Carnegie
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Meanwhile, the railroad industry decried the Pennsylvania Railroad’s coup and its now extensive control of transcontinental traffic. Wall Street, on the other hand, approved, and the Union Pacific stock began a steady climb higher. As it did so, the opportunity for a quick capital gain was hard to resist. Using several different brokerage firms to mask the sizable sales, Scott and Carnegie, who personally controlled eleven thousand shares, started selling theirs and Thomson’s Union Pacific shares in early spring of 1871. By late May, all but four hundred shares had been sold, leaving each participant with one hundred shares each—and a tidy $80,000 profit.31 The other Union Pacific stockholders were hardly amused and charged the foursome with selling the loan collateral for their personal profit.
In March 1872, Carnegie, Scott, and Thomson were expelled from the board; only Pullman, who still held a sizable stake, survived. For Scott, it was particularly embarrassing and finger-pointing ensued as to who was to blame for initiating the sale. Carnegie later noted that “the transaction marked my first serious difference with a man who up to that time had the greatest influence with me, the kind and affectionate employer of my boyhood, Mr. Scott.”32 Needless to say, when it came time for Carnegie to recover his Omaha Bridge commission in the fall of 1871 and early 1872, he carried little goodwill, and his requests were summarily dismissed by Bushnell, other Union Pacific executives, and even Thomson.33 Then, in the fall of 1872, the New York Sun broke the Crédit Mobilier scandal, exposing how the company had reaped up to $16.5 million in profits while bribing Congress by freely distributing stock. The paper estimated that James A. Garfield, a future president, and James G. Blaine, a future secretary of war and Carnegie ally, received between two thousand and three thousand shares, respectively.34 The public was outraged; congressional hearings commenced, although it was difficult to find enough innocents to serve; and any hope of Carnegie recovering his money was now gone. “I had never been so cheated and found it out so positively and so clearly,” he reflected with somewhat tainted righteousness. “I saw that I was still young and had a good deal to learn. Many men can be trusted, but a few need watching.”35
Throughout the early 1870s, Carnegie was also engaged in a fast-paced game of speculation, personally buying and selling the very bonds he was peddling, as well as stocks. The pace became ever-more frantic as he purchased bonds and stocks on margin to bolster his profits. The high degree of risk was apparent in Carnegie’s anxious tone in a letter to Thomson’s personal secretary, Richard Barclay, written as he scrambled to cover a loan from Drexel, Morgan: “Mr. Scott and I have decided that you sell the Eleven hundred and thirty six shares of Pennsylvania Railroad Stock which you hold as trustee for us jointly, and remit me Seventy thousand dollars, in time to meet our note for that amount, falling due at Messrs. Drexel, Morgan & Cos., Saturday Nov. 11th. Matters of deeper interest than this loan depend upon its being paid, and under no circumstances must you fail to remit me the amount in time.”36 Not only were profits at stake, but so was Carnegie’s relationship with Morgan, Scott, and Thomson. There was no margin for error.
Carnegie was frenetic to the point of being manic as he pursued, created, and promoted moneymaking deals. Thomas Miller was amazed by all of the “things” his friend was into in “those active years,” and later in life, Carnegie himself was surprised and had to be reminded of them all.37 On top of his sleeping car, oil, iron, telegraphy, and bridge enterprises, as well as his stock speculation, he participated in land deals with the McCandless family, in coal mining with Robert Pitcairn, and invested in a coal machinery patent, among other ventures. He was making investments for his immediate family, relatives, and even friends from the Slabtown days who were now counting on him. Carnegie wanted “to make Uncle Lauder comfortable in his old age from his American investments,” and he was managing investments for the Hogans, as well as for the families of Original Six member James R. Wilson and Leila Addison. And, of course, there remained his mother to please, and his brother to protect.38
Sadly, it would be many years before he realized the dream laid out in the December 1868 letter. When the day of reckoning knocked in December 1870, the day Andrew Carnegie was to retire from active business on his own terms and pursue a more noble life, his introspective letter was tucked safely away, but no concrete plans had been laid. For now he was making over $100,000 annually, and it was no time to relent—certainly not while accepted in the world of Junius Morgan. And yet the harder Carnegie pushed into high finance, the more repulsed he was by deceitful men and deals gone bad due to any number of uncontrollable factors. In this realm, he did not have command of his own destiny. Fate was pulling him away from the likes of Morgan and pushing him toward steel.
Notes
1. Carnegie, Autobiography, p. 144.
2. Statement of Business Holdings, ACNYPL.
3. Hendrick, Carnegie, vol. 1, pp. 146–147. The original is in possession of the Carnegie family descendents.
4. Wall, Carnegie, p. 225.
5. Ron Chernow, Titan: The Life of John D. Rockefeller Sr. (New York: Vintage Books, 1998), p. 114.
6. Jean Strouse, Morgan: American Financier (New York: Random House, 1999), p. 127.
7. Carnegie, Autobiography, pp. 144–145.
8. Sidney B. Whipple, “Notes on Mr. Schwab’s Life,” unpublished manuscript, Hagley Library, Wilmington, Del., p. 93.
9. Carnegie, Autobiography, p. 146; Jerry E. Patterson, The City of New York (New York: Harry Abrams, 1978), p. 136.
10. See notice dated May 16, 1865, ACWPHS, early investment file; Ward, p. 177.
11. AC to J. H. Linville, January 20, 1868, ACWPHS, Union Iron Mills Letterbook, 1866–1869.
12. AC to President & Directors of the Keystone Bridge Co., January 25, 1868, ACWPHS, Union Iron Mills Letterbook, 1866–1869.
13. Carnegie, Autobiography, pp. 148–149.
14. G. F. McCandless to Tom Carnegie, November 7, 1870, ACWPHS, Letterbook, November 1, 1870–March 14, 1871.
15. Joseph Gies, Bridges and Men (Garden City, N.Y.: Doubleday, 1963), p. 156.
16. Ibid., p. 161.
17. See AC to Amos Cutting, March 7, 1870, ACWPHS, Letterbook, 1869–1870; AC to J. Edgar Thomson, March 1, 1870, ACWPHS, Letterbook, 1869–1870; AC to Thomas A. Scott, March 7, 1870, ACWPHS, Letterbook, 1869–1870.
18. Strouse, p. 138.
19. Carnegie, Autobiography, pp. 150–151.
20. W. H. Holmes to AC, February 21, 1871, ACWPHS, Davenport File.
21. J. P. Morgan to AC, July 23, 1872, ACWPHS, Davenport File.
22. Sulzbach Brothers to AC, November 18, 1872, ACWPHS, Davenport File.
23. Sulzbach Brothers to AC, May 9, 1873, ACWPHS, Davenport File.
24. AC to Edward J. Allen, December 14, 1871, ACWPHS, Letterbook, March 16, 1871– March 8, 1872.
25. Sulzbach Brothers to AC, May 9, 1873, ACWPHS, Davenport File.
26. Charles Edgar Ames, Pioneering the Union Pacific (New York: Appleton-Century-Crofts, 1969), p. 406.
27. Ibid., pp. 407–409; Carnegie, Autobiography, p. 160; C. S. Bushnell to President and Treasurer Union Pacific Railroad, January 26, 1871, and C. S. Bushnell to AC, March 20, 1871, ACWPHS, Union Pacific File.
28. Ames, p. 23.
29. Ibid., p. 407.
30. Leyendecker, p. 104.
31. AC to Messrs. Boyd, Falls, and Vincent, March 20, 1871, AC to Messrs. Norton, Bliss & Co., March 22, 1871, ACWPHS, Union Pacific File; G. F. McCandless to George M. Pullman, May 8, 1871, ACWPHS, Union Pacific File.
32. Carnegie, Autobiography, p. 159.
33. AC to E. J. Thomson, March 20, 1872, ACWPHS, Union Pacific File; AC to C. S. Bushnell, September 26, 1872, ACWPHS, Letterbook, 1872–1873; E. H. Rollins to AC, September 27, 1872, ACWPHS, Union Pacific File.
34. Ames, pp. 436, 454.
35. Carnegie, Autobiography, p. 160.
36. AC to R. D. Barclay, November 3, 1871, ACWPHS, Union Pacific File.
37. See Miller letter to AC, quot
ed in Hendrick, Carnegie, vol. 1, p. 179.
38. AC to John Ross, Esq., March 28, 1873, Union Iron Mills Letterbook, 1866–1869; AC to Thomas M. Carnegie, January 3, 1870, ACWPHS, Letterbook, 1869–1870.
CHAPTER 10
Epiphany of Legend
There was one other factor in Carnegie’s decision not to retire, not to abandon America for Oxford, England: he was now living a privileged, cultured life in New York City. Carnegie had ingratiated himself with the Gramercy Park crowd, as dynamic a social group as could be found anywhere. Located between Third and Fourth Avenues and Twentieth and Twenty-first Streets, it was an upper-class enclave of homes built mostly in the 1850s and owned by prominent New Yorkers such as Peter Cooper, George Templeton Strong, and Cyrus Field. One resident and wealthy businessman with whom Carnegie became well acquainted was Courtland Palmer. Like Carnegie, Palmer aggressively pursued a balanced, humanistic approach to life and founded the Nineteenth Century Club, a group dedicated to discussing the social, religious, and philosophical issues of the day. Much more than the friendly Sunday debates in the Phipps cobbler shop, Palmer’s Nineteenth Century Club was likened to a “religious cult” that preached positivism.1
This philosophy was championed by Auguste Comte, who espoused a new social order, a “sociocracy” ruled by scientists whose mission was to oversee the progress of humanity. Such words as sociocracy and progress struck a chord within Carnegie, and once admitted to the club he became a faithful member. The monthly meetings were held in the Palmers’ home for many years, and then moved to the American Art Galleries. Much discussion circled around the provocative Herbert Spencer, and to bone up for the debates, Carnegie immersed himself in Spencer’s First Principles and Social Statics. Many of the ideas he encountered—in addition to the survival of the fittest dictum—he would live by and apply throughout his life.
In First Principles, Spencer addressed evolution, which he observed to be “a change from a less coherent form to a more coherent form,” which meshed well with Carnegie’s obsessive demand for an ever-more efficient organization. Other poignant ideas Carnegie culled from Social Statics included Spencer’s argument that the growth of the race depends on “partly weeding out those of lowest development, and partly by subjecting those who remain to the never-ceasing discipline of experience”; and his hypothesis that “society advances where its fittest members are allowed to assert their fitness with the least hindrance, and where the least fitted are not artificially prevented from dying out.”2 These ideas had a profound impact on how Carnegie conducted his life, manifesting themselves in how Carnegie dealt ruthlessly with his competition, his workers, and even his philanthropy. There was no room for sympathy.
Among the socialites, Carnegie met a particularly intriguing woman when in 1871 he befriended Anne C. L. Botta. An author and a critic, Anne Botta was a figure of consequence in New York’s literary and art circles, making her quite an attraction. In her younger days, she had presided over soirees attended by literati that included Ralph Waldo Emerson, Margaret Fuller, Washington Irving, Bayard Taylor, and Edgar Allan Poe—the latter having recited “The Raven” in her drawing room prior to its publication. Now it was a different crowd that gathered in her home, but no less eminent, including the likes of Henry Ward Beecher, Edmund C. Stedman, Julia Ward Howe, as well as eminent newspaper and magazine editors. Carnegie was quite enamored with Madame Botta even though she was white haired and nearing sixty years of age. Just as he had taken to Tom Scott’s niece Rebecca and Leila Addison as maternal tutors, so did he to Madame Botta, whom he described as a “lithe, gentle little woman.”3 She was affectionate and nurturing, qualities not readily attached to his mother. At soirees in her parlor, she found the rambunctious, seemingly contradictory radical-capitalist a curious case; and although Carnegie could be overbearing, his enthusiasm for mental stimulation won her over. They remained friends until her death twenty years later. “One of her chief characteristics was that of recognizing unknown men and women,” he acknowledged, “and giving them opportunities to benefit, not only from her own stores of wisdom, but from the remarkable class she drew around her.”4
So Carnegie, even at age thirty-five, still sought a woman other than his mother to satisfy his needs for warm nurturing. To a friend, he admitted he was eager to retire and take a wife, but he had yet to secure a woman who could fill that role.5 Mostly it was because the bride-to-be had to measure up to his mother—an impossible standard to meet, even with her flaws. Carnegie himself, now settled into his routine of being a single man, had raised his own expectations. Impatient friends prodded him to marry, but instead of discussing candidates, he complained that the older he grew, the more particular he became. “Yes Andrew,” one female companion retorted, “and the less desirable.”6
Carnegie was not completely caught up in New York’s trappings. At the same time he was penetrating the circles of the elite financiers and literati, to escape New York’s sticky summer heat he purchased a summer retreat—a simple frame house christened “Braemar Cottage”—nestled in the Allegheny Mountains at Cresson, Pennsylvania. Fresh air cascaded down the hills and through the valleys, of which the cottage had a commanding view. Here, away from the clatter of hooves and carts and shouting paperboys, away from the smell of rot and burning coal, and away from the mass of people scurrying hither and thither, Carnegie rejuvenated. Many of Pittsburgh’s industrialists, including B. F. Jones, had been going to Cresson for years, and the elite community was also another means for extending his business network.
There he befriended William J. Holland, who later became the director for the Carnegie Museum of Pittsburgh. They first became acquainted while taking a meal at the Mountain House, the upscale hotel where most of the cottagers dined. “We sometimes adjourned together to the assembly room and had merry discussions there,” Holland recalled.
He often called at our cottage and we called at his. He was then, as always, exceedingly fond of music, and among the guests at the hotel were Mr. Josiah Cohen (afterward Judge Cohen) and his charming wife, who was an accomplished musician. Mr. Carnegie now and then invited her to give a musical recital at his home, and, when bidden to attend these pleasant gatherings, we went. Being fond of walking, Mr. Carnegie was in the habit of taking strolls on the by-paths and roads on the mountain, and often he invited me to go with him on these rambles, or I myself extended to him an invitation to accompany me. He was greatly interested in all that we saw, and our conversations on these excursions into the woods related to the plants and animals, especially the birds, in which he took an interest. He informed me that as a boy he had at one time essayed making a collection of bird skins and had read a great deal about birds. On one occasion, I found a number of nests of the Snow-Bunting cunningly hidden under tufts of fern. I called his attention to the fact that this bird of the Canadian life zone was nesting at the top of the mountain. A day or two afterward he came to the cottage and told me that he had had the delight during a stroll of discovering a number of nests of the Junco, and was very enthusiastic in speaking to me about his discovery. “I did it myself,” he said. “I did not have your help.” He loved “to do things himself” if pleasant.7
In every endeavor, large or small, business or ornithology, Carnegie had to push inordinately.
Despite his enthusiasm to dabble in a myriad of ventures, whether business, philosophic, or scientific, by late 1872 Carnegie recognized that scattering his efforts and attempting to score quick windfalls was not the way to build an empire. He was beginning to understand what would later become one of his mantras: “Put all good eggs in one basket and then watch that basket.”8 In explanation, he wrote, “I believe the true road to preeminent success in any line is to make yourself master in that line. I have no faith in the policy of scattering one’s resources, and in my experience I have rarely if ever met a man who achieved preeminence in money-making—certainly never one in manufacturing—who was interested in many concerns.” Hindsight helped, of course. He now
turned to steel.
But this decision was not an epiphany, as legend has it. Over the years, a myth evolved about how Carnegie had a sudden flash that steel would replace iron, that steel was king, and how he immersed himself full steam ahead. His entry into steel, however, was cautious and calculating. Not quite the visionary he was depicted, Carnegie had been following developments in steel ever since the mid-1860s, when J. Edgar Thomson invested in steel rails and he experienced his own doomed affair with doddized rails. He was well aware that the first steel produced in the United States using the Bessemer process had been made at a mill in Wyandotte, Michigan, in 1864, but the plant had been shut down five years later. A second company, the Albany and Rensselaer Iron and Steel Company of Troy, New York, gave it a go in 1865. Two years later, so did the Pennsylvania Steel Company, which erected its works in Steelton, Pennsylvania.
On his overseas trips to sell bonds, Carnegie made it a point to meet with British manufacturers of iron and steel. One man who fascinated him was Henry Bessemer, a renowned inventor and ironmaster. During the Crimean War, Bessemer had experimented with iron, hoping to improve it for casting cannon. As with so many great advances in science and technology, he then accidentally stumbled upon a process for making steel. One day, some molten iron was exposed to gusts of cold air purely by chance, and when he studied the effects, he realized he was onto something: the rush of air combining with the molten iron and carbon had increased the iron’s temperature to such a degree that impurities were oxidized, burned off, making for a far stronger product—steel. Bessemer, who would be knighted in 1879 for his accomplishments, set about inventing a process to replicate the accident, which involved building a converter, a huge, egg-shaped container lined with fire brick into which the molten iron could be poured and then a blast of air blown in from below. He then applied for and was granted an American patent in 1856. But because making steel by this method required a high-grade, phosphorus-free iron ore, it was still a number of years before his process was perfected.