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The Rise And Fall Of The Pony Express Shows How Info Revolutions Can Turn To Dust May 14, 2000|By Ron Grossman. Ron Grossman is a Tribune staff writer. This article can be found online at: http://articles.chicagotribune.com/2000-05-14/news/0005140210_1_ponyexpress-spirit-and-endurance-riders (copied and pasted to a Word document to avoid advertisements) The Pony Express was the dot-com wonder of the 19th Century. When the company announced it aimed to revolutionize American business by drastically cutting the time it took East Coast entrepreneurs to communicate with their West Coast counterparts, admiring editorial writers and politicians tripped over their own flowery adjectives. Bear in mind that in 1860 speed was measured not in megahertz but miles per hour. Railroads had yet to span the North American continent: It could take a month or more for a letter to get from New York to San Francisco. So it caused a national sensation when Russell, Majors & Waddell, the Pony Express’ parent company, promised to get mail across that same distance in 10 days or less via relays of dare-devil riders on fast horses. Myriad cheerleaders claimed the Pony Express represented such a quantum leap in the way business could be transacted that it was scarcely to be judged by ledger-book standards. It was said to have rendered obsolete elementary benchmarks such as profitability. It was hyped in the same way e-commerce has been proclaimed a New Economy exempt from rules of thumb like a reasonable ratio between dollars invested in a venture and dollars rung up on its register. For the edification of readers stuck in outmoded ways of thinking, the San Francisco Bulletin patiently explained in 1860 that the purpose of the Pony Express was “not so much to make money at the present.” Doesn’t that sound a little like Amazon.com’s operating philosophy? Hollywood has glorified the Pony Express in many a western. But the story is worth retelling in more prosaic terms as a cautionary tale of the economic dreams and bottom-line realities of an earlier age. Mark Twain, who saw the Pony Express riders in action, proclaimed them new American heroes, the likes of a Daniel Boone or Paul Revere. “The pony rider,” he wrote, “was usually a little bit of a man, brimful of spirit and endurance.” In one respect, the venture lived up to advance notices. William Russell, in whose fertile imagination the Pony Express was conceived, said shortly after the ponies started racing back and forth across the great American West: “I was compelled to build a worldwide reputation, even at considerable expense.” Indeed, just like the e-commerce sinkholes of today, the Pony Express’ expenses far outran its income. Its technology wasn’t cheap; horses had to be fed, riders paid and relay stations had to be built and maintained at 25-mile intervals across the Great Plains and Rocky Mountains. The cost of sending a letter kept many consumers from using the service, so during its short lifespan, the company took in only $90,141 in revenue, scarcely enough to cover the cost of acquiring the horses. Within a year, the enterprise had put $1 million in red ink on Russell’s company’s books. He went from hero to goat, and was hauled into federal court by prosecutors belatedly outraged by his sleight-of-hand finances. His principal backer foreclosed, then unloaded the Pony Express to the Wells Fargo stagecoach company, correctly guessing that horseback couriers soon would be made obsolete by newer, faster means of communication. Within 18 months of its nationally celebrated birth, the Pony Express was gone, a victim of the telegraph lines that paralleled its route. Not only was its technology more efficient but its promoters deflected the hostility of the Plains Indians, who had caused the pony riders worry and grief. Hiram Sibley, who brought the telegraph to the West, summoned the chief of the Sioux to a demonstration. When the telegraph sounder began to click, Sibley explained to the chief: “The voice of the Great Spirit is speaking to you.” For the sake of your wallet, recall the story of the rise and fall of Russell’s dream venture when next your broker calls with a can’t-miss e-commerce investment tip. Or, a friend or relative touts a once-in-a-lifetime opportunity to put your money in a cyberspace company that’s going to go zinging down the Internet, turning the business world on its ear with the speed of light. Information revolutions are a tough bet. They’re not self-evident like innovations in the basics of life: food, shelter, warmth. When first a hominoid plucked a radish out of the ground, took a bite and handed it to a buddy, that fellow knew exactly what to do with it. It didn’t take a prospectus to convince cave dwellers of fire’s virtues. Communications breakthroughs, even those destined for world-shaking consequences, aren’t always immediately recognized as such. When Johann Gutenberg printed an edition of the Bible with movable type, he magnified a thousandfold and more the West’s ability to share its store of knowledge through affordable books. Korean printers had hit upon the same innovation several centuries before, and even invented a phonetic alphabet to represent their language in movable type. Yet their breakthrough went unused. No self-respecting author wanted his book to be published in anything but the handwritten Chinese characters traditionally employed in Korea. Even Thomas Edison, the greatest inventor of them all, didn’t always read the tea leaves correctly about his own contributions to modern communication. The motion picture camera and projector he pioneered would eventually take American pop culture around the globe, giving the world a ringside seat on the best and the worst of our civilization. There can’t be a country on the face of the Earth where some movie audience isn’t presently watching images of Jackie Chan or Bruce Willis dispensing karate chops or spraying bullets across the silver screen. Yet Edison thought the commercial value of his breakthrough would be realized by installing viewers in penny arcades, where it was hoped customers would pay for the novelty of seeing pictures that moved. It took the Hollywood moguls–studio bosses such as Adolph Zukor, Harry Cohn and Louis B. Mayer–to realize that the really big money would come from using the movies to tell stories, just like live theater did. Guglielmo Marconi had a similarly tough time convincing his father there was anything to the radio he invented. Marconi made his first broadcasts across his family’s estate in Italy. In one experiment, he sent a message from the far corner of the property, saying something like he would be coming in for dinner soon. “Why didn’t you just send a servant to tell us that?” his unimpressed father asked. Even when it’s crystal clear that a communications breakthrough is at hand, it’s not easy to figure where to put your money. With various inventors racing for the patent office, it can be hard to sort the crackpots and also-rans from the eventual winner. By the early 19th Century, progress in physics had made it apparent that by sending an electric current through a wire, information could theoretically be communicated from one place to another. Translating that proposition into a practical, and thereby commercially viable system, brought forth lots of would-be inventors of the telegraph. One fellow had the bright idea of running 26 wires, one for each letter of the alphabet, from one station to the next. Messages would be sent by turning the current on, for example, first in the “T” wire, next the “H” wire, finally the “E” wire, thus spelling “the.” Samuel F. B. Morse devised a much simpler system requiring only one wire. He proposed to turn the current on and off in long and short bursts of electricity–dots and dashes–the pattern of which would convey the message. Thus dot and a dash would represent the letter “A”, a single dot would stand for the letter “E,” etc. Despite the elegance of Morse’s solution, the crowd of rival systems long kept him from finding financial backers. He barely made a living as a professor at the University of the City of New York, where he received not a salary but a share of his students’ tuition. Not a popular teacher, he had few students. Once, one asked Morse if he could defer payment for a week. “Next week!” Morse said, sadly. “I shall be dead by that time.” “Dead, sir?” the student asked. “Yes, dead of starvation,” Morse replied. Yet within a few decades of that low point, Morse’s telegraph had become the standard instrument of business communication, here and abroad, and the source of enormous fortunes. In fact, so completely did it dominate, that Morse’s corporate heirs could scarcely imagine a time when they in turn would fall victim to an information revolution, just as the telegraph had once vanquished the Pony Express. Alexander Graham Bell had been working on a way to send not dots and dashes but the human voice down telegraph wires. By the 1870s, Bell had perfected his telephone, but feared he would never raise enough capital to make it a moneymaking proposition. Also, competitors were challenging his patent in the courts. One rival, a Chicagoan named Elisha Gray, had filed his version of the telephone with the U.S. Patent Office on the very same day as Bell–Feb. 14, 1876. In a moment of desperation, Bell went to see the president of the Western Union Telegraph Co., whose wires then linked the commercial cities of America. Screwing up his courage, Bell offered to sell his telephone for $100,000. The president of Western Union listened to Bell politely, then put an end to his firm’s moment in the Information Age sun and a crimp in his stockholders’ dividends, to boot. “What use,” he asked Bell, “could this company make of an electrical toy?”
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