The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supercompany

by Charles R. Morris

  Running the Machine

  The quote is from Ida M. Tarbell, The History of the Standard Oil, II:234–35.

  6. The First Mass Consumer Society

  Wanamaker’s opening is in Thomas J. Schlereth, Victorian America: Transformations in Everyday Life, 1876–1915 (New York: HarperCollins, 1991), pp. 146–47. The best history of the growth and culture of department stores is Susan Benson Porter, Counter-Cultures: Sales-women, Managers, and Customers in American Department Stores, 1890–1940 (Urbana, Ill.: University of Illinois Press, 1986); also see Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass.: Harvard University Press, 1977), pp. 224–29. The history of Ivory soap and Procter & Gamble is available at the company’s Web site, www.pg.com. My appreciation to Ed Rider of P&G Corporate Archives for estimates of P&G’s late nineteenth-century earnings. Pharmacist’s comment is Alfred Smetham, F.C.S., “Soap Manufacture and the Soap of Commerce,” American Journal of Pharmacy, vol. 56, no. 3 (March 1884), 7–12. The quote is on 8.

  The New Middle Class

  The Whitman quote is in Stuart M. Blumin, The Emergence of the Middle Class: Social Experience in the American City, 1760–1900 (New York: Cambridge University Press, 1989), p. 1. The account in this section for the most part follows Blumin, supplemented as noted. The de Tocqueville quote is from Alexis de Tocqueville, Democracy in America (New York: Alfred A. Knopf, 1945, 2 vols.), I:53. Potter quote is from David Potter, People of Plenty (Chicago: University of Chicago Press, 1954), p. 96. The discussion of inequality and occupational mobility in the next two paragraphs follows Clayne Pope, “Inequality in the Nineteenth Century,” in Stanley Engerman and Robert Gallman, eds., The Cambridge Economic History of the United States, Vol. II, The Long Nineteenth Century (Cambridge, U.K.: Cambridge University Press, 2000), pp. 109–42.

  A common index of wealth and income inequality is the “Gini coefficient.” The degree of inequality is measured on a scale of 0–1. (At 1, one household owns everything.) Gini coefficients were between 0.81–0.83 in 1860 and 1870, and was 0.78 in 2003 (all very high inequality scores), compared with only 0.66 in 1774. The richest 1 percent owned 26 percent of all wealth in both 1890 and 1962, but 34 percent in 2003. Wealth concentration in the top 10 percent of households, however, is 72 percent in 1890, 62 percent in 1962, and 69 percent in 2003 (i.e., the 2003 data show a top class even more skewed toward the top 1 percent). Income is usually about half as concentrated as wealth, but nineteenth-century income data are too sketchy for the analysis. For details on Gini coefficients, see Vincenzo Quadrini and José-Victor Rios-Rull, “Understanding the U.S. Distribution of Wealth,” Federal Reserve Bank of Minneapolis Quarterly Review, vol. 21, no. 2 (Spring 1997), 22–36.

  The 1887 Harpers article, data on white-collar growth, and account of Tailer are in Blumin, op. cit., pp. 274, 267, 112–14. Zunz clerical data are from Olivier Zunz, Making America Corporate, 1870–1920 (Chicago: University of Chicago Press, 1990), pp. 127–31. The Boston study, ethnicity, and discussion of artisan/businessman status are from Blumin, op. cit., pp. 271, 291, and 134–37.

  For developments in housing, Donald E. Sutherland, The Expansion of Everyday Life—1860–1876 (Fayetteville, Ark.: University of Arkansas Press, 2000), pp. 27–41, has a good discussion, as does Blumin and Richard L. Bushman, The Refinement of America: Persons, Houses, Cities (New York: Alfred A. Knopf, 1992), pp. 238–79. For living conditions on early nineteenth-century farms, see Jack Larkin, The Reshaping of Everyday Life, 1790–1840 (New York: Harper & Row, 1988), especially pp. 124–30. The quote “piggery” is from Sutherland, op. cit., p. 69. For water-borne diseases, see David Cutler and Grant Miller, “The Role of Public Health Improvements in Health Advances: the 20th Century United States,” NBER Working Paper 10511 (Cambridge, Mass.: National Bureau of Economic Research, May 2004). Isabel March’s quote from A Hazard of New Fortunes is on pp. 44–45 of the Modern Library Paperback Edition. Quote “much larger” is from Stuart M. Blumin, The Emergence, p. 155. For education reform, see Donald H. Parkerson and Jo Ann Parkerson, Transitions in American Education: A Social History of Teaching (New York: RoutledgeFalmer, 2001); the quote “the student should” is from pp. 156–57.

  Things

  The piano and related quote are from Montgomery Ward & Co., Catalogue and Buyer’s Guide, Spring and Summer, 1895 (New York: Dover Publications, 1969, facsimile edition), pp. 238–39; the Sears items are from Sears Roebuck & Co., 1897 Sears Roebuck Catalogue (New York: Chelsea House Publishers, 1968, facsimile edition), “Drug Department” (pages not numbered). And see Bloomingdale Brothers, Bloomingdale’s Illustrated 1886 Catalog (New York: Dover Publications, 1988, facsimile edition). History of mail order draws from W. L. Brann, The Romance of Montgomery Ward & Co.(New York: Campbell, Starring & Co., 1929); Boris Emmet and John E. Jeuck, Catalogues and Counters: A History of Sears, Roebuck and Company (Chicago: University of Chicago Press, 1950); Cecil C. Hoge, The First Hundred Years Are the Toughest: What We Can Learn from a Century of Competition between Sears and Wards (Berkeley, Calif.: Ten Speed Press, 1988); and Gordon E. Weil, Sears Roebuck U.S.A.: The Great American Catalog Store and How It Grew (New York: Stein and Day, 1977). Wanamaker quote is from Emmett and Jeuck, p. 13.

  The section on consumer items, except as noted, is from Thomas J. Schlereth, Victorian America, pp. 141–67; immigrant mother’s quote is on p. 167. The Heinz sign is from James Traub, The Devil’s Playground: A Century of Pleasure and Profit in Times Square (New York: Random House, 2004), p. 44; the grocer doggerel from Otto L. Bettmann, The Good Old Days—They Were Terrible! (New York: Random House, 1974), p. 117.

  Armory Practice Redux

  This section draws primarily from David A. Hounshell, From American System to Mass Production, 1800–1932: The Development of Manufacturing Technology in the United States (Baltimore, Md.: Johns Hopkins University Press, 1984), especially pp. 189–215, 67–123. For Pope, in addition to Hounshell, see Stephen B. Goddard, Colonel Albert Pope and His American Dream Machines: The Life and Times of a Bicycle Tycoon Turned an Automotive Pioneer (Jefferson, N.C.: McFarland, 2000). The quote “father” is from p. 190. For Cleveland, see Naomi R. Lamoreaux, Margaret Levenstein, Kenneth L. Sokoloff, “Financing Invention during the Second Industrial Revolution: Cleveland, Ohio, 1870–1920,” NBER Working Paper 10923 (Cambridge, Mass.: National Bureau of Economic Research, November 2004). The Sears executive’s “money, organization” and brains is from Boris Emmet and John E. Jeuck, Catalogues and Counters, p. 4.

  Anxiety

  The de Tocqueville quote is from op. cit., II:106. The Beecher quote is from Karen Halttunen, Confidence Men and Painted Women: A Study of Middle-Class Culture in America, 1830–1870 (New Haven, Conn.: Yale University Press, 1982), p. 23; for his shopping addiction, Daniel Horowitz, The Morality of Spending: Attitudes toward the Consumer Society in America, 1875–1940 (Chicago: Ivan R. Dee, 1985), p. 11. Halttunen has a fine discussion on sources of class anxiety; see pp. 191–97 for a summary. The discussion on population trends and contraceptive practices relies on Jenny Bourne Wahl, “New Results on the Decline in Household Fertility in the United States from 1750 to 1900,” in Stanley Engerman and Robert Gallman, eds., Long-Term Factors in American Economic Growth: National Bureau of Economic Research, Studies in Income and Wealth, vol. 51 (Chicago: University of Chicago Press, 1986), pp. 391–438; and Paul A. David and Warren C. Sanderson, “Rudimentary Contraceptive Methods and the American Transition to Marital Fertility Control, 1855–1915,” in ibid., pp. 307–90. The quote on modern China is from The Economist, November 20, 2004.

  7. Paper Tigers

  The Tribune quote is available on the extensive Fire Web site maintained by the Chicago Historical Society at http://www.chicagohs.org/fire/. For the “Chicago school,” I follow Carl W. Condit, The Chicago School of Architecture: A History of Commercial and Public Building in the Chicago Area, 1875–1925 (Chicago: University of Chicago Press, 1964). The quote “Bearing in mind” fro
m John Root, of Burnham and Root, is on p. 49. For a discussion of Chicago’s leading role in steel-frame architecture, especially compared to New York, see Thomas J. Misa, A Nation of Steel: The Making of Modern America, 1865–1925 (Baltimore, Md.: Johns Hopkins University Press, 1995), pp. 63–69. For the creation of a paper management industry, see JoAnn Yates, “Investing in Information: Supply and Demand Forces in the Use of Information in American Firms, 1850–1920,” in Peter Temin, ed., Inside the Business Enterprise: Historical Perspectives on the Use of Information (Chicago: University of Chicago Press, 1991), pp. 117–60.

  The Conquest of the Clerks

  There are good discussions of the different filters used by economic and business historians in Peter Temin, ed., Inside the Business. See especially the essay, Daniel M. G. Raff and Peter Temin, “Business History and Recent Economic Theory: Imperfect Information, Incentives, and the Internal Organization of Firms,” pp. 7–40. A key difference is that economists tend to treat the “firm” as a kind of rational monad, like the “consumer,” while business historians try to deconstruct the monads, especially to illuminate the nonrational parts. For a highly intelligent discussion on these issues, related to the history of the steel industry, see Thomas J. Misa, A Nation of Steel, pp. 270–82.

  The description of Holley’s exhortations is based on the collection of his reports and speeches in HSWP, Box 36B, including “Report to the Bessemer Steel Company Limited, No. 1, 1880: The John Cockerill Works, Practice and Costs, at Seraing, Belgium”; “Report to the Bessemer Steel Company Limited No. 3, 1880: The Rail Mill and General Plant and Practice at the Wilson, Cammel & Co.”; “Report to the Bessemer Steel Company Limited, No. 2 1881, Krupp’s Practice and Plant”; “On American Rolling Mills,” Journal of the Iron and Steel Institute, No. II, 1874; reprinted by Bessemer Council; and “Address of President A. L. Holley before the American Institute of Mining Engineers, October 26, 1874.” The crisis in heavy rails is in Steven W. Usselman, Regulating Railroad Innovation: Business, Technology, and Politics in America, 1840–1920 (New York: Cambridge University Press, 2002), pp. 223–39; and in structural steel, Thomas J. Misa, A Nation of Steel, pp. 60–83. For the increased links between science and business, and the data on professional sciences and university development, see Olivier Zunz, “Producers, Brokers, and Users of Knowledge: The Institutional Matrix,” in Dorothy Ross, ed., Modernist Impulses in the Human Sciences, 1870–1930 (Baltimore, Md.: Johns Hopkins University Press, 1994), pp. 290–307.

  For industrial securities, I used Thomas R. Navin and Marion V. Sears, “The Rise of a Market for Industrial Securities, 1887–1902,” Business History Review 29:1 (Spring 1955), 105–38; and Gene Smiley, “The Expansion of the U.S. Securities Market at the Turn of the Century,” Business History Review 55:1 (Spring 1981), 75–85. For Samuel Dodd and the Standard, see Allan Nevins, John D. Rockefeller: The Heroic Age of American Enterprise (New York: Charles Scribner’s Sons, 1940, 2 vols.), I:603–17. The quotes “the receipt,” “the trusts,” and “merely” are from U.S. House of Representatives, Investigation of Certain Trusts: Report in Relation to the Sugar Trust and Standard Oil Trust by the Committee on Manufactures (Washington, D.C.: U.S. Government Printing Office, 1889), pp. II, 300. Rockefeller’s 1896 stock holdings are from RAC, Series F, “Trial Balances, 1890–1915.” The Carnegie accounting example is David Brody, Steelworkers in America: The Nonunion Era (New York: Russell and Russell, 1970), p. 19.

  For changing context of management-labor relations, see David Brody, Steelworkers in America, and David Montgomery, The Fall of the House of Labor: The Workplace, the State, and American Labor Activism, 1865–1925 (New York: Cambridge University Press, 1977). Bruce Laurie, Artisans into Workers, Labor in Nineteenth-Century America (Urbana, Ill.: University of Illinois Press, 1997) is a fine survey with an extensive discussion of Homestead. For the effects of technology improvements on mill operations, I generally follow the excellent discussion in Brody, pp. 7–79. The “have to be” quote is from p. 34.

  Homestead

  The basic narrative follows the accounts in Kenneth Warren, Triumphant Capitalism: Henry Clay Frick and the Industrial Transformation of America (Pittsburgh, Pa.: University of Pittsburgh Press, 1996), pp. 63–97, and Joseph Frazier Wall, Andrew Carnegie (Pittsburgh, Pa.: University of Pittsburgh Press, 1989), pp. 537–82. The Carnegie labor quotes are in Joseph Frazier Wall, Andrew Carnegie, pp. 525–26, the “young & rather,” p. 575. The Jones quotes on wages are in HSWP, Box 71, Folder 1; his “entirely out of” is in Wall, op. cit., p. 521. The story of Carnegie’s use of Pinkertons at the ET is in James Howard Bridge, The Inside History of the Carnegie Steel Company, A Romance of Millions (New York: Aldine, 1903), pp. 189–90. Wall oddly omits the Pinkertons, instead following an account in Burton J. Hendrick, The Life of Andrew Carnegie (Garden City, N.Y.: Doubleday, Doran, 1932, 2 vols.), I:388–403, a hagiographic work, which in turn cites only Carnegie’s “own relation” many years later to a congressional committee. Warren, a careful scholar, follows Bridge. The two quotes are Bridge’s. The Gates quote and “patronizing” examples in the footnote are from Kenneth Warren, Triumphant Capitalism, pp. 120, 136, 211, and 185. The quotes “Amalgamated placed,” “foolish . . . repugnant,” “long and,” “Matters at,” and “I do not” are from Joseph Frazier Wall, Andrew Carnegie, pp. 579, 574, 541, 561, and 563; “something of,” Kenneth Warren, op. cit., p. 89; “These are,” Wall, op. cit., p. 624.

  The one-fifth reduction and the 58 pages of footnotes are in David Brody, Steelworkers, pp. 45, 53. The Jones cost reduction and data for my earnings impact calculation are from HSWP, Box 72, Folder 5. And see the table in Kenneth Warren, Triumphant Capitalism, p. 110. For “dismal labor policies,” Thomas J. Misa, A Nation of Steel, p. 270. The quote “agreed with practically” is in U.S. House of Representatives, Investigation of Certain Trusts, p. 29. “The Works are” from Wall, op. cit., p. 575. For the Ludlow story in the footnote, I used Ron Chernow, Titan: The Life of John D. Rockefeller, Sr. (New York: Random House, 1998), pp. 578–85. The Garland account is in Hamlin Garland, “Homestead and Its Perilous Trades, Impressions of a Visit,” McClure’s Magazine, vol. III, no. 1 (June 1894), 3–19, on p. 3. Jones and Schwab could always rev up competitions with other mills and men would work willingly till they dropped. The quote “a good deal” is from J. Stephen Jeans, ed., American Industrial Conditions and Competition: Reports of the Commissioners Appointed by the British Iron Trade Association to Enquire into the Iron, Steel, and Allied Industries of the United States (London, 1902), p. 329. “If Pittsburgh is” is quoted in Kenneth Warren, Triumphant Capitalism, pp. 111–12. For Jeans’s wage mystification, J. Stephen Jeans, ed., op. cit., pp. 316–17. Carnegie’s “to rake up,” “neither the power,” “ability, fairness,” “thought the three,” “Kind master, tell,” and “alas” are in Joseph Frazier Wall, Andrew Carnegie, pp. 576–77, 568, and Andrew Carnegie, The Autobiography of Andrew Carnegie (Boston: Northeastern University Press edition, 1986), p. 223; The St. Louis Post-Dispatch editorial, Wall, pp. 572–73.

  The Creation of the Carnegie Company

  The sequence of events here follows Kenneth Warren, Triumphant Capitalism. The “Mr. Carnegie” and “A. C. must have” quotes are from pp. 217, 218; “every movement of,” James Howard Bridge, Inside History, p. 274. For Schwab, see Robert Hessen, Steel Titan: The Life of Charles M. Schwab (New York: Oxford University Press, 1975). See Joseph Frazier Wall, Andrew Carnegie, pp. 600–12, for the ore deals with Rockefeller. Rockefeller’s “astonished” quote is from Allan Nevins, John D. Rockefeller: The Heroic Age of American Enterprise (New York: Charles Scribner’s Sons, 1940, 2 vols.), II:399. The financial data for the valuation discussions are all from ACLC; the calculations are mine. The quotes “with great” and “his oldest” are from Kenneth Warren, Triumphant Capitalism, p. 230. Gary’s “received no encouragement” is in U.S. House of Representatives, Hearings before the Committee on Investigation of United States Steel Corporation (Stanley Committe
e), (Washington, D.C.: U.S. Government Printing Office, 1912, 8 vols.), I:205. Quote “making securities” is in Kenneth Warren, op. cit., p. 232. Wall has a somewhat different account of Moore’s option from Warren’s (Wall, op. cit., pp. 728–32, although in the note on p. 1094 he concedes that the episode is murky). Wall has Carnegie asking for $2 million pro rata for the partners. The $1,170,000 would have represented his 53 percent, while the other partners consented to waive their shares. The Iron Age quotes, “not one,” “attention to” are from Warren, op. cit., pp. 234–35, 237. Carnegie’s note confirming his intent to return the $170,000 is reproduced in James Howard Bridge, op. cit., p. 320; the Frick/Phipps cable describing their bonus is in Wall, op. cit., p. 730. “Declaration of,” “For years” are from Warren, op. cit., pp. 245, 257. “The Directors have” quote is from a letter from Phipps to Carnegie, April 21, 1900, ACLC, vol. 75. The details of the 1898 profits numbers are in ACLC, vol. 61; an analysis of actual earnings in 1900 is in the next chapter and Appendix I. Carnegie’s proposal to delay bond interest was in a cable for the directors’ meeting on July 28, 1900, ACLC, vol. 76. The Phipps offer is in Schwab to Carnegie, February 3, 1900, ACLC, vol. 72.

  Note on Frick’s performance: Carnegie Steel’s first full year was 1893. Profit tabulations below for pre–1893 period consolidate Carnegie Bros., which owned the ET, and Carnegie, Phipps, which was formed to acquire the Homestead Works. See ACLC, vol. 61 and vol. 73.

  Year