With little fanfare, Western Union sent its last telegram a couple of weeks ago. The last few that were sent were hardly of earthshaking significance; in fact, most of them were sent by people trying to be a footnote in history as the originator of the last such message. This situation was a far cry from 150 years ago when Western Union sent its first. That little combination of dots and dashes was a harbinger of a new era.
Most of us grew up or at least spent most of our development in an era when virtually universal telephone service was taken for granted. In recent years, long-distance rates have fallen precipitously, and the Internet has become a primary source of instantaneous and inexpensive communication around the globe. In such an environment, it is difficult for us to imagine just how revolutionary the telegraph really was.
In 1856, when Western Union sent its first telegram, there were very active stock exchanges in numerous major cities across a sprawling new country, only 80 years from its founding and in the midst of a cosmic struggle that would erupt into Civil War five years later. Stocks often traded at quite different prices on the various regional exchanges as transactions were based on local supply and demand with no knowledge of what was taking place a few hundred miles up or down the Atlantic Coast or just over the mountains.
Once the telegraph came into widespread use, this situation changed radically. The ability to communicate quickly (by the standards of the day) across large geographic areas brought arbitrage to the markets. Savvy investors who could buy in one market and simultaneously sell in another narrowed the price gaps drastically and, in essence, created a national market (as an interesting aside, noted British economist John Maynard Keynes made a fortune decades later by engaging in similar practices with currencies using one of the first international telephones). As a result, the US stock market was essentially concentrated in New York, and the other exchanges ceased to be significant. The emergence of a single dominant center of financial activity was an early, but entirely essential step in the journey toward today’s global monetary system in which trillions of dollars routinely change hands in the blink of an eye.
The telegraph also facilitated other fundamental changes which shaped the continent. The development of the railroads and the settlement of the American West would have been much more protracted and difficult without this communications network. Even the American Industrial Revolution owes much of its initial strength to the supplier and customer linkages made possible by the telegraph.
Simply stated, the telegraph was the Internet of its day. Like the Internet, it accelerated many facets of economic activity and fostered efficiency gains that were unimaginable in a prior era. It may be obsolete and an anachronism in the modern world, but it facilitated a process that ultimately led us to a vast global communications system. Its demise is part of the inevitable and inexorable flow of technology, the process that economist Joseph Schumpeter long ago dubbed “creative destruction.”
Just as the telegraph came to be essential some time ago and now is quietly fading away, the same will occur with subsequent generations of new and seemingly indispensable innovations. More than likely, however, the life cycle will be far less than 150 years. The speed with which traditional cameras were supplanted by digital cameras only to be upstaged by photo-swapping cell phones is a case in point. The rapid integration of audio and video delivery mechanisms is another. As remarkable as modern communications are, we are still in the early stages of a long and fascinating trek. Unlike those who sent telegrams (and took advantage of the fact that punctuation was more expensive than words), we cannot and should not say “STOP!”