How the Dow's Oldest Company Got Started
Aug 26th 2013 11:34AM
Updated Aug 26th 2013 11:36AM
On this day in economic and business history...
The Dow Jones Industrial Average has 30 components, and all but one can trace their origins to a company founded in the United States after the American Revolution. The one exception is Merck , one of the world's largest pharmaceutical companies. Merck was born when Friedrich Jacob Merck bought the Engel-Apotheke ("angel apothecary," or pharmacy) in Darmstadt, Germany, on Aug. 26, 1668. Pharmacist Merck thus began a family drug business that would stretch all the way to 1891, when descendant George Merck emigrated from Germany to the U.S. and established Merck & Co. in New York as a foreign subsidiary of the family's pharmaceutical-chemicals business.
The 1891 subsidiary prospered for a time, but it fell under U.S. government control during World War I, when German-owned companies were seized to prevent domestic assets from flowing to the Kaiser's war effort. After the war, Merck was re-established under American corporate governance and soon taken public, and it reclaimed its position as one of the leading companies in a relatively unformed industry. It was not until 1942, when Merck's manufacturing operations were tuned to produce mass quantities of penicillin, that it moved toward becoming a truly modern pharmaceutical company -- nearly three centuries after a German pharmacist established the Merck name in a far different "pharmaceutical" environment.
Merck's transition toward its present form was sealed ion 1953, when it merged with Sharp & Dohme one of the early major pharmaceutical manufacturers. Merck scientists would go on to create a number of groundbreaking vaccines and treatments, and it became the Dow's first pharmaceutical company in 1979. Today, Merck is the fourth-largest pharmaceutical company in the world , according to Forbes, but that ranking may change if the company's top scientists come up with another hugely important new drug or three by next year.
Good news, everyone!
Philo Taylor Farnsworth, inventor of the first all-electronic television system, received the first modern television technology patent on Aug. 26, 1930. The technical wunderkind had been pondering and prototyping the technology for in-home moving pictures when he was a 16-year-old in high school, and he demonstrated the first working system in 1927 at the age of 21. This system had been inspired by Farnsworth's Midwest farm upbringing, which exposed the boy to the back-and-forth sensory experience of plowing a field. The horizontal "scanning lines" of cathode-ray television tubes are artifacts of this visual construction.
The early work Farnsworth scratched out at 16 became crucial in the patent battle to follow, as a competing inventor named Vladimir Zworykin had applied for a similar patent in 1923, which later became the property of radio giant RCA. Since Farnsworth's chemistry teacher was able to reproduce the teenaged Farnsworth's technical drawings -- created a year before Zworykin's application -- in court, Farnsworth won the case and forced RCA into royalty payments. However, since television's development was largely forestalled until after World War II, Farnsworth never received much in the way of royalties. By the time the war ended, his patent was already 15 years old.
Today, there are more than 2 billion televisions in use around the world. Most are now manufactured in Asia by South Korea's Samsung and LG Electronics and Japan's Sony , which have consistently claimed first through third place in market share in recent years. Philo Farnsworth's name and penchant for invention live on for fans of Futurama, who know to expect "good news, everyone!" when Professor Hubert J. Farnsworth walks into the scene.
Steaming into history
The first patent ever granted for powered transportation was awarded to steamboat pioneer John Fitch on Aug. 26, 1791. This design, which had been successfully tested in 1787 on the Delaware River in sight of delegates from the Constitutional Convention, was not the first steamboat ever created, but the test was successful enough to win allies and even investors from the ranks of America's founding fathers. Examiner.com's Karen Holt reflects on that 1787 trial:
Leaving their tasks at hand for a brief respite in the cooler air along the river, the delegates lunched on meat pies as they beheld a rumbling machine bobbing on the river before them boasting twelve oars and belching black smoke from its chimney. Delegate James Wilson took a great interest in Fitch's technology and became part-owner of the company.
Fitch's arrival and the timing with the delegates became a match made in heaven. Though there is no way to know the effect Fitch and his steamship personally had on the framing of the Constitution, a 31-year old Philadelphia merchant by the name of Tench Coxe, though not a delegate himself, picked up the gauntlet and ran with it. Determined to influence the manner in which the Constitution was written with respect to present and future inventors, on May 11, he addressed some 40 members of the Society for Political Enquiries in the home of Benjamin Franklin. James Madison was one of those who became caught up in the mesmerizing vision Coxe shared. Coxe's efforts paid off and in August, Madison and Charles Pinckney of South Carolina addressed the Convention regarding the addition of Coxe's idea in the Constitution. Power would now be given to Congress to "issue patents, reward technological advancements, and promote "commerce, trades, and manufactures."
Unfortunately, Fitch's trial run proved to be a higher point in his steamship-entrepreneur career than the patent itself. Fitch won the patent claim over a rival steamboat inventor, but the patent only covered Fitch's particular design. The same day the Patent Commission granted Fitch his patent, it also awarded patents for steam-engine innovations to his rival and two other inventors. The lack of broad monopoly protection for this largely untested mode of transportation sent Fitch's investors scurrying. Fitch himself went to France to try again but had the exquisite bad luck to arrive shortly before the notorious, neck-chopping Reign of Terror. The promise of a profitable steamboat business was not fulfilled until Robert Fulton began plying the waters of New York in 1807.
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The article How the Dow's Oldest Company Got Started originally appeared on Fool.com.Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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