Carnegie had reached a crossroads. He decided he didn’t need promotion in the railroad as his investment dividends brought him more than his working salary and he had a notion of returning to Scotland, maybe to act as American Consul at Glasgow. Towards this end he asked Thomas A. Scott to mediate with Abraham Lincoln’s Secretary of State, Simon Cameron, to get him the job. Cameron did not oblige.17 Nevertheless, Carnegie was adamant he was getting out of railroads in order to follow his determination ‘to make a fortune’ – something he could not do ‘honestly’ in transportation.18
A little short of two weeks before General Lee surrendered the Confederate Army to General Grant at Appomattox Court House, Virginia, Carnegie sat down and wrote his letter of resignation:
PENNSYLVANIA RAILROAD COMPANY
SUPERINTENDENT’S OFFICE
PITTSBURGH, MARCH 28 1865
TO THE OFFICERS AND EMPLOYEES OF THE PITTSBURGH DIVISION:
Gentlemen:
I cannot allow my connection with you to cease without some expression of the deep regret felt at parting.
Twelve years of pleasant intercourse have served to inspire feelings of personal regard for those who have so faithfully laboured with me in the service of the Company. The coming change is painful only as I reflect that in consequence thereof I am not to be in the future, as in the past, intimately associated with you and with many others in the various departments, who have through business intercourse, become my personal friends. I assure you although the official relations hitherto existing between us must soon close, I can never fail to feel and evince the liveliest interest in the welfare of such as have been identified with the Pittsburgh Division in times past, and who are, I trust, for many years to come to contribute to the success of the Pennsylvania Railroad Company, and share in its justly deserved prosperity.
Thanking you most sincerely for the uniform kindness shown toward me, for your zealous efforts made at all times to meet my wishes, and asking for my successor similar support at your hands, I bid you all farewell.19
Carnegie’s rather pompous letter was not the end of his railroad interests. His investments kept him a keen follower of the postwar railroads, bridge-building and telegraphic industries. What a step he had taken. The poor boy from Dunfermline, desperate for a job, had now jettisoned a position with greater prospects. Wealth had boosted Carnegie’s confidence and there was now greater chance of gallivanting.
EIGHT
EUROPEAN INTERLUDE
No business man is worth his salt . . . who does not have his affairs so expertly organised that he cannot drop them at a moment’s notice and leave for parts unknown.
Burton J. Hendrick, The Life of Andrew Carnegie, vol. I, p. 138
Carnegie was getting itchy feet again. For two years he had juggled his financial interests which had now mutated into two distinct balance sheet groupings. There were the businesses like the Keystone Bridge Co., the Pittsburgh Locomotive Works, the Superior Rail Mill and the Union Iron Mills, which demanded Carnegie’s direct attention and relevant intervention, and company interests like banks, insurance concerns, Adams Express, Columbian Oil and Woodruff Sleeping Cars that were run by others.
As Carnegie assessed his financial sheets, America jogged along after the shock assassination of Abraham Lincoln on 14 April 1865 at Ford’s Theatre, Washington, by actor John Wilkes Booth. His death removed the only man who could have reconciled North and South, and the country had a new president in Lincoln’s Vice-President Andrew Johnson (1808–75). As Johnson settled into his struggles with the radicals in his own party, Carnegie set out for Europe in May 1865, with share revenue flooding into his pockets.
Inspiration for the journey came from a book by American travel writer James Bayard Taylor entitled Views Afoot: or, Europe Seen with Knapsack and Staff (1846). But there was another underlying motive for Carnegie to undertake the five-month tour. He wanted to round off his ‘mind and character’ and achieve the ‘desirable expansion of his soul’ through travel.1 His arrangements for the voyage made, Carnegie left his interests principally in the hands of a quartet of trusted colleagues: Andrew Kloman, of the iron-working firm of Kloman & Co., who had brought Carnegie into the iron manufacturing business; John Piper of the bridge builders Piper & Shiffler Co., in which Carnegie had made a key investment; his old friend Tom Miller; and his much put-upon young brother Tom. This group of individuals underlined another of Carnegie’s secrets of success: put into roles of responsibility people who are more accomplished at the job than you are yourself.
This time Carnegie’s travelling companions were Henry Phipps and John W. ‘Vandy’ Vandervort; it would cost them some $3,000, earned from oil revenues.2 They sailed from New York in May 1865 aboard the Scotia, bound for Liverpool, and thence travelled directly to Dunfermline. A sojourn with the Lauders and Morrisons was a happy time. Carnegie honed his sentimentality for Scotland and was overcome by a sense of ‘coming home’; he wrote to his mother and brother: ‘[At Dunfermline] we have a local history extending to the third generation, and many a one speaks kindly of our ancestors.’3
The party now retraced their steps to Liverpool where they met up with a distant cousin of Henry Phipps, John Franks, who joined them for the rest of the tour. They crossed France, Germany, the Netherlands, Switzerland and Italy, sojourning at London, Paris, Antwerp, Amsterdam, Dresden, Vienna, Naples and Pompeii, soaking up art galleries and theatres, opera and architecture, scenery and volcanoes, much as eighteenth-century aristocrats had done on the Grand Tour. Carnegie recalled how they ‘climbed every spire, slept on mountain-tops, and carried our luggage in knapsacks upon our backs’.4
John Franks put together a sort of journal of the continental tour in correspondence to his sister. He reported that Carnegie was ‘exuberantly joyous’ throughout the trip.5 Other important letter extracts offer a rare glimpse of Carnegie at 30. Franks explained:
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 . . .
Visited the theatre one evening to witness the performance of ‘The [sic] Biche au Bois’ [The Hind of the Forest] by Parisian Actors. This was by Andy’s desire, who, having seen it in Paris, was in raptures with it. Another evening a visit to the Theatre Royal to witness and hear the opera ‘La Traviata’ . . .
Located in comfortable quarters on the Unter den Linden, seated in my sumptuously furnished bedroom, my friends seated on the velvet cushioned sofa and chairs, busily writing at a large round table in the centre of the room, we are all occupied in our usual Sunday avocation of established lines of communication to our respective homes. Harry is writing to his sister, Vandy to his brother, and Andy is engaged in communicating his constant experiences to the editor of the Pittsburgh ‘Commercial’. Behold us then in my room which presents, if not a ‘lettery’ at any rate a truly ‘littery’ appearance. What with Andy’s confident assumption of the French language, which he displays at every possible opportunity, to our great amusement, and what with the arguments we have upon most questions, social, political, etc., Andy brimming first upon one side, then upon the other, with admirable impartiality, and possibly to keep the balance even, it must be confessed, that upon the whole we make up a tolerably lively party . . .
[Prague] On Friday last, we were up shortly after six and at half past seven were on our way to Brunn. A beautiful bright day made our journey cheerful, which was further enlivened by discussion of various subjects. Andy’s opinion and judgements, Vandy’s general abstinence from discussion, for which he was taken to task by Andy, Harry’s precipitate conclusions, then running onto politics and art. It was afterwar
d varied by readings from [Lord Byron’s] ‘Childe Harold’ . . . Andy is so overflowing that it is extremely difficult to keep him within reasonable bounds, to restrain him within the limits of moderately orderly behaviour – he is so continually mischievous . . .6
Carnegie was particularly ebullient when they visited the Doge’s Palace in Venice; having placed his friends in poses among the Doge’s antique furniture, he declaimed a speech from Othello for effect.
Franks was to offer a further interesting comment illustrating that business was never far from Carnegie’s thoughts: ‘The boys are elated by glorious news in letters of continued advance in prices, of stocks advancing, of their mills working double turns, of large orders pouring in, of new patents obtained and of still greater success looming in the future.’7
Carnegie deemed the visit to Europe the most ‘instructive’ he had ever undertaken: ‘Up to this time I had known nothing of painting, or sculpture, but it was not long before I could classify the works of great painters . . . My visit to Europe also gave me my first great treat in music . . . Handel . . . at the Crystal Palace in London . . . I had never, up to that time . . . felt the power and majesty of music in such high degree.’ Even the choir of Pope Pius IX at Rome cut across his natural Scottish anti-Catholic bias to offer him ‘a grand climax to the whole’.8
Although Carnegie walked through the streets of Paris with wonderment, admiring the remodelling of the boulevards under the direction of Baron George Eugene Haussman (1809–91), the France of Napoleon III did not impress him as a whole, while Prussia, under its seventh king, Wilhelm I (the first German Emperor in 1871), was more to his liking. He wrote to his mother and brother:
In France, all seems dead. 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’.9
Four years after Carnegie’s trip Napoleon III declared war on Prussia, leading to the capitulation of Paris on 28 January 1871. Carnegie had sensed the impending Gallic doom, but in this letter home he also foreshadowed his own attraction towards Germany which would lead to his future support for Kaiser Wilhelm II.
Back home, though, all was not happy. Carnegie’s brother Tom was feeling the pressure of tending to his brother’s business, and the mail from Europe regularly brought a flurry of letters urging Tom to undertake a whole range of tasks. Now 22, Tom’s early education was more firmly based than Carnegie’s, and he had a more relaxed nature. Where Carnegie was melancholy by nature, Tom was cheerful, and where Carnegie was solemn, Tom was bright, and although his brother was ‘protective’, Tom never forgot the childhood bullying. The stress brought about by Carnegie’s letters was continually rising and Tom took to the bottle. Finally he could stand it no more and sent Carnegie a letter of complaint. In a condescending reply Carnegie attempted to assuage his brother’s ire:
It is a heavy load for a youngster to carry, but if you succeed, it will be a lasting benefit to you. Talk to mother freely; I always found her ideas pretty near the right thing. She’s a safe counsellor, safer than I, probably, who have made money too easily and gained distance by carrying full sail, to be much of an advisor when storms are about, or sail should be taken in.10
Carnegie showed little real understanding of his brother’s predicament or his feelings, but continued his trip with a resolve to search for more moneymaking ideas in Europe. Victorian London particularly pleased him. The underground railway was progressing from its first operation in 1863, and as novelist Sir Walter Besant was to remark in South London (1899), houses ‘sprang up as if in a single night: streets in a month, churches and chapels in a quarter’. London was the focus of ‘national thought and industry’, and as he viewed all that was going on from pavement and cab Carnegie was enchanted by the ‘World City’. ‘I am quite taken with London,’ he wrote to his mother, ‘and would like to spend a year or two there.’11
As he sought out new ideas and business concepts Carnegie was particularly interested in steel replacing iron for railways; at that time his own company was finding that iron rails were too brittle for high-speed main line trains. A new process strengthening iron rails with steel had been invented by one Thomas Dodd, who evolved ‘dodderised rails’ which were stronger than the ones used by the Pennsylvania Railroad. So along with cousin Dod, Carnegie investigated the matter further with a view to investing in the idea. He took steps to win an exclusive contract for supplying such rails to the American market. With his persuasive business acumen at full blast, Carnegie talked Dodd and his colleagues into a satisfactory deal. All this was undertaken while his travelling companions spent three weeks in Switzerland. Carnegie joined his friends at Mayence, but followed up his steel researches at the Iron Works in Prussia and the cast-iron plant at Magdeburg, and looked into the manufacturing of ‘dodderised’ material at Ruhwart on the Rhine.
Carnegie arrived back in America during the spring of 1866 raring to get back into business, although his commercial interests had rarely been far from his thoughts in Europe. He launched afresh into his bridge-building, telegraph and sleeping-car interests, but the manufacture of iron would increasingly grab more of his attention. His companies were very much tied to the production of iron and this was one of the reasons why he had founded the Cyclops Iron Co. with Thomas Miller back in 1864; this had been merged in 1865 with the rival company of Kloman & Phipps to form the Union Iron Mills. However, at the time of his return the Union Iron Mills were not doing well; orders were not coming in via the feeder companies like the Keystone Bridge Co., and internal management rivalries made meetings sticky. In essence Thomas Miller could not stand Henry Phipps and meetings regularly boiled over until Carnegie bought out Miller’s share of the company, which was renamed as Carnegie, Kloman & Co.
Meanwhile Carnegie’s negotiations for an extended exclusive contract for the ‘dodderised’ rails were not proceeding smoothly. Thomas Dodd had travelled to the United States and set up the American Steeled Rail Co., and had granted rights to other American companies. The exclusivity that Carnegie thought he had won was not valid, and he endeavoured to clarify the position. Carnegie did much to promote the Dodd process to keep his interests high. Alas, the rails did not stand up to the American weather conditions. J. Edgar Thomson advised that the Pennsylvania Railroad had no further trust in them. For a while Carnegie pressed on with the Dodd process but at last he had to withdraw his efforts. In true Carnegie fashion he kept his name clean by blaming Dodd for the failure.
Back in Britain the London-based engineer James Livesey, who was acting as Carnegie’s agent with the Dodd company, wrote about the ‘Webb process’ he had discovered for economically priced hard-wearing rails. Negotiations for this process also failed, as the product proved dubious. Carnegie began to look elsewhere.
NINE
NEW YORK AND THE WOLVES OF WALL STREET
As a businessman . . . Carnegie was the most driven and competitive, the most obsessive and compulsive, the most independent and daring. He was so convinced of his own rightness – on business, politics and philanthropy – that he couldn’t conceive of being wrong. He was intoxicated by his own holiness.
Peter Krass, biographer, 2002
Iron-manufacturer William Coleman was one of the Carnegies’ Homewood neighbours at Pittsburgh and a co-investor in oil. During the late summer of 1867 his daughter Lucy married Tom Carnegie and the Homewood house became their new home. Carnegie took this event as a time to reassess his position: ‘My field appeared to be to direct the general policy of the companies and negotiate the important contracts.’1 Tom and Henry Phipps ‘had full grasp of the business at Pittsburgh’, so Carnegie decided to move with his mother to the centre of all the ‘important enterprises’ at New York. They took up residence at the plush 600-room St Nicholas Hotel, Manhattan, in the autumn of 1867. In due course the o
wners of the St Nicholas opened the Windsor Hotel and the Carnegies were residents there until 1887.2 In personal relationships Carnegie’s mother was still the core figure of his life: ‘we would be happy anywhere as long as we were together’.3 Carnegie opened an office at 19 Broad Street (later moved to 57 Broadway) and employed a full-time personal secretary in Gardner McCandless.
New York in those days was hardly better than Pittsburgh; indeed, Carnegie’s biographer Burton J. Hendrick describes it as ‘crude, provincial and dirty’.4 It had a population of less than one million, 50 per cent of whom were immigrants, and ‘an unwashed proletariat’ lived in a shanty town bordering the 843-acre Central Park. Public transport was still primitive, ranging from ‘rickety horse carts’ to ferries, and in winter sleighs still jingled their way up Broadway. The Carnegies, though, were distanced from the drunken stage-drivers and the rooting pigs of Central Park, cocooned in one of the finest of America’s hotels amid Carrara stairways and ‘pendant chandeliers of iridescent crystal’. Carnegie could well afford it; an inventory of his current income dated December 1868 revealed that he had an annual return of $56,110 from bridge building, transport, oil, telegraphy and banking.5 This was a time too, when Carnegie was expanding his interest in steel manufacture.
Following the failure of the Dodd and Webb iron projects, both of which Carnegie had been reluctant to drop, by 1868 he was investing in and promoting Bessemer steel. This process had been invented by (later Sir) Henry Bessemer (1813–98). An entrepreneur in the manufacture of metal processes – he invented a type-composing machine as early as c. 1838 – Bessemer described his steel process at a meeting of the British Association for the Advancement of Science at Cheltenham in 1856. His process involved the manufacture of steel from melted pig-iron through which air under pressure (or steam) was blown with the object of abstracting carbon. In 1859 he established a steelworks at Sheffield, where he specialised in making guns and the manufacture of steel rails. Bessemer steel was introduced to America by Alexander L. Holley and by 1866 Carnegie had started to make Bessemer steel in his reformed Freedom Iron & Steel Co.
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