 weighed 92 pounds, took two people to work, and cost as much as a quarter of a car.

In 1910 came the first electric washing machine. Until then washing machines ran on human muscle or steam; electricity marked the start of automated housework.

These appliances freed women. In the 19th century a housewife without appliances spent two days a week washing clothes by hand. By the 1950s washing machines were everywhere in the United States, and her hands were free.

More important, appliances gave city dwellers spare time. They could go out, shop and spend, which drove the economy further.

Later still, women no longer had to go to market every day, because of the refrigerator. In 1918 the American company Kelvinator sold refrigerators for the first time, and shifted only 67 units that year. In 1926 General Electric produced the world's first refrigerator with a sealed cooling system; household absorption refrigerators followed, and spread through the 1930s.

All of it came out of the light bulb.

In the early years appliances screwed straight into light bulb sockets. The first washing machines had no switch at all — screwed in, they simply ran and ran.

As appliances multiplied, the wall outlet arrived in 1904.

At first households did not run wires into the house for appliances. They did it only for light.

The light bulb was a "killer app." It let people feel the appeal of electricity for the first time, and everything else followed.

But the incandescent bulb, as a business, is finished.

Lighting Is No Longer GE's Biggest Business, and New Technology Has Replaced the Incandescent Bulb

The first man to leave the incandescent bulb business was Edison himself.

By the end of the 19th century Edison had several companies to his name. Besides the Morgan-backed Edison Electric Light Company, there was the Edison Machine Works, which built generators, plus companies making lamps, sockets and other electrical lighting fittings. In 1889 they merged into the Edison General Electric Company.

That year Edison's company became the largest in the United States, taking in $7 million a year and turning close to $700,000 in profit.

By 1891 Edison General Electric's sales had reached $11 million, and profit had doubled to $1.4 million.

But the advantages of alternating current became plainer, and Edison's company kept losing market share. Morgan decided to restructure it, and in 1892 bought AC patents along with the Thomson-Houston Electric Company.

The company was renamed "General Electric" (GE), and Edison's name came off. It has been called that ever since.

Edison, kept in the dark, took no part in the merger; he was bitter about it and eventually walked out. Capital dropped Edison and direct current at the same time.

Over the next hundred-odd years General Electric grew enormous. When the Dow Jones Industrial Average was created in 1896, GE was one of the 12 original members. The index drops companies that perform badly, and a century later GE was the only one of the 12 still on it.

What did General Electric do over that century?

1879

The Edison Electric Light Company is founded; its shareholders include Morgan's firm.

1889

Several of Edison's companies merge and, after buying the Frank Electric Railway and Motor Company, form the Edison General Electric Company.

1892

Edison General Electric merges with the Thomson-Houston Electric Company and is restructured into General Electric.

1905

Moves into commercial finance, setting up a bond and stock company.

1911

Starts its lighting business, buying the National Electric Lamp Company.

1919

Founds the Radio Corporation of America (RCA) in a joint venture with AT&T.

1957

Builds the world's first nuclear power plant.

1969

Supplies quality control, systems engineering support and launch and satellite systems technology for the whole moon-landing program.

1970

Sells its computer business to Honeywell.

1986

Buys RCA.

1999

Enters e-commerce, taking in $2 billion that year.

2004

Buys Vivendi and merges it with NBC to form NBC Universal.

2015

Announces it will shrink its finance arm, selling and spinning off assets to return to manufacturing as its core.

2016

Sells its appliance business to Qingdao Haier, controlled by Haier Group.

2017

Plans to sell its lighting business.

In the early 20th century GE moved into broadcasting, founding RCA with AT&T, and invented the videodisc player.

Many household appliances were GE inventions from this period, including the electric stove, the toaster, the refrigerator and the air conditioner.

GE even became the world's first commercial company with a computer business, at one point building its own computers and even operating systems. By the 1960s it stood with IBM among the world's eight largest computer makers. The business was sold to Honeywell in the 1970s.

Through the 20th century GE built its empire by buying. In 1939 it had just over 30 factories; less than a decade later it had 125.

Abroad, GE steadily absorbed electrical firms in Italy, France, Germany, Belgium, Switzerland, Britain, Spain and elsewhere. By the end of 1976 it was a giant multinational with 113 plants in 24 countries.

To say today's GE is rich enough to rival a country is no exaggeration. It operates in 100 countries, employs 300,000 people, takes in $120 billion a year and holds more than $650 billion in assets. Its work runs across industry and consumer markets alike — appliances, lighting, aviation, finance, electronics, healthcare, media and rail together make up this sprawling company.

For GE, the lighting business that began with the incandescent bulb no longer matters. In 2016 lighting, commercial lighting included, brought in about $2.2 billion, under 2% of total revenue; energy management and lighting combined came to only 12%.

Lighting is not the only case — nothing consumer-facing matters much now. GE has fixed its future on industry, pouring money into software, sensors and new energy. After repeated restructuring, including the sale of its finance arm and of its appliance business to Haier Group, 70% of GE's revenue now comes from industry.

Most of the world has electricity, and lighting is still a big business, but the competition has changed.

In Edison's day the incandescent bulb was a high-technology product; only a few large companies, GE and Philips among them, could build bulbs that lasted longer and worked more reliably.

The light-emitting diode (LED), which asks very little of the factory, changed that. LED lamps from small workshops last long enough and perform well enough. By 2014, 30% of world production came from Chinese companies, simply because they were cheap enough.

A hundred years of light bulb technology

1880

Edison's carbonized-bamboo-filament bulb stays lit in the lab for 1,200 hours.

1906

General Electric begins making incandescent bulbs with tungsten filament in place of carbonized bamboo.

1910

The Frenchman A. Claude invents the neon discharge lamp — commercial neon lighting. It starts replacing incandescent bulbs in 1950.

1976

GE engineer Edward Hammer invents the first compact fluorescent lamp.

1934

The mercury lamp appears, the first true gas-discharge lamp.

1959

The halogen lamp is developed, giving white light with very little bulk and very little light decay.

1962

General Electric invents the light-emitting diode, turning electricity straight into light.

1980s

The first generation of high-brightness LEDs appears; ultra-bright LEDs follow in the 1990s.

2000

The U.S. energy department works with private companies to push white LED technology forward.

The age of the incandescent bulb is over. New lighting technologies came one after another, and against them the incandescent bulb is dim, clumsy, power-hungry and too short-lived.

The Energy Independence and Security Act, passed in the United States in 2007, required that between January 2012 and January 2014 the country phase out 40W, 60W, 75W and 100W incandescent bulbs in favor of energy-saving ones.

The European Union issued a ban in 2009, retiring traditional bulbs above 100W, then 75W and 60W.

China drew up a five-stage phase-out plan running from November 2011 to October 2016, covering incandescent bulbs from 100W down to 15W.

Siemens spun off Osram in 2013. Philips split off its lighting business and listed it last year, to keep it from dragging down healthcare and its other units. Now General Electric is splitting off its consumer lighting business too.

The lighting business Edison founded 138 years ago is over. But the power grid that came with it will stay, for as far ahead as anyone can see.

Cover image from Pixabay

Some information in this article comes from:

Empires of Light, by Jill Jonnes, translated by Wu Min, CITIC Press, June 2015

Documentary American Genius, National Geographic Channel, aired June 2015

Documentary American Experience, Public Broadcasting Service (PBS), aired March 2015

Documentary The Men Who Build America, History Channel UK, aired October 2012