by Peter Krass
Carnegie cajoled him with promises that he would be the largest shareholder, quipping, “You return as conqueror.” Finally, Miller relented, on the condition that he have no contact with his “former protégé” Phipps.12 It was agreed that for a 50 percent interest in the new firm, Carnegie and Miller would pay the Iron City partners $50,000 cash to divvy up among themselves and would donate the Cyclops plant and equipment. The new company was christened Union Iron Mills to commemorate the reunion of both the country and Carnegie’s friends, although Phipps was asked to step down as a director to ensure Miller would have no personal contact with him.
The Carnegie brothers, and Andrew in particular, were accused of sinister, Machiavellian tactics in capturing control of what had once been Kloman’s iron firm. The charges were partly true. Carnegie’s loan to Tom for his share in Iron City Forge paid a handsome return of $4,250 in 1863, according to his income tax statement; but something was wrong there. Interest on a $10,000 loan to Tom should have amounted to no more than a few hundred dollars that year, strongly implying the $4,250 was, in fact, a share of the Kloman profits.13 Carnegie and his younger brother had struck a deal of some kind that in a few short months yielded almost twice as much money as his superintendent’s salary. Whether this affected the eventual merger is unknown; however, Carnegie’s adept skill in consummating the marriage was certain in Machiavellian terms.
He innately executed the advice offered by Machiavelli in The Discourses for conquering a troubled city (Iron City): “The way to do this is to try and win the confidence of the citizens that are divided amongst themselves [Kloman, Phipps, Miller], and to manage to become the arbiter between them [Carnegie], unless they should have come to arms; but having come to arms, then sparingly to favor the weaker party [Miller], so as to keep up the war and make them exhaust themselves, and not to give them occasion for the apprehension, by a display of your forces, that you intend to subjugate them and make yourself prince. And if this course be well carried out, it will generally end in your obtaining the object you aim at.”14 Carnegie played the role of arbiter to perfection.
He was able to remain loyal to both the Phipps family, who had given his mother work in their destitute days, and his bosom buddy Miller. Because his family had forsaken Scotland, maintaining such loyalties was crucial to Carnegie’s sense of belonging to a community, which still needed reinforcement even though he had lived in Pittsburgh for almost twenty years. Misplaced loyalty could have dire consequences, however; two years later, Carnegie would indeed admit how foolish the Cyclops venture had been. “I knew you had previously been wronged and felt you could not forget it,” he wrote Miller. “I did what I could at the time to redress the wrong and went into the most hazardous enterprise I ever expect to have any connection with again, the building of a rival mill.”15 Carnegie would have to guard himself against blind loyalties.
Carnegie’s promise of making Miller the largest shareholder, his promise of money and power, had been enough to keep his friend in the firm as long as he had no contact with Phipps. When a position on the Union Iron Mills board of directors opened up in the spring of 1867, however, and Miller found Phipps in the vacated chair at the next meeting, he exclaimed, “I will not sit at the table with that man!”
“Oh come, Tom, don’t act like a child,” said Carnegie. “Come back, shake hands with Harry and be friends once more.” An unyielding Miller stormed from the room and later resigned. “He was Irish,” Carnegie observed dryly, “and the Irish blood when aroused is uncontrollable.”16 He now realized it would take more than money, so he played on two very potent emotions, vanity and guilt, a mix he would use throughout his business career to motivate and control his partners and lieutenants.
During the very period that beleaguered President Andrew Johnson and the Senate—which had failed to impeach him by one vote—were in dire need of reconciling their differences, Carnegie made a last effort to coax Miller to return and to reunite his friends. In a sharply toned letter, he played on Miller’s vanity by lavishly complimenting his abilities—abilities desperately needed by the company. He then attempted to evoke guilt by issuing reprimands laced with bursts of impatience, writing Miller that “for so large an interest as yours should receive your attention—principally upon my account, for so far from your presence being an embarrassment it would be esteemed of great value. . . . I want all parties in interest to understand that I have worked to bring matters right about as long as I intend to do so. When you know how we are placed I think instead of embarrassing us by resigning you should put your shoulder to the wheel with us. We never needed the efforts of all more urgently than now. You have of course aided us in money matters for which we are duly thankful, but your presence at the mill every morning for twenty minutes would double this obligation.”17 The scolding failed. As far as Miller was concerned, it was either him or Phipps. Carnegie had no choice but to choose Phipps because, when it came to the bottom line, Phipps contributed more than Miller. Phipps and brother Tom, Carnegie ascertained, were quite capable of managing Union Mills, while he played the role of financier and salesman at large, exploiting his railroad contacts to secure contracts. Carnegie did not spend notable time at the mills; a plush study at home provided the fertile ground for his business contemplations.
Now it became a matter of dealing with Miller’s stake in the firm, because if he wasn’t going to contribute, he wasn’t going to share in the profits. Rather than sell it back to all the partners, who included Kloman and Phipps, Miller preferred to have Carnegie buy him out; and so the haggling between the stubborn Irishman and the tight-fisted Scotsman began. In September, Carnegie played down the company’s worth, claiming that the Union Iron Mills was “going as fast as they could into bankruptcy,” and said he was willing to pay only $27.40 a share, a hefty discount from the book value of $40. He employed a little more guilt, too, blaming Miller for involving him in the first place. But Miller held out for $32.75 a share. The two men came to terms in March 1868, with Carnegie buying Miller’s 2,203 shares at Miller’s asking price for a total of $72,148.25, giving him a controlling interest in the firm.18
Again, observers accused Carnegie of Machiavellian tactics, but Miller never suggested as much nor regretted what he did. Almost forty years later, in a letter to Carnegie, he confirmed his decision to sell out: “I could not stand the stink of such treachery as his [Phipps] conduct had been in 1863— indeed after 40 years, while I have forgiven him, I cannot meet him comfortably. As to yourself, what you did then was wise, you had no quarrel with Henry Phipps, you advised me well to ‘let bygones be bygones’—and I loved you then Andy, as I have ever loved you, but Phipps had stabbed me at a critical time in my life—but why weary you with dirty linen of the past.”19
To Carnegie, such petty, unyielding behavior when profits were to be made was incomprehensible. Hurt by Miller’s defection, their friendship became strained; it would be years before they could again be called chums. “He mellowed in old age,” Carnegie reflected, “like the rose, bursting into glossy purple at last; one of the sweetest natures I have ever known; tender as a woman and true as steel.”20
The iron business was evolving into a love-hate relationship. On the one hand, Carnegie had encountered one headache after another at the Union Mills, and the roaring furnaces reminded him of his days stoking Mr. Hay’s boiler. On the other hand, iron was fast becoming the centerpiece of his portfolio; in 1867, Union Mills would yield a personal profit of $20,000. Still, Carnegie had yet to sense that his fate was tied to iron and to Pittsburgh, the forge of the universe. Instead, he continued to pursue tangential investments and scatter his capital, and in the ensuing years he would overextend himself.
Notes
1. T. B. A. David to AC, May 20, 1903, ACLOC, vol. 96.
2. See Memorandum of Agreement for coal mining patent, February 1, 1865; Articles of Association for Neptune Coal, October 1, 1864; George Boulton to AC, March 27, 1865; Ferree Property Agreement, n.d., among oth
er documents in ACWPHS, Early Investments File.
3. Baldwin, p. 222.
4. James Howard Bridge, The Inside History of the Carnegie Steel Company (Pittsburgh: University of Pittsburgh Press, 1991), p. 3.
5. Thomas N. Miller to AC, quoted in ibid., p. 10.
6. Bridge, p. 11.
7. See receipt for the $850, dated June 19, 1864, and the Certificate of Non-Liability, dated July 19, 1864, ACWPHS, Miscellaneous Papers File.
8. Carnegie, Autobiography, p. 135.
9. Wall, Carnegie, p. 224.
10. See resignation letter, March 28, 1865, ACLOC, vol. 3.
11. Bridge, p. 21.
12. Hendrick, Carnegie, vol. 1, pp. 136–137.
13. Hendrick and Wall don’t raise this possibility, but it is the only explanation.
14. Niccolo Machiavelli, The Prince and the Discourses (New York: Modern Library, 1950), p. 372.
15. AC to Thomas N. Milller, September 4, 1867, quoted in Bridge, p. 23.
16. Hendrick, Carnegie, vol. 1, p. 141; Carnegie, Autobiography, p. 129.
17. AC to Thomas N. Miller, June 3, 1867, ACWPHS, Union Iron Mills Letterbook, 1866–1869.
18. Bridge, p. 30; AC to Thomas N. Miller, September 4, 1867, quoted in Bridge, p. 29.
19. Thomas N. Miller to AC, April 2, 1903, ACLOC, vol. 95.
20. AC to William J. Holland, December 22, 1911, quoted in Hendrick, Carnegie, vol. 1, p. 142.
CHAPTER 8
Many Hands, Many Cookie Jars
Carnegie fancied himself an investor extraordinaire, a financier, a broker of deals. He was not a Wall Street gambler or a swindler, but he was swept up in the post–Civil War money fever, the contagion of greed unleashed after four years of horrific bloodshed. His cavalier attitude toward investing was exposed when Carnegie proposed to his friend John “Vandy” Vandevort, “If you could make three thousand dollars would you spend it in a tour through Europe with me?”1
“Would a duck swim or an Irishman eat potatoes?” Vandy replied. Both Carnegie and he had been reading travel writer Bayard Taylor’s Views Afoot; or, Europe Seen with Knapsack and Staff, which inspired them to strike out for the Continent. If culture could be had, a little stock speculation was certainly excusable; and so Carnegie, like an Arabian genie, transformed a few hundred dollars of Vandy’s money into a few thousand by investing in oil. Vandy was tall with a trim brown beard and seductive eyes, carried himself in an urbane manner, and relished adventure. The much shorter, plainer-looking Carnegie purposefully selected such suave, handsome friends as Miller and Vandy to offset his own physical shortcomings. Harry Phipps was also invited. Departing for a vacation to last until the next spring on the heels of the Civil War and with so many investments to monitor appeared irresponsible; however, for Carnegie, becoming a well-rounded man of culture added a dimension of power he craved. And as cousin Dod noted, “Carnegie owes a great deal to his habit of traveling. While other men were wallowing in details, he was able to take a wider view.”
Upon arriving in Liverpool in late May 1865, the trio proceeded directly to Dunfermline, where Carnegie introduced his chums to the family. Contrary to the visit three years prior when he found his hometown to be of Lilliputian size, a more mature Carnegie now reveled in reconnecting with his heritage and extended family. In a letter home, he paid tribute to the Sir Walter Scott monument in Edinburgh, and no longer was his tone condescending when speaking of relatives and friends. “It was ’ondrous strange to be surrounded with old men who were our father’s boon companions,” he wrote Tom. “In America we are an entirely new family, and outside of Aunts Aitken and Hogan we have no relatives nor associations. Here we have a local history extending to the third generation, and many a one speaks kindly of our ancestors. You may believe this seems a very great change.”2 Never quite comfortable with his boyhood uprooting from Scotland, Carnegie relished the sense of belonging he discovered during this stay.
After a brief stay in Dunfermline, the trio returned to Liverpool, where Robert Franks, a relative of Harry Phipps, joined them. Then it was to London and the Continent, Carnegie leading the assault on France, Germany, and Italy with the same vigor he brought to business. Franks was so enamored with Carnegie that he would later become his financial secretary for life. “As to Andy’s health,” Franks wrote his sister, “this is so overflowing that it is extremely difficult to keep him within reasonable bounds, to restrain him within the limits of moderately orderly behavior, he is so continually mischievous and so exuberantly joyous. . . . He is full of liveliness, fun and frolic. His French is to carry us through when Vandy’s German is no longer required. I had to acknowledge my obligation to him no later than yesterday when, wishing my portmanteau forwarded by rail and the German porter being so stupid as not to understand my good English, Andy kindly stepped forward to the rescue with ‘Voulez vous forward the baggage to Mayence?’ It is, I expect, needless to tell you that in time I found my portmanteau at its destination.”3
Carnegie provided his own assessment: “We make up a splendid whole and go laughing and rollicking through, meeting with many laughable adventures and exciting much merriment.” But rather than indulging in his companions’ personalities as did Franks, he viewed each as serving a function: “Vandy is by far the most useful man of the lot. . . . He earns his grub. . . . To Harry is given the Post Office department. He mails all letters, gets them out . . . goes back after coats forgotten or guide books left at the hotel, and is par excellence the accommodating member of the quartette.”4 Each had to serve a function to be valued and included in Carnegie’s circle; if not, they were cut loose like Miller. A normal, emotionally congenial friendship absent of strings was not possible with Carnegie.
Already anticipating a larger stage for himself, the ambitious Carnegie wasn’t satisfied with merely writing letters home to Tom and his mother; adopting Bayard Taylor’s persona, he also wrote letters to the editor of the Pittsburgh Commercial, in which he recounted their experiences. “This visit to Europe proved most instructive,” Carnegie later reflected. “Up to this time I had known nothing of painting or sculpture, but it was not long before I could classify the works of the great painters. One may not at the time justly appreciate the advantage he is receiving from examining the great masterpieces, but upon his return to America he will find himself unconsciously rejecting what before seemed truly beautiful, and judging productions which come before him by a new standard.”5 Although Carnegie developed a degree of aesthetic appreciation for fine art, in general art remained something to be classified and judged by him. Except for a growing sentimentality for Scotland, he still lacked the emotional depth to be moved in a spiritual way by an artist’s inspiration—his callous spirit wouldn’t allow it—and he never collected art like J. P. Morgan and other haute capitalists. He was too thrifty to spend money on priceless art and too priggish to grace his home with reclined nudes by European masters.
The various cultures Carnegie encountered were to be studied, too. “In France, all seems dead,” he wrote home. “The soil is miserably farmed, and one is at a loss to account for the leading position which the Gauls have attained. I am one of those who hold that they cannot maintain it long—that they must give way to the German element which, you know is Anglo-Saxon and therefore has the right ‘blend.’”6 Again, it wasn’t a spiritual experience, but a scientific one. His determination that the Anglo-Saxon had “the right ‘blend’” suggested an unsavory Aryan streak in Carnegie’s personality that would manifest itself more clearly as he came to view himself as a trustee of civilization and became enamored with Kaiser Wilhelm II in the early 1900s.
Political debates were unavoidable among the group. So sure was Carnegie of his positions on various matters, Franks observed, that “on all questions grave or otherwise, Andy is ever ready ‘to back his own opinions with a wager’ as Byron says. . . . What with the arguments we have upon most questions, social, political, etc., Andy brimming first upon one side, then upon the other, with admir
able impartiality, and possibly to keep the balance even, it must be confessed, that upon the whole we make up a tolerably lively party.” Carnegie had become an admirable orator and debater, his skills honed in Mr. Phipps’s leather shop on Sunday afternoons, his mind expansive and agile enough to dissect an issue from opposing viewpoints.
While the young men took in the sights of London, Paris, Antwerp, Amsterdam, Dresden, Vienna, Naples, and Pompeii, and as they attended plays and operas and sipped lemonade at outdoor cafés, they kept an eye on business matters back home. “The boys are elated by glorious news in their letters of continued advances in prices, of stocks advancing, of their mills working double turns, of large orders pouring in, of new patents obtained and of still greater successes looming in the future,” noted Franks.7
Reports of success didn’t stop Carnegie from pushing brother Tom ever harder on all fronts as though a general commanding an army, albeit a one-man army:
We must pull up and develop the Union Mills sure. . . . How is the Brick concern doing? . . . Am glad to see you are pushing around after trade, but my dear boy, the South is our future market. The Freedom Iron Co. made most of its profits from Southern trade. . . . I beg to urge upon you the importance of sending a first class man to Nashville, Memphis, Vicksburg, etc. at once. . . . Will you please carry out these views regardless of expense of anything else? . . . The Carnegie family, my boy, are destined always to be poor, but I am poorer than I expected if $8,000 in debt. We must work like sailors to get sail taken in. . . . What about Pit Hole? My interests there requires your attention, I think.8
