According to the History Channel site, the Pinkerton National Detective Agency “first made its name in the late-1850s for hunting down outlaws and providing private security for railroads. As the company’s profile grew, its iconic logo—a large, unblinking eye accompanied by the slogan ‘We Never Sleep’—gave rise to the term ‘private eye’ as a nickname for detectives.”
Other sources, however, say that the “eye” in private eye is actually a phonetic joke on the letter “i,” as in the initialism “P.I,” short for “private investigator.”
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