Carnegie
Page 66
32. AC to John Morley, December 17, 1899, ACLOC, vol. 70.
33. New York Times, January 1, 1900.
34. Harvey, p. 242.
35. Burton J. Hendrick interview with John Walker, February 16, 1928, ACLOC, vol. 239.
36. Ibid.
37. Warren, p. 261.
38. Henry C. Frick and Henry Phipps to AC, January 29, 1900, ACLOC, vol. 72.
39. AC to Caroline Wilson, March 2, 1900, ACWPHS, Frick Suit Folder.
40. A. B. Farquhar to AC, March 14, 1900, ACLOC, vol. 73.
41. George Westinghouse to AC, February 8, 1900, ACLOC, vol. 73.
42. New York Daily Tribune, February 15, 1900.
43. See “Joint and Several Answer of the Carnegie Steel Company Limited and Andrew Carnegie,” dated March 1900, ACLOC, vol. 73.
44. Board Meeting Minutes, January 3, 1899, ACLOC, vol. 60.
45. Gibson D. Packer to AC, February 3, 1900, ACLOC, vol. 72.
46. Board Meeting Minutes, October 19, 1897, ACLOC, vol. 46.
47. W. H. Singer to AC, March 8, 1900, ACLOC, vol. 73.
48. Henry C. Frick to AC, June 10, 1898, ACLOC, vol. 52.
49. Henry Phipps to Henry C. Frick, January 17, 1900, quoted in Warren, p. 262.
50. New York Daily Tribune, February 15, 1900.
51. J. Moritzen, “The Great Steel Makers of Pittsburgh and the Frick-Carnegie Suit,” Review of Reviews 21, p. 432.
52. New York World, February 13, 1900.
53. Net Earnings Statement for March 1900, and Board Meeting Minutes, April 23, 1900, ACLOC, vol. 74.
54. Harvey, p. 254.
55. Charter of Carnegie Company, March 22, 1900, ACLOC, vol. 73.
56. Harvey, p. 256.
57. James Laughlin to AC, March 26, 1900, ACLOC, vol. 74.
58. John Morley to AC, April 25, 1900, ACLOC, vol. 74.
59. F. W. Haskell to Henry C. Frick, February 12, 1900, quoted in Warren, 266.
60. Samuel A. Schreiner, Henry Clay Frick (New York: St. Martin’s Press, 1995), p. 9.
61. AC to Charles Schwab, March 29, 1900, quoted in Whipple, p. 69.
CHAPTER 28
The World’s Richest Man
Confirming my wire upon the situation let me say that all is coming just as expected. There is nothing surprising; a struggle is inevitable, and it is a question of the survival of the fittest.”1 It was not melodramatic rhetoric; entering the summer of 1900 the market for steel was flat, competition was intense, and Carnegie was putting Schwab on notice. When Carnegie, Louise, and Margaret boarded the American liner St. Louis on May 2, bound for Britain, he had no doubt the battles with the Morgan and Moore consolidations would intensify. He was scheduled to speak at the Iron and Steel Institute’s meeting at the Hotel Cecil in London on May 9, and he would meet with Morley and Spencer—all three together for the first time in years—but Carnegie planned no other engagements. There would be no time for excessive socializing this summer, no six months of bliss in his heaven on earth.
Although Carnegie had lost his fight with Frick, it was the catalyst for a rebirth of Carnegie as a leader. Now that Frick was gone, there was no hesitation, no waffling, and no ambivalence on Carnegie’s part as he now focused on Morgan and Moore. His inability to share power was a fault, perhaps, but he was a much stronger and decisive leader when recognized as the undisputed force in his company. He was almost sixty-five, an age when most men would be retiring, yet Carnegie was thrusting himself back into the heat of battle to fill the breach caused by Frick’s expulsion.
“A nation should never make war except to repel invaders,” Carnegie once said. As he surveyed his empire, he identified several forces intent on raiding his territory and pillaging his profits. In addition to reenergizing the counterattack on the Morgan and Moore consolidations, which were buying less and less steel from the Carnegie Company, he quickly surmised he had to contend with John D. Rockefeller, who had iron-fisted control of shipping on the Great Lakes and was threatening price increases; and he had to again confront the Pennsylvania Railroad, which had a new president who was refusing to recognize past rebate deals. A hardened veteran, Carnegie was on familiar ground.
Carnegie signaled his willingness to fight in “Popular Illusions about Trusts,” an article he penned for the May issue of Century Magazine. He again criticized trusts as the panacea of the moment, and he envisioned a line of dead trusts like the ghosts of Macbeth’s victims, only much longer. As an “evolutionist,” Carnegie believed all businessmen would eventually return to what was best—spirited competition. The month after the article was published, he informed Dod every pool agreement was up for review. If not favorable, the company should break them and “take the business & run.”2 On June 4, he charged Schwab with the same rallying cry he had used for the last twenty-five years: “The sooner you scoop the market the better. It has never failed that the lowest price given has proved to be a high price at time of delivery on a falling market. When you want to capture a falling stone, it won’t do to follow it. You must cut under it, and so it is with a falling market.”3 The strategy had been successful against smaller firms without deep pockets, but would it work against Morgan and Moore? Displaying his wicked sense of humor in the time of crisis, Carnegie added, “All very well here and Skibo finer than expected. Tell any of the managers that in case of a collapse they can be cured here upon most reasonable terms.”
At the same time Carnegie questioned any pool agreements, he plotted an all-out invasion into National Tube’s territory. It was absolutely necessary because Morgan’s tube consolidation had built its own furnaces to supply its steel, and whatever additional steel it required was ordered from its sister company, Federal. Once a large supplier, Carnegie was now completely choked off in a quickening race for total domination. To ensure Schwab had support, he informed Dod of his intentions: “We ought to go into tubes because we have a combine at our mercy and lost trade we used to have before National Tube left us. We can spend a few millions (no blast furnaces at present) and divide with the Trust. It is clear sailing.” Regardless of the potential for overcapacity, Carnegie was confident Morgan’s tube trust would cooperate when faced with cutthroat competition.
Carnegie’s unilateral decision to forge ahead was dictatorial and autocratic, but his ability to make instantaneous decisions in the field gave him an advantage over the trusts. Morgan and Moore’s lieutenants had to worry about presenting plans to committees, boards of directors, and major stockholders, while Carnegie did not. And Carnegie could postpone dividends, reinvest profits, and spend several millions without fretting a backlash from shareholders, Harry Phipps aside. “It was a contest between fabricators of steel and fabricators of securities; between makers of billets and makers of bonds,” Carnegie said.4 It was survival of the fittest.
The cables from Schwab brought bad news, however. Gates’s American Steel and Wire, which had ordered as much as 14,000 tons of billets each month, cut its orders to just 6,000 tons a month and then canceled all contracts. Moore’s American Steel Hoop, once a customer requiring 15,000 to 20,000 tons a month, had cut its orders to 3,000 tons.5 Such behavior was unacceptable, and Carnegie ordered Schwab to either recapture the lost orders or to go into direct competition with American Steel Hoop.6 In a letter to the board, read at the June 22 meeting, he declared that building mills to compete directly with American Steel Hoop “will not only give them but others a lesson, which I am sure we will have to give sooner or later.”7
In his sixties, when most men would be considering retirement, Carnegie reigned supreme in steel. (Courtesy of the Carnegie Library of Pittsburgh)
Smiling Charlie Schwab was made president of Carnegie Steel at the tender age of thirty-six. He would become caught in the middle of Frick and Carnegie’s bickering. (Courtesy of the Carnegie Library of Pittsburgh)
Carnegie was quite prepared to raise the stakes, his old motto “The friend of all; the ally of none” was about to be reduced to “The ally of none.” He boil
ed the situation down to one blunt issue, which Schwab relayed to the board: “You are face to face with the great question, the parting of the ways; the country cannot take the product of the steel works. Are we to decide that we will take the business at the best price possible and run the works full, independent of all other concerns, managing our business in our own way, or are we to take percentages of the business with these and try to maintain prices.”8
Carnegie enjoyed singing the Scottish ballad “Wha Daur Meddle wi’ Me?” and it became the refrain for a tempestuous June.
Consumed by business, Carnegie had little time for family, but on July Fourth he hosted a fete for the inhabitants of the entire Skibo estate, a tradition that would continue for the next fourteen years. The event began with the children attending the five schools within the estate, along with their teachers, parents, and friends, numbering anywhere from a thousand to fifteen hundred, assembling at the front gate lodge. Led by brass and pipe bands, they marched up the drive to the castle, where Carnegie greeted them and made a little speech. Joined by Carnegie, Louise, Margaret, Stella, and houseguests, the parade continued, descending the terrace steps to a bright green field where they played games. For the footraces, Carnegie, brandishing a pistol, served as starter. Under a great tent, refreshments were served and cash prizes handed out. Overhead, the Stars and Stripes and the Union Jack fluttered.
Two days after the festivities, Carnegie, exhibiting a growing sense of urgency, again spurred on Schwab: “My recent letters predict present state of affairs; urge prompt action, essential; crisis has arrived, only one policy open; start at once hoop, rod, wire, nail mills, no half way about last two. Extend coal and coke roads, announce these; also tubes. . . . Never been time when more prompt action essential, indeed absolutely necessary to maintain property. . . . Spend freely for finishing mills, railroads, boat lines. Continue to advise regularly by cable.”9 Bolder than most of the other junior partners, Schwab was eager to comply in this high-stakes poker game.
One of Carnegie’s favorite weapons was to threaten competition, which had worked so well against the Pressed Steel Car Company, and he hoped it would again to bring the consolidations back into the fold as customers, but if not, he was convinced he would best them in price. The real pressure was on Smilin’ Charlie Schwab, who was going to have to play the heavy. Although Schwab had battled the Huns with clubs and guns, this fight was more sophisticated, with millions of dollars at stake, and Carnegie questioned whether he would snap under pressure as Abbott and Potter had. On July 11, Carnegie wrote him an inspirational letter: “Briefly, if I were czar [which he was, Schwab must have noted with a wry smile], I would make no dividends upon common stock, save all surplus and spend it for a hoop and cotton tie mill, for wire and nail mills, for tube mills, for lines of boats upon the lakes. . . . You have only to rise to the occasion, but no half way measures. If you are not going to cross the stream, do not enter at all and be content to dwindle into second place. Put your trust in the policy of attending to your own business in your own way and running your mills full regardless of prices and very little trust in the efficacy of artificial arrangements with your competitors, which have the serious result of strengthening them if they strengthen you. Such is my advice.”10
Presiding over the board meetings was another duty Schwab had assumed; it was not always pleasant, for although the disruptive Frick was gone, harmony did not reign. At the July 16 meeting, the men were sharply divided over expanding into finished goods, as they debated building the wire and nail mill Carnegie demanded to strike back at Gates. “This is a very dangerous time in our history,” said a tentative Dod, and he voted against “further expenditures.” Schwab immediately criticized him for always being against expansion, an assault that was construed as personal by Dod, who then called for a delay until his cousin returned in the fall.
Annoyed by the stonewalling when he already had Carnegie’s blessing to attack, Schwab said resolutely, “If we want to drop back into an old-fashioned way of doing business, I want to be counted out of it.” His threat was taken seriously; the board approved $1.4 million for rod, wire, and nail plants to be built at the Duquesne Steel Works.11 Finally they were taking the fight to the competition. When Carnegie received the July 16 board meeting minutes, however, he immediately sensed the tension between Schwab and Dod. It would not do—one civil war was enough—so he beckoned Dod and Schwab to Skibo for a conference.
The sudden absence of Dod and Schwab raised eyebrows in Pittsburgh and ignited rumors that Carnegie Steel was in trouble. On September 5, the New York Daily Tribune reported: “The facts about the trouble in the Carnegie Steel Company are gradually coming to the surface, despite denials of the officials of the company who are not at Skibo Castle. It is learned that the officials who took charge after H. C. Frick was ousted have been too light for the places they occupy, say those who are interested in the fight. They want H. C. Frick back at the head.”12 Lawrence Phipps first raised questions about management’s abilities, according to the Tribune, and Harry Phipps was allegedly supporting Frick’s return.
Frick’s criticism of the Carnegie Company was the source of the innuendo. Still a major stockholder in the company, he analyzed management’s every move, and in August he leveled some sharp criticism at Carnegie, which he undoubtedly shared with others. “You being in control,” Frick cabled Carnegie, “stockholders and public look to you to see that the great Carnegie Company is managed successfully and honestly.” He warned Carnegie to not let his men “hide things from you. You cannot trust many by whom you are surrounded to give you facts. You need commercial rather than professional ability to cope with the concerns managed by brainy and honest men trained to the business. You are being outgeneraled all along the line, and your management of the Company has already become the subject of jest.”13
Appalled when he heard of the cable, Phipps reproached his ally: “If any good is to be accomplished at this stage it is by patient and gentle methods, and in view of policy I was very sorry that you sent the cable you did to Mr. Carnegie.”14 Yes, it appeared as though the newspapers were correct—a movement was afoot to reinsert Frick. But considering profits would leap to $40 million in 1900, up from $21 million in 1899, Frick’s criticism was more mean-spirited than justified.
That summer Morley wrote Carnegie an appropriate and insightful note: “I thought of you t’other day when I came across a line of Wordsworth,—‘a man of cheerful yesterdays and confident tomorrows.’ Quite right, too. That’s the temperament that wins. Only it does not win everything, recollect. There is a crumb or two for people of the other sort, who like to see things as they are, such people as Your friend J.M.”15 It was a gentle caution: Carnegie should not expect to win everything.
It was a tumultuous year in business and in politics, with Bryan again pitted against McKinley in the presidential race and the Philippine War still raging. Although American generals kept on insisting the Filipino nationalists were hemmed in and their defeat imminent, the war dragged on. It was the anti-imperialists’ fault, claimed the expansionists, because they gave Aguinaldo and his rebels hope. One of the most outspoken and harshest critics of the war was Mark Twain, an impressive orator for the cause, a striking figure on stage with his white suit, his luxuriant tangle of white hair and mustache, and cigar. Twain’s bold commentary endeared him to Carnegie, whom he’d become acquainted with in the early 1890s. They were now drawn closer together by a common cause.
To be sure, Twain had fun with Carnegie’s riches, forever scheming to swindle a dollar or two. In one of his more unabashed jabs, in May 1900, he wrote little Margaret a letter instructing her to give her daddy “five or six fingers of Scotch, and then talk. This will mellow him up and enlarge his views, and before he solidifies again you will have him. That is to say, you will have his cheque for £500, drawn to order of ‘Plasmon Syndicate, Ltd.’ which you will send to me, and you and I will be personally responsible that the money is back in his hands in s
ix months, and along with it 500 shares in the Plasmon Company, all paid up. P.S. Don’t let your papa get hold of this—he’ll sell it for ten dollars. Mark.”16 It gave Carnegie reason to laugh in what was an earnest and taxing year.
The New England Anti-Imperialist League supported Bryan for president, but not Carnegie, who was convinced McKinley would ultimately reverse course on the expansionist policy. His only concern was the aggressive views of McKinley’s running mate, Teddy Roosevelt. “I had hoped you would be Vice-President instead of Roosevelt,” he wrote Andrew White in June. “He is a dangerous man.”17 He was not the only Republican who felt that way about Roosevelt, for Ohio senator Mark Hanna would warn, “Don’t any of you realize there’s only one life between this madman and the Presidency?”18
The Boxer Rebellion in China, which climaxed in August 1900, reaffirmed Carnegie’s fears that friction in the colonies and imperialistic desires would lead to warfare. In hopes of ridding the country of foreign influences, Chinese militia units had staged a series of attacks on foreigners and missionaries, and in the summer of 1900 laid siege to the foreign legations in Peking (now Beijing). To rescue the diplomats and suppress the militants, an international force of soldiers contributed by the United States, Britain, Russia, France, Germany, Austria, Italy, and Japan fought their way to Peking. It was an exotic sight with the French Zouaves in their red and blue, the blond Germans in pointed helmets, the Italian Bersaglieri in tossing plumes, Bengal cavalry on Arabian stallions, and turbaned Sikhs. Each country had a vested economic interest in China, and in August, the siege was lifted. One estimate put the death toll of Chinese and foreign Catholics at thirty thousand or more, and the international force retaliated in kind, slaughtering men, women, and children, prompting journalist George Lynch to note, “There are things that I must not write, and that may not be printed in England, which would seem to show that this Western civilization of ours is merely a veneer over savagery.”19