Enos Barton: The Insurance Policy (Part 3 of 4)
How would you like to be 30 years old and a top executive with a leading technology company? Do you thrive on stress? Do you love reorganization? If you can answer an enthusiastic “yes” to those questions, you may begin to appreciate how Enos Barton approached his work in January of 1873.
In that year, the telegraph was one of only a handful of commercial applications of electricity, and Western Union was the premier telegraph service company. In a “high-tech” business, Western Union was the industry leader, and Enos Barton had risen to a top position there.
Barton and his contemporaries faced sweeping technological changes that rival those of today. In one decade, the world witnessed the birth of the telephone and electric lighting, as well as the invention of the phonograph, typewriter and countless other devices.
Companies were formed literally overnight to exploit the commercial possibilities of new technologies. Investors lined up even before the product had left the inventor’s bench. A few entrepreneurs made fabulous fortunes; many more went bankrupt.
“Reorganization” was a matter of survival of the fastest. Companies speedily expanded, or were devoured, as exciting new markets emerged and just as quickly disappeared.
In this environment Enos Barton thrived. He was ambitious, bright and shrewd – as were hundreds of his competitors. Left on his own, Barton no doubt would have made his mark. Yet he had aligned himself with Elisha Gray, and that decision was to make all the difference.
Professor Gray’s telegraph inventions formed the core of Gray & Barton’s original product line. At first, Gray & Barton was one of many suppliers to the huge Western Union. However, the small company quickly distinguished itself from its competitors.
In those days, when a few individuals were able to stay on the leading edge of a technology, Elisha Gray was one of the top minds in telegraphy. His many telegraph improvements, beginning with an automatic repeater that increased the signal strength in transmission lines, had earned “the Professor” the respect of the industry.
For his part, Enos Barton enjoyed the process of transforming inventions into commercially successful products. He was perfectly suited to be a partner with Gray. Barton had a solid foundation in telegraph technology, as well as a practical foundation in business. He was born salesman, an effective promoter of his company, and a financier. He proved to be a genius at manufacturing, production and at recruiting top people to work with him.
We picture the company in its early years as essentially a two-man operation, yet it was always more than that. The firm employed a small but growing band of engineers, skilled craftsmen, electricians and model builders who were essential to the partnership’s success. Among them was J.C. (“Old Man”) Warner, who had worked in the lab of Samuel F. B. Morse.
Barton insisted on the highest performance standards for all products that left his shop. Gray & Barton’s competitors offered handmade, one-of-a-kind products without interchangeable components and with highly variable performance. Under Enos Barton, however, Gray & Barton offered standardized products that consistently met performance specifications.
Years before the world had heard of Henry Ford, Enos Barton had instituted the step-by-step manufacture of high-quality products according to precise specifications.
The products that paid the partnership’s bills in the early years were telegraph instruments and switchboards, burglar alarms and fire alarm systems – including mercurial thermostat switches for automatic signaling of overheated rooms.
Among the products manufactured by Gray & Barton were call boxes, registers and answer-back systems for the American District Telegraph Co. in Cleveland. ADT subscribers could signal the central station for police, the fire department, a physician, messenger and even a carriage. Today, the descendant of this company is still known as ADT.
Gray & Barton prospered. Gray’s devices had the attention of Western Union executives, and Barton had the partnership running in the black. The small company grew quickly and became a key supplier to Western Union.
Success brought reorganization. Western Union bought a controlling interest in the partnership and relocated the company to Chicago. Barton was appointed a Western Union vice president and placed in charge of the business operations of the expanded plant. Gray was named the superintendent and placed in charge of inventions.
Western Union named its new division the Western Electric Manufacturing Company. The “Western” in the name identified the company as the subsidiary of Western Union.
Charles Lewis, the company’s first foreman, described the early years of the company. “Mr. Barton”, he recalled, “was rapidly developing the firm and although ranking as vice president, was the actual head of the firm; in fact, he was the whole works.”
Lewis continued, “Mr. Barton was in all respects essentially a man, level-headed, cool never excited, of good temperament and always encouraging. If anything went wrong, his pet phrase was, ‘It might be worse.’ He stood for real things in men, and in the early days he hired them himself.
“He was a wonderful judge of men, kind-hearted and considerate, a wonderful listener, but of few words, a strict disciplinarian, decided in his judgment and not quick to depart from his decision; and when he made up his mind to act, he acted. He was progressive and always looking for improvements. We were never in any financial difficulty. On pay day our money was always there.”
While our company was formed originally to develop and manufacture Elisha Gray’s telegraph apparatus, Enos Barton was convinced that Western Electric’s future was in the electrical products business, not just the telegraph business. This vision guided Barton in all his decisions.
Elisha Gray, who himself was known for sharing his own research with other inventors, did not question Barton’s vision for the company they had co-founded. Gray’s passion was for research and invention. He was neither motivated by money nor by the business goals that drove his partner.
This vision for their company, which Barton aggressively pursued and which Gray largely ignored, led to a great irony. During the next decade, Western Electric found itself in the middle of a huge telephone patent fight that pitted Alexander Graham Bell against his chief rival, Elisha Gray.
Both Bell and Gray had sought protection for devices that would transmit human speech electrically over a wire. The inventors and their financial backers knew that much more than a telephone instrument was at stake. Whoever won the telephone patents would also win the rights to build and operate an entire new industry.
A titanic legal battle began. On the one side was Western Union, representing the Gray camp. Included in this camp was Thomas Edison, who had invented a variable resistance carbon transmitter used as the telephone microphone. On the other side were the backers of Alexander Graham Bell.
Each side sued the other for patent infringement. While the legal battle raged from court to court, both sides furiously established local telephone companies and manufactured telephone instruments using their own competing patents—more or less.
Both sides knew that whoever finally won the patent fight would be able to shut down the opposition, absorb competing telephone systems, and tie the surviving parts together into a new telephone network.
As an arm of Western Union, Western Electric vigorously supported Elisha Gray’s claims. Western manufactured to its own exacting standards, thousands of telephones under license from Gray and Edison and organized several Midwest telephone companies. Anson Stager, the Western Union executive who had moved Gray & Barton from Cleveland to Chicago, invested a considerable amount of his personal fortune in these enterprises.
Enos Barton, however, was not about to risk having the most exciting invention of the century slip through his fingers. His vision for Western did not include the possibility of being shut out of the telephone business if Gray lost to Bell.
Accordingly, while Western used the Gray and Edison patents to compete aggressively with Bell’s manufacturing licensees, Enos Barton quietly bought some of those same Bell licensees.
This was Barton’s insurance policy for Western. It gave the company limited access to Bell markets without giving up its support to Gray. It also allowed Western to demonstrate to the Bell System the high quality of Western Electric manufacturing, should the decision go against Gray.
As further insurance against the fallout from the telephone patent war, and true to his vision for the company, Barton diversified Western Electric into non-telephone electrical products. At his direction, Western enlarged its plants to manufacture power and lighting apparatus, motors, switches, and other products.
Barton’s decision, based on pragmatism, proved to be another great move for Western Electric. The demand for these non-telephone products soon outstripped manufacturing capacity. By 1879, Enos Barton had positioned Western Electric to prosper, regardless of who won the telephone war. In just 10 years, the Gray & Barton partnership had evolved into a premier electrical manufacturer.
Yet Western’s fortunes—which were already bright—were about to become dazzling. In 1879, Western Union threw in the towel and sold its telephone patents to the Bell System. The next year, Anson Stager, who with Western Union had controlling interests in Western Electric and in a dozen midwestern telephone exchanges, sold those interests to Bell.
Enos Barton’s “insurance policy” of manufacturing telephone products for both the Gray patent holders and the Bell System had proven Western’s value to both sides. Now in 1881, Western Electric found itself in the best of all possible worlds.
Read Part 4 of the Enos Barton series here.
This article was republished from the Winter 1994 Graybar Outlook magazine.