Herbert Hoover
Page 9
The foreign troops dispatched to quell the Boxers inflicted a Carthaginian peace, plundering, pillaging, and raping in the wake of the fleeing Boxers. The assets of Hoover’s company were seized by an influx of Europeans and Russians scavenging the spoils. The Russians occupied the mines; the Chinese themselves ripped up the railroads; even American soldiers joined the looting. China became a grab bag for looters. Hoover’s mining infrastructure lay in ruins, and he prepared to depart for America, wishing China good riddance. However, Chang, seeking to regain favor at court, operating on the principle that self-preservation constitutes the first law of survival, approached the American with a deal that would salvage Chinese and British interests and provide leverage to regain title and possession of the precious Kaiping coal-mining operations. Chang proposed deeding the property to Hoover, as the representative of Bewick, Moreing, a British company, which would give him standing to sue in British courts to recover the assets from the predatory European armies. Chang correctly perceived that the Europeans would not respect the rulings of Chinese courts but would bow to decisions handed down by British courts. Further, Chang and Hoover reasoned, nations would be less likely to seize by force property that had the imprimatur of British protection. Moreing and Hoover each received substantial shares of stock, giving the British firm the controlling interest in the property. Later, the initial deed to Hoover was altered to become a lease, because under Chinese law, imperial property could not be sold to a foreigner. Hoover’s share of the stock amounted to $50,000. In return, after raising investment funds in Europe, he would return to China as director of the mines, the processing plants, and the transportation network, for which he would be paid generously. Hoover’s negotiations rose above the realm of mining to international diplomacy. He had to deal with difficult personalities, national pride, and competing interests, both to protect Chinese rights and to ensure the profitability of his own company. The deal required patience, perseverance, tact, imagination, and moxie.37
After visits to Europe and America, Hoover returned to China in early 1901 as director of the Kaiping mines and their processing and shipping facilities. En route to resume his duties in China, he dropped off Lou for an extended vacation in Japan. He pieced together the sprawling enterprise from the fragmentation that had wrenched it apart in the wake of the Boxer uprising. He imported American engineers and machinery, raised wages, minimized the squeeze but again failed to eliminate it, and streamlined production. The railroads were rebuilt, the port improved, and the cement plants upgraded; steamships plied the oceans with exports, and the efficiency of the enterprise returned it to a state of profitability, with corresponding rises in the value of the stock on the London exchange. The company’s properties were sprawling, involving much more than coal mining. It manufactured cement, operated canals, and owned cargo vessels and a railway, and employed twenty-five thousand men. Hoover constructed a new harbor and new mine shafts and modernized the mining techniques. The company began to reap generous profits.38
Chang demanded a share in the increased profits and Hoover negotiated a compromise that raised his income and helped the suave Chinese official save face at court. A second board of directors, comprised entirely of Chinese nationals, was created to receive a greater share as profits improved and was authorized to exert a voice in policy. Unfortunately, the newly attractive stock drew foreign capital that competed with Bewick, Moreing for a controlling interest. By September 1901, the financial power of the firm had passed from Moreing and his British capitalists, who owned 38 percent of the debentures issued in mid-1901, to the Belgians, who owned 62 percent. Their Far Eastern representative, Émile Francqui, was a military man turned financier, closely connected to Belgian king Leopold II. During 1902 there was a struggle for control of the company and the Belgians gained the upper hand. Bewick, Moreing lost control of the board and Francqui traveled to China to implement a new order. Hoover could remain as mine director, he was told, but his American engineers would be replaced by Belgians. All policy decisions would be issued from Brussels. This was anathema to Hoover, who once again packed to return to California, which he planned to do ultimately, anyway. In order to retain their prized engineer, Bewick, Moreing offered him a junior partnership at the London home office with a 20 percent interest in the firm. Recognizing that this meant security, Hoover accepted. He was only twenty-seven when he left China, yet he was already a well-traveled engineer. He had been at the nexus of earthshaking events, had barely escaped with his life, and had seen China as few foreigners had. No wonder he titled the first volume of his memoirs Years of Adventure. As for Émile Francqui, the American would meet the autocratic Belgian under entirely different circumstances about fourteen years later. Francqui would ask Hoover for a favor—a big favor—and Hoover would perform it.39
The two-headed board of directors never worked well. The Europeans did not take the Chinese seriously and haughtily ignored them. Chang had two supporters on the European board, Hoover and Edmund de Wouters, a Dutchman, who argued that the two-board system had been negotiated in good faith and had sound legal standing. Arrogance would estrange the proud Chinese and could incite legal trouble. In 1903, Chang, now an aging man, sued in British court, accusing the European board of violation of the contract he had signed with Hoover. As a member of the board, Hoover became a party to the suit, as did all board members. Chang did not accuse Hoover personally of doing anything wrong, and at the trial Hoover testified in support of Chang’s position. Although in later political wars charges were trumped up to accuse Hoover of cheating the Chinese, the truth was quite the contrary. Not only had Hoover defended Chinese sovereign rights; he had saved Chang’s life during the Boxer uprising. Theodore Hoover explained that the best evidence of his younger brother’s good faith was that Chang “made Herbert Hoover the guardian of his precious son after all the fury and contention of the legal battles was over.”40
The Hoovers arrived in London in early November of 1901 and Bert quickly acquainted himself with the other partners. Two partners, Thomas B. Bewick and Edward Hopper, who had been Hoover’s boss in Australia, had retired. The new firm included Charles Algernon Moreing, who owned a 50 percent interest, Hoover, with 20 percent, T. W. Wellstead, allotted 10 percent, and A. S. Rowe, the company accountant, with 20 percent. Hoover had to buy into the partnership for $40,000, but his net worth at the time was approximately $750,000, though not all of it was liquefiable. Moreing was involved in the business and financial end; Wellstead was a mechanical engineer; and Hoover was the technical engineer and became the company’s roving troubleshooter. The firm managed some twenty mines worldwide and pursued new properties to develop, part of Hoover’s job. The American remained a partner for about seven years, until he left to become an independent consultant. Bert worked primarily in the field and spent only about one-tenth of his time in London, unlike his London colleagues. While connected with the firm, he circled the globe five times by steamer. Sometimes he was away for months at a stretch; once he was absent for nearly two years. Still, the rising engineer managed to return to America every year except one until 1914, and his heart remained in his homeland. As a globe-trotting expert evaluator and investor, Hoover opened offices in San Francisco, New York, London, Paris, St. Petersburg, Melbourne, Johannesburg, and Rangoon. His informal office was wherever he happened to be, even a tent in the jungle or the desert. The Stanford alum’s associates marveled at his unrivaled ability to keep track, almost solely by memory, of his business in Colorado, California, Australia, China, Egypt, Europe, the Near East, South Africa, India, Russia, Ethiopia, Scotland, Korea, and Canada. Bert’s assignments required a mixture of engineering skill, financial acumen, and the ability to deal with people, including other engineers, employees, stockholders, the press, and even the general public. The American did much of his paperwork aboard ship. At each port he collected cables; he replied to them while at sea, dispatching his responses at the next stop. He maintained his diverse reading
habits, consuming world literature at every opportunity and setting aside two hours nightly for pleasure reading, a habit he retained for the remainder of his life, including during his presidency.41
Hoover personally managed twenty mines, most of them in Australia. The first extended voyage of Hoover’s partnership was to his old domicile on the island continent. By then, the gold fever had receded; many of the mines had been exhausted and shut down. Hoover was concerned about mining gold as the pillar of the company’s income and persuaded his partners to diversify into base metals, which produced more consistently over a longer period and ultimately yielded greater profits. “Taking the world as a whole,” Hoover said, “the gold produced costs more than it sells for.”42 Nonetheless, Hoover’s rate of success with gold was higher than that of any other mining engineer of his time. In his gold mines, he drilled deeper and found veins of lower quality, yet by implementing the most modern technology and employing the best workers, he extracted greater profits from them than from the richer veins near the surface. His men trusted him implicitly and became his fanatical followers. “Completely unknown to the public at large, he was the most famous of all in his own field,” biographer Eugene Lyons writes. His men worshipped him. “The best of this human crop was to follow him into his new career as they had followed him from Australia to China, from China to Russia, and back again,” Lyons explains.43 One Australian gold mine demonstrated the efficacy of Hoover’s strategy. The mine produced 1 million tons of metal worth $18 million after previously having lost nearly $1 million under other management. Nonetheless, the backbone of successful mining, Hoover proved, was the exploitation of large deposits of low-grade ores, especially those needed by industry, such as copper, zinc, lead, and coal. The man who earned the title of the Great Engineer achieved fame largely by his consistency. He always thought big. Over the course of his mining career, including the time after he left Bewick, Moreing to become a private consultant in 1908, Hoover employed more than 1 million workers. At the time he retired from mining in 1914, over 125,000 men were on his payroll.44
Not only were these golden years for Bert’s mining career; they were a boon for his family and, when they could live and travel together, a sustained adventure. Lou enjoyed soaking up exotic sights, meeting new people, exploring diverse cultures, and having the opportunity to share Bert’s work. Lou, and later their two boys, accompanied him on most of his trips. Herbert Jr., born in London in 1903, accompanied his parents to Australia at five weeks, carried along in a basket. Allan, born in London four years later, went to Burma during his fifth week. Both children were registered at the American consulate, establishing their identity as American citizens. Lou coupled her nurturing with her handling of family logistics; otherwise, her husband could not have been so single-minded in his devotion to work. She carried the children on horseback and camelback and shielded them from arctic cold and sweltering tropical heat, from rain and snow. She set up a home wherever her husband wandered. In 1907, the Hoovers rented a spacious semipermanent home in Campden Hill, London, with a distinctive red door, known as the Red House. The two-hundred-year-old structure, complete with stables, servants, and spacious, venerable living quarters in which to dine and entertain, was also the home of a menagerie of family pets, including a dog named Rags, Persian and Siamese cats, and pigeons. Still, the family’s hearts remained at what they considered their permanent home at Palo Alto, near the Stanford campus.45
In December 1902, after returning from a mine inspection abroad, Hoover discovered a twenty-page letter addressed to him by A. S. Rowe, the firm’s accountant, who had disappeared in the middle of the night. Rowe confessed that he had stolen about $1 million from the firm, a staggering sum for that time. He had engaged in reckless speculation, lost on his investments, and forged bonds and stock certificates, defrauding clients, to cover his losses. When he departed, Rowe took the remaining cash in the company’s coffers. Hoover and Wellstead, who could not reach the senior partner, Algernon Moreing, who was hunting tigers in China, had to render a prompt, clear-cut decision upon which rested the future of the company. Summoning a press conference, they announced that, although their lawyers had ruled the firm a victim rather than an accomplice, and they were not legally liable, the junior partners considered the company morally liable and announced that it would pay off the bad debts completely. Upon his return, Moreing was temporarily agitated, but he soon realized that a default would have destroyed the company’s reputation, driven away new clients, and forced them out of business. Ultimately, the decision raised the reputation of the revered firm, which actually attracted additional clients because of its transparent honesty. Hoover’s share amounted to 25 percent, and the next three years, until the money was repaid, were a slow grind. It meant starting over. Hoover’s savings had been wiped out; it was as if he were back at Grass Valley wielding a pick on his first job. Rowe was tracked down in Canada, extradited, convicted of embezzlement, and sentenced to ten years in prison. The Hoovers held no grudges. During these bleak years, Bert and Lou aided Mrs. Rowe and her four children until she divorced her husband, remarried, and became solvent. Even Rowe himself, after his release, sent the Hoovers a letter thanking them.46
The financial strain of recouping from the Rowe defalcation and the unrelenting stress of his work since graduation in 1895 took their toll. Hoover had been working too hard for too long, sleeping only four hours per night. In 1904, he was on the verge of a nervous breakdown and his doctors ordered him to get away from his work and his family responsibilities for a brief unaccompanied break. Hoover boarded a steamer for South Africa, where Bewick, Moreing owned mines. There, he fished, read, and tried to unwind. He slept long hours and soaked up the solitude. Still, he could not resist inspecting a few mines and negotiating several business deals near the Cape of Good Hope. The relaxation helped but did not bring total release. When he returned to London, the stress returned with the culmination of Chang Yen Mao’s trial. After the settlement, in which Hoover was exonerated, the family, first Lou and Herbert Jr., followed by Bert, traveled to their favorite spot on the globe, California. There, they visited Lou’s family in Monterey; stayed with Tad and his wife, Mildred Brooke, at Palo Alto, where they also attended the tenth anniversary of Stanford’s pioneer class; and fished, camped, and hiked. The vacation renewed their spirits. For Hoover, nothing could compete with the grandeur of nature and the familiarity of family, fishing, and California sunshine. During his entire ninety years, this was the only period when Hoover suffered from an illness related to nervousness. For the remainder of his life, including the turmoil of his presidency, he remained extraordinarily calm and his stamina proved remarkable. Of course, it is impossible to read his mind, and it is likely that he worried. Yet he always drew upon inner strength, the resilience of Quaker stoicism, and the outdoors.47
During his career, the Great Engineer achieved a reputation for necromancy; he could raise deceased mines from somnolence. One of the most prominent demonstrations of that ability occurred in Australia, the site of earlier triumphs, but the mine at Broken Hill proved an exasperating, prolonged experience in frustration before resolution in triumph. It required much more than reorganization and cost-efficiency to resurrect the depleted Broken Hill mine; it took a lengthy period of trial and error, with numerous failures. Broken Hill, an exhausted silver mine, lay in an arid, trackless region of the outback. While extracting the silver, mine operators had left mounds of tailings that included zinc, but no one had discovered a method of extracting the zinc profitably from the refuse, especially considering the absence of a reliable source of water. Hoover created the Zinc Corporation, an international company, raised millions in capital, and invested heavily in new methods designed to separate the zinc from the refuse, beginning in 1905. Yet three successive techniques failed, as the stock plummeted and directors resigned from the board. Hoover was on the verge of conceding that to think big sometimes meant to lose big. Much of his own money and his repu
tation were invested in the mine. Finally, in 1908, his perseverance paid off. The corporation not only became profitable; its profits accelerated until it became the most lucrative zinc mine in the world, continuing production even beyond Hoover’s death in 1964. The secret was a process Hoover designed called oil flotation, in which he used the capacity of zinc to float upon oil to separate the ore from the tailings. The success of the Zinc Corporation corresponded with Hoover’s zenith with Bewick, Moreing and the peak of the parent company’s ascendancy.48
Of all the mines Hoover developed, none showed more potential than an ancient silver, lead, and zinc mine deep in the steamy, nearly impenetrable jungles of northern Burma, near the Chinese border. During his early explorations, Bert unwittingly crept into a tiger’s lair. Recognizing fresh tracks, he backed out prudently. On his next excursion to Burma, the daring engineer brought Lou and the boys. Both adults contracted malaria, but fortunately the children did not. During his fevered delirium, Hoover penned stacks of poetry, highly unusual for him, but the poetry passed out of his system along with the malaria infection. Like the Broken Hill mine and several others, the Burma mine took years to develop and overlapped his period as a partner in Bewick, Moreing and the time after 1908 when he became an independent consultant yet still retained an interest in some properties he had developed earlier and for which he continued to sit on the boards of directors. The Burma mine had been worked from about 1450 to 1850, when silver near the surface became exhausted. Attempting to dig deeper, the Chinese struck water, and they lacked the sophisticated equipment to cope with the seepage into the tunnels. The Chinese priority was silver, and they left half a million tons of lead heaped as refuse mixed with other metals, including zinc, copper, and antimony, which they considered waste. This slag also contained lower grades of silver, which could be separated by modern chemistry. Hoover recognized the potential of the site, yet it posed formidable geographical obstacles. He had to construct an eighty-mile rail line over two mountains, erect hydroelectric plants and a smelter, and build an infrastructure for thirty thousand workers, including housing, schools, and recreational facilities. The local tribal leader became rich, and the miners enjoyed the highest pay they had ever received. The audacious engineer began by separating the lead tailings, which provided seed money for development. On his recommendation, Bewick, Moreing purchased an interest in what became known as the Bawdwin mine, and Hoover himself bought 18 percent, violating his cardinal rule of abstaining from investing in stock in mines he managed. He became a director of the Burma Corporation in 1908, and in 1914 he became chairman of the board. The mine began producing lead in quantity in 1908.49