Tesla had given no specific thought to commercializing his work at this time. He was in the midst of a program of experimental work which was far from complete and he desired to finish it before engaging in another line of activity. He expected that there would be no alternative to establishing his own company and engaging in the manufacture of his dynamos, motors and transformers. Such a course would take him away from the original experimental work which greatly fascinated him, and which he did not wish to interrupt. Commercializing his inventions, therefore, was a problem that could be postponed, as far as he was concerned, at least as long as the present financing of his work continued.

George Westinghouse, head of the Westinghouse Electric Company in Pittsburgh, was a man of vision. He was already famous as an inventor of numerous electrical devices but principally for his air brake for trains, and had made a fortune out of the exploitation of his own inventions. He recognized the tremendous commercial possibilities presented by Tesla's discoveries and the vast superiority of the alternating- over the direct- current system. He was a practical man of business and was not limited in his choice between the two systems.

Edison, head of the Edison General Electric Company, on the other hand, was under a limitation. Edison's invention was the incandescent electric lamp. Having developed this project, he was faced with finding some way to use it commercially. In order to sell his lamps to the public it was necessary to make the electricity available for lighting them. This necessitated the building of powerhouses and distribution systems. Another kind of electric lamp was already available--the arc lamp--in which he was but slightly interested. The Edison system powerhouses were standardized on low-voltage direct current. At that time direct-current motors were in use, and most technical men believed it was not at all likely there would ever be a practical alternating-current motor. The direct-current system, therefore, offered a number of advantages of a practical nature from Edison's viewpoint.

Westinghouse had no pet project comparable to the incandescent lamp around which he had to throw protecting conditions such as direct-current limitations, so he could look at the Tesla alternating-current discoveries from an unbiased and purely objective point of view. He reached his decision a month after Tesla's lecture. Having done this, he forwarded a brief note to Tesla, making an engagement to see him in the latter's laboratory.

The two inventors had not previously met but each of them was well acquainted with the other's work. Westinghouse, born in 1846, was ten years older than Tesla. He was a short, stout, bearded, impressive-looking individual, and had a habit of directness in conducting his affairs that amounted almost to bluntness. Tesla, thirty-two years old, was tall, dark, handsome, slender and suave. They made a strongly contrasting pair as they stood in Tesla's laboratory, but they had three things in common: they both were inventors, engineers and loved electricity. Tesla had in his laboratory dynamos, transformers, and motors with which he could demonstrate his discoveries and models in actual operating conditions. Here Westinghouse was right at home and quickly became completely sold on the inventor and his inventions.

So favorably impressed was Westinghouse that he decided to act quickly. The story was related to the author by Tesla.

"I will give you one million dollars cash for your alternating-current patents, plus royalty," Westinghouse blurted at the startled Tesla. This tall, suave gentleman, however, gave no outward sign that he had almost been bowled over by surprise.

"If you will make the royalty one dollar per horsepower, I will accept the offer," Tesla replied.

"A million cash, a dollar a horsepower royalty," Westinghouse repeated.

"That is acceptable," said Tesla.

"Sold," said Westinghouse. "You will receive a check and a contract in a few days."

Here was a case of two great men, each possessed with the power of seeing visions of the future on a gigantic panorama, and each with complete faith in the other, arranging a tremendous transaction with utter disregard of details.

The amount involved was unquestionably a record one, for that time, for an invention. While Tesla liked to think of his complete polyphase system as a single invention, he was, nevertheless, selling about twenty inventions on which patents were already issued, and about as many more still to issue. With a total of forty patents involved in the transaction, most of them strongly basic in nature, he received, therefore, about $25,000 per patent. Westinghouse thereby obtained a record-breaking bargain by buying the patents in wholesale quantities.

Westinghouse arranged with Tesla to come to Pittsburgh "at a high salary" for a year, to act as consultant in the commercial application of his inventions. The generous offer made by the Pittsburgh magnate for the purchase of his patents made it unnecessary for Tesla to have any more worries about having to devote a major portion of his time to exploiting his inventions commercially through his own company. He could afford, therefore, to give this year of his time.

The apparatus which Tesla demonstrated to Westinghouse when the latter visited his laboratory, and which worked so beautifully, was designed for operation with a current of 60 cycles. Tesla's investigation had demonstrated that this was the frequency at which the greatest efficiency of operation could be achieved. At higher frequencies there was a saving in the amount of iron required; but the drop in efficiency, and design difficulties that developed, were not compensated for by the very small saving in cost of metal. At lower frequencies the amount of iron required increased, and the apparatus grew in size faster than increased efficiency justified.

Tesla went to Pittsburgh and expected to clear up all problems in less than a year. Here, though, he encountered engineers who faced the problem of producing a motor with a design that would insure, first, certainty of smooth and reliable operation; second, economy of operation; third, economy in use of materials; fourth, ease of manufacture; as well as other problems. Tesla had these problems in mind but not with the urgency with which the engineers faced them. In addition he was quite adamant in the choice of 60 cycles as the standard frequency for alternating current while engineers, who had experience on 133 cycles, were not so sure that the lower frequency would be best for the Tesla motors. At any rate there was conflict between the inventor, interested mainly in principles, and engineers interested in practical design problems. Very definite problems were encountered in making the Tesla motor work on a single-phase current in small sizes. In this type of design, artifices had to be incorporated in the motor to achieve some of the characteristics of a two-phase current from the single-phase current that was supplied to operate it.

Tesla was thoroughly disgusted with the situation. He felt his advice concerning his own invention was not being accepted, so he quit Pittsburgh. Westinghouse was sure the situation would work itself out. Seeking to persuade Tesla to remain, he offered him, Tesla revealed many years later, twenty-four thousand dollars a year, one third of the net income of the company and his own laboratory, if he would stay on and direct the development of his system. Tesla, now wealthy and anxious to return to original research, rejected the offer.

Development work proceeded after Tesla left, and soon practical designs were produced for all sizes of motors and dynamos, and their manufacture started. Tesla was happy to note that the 60-cycle standard, his emphatic choice, but which had been questioned on the ground it was less practical in small units, had been adopted as the standard frequency.

On returning to his New York laboratory, Tesla declared that he had not made a single worth-while contribution to electrical science during the year he spent at Pittsburgh. "I was not free at Pittsburgh," he explained; "I was dependent and could not work. To do creative work I must be completely free. When I became free of that situation ideas and inventions rushed through my brain like a Niagara." During the following four years he devoted a large fraction of his time to further developments of his polyphase power system, and applied for, and was granted, forty-five patents. Those granted in foreign countries would bring the total to several times this number.

The ideas of the two giants among inventors--Edison and Tesla--were meeting in head-on battle. Out of the laboratories of the two geniuses, within sight of each other in South Fifth Avenue in New York, had come world-shaking developments.

There had been considerable conflict between Edison, who adhered strictly to direct current, and those who supported the claims for alternating current. The Thomson-Houston Company and the Westinghouse Electric Company had extensively developed this field for series electric lighting and arc lighting before the Tesla power system was developed. Edison had engaged in many tilts at these competitors, attacking alternating-current as unsafe because of the high voltages used. The advent of the Tesla system added fuel to the fire.

It was Tesla's belief that when the New York State Prison authorities adopted high-voltage alternating current for electrocution of condemned prisoners, the Edison interests had engineered the project to discredit alternating current. There is no doubt about the aid the prison authorities' choice gave the direct-current group; but their decision was undoubtedly based on the fact that direct current could not, by any practical means, be produced at the high voltages required, whereas alternating-current potentials could be very easily increased. Direct current is just as deadly, at the same voltage and amperage, as alternating current. In this "war of the currents," however, as in other wars, appeal to the emotions, instead of to simple facts, were the governing influences.

The task of putting the United States on an electrical power basis--which is what George Westinghouse undertook when he began to exploit the Tesla patent--was a gigantic one requiring not only engineering talent but capital. The Westinghouse Electric Company experienced a tremendous expansion in the volume of its business, but the upward surge came at a time when the country was going into a stage of commercial and financial depression; and Westinghouse soon found himself in difficulties.

This was, in addition, an era in which competing giant financial interests were battling for control of the industrial structure of the country through control of capital. It was a time of mergers, a period when the financial interests were building larger units of production by uniting smaller companies in related fields, frequently forcing these combinations without regard to what the owners of the companies desired.

One merger, internally initiated and arranged by mutual consent, brought together the Thomson-Houston Company and the Edison General Electric Company, the two biggest competitors of Westinghouse Electric, to form the present General Electric Company. This was a challenge to competing financial interests.

Westinghouse had expanded his business at a very rapid rate in exploiting the Tesla patents. Because his financial structure thereby lost a certain amount of flexibility, he became vulnerable to financial operators and soon found himself in the toils of a merger that involved uniting several other small companies with his organization. Financial interests that had stepped into the situation demanded that the Westinghouse Electric Company be reorganized as a step toward bringing about a merger with it of the U. S. Electric Company and the Consolidated Electric Light Company, the new unit to be known as the Westinghouse Electric and Manufacturing Company.

Before this reorganization would be consummated the financial advisers, in strategic positions, insisted that Westinghouse jettison some of his plans and projects which they considered inadvisable or a detriment to getting the new company onto a new foundation that would be sounder from a financial point of view.

One of the requirements was that Westinghouse get rid of the contract with Tesla calling for royalty payments of $1 per horsepower on all alternating-current articles sold under his patents. (No documentary evidence exists concerning this contract. The author located two sources of information. One was in complete agreement with the story here related. The other states that the million-dollar payment was advance royalties and Tesla so described it to him, declaring no further royalties were paid.) The financial advisers pointed out that if the business which Westinghouse expected the company would do under the Tesla patents in the ensuing year was anywhere near as great as estimated, the amount to be paid out under this contract would be tremendous, totaling millions of dollars; and this, at the time of reorganization, appeared a dangerous burden, imperiling the stability which they were trying to attain for the new organization.

Westinghouse strenuously objected to the procedure. This patent-royalty payment, he insisted, was in accordance with usual procedures and would not be a burden on the company, as it was included in costs of production, was paid for by the customers, and did not come out of the company's earnings. Westinghouse, himself an inventor of first magnitude, had a strong sense of justice in his dealings with inventors.

The financial advisers, however, were not to be overruled. They nailed Westinghouse on the spot by insisting that the million dollars he had paid Tesla was more than adequate compensation for an invention, and that by making such an exorbitant payment he had imperiled the financial structure of his company and jeopardized his bankers' interest. Any further imperiling of the reorganization by any effort to retain the royalty contract would, it was argued, result in the withdrawing of support that would save the company.

The situation boiled down to the common "Either-Or" technique.

Westinghouse was required to handle the negotiations with Tesla. No situation could be more embarrassing to him. Nevertheless, Westinghouse was a realist among realists. He never hesitated to face facts squarely and with a blunt directness. "I will give you one million dollars cash for your alternating-current patents, plus royalty": he had been both brief and blunt when he purchased the patents from Tesla. Now he was faced with the problem of undoing the situation into which he had entered with such brevity. Then money talked and he held the money. Now Tesla held the dominant position; he held a perfectly valid contract worth many millions, and he could go to court to force compliance with its terms. Edison's successful suit against infringers of his electric-light patent, bringing disaster to many companies that violated his patent property rights, had caused the whole industrial world to hold a new and wholesome respect for patent rights.

Westinghouse had no reason for believing that Tesla would show the slightest inclination to relinquish his contract or permit its terms to be changed to provide a smaller rate of royalty. He knew that Tesla's pride had been hurt by the disagreement with the Pittsburgh engineers, and that he might not now be in a conciliatory mood. On the other hand, Westinghouse knew that he had succeeded in having Tesla's ideas adopted. His greatest comfort came from the fact that he had entered into the contract with good faith--and with the same good faith he was trying to handle a much less satisfactory situation. Perhaps he could offer Tesla an executive position in the company in lieu of the contract. There would be mutual advantages in such an arrangement.

There is no means of fixing the definite value of the contract Tesla held. His patents covered every department of the new alternating-current power system, and royalties could be collected on powerhouse equipment and motors. At that time the electric power industry had barely started; no one could look into the future and see the tremendous volume of business that would be developed. (The latest data available indicate that in 1941 there was 162,000,000 horsepower of electrical generating machinery in operation in the United States, practically all of it for alternating current. Assuming a uniform growth from 1891 to 1941, the installed horsepower in 1905, when the first Tesla patents would have expired, would have been about twenty million. This figure is, apparently, too high.

According to a census of central stations in the United States conducted by T. Commerford Martin (Electrical World, March 14, 1914) the horsepower of generators in operation in 1902 was 1,620,000 and in 1907 the figure had risen to 6,900,000. On a pro rata, per-year basis, this would make the figure for 1905, the year when Tesla's first patents expired, 5,000,000. During this period many manufacturers who had been using steam power installed dynamos in their factories and operated isolated plants. These would not be included in the central-station figures and, if added, would bring the total horsepower to perhaps 7,000,000. Tesla would have been entitled to $7,000,000 royalties on this equipment, on the basis of his $1-per-horsepower arrangement. In addition he would have been entitled to royalties on motors that used the power generated by these dynamos. If only three quarters of the current generated were used for power, this would have entitled him to additional royalties of $5,000,000, or a total of $12,000,000.)

It would be a tough job for any executive, no matter how shrewd or clever, to talk a man out of a contract that would net him many millions of dollars, or induce him to accept a reduction in rates amounting to millions.

Westinghouse called on Tesla, meeting him in the same South Fifth Avenue laboratory where he had purchased the patents four years before. Without preliminaries or apologies Westinghouse explained the situation.

"Your decision," said the Pittsburgh magnate, "determines the fate of the Westinghouse Company."

"Suppose I should refuse to give up my contract; what would you do then?" asked Tesla.

"In that event you would have to deal with the bankers, for I would no longer have any power in the situation," Westinghouse replied.

"And if I give up the contract you will save your company and retain control so you can proceed with your plans to give my polyphase system to the world?" Tesla continued.

"I believe your polyphase system is the greatest discovery in the field of electricity," Westinghouse explained. "It was my efforts to give it to the world that brought on the present difficulty, but I intend to continue, no matter what happens, to proceed with my original plans to put the country on an alternating-current basis."

"Mr. Westinghouse," said Tesla, drawing himself up to his full height of six feet two inches and beaming down on the Pittsburgh magnate who was himself a big man, "you have been my friend, you believed in me when others had no faith; you were brave enough to go ahead and pay me a million dollars when others lacked courage; you supported me when even your own engineers lacked vision to see the big things ahead that you and I saw; you have stood by me as a friend. The benefits that will come to civilization from my polyphase system mean more to me than the money involved. Mr. Westinghouse, you will save your company so that you can develop my inventions. Here is your contract and here is my contract--I will tear both of them to pieces and you will no longer have any troubles from my royalties. Is that sufficient?"

Matching his actions to his words Tesla tore up the contract and threw it in the waste basket; and Westinghouse, thanks to Tesla's magnificent gesture, was able to return to Pittsburgh and use the facilities of the reorganized company, which became the present Westinghouse Electric and Manufacturing Company, to make good his promise to Tesla to make his alternating-current system available to the world.

Probably nowhere in history is there recorded so magnificent a sacrifice to friendship as that involved in Tesla's stupendous gift to Westinghouse of $12,000,000 in unpaid royalties, although Westinghouse personally received only indirect benefits from it.

It is also probable that the failure to pay Tesla these royalties resulted in one of the greatest handicaps to scientific and industrial progress which the human race has experienced. A few years later Tesla, still an intellectual giant far from the peak of his greatest growth, still pouring forth a profusion of inventions and discoveries of first magnitude, equal in importance to his first efforts which put the world on an electrical power basis, found himself without funds with which to develop his discoveries, with the result that many of them have been lost.

Nearly fifty years after this majestic relinquishment of wealth on the altar of friendship, during which time Tesla had had opportunity to see the United States and the world as a whole wax wealthy out of the power he had made available, he was called on to respond, with a speech, to honorary citation by the Institute of Immigrant Welfare. Tesla, then about eighty, was unable to appear in person. He had experienced decades of poverty in which he faced ridicule for his failure to develop inventions which he declared he had made, and had been forced to move frequently from hotel to hotel, owing to inability to pay his bills. In spite of these experiences he developed no rancor toward Westinghouse in whose behalf he sacrificed his $12,000,000 in royalties. Instead, he retained his original warm friendship. This is indicated by a statement in the speech he sent to the Institute to be read at its dinner held in the Hotel Biltmore, May 12, 1938:

"George Westinghouse was, in my opinion, the only man on this globe who could take my alternating-current system under the circumstances then existing and win the battle against prejudice and money power. He was a pioneer of imposing stature, one of the world's true noblemen of whom America may well be proud and to whom humanity owes an immense debt of gratitude."