May 14, 2022
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How much money did Alexander Bell need to develop the telephone in today’s dollars?

The original telephone was very simple by today’s standards but it was a very complex machine for its time. None of the obvious technologies such as the microphone or speaker were figured out back then. To put that in perspective, no one knew how to send an audio signal through copper wires. Worse, there was no audio signal! The telephone was truly a jaw-dropping technology when it was revealed to the public.

The first successful call was made on March 10 of 1876 by Mr. Bell in which he asked Mr. Watson to “come to see him”. Bell was not the first person to think or dream of the telephone. There were several competitors and competing patents and partially successful attempts before his success. Elisha Gray was Bell’s main competitor and was a major supplier to Western Union which was a big “IT” corporation.

Today, high-quality microphones are everywhere and cost a fraction of a dollar. Of course, we are not talking about fancy microphones with extreme dynamic range. The first microphone had a very different theory of operation and was called Liquid Transmitter. A liquid transmitter is composed of a flexible diaphragm with a conductive pin attached to its center that is in close contact with a conductive liquid. Vibrations from the plane are transferred to the pin. These vibrations change the resistance between the pin and the liquid.

The pin and the liquid are in a closed circuit with a receiver. Changes in the resistance due to vibrations cause changes in the electrical current in the circuit. This changing current causes a piece of metal to vibrate in the receiver and speak!

Graham Bell’s original notes about the telephone. Source: Library of Congress

Let’s list the parts that went into the original telephone and investigate how much each cost in today’s dollars.

The important parts and subassemblies that went into the original phone.

The electric wire was a critical piece of the telephone. In the 1870s, copper was $7/lb which is equivalent to ~$200/lb of 2022 US dollar. Copper is much cheaper than that today thanks to technology. The battery was probably the most expensive piece of Bell’s telephone. He must have used more power and more expensive batteries for his large demonstrations, but the first few successes did not require them. The rest of the parts were not particularly rare or difficult to manufacture. The smaller batteries used for his first prototypes should have cost about $200-$300 in the 1870s money which translates to roughly $10,000 today. Batteries were not as common and cheap as we find them today.

It took Bell roughly five years (1871-1876) to build the telephone with the help of his partner, Watson. We can think of them as two co-founders who started a company today. It must have taken them much more than $10,000 worth of today’s US dollars to build their first prototype because things break and we don’t get things right the first time. Let’s assume that it took ten times that, $100,000. We still haven’t included the hours they spent on the project. Today, in the eyes of venture investors, it cost ~$200,000/year two pay two technical founders which is equivalent to $1MM total for a 5-year project.

So overall, in today’s dollars, it took Bell and Watson $1.1M to develop the telephone. That is it! This amount of money is incredibly small compared to what most startups raise these days. Software startups raise millions of dollars for an app or website let alone hardware companies that are a lot more capital-intensive.

Here is the important question: Is developing a fundamental technology more expensive these days or a quantum leap does not necessarily require tons of capital? These are the questions that I’ll try to answer in a series of studies about major breakthroughs in technology.