Carnegie

by Raymond Lamont-Brown

  Another important document relevant to the time of his move to New York was found in his papers, which speaks volumes about his sense of achievement and his plans for the future. In the form of a letter to himself Carnegie wrote this at the St Nicholas Hotel in December 1868:

  Thirty-three and an income of $50,000 per annum! By this time two years I can arrange all my business as to secure at least $50,000 per annum. Beyond this never earn – make no effort to increase fortune, but spend the surplus each year for benevolent purposes. Cast aside business forever, except for others.

  Settle at Oxford and get a thorough education, making the acquaintance of literary men – this will take three years’ active work – pay especial attention to speaking in public. Settle then in London and purchase a controlling interest in some newspaper or live review and give the general management of it attention, taking a part in public matters, especially those connected with education and improvement of the poorer classes.

  Man must have an idol – the amassing of wealth is one of the worst species of idolatry – no idol more debasing than the worship of money. Whatever I engage in I must push inordinately; therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery. I will resign business at thirty-five, but during the ensuing two years I wish to spend the afternoons receiving instruction and in reading systematically.6

  In contemplating what he thought would be an ideal existence, Carnegie’s letter exhibits a mindset that harped back to his childhood. He emphasised self-improvement to supplement the poor education he had as a child. He wanted to perfect the art of public speaking to emulate his uncle Tom Morrison, whose public utterances had been so much a part of his childhood memories, as well as to get over the main thrust of what he wanted to say. He was keen too, to own a newspaper, like his uncle Tom’s The Precursor.

  Not long ago he was boasting that he was rich, now he was condemning the amassing of money. In 1868 Carnegie started to change his views on money and began to be apprehensive about its power. How could he avoid its perils? By giving it away. But not in a socialistic way like the state handing out welfare willy-nilly; having been poor himself, Carnegie believed he could analyse the needs of the poor and satisfy those needs with donations.

  This letter was simply a statement of intent; he never did go to Oxford, instead pursuing a course of self-improvement culled from omnivorous reading. He joined the Nineteenth-Century Club, then under the directorship of Mr and Mrs Courtland Palmer, which met as a ‘salon’ to discuss topics of the day. As the membership grew, public rooms were taken and Carnegie absorbed the techniques of the orators who addressed the meetings.7 He befriended and cultivated all he could. He took up a study of the politics, commerce, social problems and opportunities of the United States and Britain, while working out how he might stimulate educational opportunities and better the social conditions of the less fortunate. Thus from 1868 he laid down new avenues for his life.

  Philosophically and intellectually Carnegie was filling his days but there was one vacuum in his life: he lacked a romantic companion. Clearly his mother was a domineering woman; her fight with poverty had made her so. She had always run her son’s domestic affairs with efficiency, but now they were ensconced in a luxury hotel, she had more time to indulge her son, often bullying him to take paths she chose for him. Whatever sexuality Carnegie had he seems to have suppressed it. Whatever love he felt was channelled towards his mother; the women he came close to had been treated in a platonic way. Although his Scottish soul was not encased in fundamental Presbyterianism, he was repulsed by the carnality expressed in the verses of his poetic hero Robert Burns. For Carnegie romance was abstract and not sexual.

  There was also another revulsion growing in Carnegie. He was aghast at the web of political improbity and commercial dishonesty of the wolves of Wall Street and the New York legislature. New York was a great money-pot for investors in speculative ventures out West and in money-for-nothing deals. In his autobiographical writings Carnegie made his position clear:

  I was surprised to find how very different was the state of affairs in New York. There were few even of the business men who had not their ventures in Wall Street to a greater or less extent. I was besieged with inquiries from all quarters in regard to the various railway enterprises with which I was connected. Offers were made to me by persons who were willing to furnish capital for investment and allow me to manage it – the supposition being that from the inside view which I was able to obtain I could invest for them successfully. Invitations were extended to me to join parties who intended quietly to buy up the control of certain properties. In fact the whole speculative field was laid out before me in its most seductive guise.

  All these allurements I declined . . . I never bought or sold a share of stock speculatively in my life . . . I have adhered to the rule never to purchase what I did not pay for, and never to sell what I did not own.8

  Insider dealing was not for Carnegie, but between indulging himself with horse-riding in Central Park and savouring such cultural delights as the newly opened American Museum of Natural History (1869), he did nurture his investments. ‘My first important enterprise after settling in New York was undertaking to build a bridge across the Mississippi at Keokuk.’9 The 2,300ft-long bridge with a 380ft span was built by the Keokuk & Hamilton Bridge Co., with Carnegie picking up a large parcel of stock investment. Carnegie was not only responsible for building the bridge, but he would be involved in selling iron for the construction and he would also run trains over it. A key player in this was Carnegie’s Keystone Bridge Co., soon to have a further engorged order book.

  The Keokuk venture led Carnegie to branch out further into a new project to promote designer Colonel James B. Ead’s bridge over the Mississippi at St Louis. ‘This,’ he said, ‘was connected with my first large financial transaction.’10 Again Carnegie secured contracts for the Keystone Bridge Co. and the Pennsylvania Railroad, while his next task was to raise $4 million in mortgage bonds for the project. These negotiations would prove to be a greater moneyspinner for Carnegie than the actual bridge building. With the backing of his Pennsylvania colleagues Thomson and Scott, he approached the chairman of the St Louis Bridge Co. committee, Dr William Taussig, for the commission to raise the funds. He duly won the commission – which would bring him a return of $50,000 if successful.11 Armed with his letters of authority, in March 1869 Carnegie set off for London to enlist the help of the American financier Junius Spencer Morgan (1813–90), now based at 22 Broad Street, London.

  Carnegie made his presentation and Morgan was interested, although his lawyers baulked at some of the details of Carnegie’s prospectus. Wiring the principals in the United States, Carnegie made the necessary changes and Morgan agreed the deal, ‘This was my first negotiations with the banks of Europe,’ Carnegie noted.12 Work went ahead and the bridge was opened in 1874.

  While Morgan was mulling over the deal, Carnegie paid another visit to Scotland. He spent three weeks at Dunfermline and saw his first ‘considerable gift’ come to fruition. This was to result in the town’s first public baths, eventually opened in 1877. Years before, at the instance of his uncle George Lauder, Carnegie had given a subscription to the fund for architect John T. Rochead’s monument on Abbey Craig, Stirling, to patriot William Wallace, the foundation stone of which was laid on 24 June 1861. Carnegie’s mother had been particularly proud to see her son’s name on the list of subscribers; years later Margaret Carnegie presented a bust of Sir William Wallace to be displayed in the monument’s Hall of Heroes.13 Carnegie viewed the monument before he returned to London and Morgan’s acceptance.

  The American sleeping-car business, in which Carnegie had a continuing interest, was steadily expanding. A key player in the field was cabinet-maker turned sleeping-car inve
ntor George Mortimer Pullman (1831–97). At this time Pullman was keen to run his cars on the almost completed transcontinental line operated by the Union Pacific Railroad (East) and the Central Pacific Railroad (West). To do so would be a great coup and several parties were intent on securing such a deal, including Carnegie.

  After carefully considering his options, Carnegie decided that his best bet would be to enter into a formal partnership with Pullman, linking the latter’s interests with the Central Transportation Co. (i.e. the T.T. Woodruff Co.). In the summer of 1869 Carnegie found out that Pullman was in New York and was about to discuss matters with the Union Pacific Vice-President Thomas C. Durant at the St Nicholas Hotel – a meeting to which Carnegie, as an interested party, had been invited. He seems to have engineered an accidental meeting with Pullman on the Carrara stairway of the hotel. ‘Good evening, Mr Pullman!’ Carnegie beamed, charm at full throttle. ‘Here we are together, and are we not making a nice couple of fools of ourselves?’ Guardedly Pullman asked: ‘What do you mean?’ Carnegie quickly explained that by competing against each other for the Union Pacific contract they were queering each other’s pitch. Pullman stopped on the stairs: ‘Well, what do you propose to do about it?’ ‘Unite’, said Carnegie. And then he suggested that the company be called The Pullman Palace Car Co. Carnegie had hit his target.14

  Vanity won the day and a merger was agreed. Carnegie now set about the difficult task of winning over the reluctant executives of the Central Transportation Co. Several of the board believed that Pullman had used their design patents fraudulently in producing his cars. At length a compensation deal was agreed and by 1871 the Union Pacific Railroad had three new directors in Thomas A. Scott, G.M. Pullman and Andrew Carnegie. ‘Until compelled to sell my shares during the financial panic of 1873, I was, I believe, the largest shareholder in the Pullman Company.’15 Thus Carnegie, by ‘accidentally’ bumping into Pullman on the St Nicholas staircase, associated his name and company with one of the most historic of public services.

  Carnegie was never far away from what he called ‘educative influences’ and two people he particularly cultivated were Professor and Madame Vincenzo Botta. Anne Botta presided over a ‘salon’ at their house at Murray Hill, and for decades ‘she wielded a broad, if unobtrusive, influence in the artistic and literary life of New York’.16 Here Carnegie met the literati of the day from both sides of the Atlantic. Botta was Professor of Italian Literature at New York University and was a specialist in the works of Dante; Anne was a poet and her chatter about such men as Edgar Allan Poe, Ralph Waldo Emerson and Washington Irving, who had all formerly graced her drawing room, was a delight for Carnegie, taking his thoughts away from railway carriages and pig-iron. The Bottas looked upon Carnegie as one of their ‘discoveries’, but he learned more from them than they ever did from him.17

  There was some cross-fertilisation between the Botta soirées and the Nineteenth-Century Club organised by the Palmers. Anne Botta had sponsored Carnegie for the club’s membership and Carnegie was thrust deep into the club’s enthusiasm for the philosophical theories of the French thinker Auguste Comte (1798–1857). Generally accepted as the founding father of ‘sociology’ – the study of the structure and function of human society – Comte promoted his own ‘positivism’ and ‘sociocracy’, wherein scientists would monitor the progress of humanity for the common good. At Anne Botta’s in particular, Carnegie learned of the works of Herbert Spencer (1820–1903), the English railway engineer turned philosopher. Carnegie studied closely Spencer’s First Principles (1862) and Education (1861), and incorporated many of Spencer’s ideas into his own life – especially the theory of the ‘survival of the fittest’ (Principles of Biology, 1864–7) and the notion that ‘education has for a chief object the formation of character’ (Social Statics, 1850). Anne Botta, although twice Carnegie’s age, became an important female influence in his life at that time, becoming one of his ‘maternal tutors’, able to give him an intellectual direction that his dominant mother could not.18 With the help of the Bottas Carnegie was able to balance his dealings with the wolves of Wall Street with his socialising with the likes of Charles Kingsley, James Anthony Froude and Matthew Arnold, all of whom would figure in his future life.

  In these early days of the 1870s Carnegie was actively wheeler-dealing his sleeping-car, oil, iron, telegraphy, bridgebuilding and railway interests, interlarding these with negotiating bonds, stock and shares. To these he added land speculation ventures with his friends the McCandlesses and coal mining with Robert Pitcairn. His income was now in excess of $100,000 per annum. Not everything went smoothly. In March 1872 Carnegie, Scott and Thomson were voted off the Union Pacific board because the other board members believed that the three had promoted insider dealing – selling shares in the company that they had bought at privileged prices, and making a substantial profit. In his usual manner Carnegie later professed his total innocence of underhand dealing, blaming Scott for selling the shares; in fact Carnegie was as guilty as the others.

  As the autumn of 1872 approached, America was still in distress, licking its battle-inflicted wounds. The country was now led by one of the nation’s greatest military heroes, the Republican Ulysses S. Grant (1822–85), but although he had been a masterful leader on the battlefield he proved ingenuous in the White House. Even though he had brought the Civil War to a close he was not the right man to bind the nation’s wounds. However, the passage of the Amnesty Bill in 1872 restored civil rights to most Southerners and at this point Carnegie considered it time to reassess his interests once again.

  In his mind Carnegie was formulating a new dictum: ‘Put all good eggs in one basket and then watch the basket.’19 He would later explain to enquirers that this meant that no man in manufacturing in particular achieved ‘pre-eminence in money-making’ by being ‘interested in many concerns’. Out of this he believed that for the future ‘steel was king’ so with careful planning he extended his already established steel interests into his proverbial basket. His visit to the Bessemer works at Sheffield in 1872 put paid to any doubts he might have had that steel was the future.

  On 5 November 1872 the steel firm of Carnegie, McCandless & Co. was founded, with Tom Carnegie, Harry Phipps, Andrew Kloman and a few others as partners. Carnegie held $250,000 of the $700,000 company equity. Their mill was established at Braddock’s Field, some 12 miles outside Pittsburgh, to a design by steel plant genius Alexander Holley.

  Problems arose in 1873 when financial panic gave birth to the United States’ first economic depression which would last until 1879. Financial trouble in Europe made things worse as foreign investors pulled out of American securities. Pressure was put on all parties involved as banks failed and money became tight. One financial casualty of the depression was Thomas A. Scott, Carnegie’s old mentor. He made several requests for Carnegie to help him out from his reserves, and even asked J. Edgar Thomson to speak to Carnegie on his behalf. But Carnegie declined to assist, his excuse being that there were too many people already dependent on him for financial protection, from his family to his steel partners. This refusal, said Carnegie, ‘gave more pain than all the financial trials to which I had been subjected up to that time’.20 Many believed – rightly – that Carnegie had betrayed his old friend, who had given him vital support when he was starting out.

  As the financial problems took their toll on both Scott (who died in 1881) and Thomson (who died in 1874), Carnegie began to suffer from nervous debilitation, but he never allowed circumstances to alter his focus on his targets. Employment in New York reached 25 per cent and soup kitchens flourished. One by one the wolves of Wall Street were growing leaner. Another blow fell when his steel partner Andrew Kloman overstretched himself with investments which he kept secret from his partners. Carnegie made sure that Kloman was declared bankrupt, later buying out Kloman’s shares. Nevertheless Carnegie also suffered financial difficulties as certain of his bonds failed, particularly the Davenport & St Paul Railroad stock, which left him
with lawsuits to settle. These would rumble on for years, but in 1874 Carnegie, McCandless & Co. was dissolved and reorganised as the Edgar Thomson Steel Co.

  New management structures were effected, with Carnegie interfering at every level to secure his own candidates in prime positions. Certainly his most successful appointment was Captain William Jones, late of the Cambria iron works in Johnstown, as general superintendent, ably backed by general manager William P. Shinn.21 On 1 September 1875 the first steel rolled off the line at the Edgar Thomson Steel Co., where Holley’s genius had produced the largest steel mill in the world with every aspect of modern technology reflected. It was a tough job to win orders in the depression, and Carnegie worked hard to raise capital, to which end a trip to London in 1874 was helpful.

  Carnegie enjoyed consorting with America’s steel magnates like Samuel Felton at Pennsylvania Steel and Joseph Wharton of Bethlehem Steel. Several of these steel ‘aristocrats’ looked upon Carnegie as a jumped-up jackanapes, especially when he bombastically boasted that the Edgar Thomson Steel Co. would outshine them all. Back in 1866 the ‘aristocrats’ had formed the Pennsylvania Steel Association, later renamed the Bessemer Steel Association. Their intent was to purchase, administer and allocate for large fees steel patents in America. By 1877 Carnegie had enough influence to become one of their number, although he grumbled at the royalties he had to pay for the privilege.

  Weathering market, employee, partner and financial difficulties, by 1878 Carnegie had seen the Edgar Thomson Steel Co. grow to a capital stock of $1,250,000, Carnegie’s $741,000-worth making him the majority partner.22 As many of the wolves of Wall Street and others were being ruined by the depression, Carnegie became ‘the richest man of his time’.23