But home building would hardly be Isaac Rice’s sole focus. He investigated a multitude of innovative devices that used electricity, and invested in any of them that seemed to hold promise of growth and profit. One of these was a revolutionary form of communication that had been developed in Europe and which Rice believed, once again correctly, would change the world. Through the summer and fall of 1899, he recruited investors and made arrangements for trained technicians to sail across the Atlantic to set up operations in the United States.
In November, Rice was ready to announce his new venture. Articles of incorporation were filed in New Jersey for a corporation capitalized $10,000,000, to be known as the Marconi Wireless Telegraph Company of America. Rice had licensed the Marconi patents, and also acquired the exclusive rights to operate in all American possessions and Cuba. “The incorporators are Guglielmo Marconi, London; Isaac L. Rice, August Belmont, and Clement A. Griscom, New York; and Robert Goodbody, Paterson, N. J.”
Rice also announced factories and headquarters would be established in New York. “We shall be in active operation just as soon as it is possible to find suitable quarters and build the machinery. Special attention will be given to the manufacture of wireless instruments with which to equip ships that they may communicate at sea. There will be large orders for establishing communication between points where it is not practicable to maintain cables. We expect to equip the signal and life-saving stations along the coast with the wireless system, that they may warn approaching vessels in time of fog or storm. The uses to which the wireless system may be put are almost unlimited. There is an immense field before us, and the system is as yet in its infancy.”16
Rice seemed prescient yet again. On December 12, 1899, for the first time, a wireless signal was sent across the Atlantic, from Cornwall, England, to St. John’s, Newfoundland, and Marconi could not wait to proclaim the feat to every reporter he could find. The resulting spate of front-page stories hailing the event could have been anticipated, but there were a surprising number of in the business community who did not greet the news favorably. One of the most distressed was Edward Moeran, the Marconi Company’s senior counsel. When he heard of Marconi’s announcement, he exclaimed, “I wish the fellow had been hanged first. What an ass that man Marconi is. He talks too—much.”17 Moeran’s problem was not the impact on the company’s stock, which promised to soar, but on everyone else’s. “Of course, it goes without saying that this is one of the most important things that has ever happened in the history of mankind. [But] stocks will drop like a stone on Monday. It means doom of everything except wireless telegraphy and signaling. I wouldn’t be surprised if there is a drop of 100 points in Western Union Cable stock.”
Although Moeran’s pessimistic scenario did not play out, Marconi’s invention encountered surprising resistance when plans to build relay stations were introduced. In early 1903, a consortium tendered an offer for the company, which was accepted. Many of the original investors stayed on as stockholders in the new company. Belmont and Rice did not. Although terms of the buyout were not disclosed, it is reasonable to believe that both men made a good bit of money on the deal. In any event, by 1903, Rice had fully divested his interests and moved on.
But he was hardly idle. In addition to the Marconi Company, he was also president of a concern to install street lighting, another to manufacture automobile tires, and was a prominent stockholder in as many as a dozen other firms. Rice spent a good deal of time promoting chess as well, as an officer of chess associations, a referee in international matches, and a promoter of a “cable tournament,” begun in 1896, in which an American team competed against a team from Great Britain, ten players each, not face-to-face, but rather with moves transmitted by telegraph. (Wireless communication was not considered feasible to transmit the moves accurately.) Rice was particularly pleased in March 1899—the same month he sold out to the Whitney group—when the American team, which had lost in the previous two years, bested the British six points to four.
All his myriad interests notwithstanding, however, beginning in mid-1899, Isaac Rice’s primary focus became submarines.
_____________
*Spencer, not Darwin, coined the phrase “survival of the fittest,” which Rice ridiculed as encouraging the very sort of behavior that would doom the human species rather than advance it.
†He was inexorably drawn to Julia as well. Within ten years, she had borne them six children.
‡The first true battery had been fabricated by Alessandro Volta in 1800, but it had little power and an extremely short life span. Volta had found that certain fluids could conduct a continuous stream of electricity when in contact with a set of two specific metals, such as copper and zinc. A number of experimenters tried to compensate for the shortcomings of Volta’s invention—a film of hydrogen bubbles formed on the copper, and tiny short circuits degraded the zinc—but none of them found a way to extend battery life to make the device practical for industry. In 1859, however, a French physics professor, Gaston Planté, discovered the lead-acid process, which could be used to create a battery that could be recharged. Other developers, such as Payen and Brush, attempted to adapt this process for commercial application, and the chloride accumulator was the eventual result.
§Cornering the market on storage batteries did not keep Rice from the chessboard. In 1895, while experimenting with a series of moves called the Kieseritzky Gambit, Rice discovered a variation in which a knight is sacrificed. To tout the Rice Gambit, as he modestly dubbed it, Rice paid some of world’s most eminent players, including José Raúl Capablanca, Emanuel Lasker, and Mikhail Chigorin, to analyze his discovery—favorably, of course. He also sponsored chess tournaments with the Rice Gambit required in the opening. He ultimately spent some $50,000 in promotion.
¶Villa Julia was to be torn down in 1980, but it was saved by Jacqueline Onassis as a historical site. It has since become the decaying home of Yeshiva Ketana, an ultraorthodox Jewish boys’ school.
CHAPTER 17
A NEW SKIPPER
Rice’s practical introduction to undersea travel had occurred in mid-1898, likely on July 4, when he had been a passenger on one of the Holland’s test runs. His interest, however, had been piqued some months earlier when both Holland and Lake had purchased Exide batteries; Holland to power his boat when submerged and Lake to power internal electrical systems.
To that point, Rice had not seemed especially interested in waterborne vessels. Electric Launch was a solid business, but he had done little to promote luxury pleasure boats, perhaps because for surface craft, despite the noise and smoke, both steam and hydrocarbon power held decided advantages over batteries—they had a greater range and added less weight. After his run in the Holland, however, Rice appeared to realize that for boats traveling under the surface rather than on it, battery power would be indispensible. In addition, submarines, precisely because they had to that point experienced so much difficulty in gaining official acceptance, were precisely the sort of undervalued asset for which Rice was always on the look-out.
The first decision he needed to make was choosing which of the submarine applications he thought would make him the most money. At that point, both Lake and especially Holland were short of capital and faced with significant expenditures to upgrade their boats. Although salvage seemed to have obvious profit opportunities, Rice must have decided warships held the greater long-term potential because he made no attempt to invest in Simon Lake’s company, but instead turned his sole focus to the Holland.
He began in late 1898. Rice had kept abreast of the company’s activities, and knew that Holland and E. B. Frost, frustrated by the navy’s intransigence, had decided to use the winter to upgrade the boat, although the cost was beyond the company’s resources. He contacted Frost and offered to fund the modifications planned for the boat in dry-dock. These were extensive, involving the removal of much of the stern section. Whether this initial investment was structured as a loan or in return for partial owne
rship is not clear, but within months the question would be rendered moot. Rice’s choice of Frost for his entrée into the company was not arbitrary—for what Rice had in mind, it was better to work exclusively through the businessman and not through the inventor.
On February 7, with repairs on the Holland still under way, and even before the sale of Electric Vehicle to the Whitney group had been finalized, Rice created the Electric Boat Company, incorporated in New Jersey and capitalized at $10,000,000. Rice had also solidified his holdings in the Electro-Dynamic Company, Frank Cable’s employer, although the degree of his participation was not yet a matter of public record.
With Electric Boat as an umbrella corporation, Rice proposed acquiring the John P. Holland Torpedo Boat Company as its major subsidiary. Part of the deal was that, in return for a large but noncontrolling block of preferred stock, John Holland would assign all of his submarine patent rights, including any patents he held in his own name, to the new venture, with Isaac Rice as president of both the parent and the Holland subsidiary. Holland would be named general manager of the subsidiary, with E. B. Frost again as secretary-treasurer.
Holland consulted with Frost, who he still viewed as a partner and friend, and with Frost’s enthusiastic recommendation, took the deal. For agreeing to part with his patents, Holland has been ridiculed by historians, one of the kinder characterizations describing him as “an innocent in an era of carnivorous capitalism.”1 But it is easy to see why Holland felt he had no choice. He had been toiling with his invention for more than two decades, had been acknowledged as one of the two most knowledgeable submarine men in the world, was acutely aware that no navy would be able to successfully compete in future wars without his product, and had still been unable to make any significant dent in the naval bureaucracy. In Isaac Rice, he saw a man who was willing to invest whatever amount of money was necessary to see the project through to a successful conclusion, but, even more, had demonstrated that he could go head-to-head with the most rapacious speculators on Wall Street and emerge victorious. Holland, in agreeing to give up rights to his invention for stock was, then, no different from any modern day entrepreneur who is forced to sign away most of his company to obtain venture capital. Still, if Holland had researched Isaac Rice a bit, he might have learned that Henry Morris and Pedro Salom had felt precisely the same way before the electric automobile had almost literally been yanked out from under them.
The following month, at virtually the same moment Isaac Rice was selling Electric Vehicle to the Whitney group, John Holland embarked on a pivotal sea voyage, but this time on the surface rather than under it, and the vessel was a passenger ship, the St. Paul, not a submarine. His destination was Ireland, his first visit home in a quarter century. Although newspapers noted that “it is reported the British government is desirous of securing a submarine boat,” and that “Holland may sell his boat to England,” the actual purpose of the trip, why Holland would agree to leave the United States at this crucial moment for himself and his company, when it had just been acquired by the sort of wealthy, committed investor he had been seeking for decades, has two quite distinct versions.2
In one account, the trip was not prompted by business at all. After the November 1898 test, Holland was described as “a tired and discouraged man,” that “the buoyant enthusiasm of earlier months had waned with each new setback.” Facing bankruptcy, “E. B. Frost, concerned about the health of his friend, urged Holland to plan a voyage to England and to visit his native Ireland.” Only after he was rested and once again fit, “if his energies permitted,” should Holland even consider a side trip to continental Europe “to assess the foreign market for his submarine boats.”3
It would be early May before Holland returned. As he stepped off the boat, he was met by reporters who clamored for the details of his dealings with the British and the identities of the other foreign powers that had decided to create submarine fleets. Holland’s response to their badgering was testy. “There is not the slightest foundation for such a statement,” he grumbled, “because the British Government was not asked to buy the boat, and could not get it if it wanted to do so. The truth of the matter is my health was run down, and I thought if I took a vacation at my birthplace, in Cork, Ireland, it might do me good. I went abroad two months ago with my family, but I seemed to get worse there, and therefore I returned.”
Holland did admit to some professional activities, albeit with unsatisfactory results. “While on the other side I went to London, and of course met marine engineers. They all appear to be opposed to submarine boats, because they know nothing about submarine navigation. They have never been below the surface of the water. Still, they undertake to condemn a mode of travel which is perfectly feasible . . . their ignorance on such matters is simply ridiculous.”4
He did not expand on those comments, which could have been instigated either by frustration at finding no interest by foreign governments or simply because he could not abide what he saw as the stupidity and shortsightedness of others. He certainly was firm in the belief that he was the only man capable of building an attack submarine. Holland knew that Simon Lake was building a more sophisticated craft, but not one to challenge his own as a warship. “The Argonaut is, I think, a little ahead of its time,” he allowed. “It will prove of great service in submarine engineering work, and the locating of wrecks.”
The other explanation of Holland’s two-month hiatus is darker, and given both the identity of the players and what transpired during Holland’s absence, it seems closer to the truth.
In this narrative, Isaac Rice and E. B. Frost had been in contact with each other and perhaps were even negotiating, ever since Rice’s trip aboard the Holland. Rice had waited to make a move for the company because Holland, the headstrong and stubborn perfectionist, would rebuff any effort to shift toward a more commercial footing. Only when the Holland Torpedo Boat Company seemed certain to run out of money did Rice, with Frost’s support, step in and offer to fund the refit. At the same time, Frost suggested Holland take a sojourn abroad, to get him out of the way. After the deal was consummated and Holland’s patents had been safely transferred to Electric Boat, Frost’s entreaties became more urgent and he did finally convince the inventor to go abroad for a rest so that he may return prepared for a major effort to perfect the boat under the new ownership. After the St. Paul sailed, with Holland out of the way, Frost and Rice moved quickly to shunt him aside.
According to Frank Cable, as early as October 1898, he had attempted to make changes in both Holland’s method of ballasting and piloting the craft when submerged, changes Holland doggedly resisted until finally Cable succeed in demonstrating that they worked. But the biggest disagreement was in how to orient the propellers and rudder, the very repair that Rice’s $30,000 would go to fund. Although Holland eventually agreed to move the rudders to the rear of the propeller, if Cable is to be believed, Holland had likely established himself to Rice as headstrong and potentially difficult to work with.
Although Cable’s assertions must be taken with some skepticism, by the time Holland returned from Europe, some significant changes had taken place. For one thing, Rice had the boat removed from New York Harbor and towed to a more private facility ninety miles away in New Suffolk, at the east end of Long Island, on Little Peconic Bay. The new location provided a good deal more privacy from reporters and also a less congested waterway in which to conduct tests. (The Marconi Company, in which Rice would invest later in 1899, would shortly thereafter build a receiving station in nearby Sagaponack, on Long Island’s south shore.) In New Suffolk, Electric Boat rented a dedicated storage and maintenance facility, and also leased accommodations for draftsmen, engineers, and crew.
When Holland returned to the United States, he was instructed to relocate east and to work on the boat through summer and fall. Frost lost little time in letting Holland know that his role in the company had changed. For one thing, Frank Cable would be the new captain of the Holland. Holland would no long
er be allowed to pilot the boat because, Frost insisted, Electric Boat could not obtain insurance on his life that would cover underwater mishaps. While there is no specific evidence to refute this assertion, there is some question as to its veracity, as Simon Lake was able to obtain that very coverage for himself. Frost also informed Holland that as their focus had shifted increasingly to sales, he was not to be the general manager of the Holland Torpedo Boat Company, but rather its chief engineer, a position for which he was given a five-year contract.
The demotion and reassignment of John Holland marked the beginning of a process that would see him demeaned, marginalized, and eventually forced from the company he had dedicated much of his adult life to create. “It would be a dirty campaign of slights, demotions, petty insults, and dubious legalities exploited to the hilt . . . with scant regard for appearances or sentiment.”5
The first salvo had been fired while Holland was in Europe. Although Holland had signed over his American patents to Electric Boat, through either an oversight or the unwillingness of Frost and Rice to risk inciting him enough that he backed out of the deal, Holland still held the rights to patents he had taken out in Great Britain, Germany, Sweden, and Belgium. Holland, however, was unaware that he retained so much leverage. It is not impossible that keeping him from finding out had figured prominently into Frost’s urging Holland to leave the country.
Marketing the submarine to European navies was a key to Electric Boat’s ultimate success, and unless the company could gain control of the foreign patents from their unwitting owner, sales in these nations could be blocked. But although Holland held patents, Frost wrote the checks. The company’s financial straits had precluded paying taxes in these nations, and five years’ arrears had accrued. With Rice’s money in the bank, Frost paid off all the back taxes and he did so with Electric Boat funds, and thus established at the very least a lien on those patents. If Holland learned the true state of things and decided to dig in his heels, Electric Boat could simply bring suit and Holland, who lacked the funds to reimburse the company, would lose title in court.
Going Deep Page 20