Lincoln was fully aware of the North’s uniqueness. His speeches emphasize again and again the exceptionalism of America, where the broad populace enjoyed the social and economic underpinnings of political freedom. In no other country was political freedom an intrinsic part of the national project. What country of Europe, presented with a vast wealth of unexploited resources, would have conceived of giving it to its people? Or consciously set out to make its citizens economically independent?
The prolonged American boom that persisted for some forty years after the Civil War—accepting all the reverses and jagged ups and downs—was the greatest in history, at least until the spectacular late twentieth-century growth spurts in the “Tiger” economies of East Asia. Lincoln would have been gratified at the thought, though not surprised. But if he had possessed some magic peephole into the future, even the future of only twenty or so years thence, one can imagine that poor Lincoln, with his moderate-Whig aversion to concentrated power, his mistrust of economic giantism, his hatred of speculators and manipulators of paper, would have blanched.
Young Tycoons
When Lincoln died, Andrew Carnegie was turning thirty, and already wealthy, although he had been a factory bobbin boy hardly a decade and a half before, and had yet even to settle on a career. John D. Rockefeller was only twenty-six, but his Cleveland oil refinery was one of the largest and most profitable in the country, and he may have already formed his design of taking over the entire industry. Jay Gould was twenty-nine, and after a brief, stormy career as a tanner, was trying his hand as a railroad turnaround specialist. Pierpont Morgan was twenty-eight, quietly learning his trade within his father’s banking network.
The vast forces afoot in post–Civil War America far transcended any small group of men; but these four would become the greatest of a generation of outsized business leaders, the most prominent of the cadre the press dubbed “The Robber Barons,” and by their sheer intelligence, their ambition, and their forcefulness, they laid down the channels that other people followed. They were never friends, and as often opponents as allies; the wary respect they held for each other readily shaded into active dislike. While it would be too much to say that they created the American industrial superstate, it still conspicuously bears their fingerprints.
Carnegie, Rockefeller, and Gould personified the unlimited entrepreneurial opportunities suddenly opened by America’s vast resources and its freedom from constraints of class and caste. For the man of fierce business ambition and massive talent, it was the one place, and perhaps the one time, where he could push as far as he could possibly go.
Morgan stood apart from the others. He was not only born wealthy, of the bluest of blue-blood Yankee stock, but he defined his career in reaction to the great entrepreneurs. He worked with them all, especially with Carnegie and Gould, but became a dominant figure only as their careers were peaking. Then he emerged as the boundary-setter, the bringer of order, the creator of the first, porous, institutional webs designed to cushion the disruptions of outsized men.
• CARNEGIE •
Andrew Carnegie was the most irritating of tycoons. A petite five-foot-three, towheaded, with small hands and feet and a boyish face, he was a tireless bundle of bouncing, gabbling energy, opinionated and obsequious, fawning and provocative, preternaturally quick in apprehension of anything that would advance his interests.
His rise is the canonical American rags-to-riches tale. Carnegie’s father was a displaced Scottish hand-loom weaver, and the family emigrated to Pittsburgh when Andrew was thirteen. Andrew zipped through jobs as a bobbin boy, a bookkeeper’s clerk, and a telegraph delivery boy, where he picked up telegraphy by watching the operators. He quickly became the business community’s favorite telegrapher, and then a one-man wire service, compiling each day’s telegraphic news reports for Pittsburgh’s newspapers. He was as relentless in self-improvement as in everything else, reading voraciously, and working hard on his accent and grammar. His life was dominated by his mother, Margaret, who imparted the fierce class consciousness of the respectable poor—a wrenching shame of poverty and withering scorn for the unambitious laboring people they were forced to associate with. She and Andrew were inseparable until she died, just before his fifty-first birthday. The Carnegies were nonbelievers, but Andrew still inherited a strong Calvinist aversion to fleshly pleasures. He was immensely charming, and had many friendly associations with women, but probably no intimacy until he finally married a few months after his mother’s death, to a young lady who had waited years for that blessed event.
Andrew’s big break came when he was seventeen, in the person of Tom Scott, who became his business hero. Scott was one of the era’s great railroad executives. Born poor, and working since age ten, he immediately took to Andrew. The need to track far-flung rolling stock made railroads heavy telegraph users, and Scott, who had just been appointed superintendent of the Western division of the Pennsylvania Railroad, was a frequent visitor to Andrew’s telegraph office. When he decided that the workload justified a telegraph station of his own, his first choice for an operator was that bright, bustling little “Andy.”
Since Scott did so much work by telegraph, he and Carnegie shared an office, and the flow of messages allowed Carnegie almost to inhale the essence of the railroad business. Early one morning before Scott had arrived at the office, Carnegie received a message that a train accident had left traffic in a dreadful snarl. Unable to locate Scott—one wonders how hard he tried—Carnegie took control and issued a flood of orders under Scott’s “TAS” signature. By the time Scott was tracked down and came rushing into the office, everything was moving smoothly. This was one time, Carnegie later recalled, that he feared he had gone too far; but after he had nervously explained what he had done, Scott just looked at him strangely, checked that the lines were indeed in order, and let it pass. Shortly thereafter, however, Carnegie was delighted to learn that Scott had been bragging of the exploits of the “little white-haired Scotch devil” in his office, and that he was already known within the railroad as “Mr. Scott’s Andy.” Even the great J. Edgar Thomson, president of the Pennsylvania, popped his head into the office one day, stared hard at Carnegie for a moment, and said, “so you are Scott’s Andy.”
Had Carnegie spent his career at the Pennsylvania, there is no question he would have been one of the great railroad executives of the age. His niche as “Mr. Scott’s Andy” ended in 1859, when Scott was promoted to vice president of the railroad, and secured Carnegie’s appointment as superintendent of the Western division, an extraordinary promotion for his age and experience, more especially since the Pennsylvania’s western roads had been hastily built over difficult terrain and were plagued by line breaks and service interruptions. Carnegie plunged into the job. He kept a telegraph station in his home and was on the railroad lines day and night, supervising repairs, rerouting traffic, shoring up system weak points, instinctively grasping, as few railroad men had, that the core challenge was to keep traffic flowing. Shortly after his appointment, he shocked fellow executives by burning stalled cars to clear lines. It was the classic Carnegie technique: focus on an objective, then cut brutally through any conventions, competitors, or ordinary people who stood in your way. Car burning was soon a standard method for clearing stalled trains. The next year, when Scott was appointed U.S. assistant secretary of war for railroad and telegraph services, he naturally brought Carnegie with him, and in a matter of weeks, Carnegie had again performed prodigies of construction to assemble Union troops for the disastrous first battle at Bull Run in 1860.
By the early 1860s, Carnegie was already a rich man. In an age when conflicts of interest were routine, Scott had carefully steered him to investments in companies doing business with the Pennsylvania, like a sleeping car company and a railroad bridge builder, often advancing him the purchase money. The sleeping car investment alone paid Carnegie dividends of $5,000 a year, more than double his salary at the Pennsylvania, on a cash outlay of less than $450. An early
investment in the Pennsylvania oil boom, in a property known as the Storey Farm, one of the most fabled of the early Pennsylvania drilling sites, earned Carnegie a staggering $125 for each $1 invested. When he made out his return for the new wartime income tax in 1863, Carnegie showed total income of more than $42,000, suggesting a portfolio in the half million-dollar range, or perhaps $6–7 million in today’s money.
Carnegie was so spectacularly talented—with his extraordinary intelligence and dead-accurate Scots practicality, his energy, his immense charm, his feline instinct for a deal—that he simply overmatched everyone else. He was also far better read than most of his peers, with an acquired, but genuine, taste for art and culture, and an attractive writing style. Indeed, he constantly questioned whether he was squandering his talents in business. When his investment income passed the $50,000 mark in 1868, he promised himself that he would work for just two more years to secure that level of income for life, and then devote himself to finer pursuits.
He was kidding himself. The core fact about Carnegie was the drive to dominate—at all costs. But for some reason, although Carnegie was among the hardest of men, he always insisted on parading as a humanitarian idealist, as if his businesses were some kind of social welfare project. So when he was the world’s greatest steel magnate, he loved to issue prolabor manifestos and to bask in the attendant adulation, even as he steadily ratcheted up the demands on his workers and as steadily cut their pay. In his telling, every encounter with workers becomes a parable of a republic of good deeds, and each tall tale winds up with a lecture on the virtues of kindness, for “the reward is sweet in proportion to the humbleness of the individual whom you have obliged.” At the height of the 1892 Homestead Strike, one of America’s deadliest labor-management conflicts, he tells us that the workers “alas, too late” telegraphed him, “Kind master, tell us what you wish us to do and we shall do it for you.” (There is, of course, no trace of such a telegram in the extensive files of the strike.)
Carnegie was often pointlessly cruel, even to his most loyal associates. He manipulated his underlings shamelessly, harping obsessively on their smallest failures and taking the credit for their every success. When Henry Frick retired—Frick, who had contributed as much as anyone to building his empire—Carnegie applied all of his trademark energy and obsessiveness to cheat him of his stake. A proclaimed pacifist, Carnegie chased after war contracts, after promising his wife he never would, and then cheated to get them. He resolved the conflict between his behavior and his stated ideals by lying—egregiously, consistently, and continually. He became, in fact, that most corrupted of liars, one who lies to himself. Even his contemporaneous letters and memoranda of events are likely to be false, to show himself in a better light. It is no surprise that the faults, and occasionally the crimes, of the great tycoons are on the scale of their achievements, but none but Carnegie was so repellantly smarmy.
A few years after Carnegie retired from the Pennsylvania, he became one of the Morgan bank’s favorite clients, although his relationship was with Junius Morgan, Pierpont’s father, for he did not get on with Pierpont. In the long run, he bested Pierpont, as he did almost everyone else. The crowning deal of Morgan’s long career was his buyout of the Carnegie Company in 1901 to create the United States Steel Corporation; in constant dollars, it was the biggest corporate transaction in history until the buyout boom of the 1980s. But that was less a Morgan triumph than a measure of his fear that Carnegie was about to destroy a painstakingly constructed steel cartel. Buying Carnegie out was the only way to get him off the field, and Morgan could thank his angels that Carnegie’s wife was pushing him toward his long-stated goal of finally doing some good in the world. Carnegie rubbed it in by lying about his profits when he and Morgan set the price.
Indeed, over a long career the only fellow tycoon who fully matched up with Carnegie in a business setting was the man he liked to called “Reckafellows.”
• ROCKEFELLER •
John D. Rockefeller descended from solid farmer stock on both sides of his family, and while the Rockefellers were often in straitened financial circumstances, he was never truly poor. Indeed, were it not for the bizarrely unstable behavior of his father, John’s early years would have been almost the cliché of a midcentury boyhood in rural western New York. “Big Bill” Rockefeller was a trickster character. A large, handsome, overpowering man, he was at various times a farmer and businessman, a traveling medicine man, a magician, and an ersatz doctor, who was once indicted for rape. (Weirdly, he also liked to feign being a mute.) Rockefeller’s first biographers noted that his father often disappeared on “long, mysterious, trips”; in fact, as “William Levingston” he was married to another woman and more or less supporting two families for much of John’s life. As John’s fame grew, he simply rebuffed inquiries about his father—he could hardly admit that his father was “Doc” Levingston, a practicing backwoods medicine man, still bilking the rubes.
Perhaps in reaction to his father’s behavior, John was the most sober and industrious of young men—diligent at school, serious about his Baptist religion, scrupulously honest, utterly reliable. His adult life was similarly conventional, at least outside of business. He married young, was close to his wife and children, and in later years worked hard to prevent their lives from being completely distorted by his great wealth. John was better educated than most young men of his time, completing high school and some commercial courses before starting work at sixteen as an assistant bookkeeper for a produce merchant in 1855. Two years later, with a loan of $1,000 from his father, John purchased a partnership in the firm of another merchant, Maurice Clark, a gregarious Englishman about ten years older than himself, and by the time John was twenty, he was already recognized as one of Cleveland’s outstanding young merchants—honest, reliable, and with a shrewd sense of commodity markets. The truly portentous event of John’s twentieth year, however, was Col. Edwin Drake’s success in producing a substantial amount of “rock oil” from a well near Titusville, in Pennsylvania’s “Oil Creek” region, so named for its visible seepages of surface oil.
Drake was backed by professional investors who had done the scientific homework to know that Pennsylvania oil, if only it could be produced in commercial quantities, could be the superior illuminant and lubricant the world so desperately needed. Drake’s fitful progress was closely watched, and when his well finally bubbled with a large volume of oil, the region went berserk. A local lumberman became a millionaire almost overnight by galloping through the valley and buying out any farmer who would sell. Wildcatters poured into the region, and immediately began to strike wells over an area of hundreds of square miles. Oil Creek shipped an estimated 200,000 to 500,000 barrels of crude in 1860, the year after Drake’s discovery, and 2,000,000 barrels in 1861, including some 275,000 barrels sold internationally. (A Pennsylvania barrel, still the standard today, contains forty-two gallons.) About 70 percent of the production was for lighting.
As merchants and commodity traders, Clark and Rockefeller would have traded oil for their customers and must have had some idea of the profits to be made. But the idea of going into oil was brought to them, two years after Drake’s strike, by a friend of Clark’s, an Englishman and self-taught chemist named Sam Andrews. Andrews, who had some refinery experience, proposed that Clark and Rockefeller back him in opening a refinery, and they finally agreed to put up $4,000, which John regarded as “very large.” The new undertaking was organized as Andrews, Clark and Co., although Rockefeller apparently put up the same amount of capital as Clark. At twenty-two, John was still regarded as a junior partner, the guy who took care of the numbers.
The Andrews, Clark refinery, which they dubbed the Excelsior Oil Works, flourished from the start. Rockefeller picked the location—situated for maximum access to rail and water transport. And as he gradually became obsessed with the opportunities in oil, he took over the day-to-day operations of the business while Andrews ran the refinery. Andrews was an excellent refiner
, and his products quickly gained a high reputation; most important, he had the sense to recognize that John, young as he was, should make the business calls. For the first time, Rockefeller could demonstrate his extraordinary ability to combine headlong expansion with fanatical attention to efficiency and cost. Within two years, Excelsior was turning out some five hundred barrels a day of refined product. That was paltry production by the standards of just a few years later, but in 1865 it made Excelsior one of the largest refineries in the country and twice as large as any other in Cleveland. Under Rockefeller’s management, it was also the most consistently profitable.
The problem was the Clarks. Maurice had brought his two brothers into the business, as buyers and salesmen. One of them, James, who was an exprizefighter and a bully, clashed with Rockefeller almost from the start. Worse, Rockefeller didn’t trust him. James liked to make risky side deals, padded his expense claims, and bragged about cheating customers. At the same time, Maurice was worried by Rockefeller’s appetite for debt and began to take a hard line against continued expansion. As frictions grew, the Clarks made frequent threats to dissolve the partnership. On one such occasion, Rockefeller disingenuously asked them if they really meant it, which they confirmed. The next day, to their shock, they read a notice of dissolution in the local newspaper. They were doubly shocked to find that Andrews had thrown in his lot with Rockefeller; and then, after they had agreed to an auction to settle the ownership of the refinery, were shocked again to find themselves coolly outbid by the twenty-five-year-old Rockefeller. The deal was done on March 2, 1865, just a few weeks before Appomattox.
The Clarks conceded the auction when the bidding hit $72,500. Maurice clearly felt that was an extraordinary price for a one-half interest. In addition, Rockefeller was giving back his half interest in the produce business, which pushed the total price up near the $100,000 mark. In truth it was a steal. The next year, in 1866, Excelsior Oil had total sales of $1.2 million, easily returning the purchase price before the year was out. Within just a few months after buying out the Clarks, Rockefeller and Andrews had started construction on a second refinery, and had set up yet a third business in New York to focus on overseas oil brokerage and sales; it was headed by John’s younger brother William, who was becoming an excellent businessman in his own right.
The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supercompany Page 3
