In 1896, Dow Jones created an Industrial Average of the equity values of twelve corporations that dominated the American stock market. Thomas Edison’s company General Electric was one of those twelve firms.
The other eleven corporations are long gone from the Industrial Average. Some continue to operate as smaller entities. Others merged into larger firms. And others dissolved or were broken up by court order.
Only General Electric remained in the Industrial Average until, last week, S&P Dow Jones Indices decided to expel it. Apparently, GE can no longer be characterized as a dominant American corporation.
So what would Edison, the American entrepreneurial icon who founded GE, say about this downgrade? Ironically, he’d probably wonder how his firm managed to remain in the Industrial Average until now.
That’s because GE was founded by Edison by 1890 to serve as a holding company for a variety of his electricity-related business interests. A hodgepodge of lamps, motors, and other items were tossed together under the General Electric brand name.
Had Edison been alive today, he likely would’ve explained that he always expected his application product businesses to wax and wane over time. He’d then return to his New Jersey laboratory and roll up his sleeves, determined to invent the next generation of applications.
Edison understood that the capitalist process of destruction and innovation would ensure that no application product would be popular forever. He undoubtedly realized that, just as his electric lamps and motors replaced predecessor products that ran on kerosene and steam, his own inventions would eventually yield to more efficient and effective products.
In other words, Edison would’ve likely put aside the existing application products of General Electric, and would’ve turned his attention to the solar panels and wind turbines of the future. And, while doing so, he would’ve relished the opportunity to build a better company than today’s GE.