Carnegie
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The high demand placed on the Pennsylvania Railroad to transport men and materials required Andy’s return to Pittsburgh at the end of the summer of 1861, but there the pace was no less stressful. Men departed daily for the front, arriving at the depot in mule-drawn carts, accompanied by hoopskirted ladies, tearful good-byes, and goodies wrapped in handkerchiefs, and then were loaded on waiting cattle cars. The human cargo flowed both directions— more than a hundred thousand wounded men would eventually be transported to Pittsburgh to be cared for. Heavy artillery, small arms, ammunition, gun carriages, wagons, tents, blankets, clothing, cattle, and hogs also filled the outer depot. During the war, the city’s Fort Pitt Foundry alone supplied the Union army with 1,193 cannon, some of the guns weighing 56 tons, and 10 million pounds of shot and shell.10 The first year of the war marked the point when railroads became the dominant mode of transportation, carrying more freight than the canal boats. All of this, from the tearful good-byes to massive cannons, contributed to the logistical nightmare Andy faced. In the process, he came into his own as a manager and leader.
On October 4, he fired off a letter to General Superintendent Enoch Lewis, seeking the approval to purchase adjacent pastureland to expand the rail yard. The very next day, he sent Lewis a nine-page letter detailing the need for additional lines, locomotives, and cars to handle the increased tonnage. Competition was still a factor, too, and he argued that his Western Division needed to reduce its passenger rates to certain outlying suburbs to compete with the newly opened Pittsburgh & Connellsville Railroad. To offset the price reductions, Andy detailed how the railroad could cut costs, which included the elimination of a train crew change on the run between Pittsburgh and Altoona, which would be accomplished by asking the trainmen to work as much as thirteen hours a day as opposed to ten.11 While he was not asking them to work any harder than he did himself in these extraordinary times, he now viewed—like top boss Edgar Thomson—the men as an expendable resource with a very definite cost, and reduced costs translated to greater profits. “Mind the costs and the profits will take care of themselves” became Andy’s foremost business mantra, derived from his schoolboy’s proverb, “Take care of the pence and the pound will take care of themselves.” This letter was evidence of his evolving business philosophy, one built on three cornerstones: cut costs, cut prices, and scoop the market. He had come to realize competitors had to be aggressively run from the field before they could establish a position.
But Andy had to admit to Lewis that some Pittsburgh engineers were already forced to work as many as thirty hours at a stretch, that morale was low, and that many men “have not visited their families for several weeks.”12 In addition to the labor and capacity problems, Andy had to contend with escaped pigs, rotting produce, missing freight cars, dangerously overloaded mail cars, church ministers complaining about freight trains running on Sundays, and shipments being late or going to the wrong station.13 Another major concern was accusations of war profiteering on the part of the Pennsylvania Railroad and its officers.
Andy’s mentor, Tom Scott, was accused of price gouging the government, and Congress initiated an investigation. As Congress scrutinized the practices of the Pennsylvania Railroad, both Scott and his friend, War Secretary Cameron, who was an owner of Northern Central railroad stock, were also accused of allocating a disproportionate share of traffic to their railroads. Although the Pennsylvania increased its earnings by 40 percent and the Northern Central had doubled its earnings in 1861, the defrauding of the government was impossible to prove because of conveniently poor recordkeeping.14 While Scott was the point man, Andy was all too aware of the practice and guilty by association. He could not disobey his superiors, however, and turned a blind eye to their indiscretions. Slowly, a step at a time, he continued to be lured into ambiguous moral territory. Twenty years later he would admit to his price discrimination days with the railroad, but would claim to be reformed.15 The truth was that discriminatory pricing was a fact of business life, and a practice Andy would become adept at using to his advantage while protecting his companies from it.
A welcome distraction from the war that would generate prodigious dividends landed in Andy’s lap in the fall of 1861: black gold. His speculation in oil was the first of three significant investments he made during the Civil War, each profiting from the conflagration and each a considerable step toward attaining independent wealth.
During the war, the demand for petroleum-based products and illuminants increased dramatically, and a region some sixty miles north of Pittsburgh would find itself in the midst of an oil rush. There, ran a modest yet mystical river called Oil Creek, where slimy oil bubbled to the surface and covered the water with a slick coat. Oil wasn’t considered particularly crucial, however, until the mid-1850s, when Samuel M. Kier, a Pittsburgh merchant who was selling it as the most wonderful remedy for “the torturing pains of rheumatism, gout, and neuralgia,” succeeded in refining the crude oil to a point where it was clean enough to burn in lamps.16 Once word spread of the refined oil being used as an illuminant, the craze was under way. Then, in August 1859, the first derrick struck oil. Soon it was the California gold rush incarnate. One Pittsburgh group intent on investing in the oil included William Coleman, one of Andy’s Homewood neighbors. In 1859, the group leased the Storey family farm, situated right on Oil Creek, and a number of their wells proved very productive.17 The one major drawback, besides the filth and stink, was the wildly fluctuating price of oil, which ranged from ten cents a barrel to five dollars. To stabilize their venture, Coleman and his partners decided to reorganize as a joint-stock company to raise funds for building more efficient facilities. In his search for investors, Coleman turned to Andy.
Coleman, with a full beard laced with white, gray hair, and a straight nose, was of good puritan stock. Having already made a fortune in the iron trade, he carried himself like a general. As had Tom Scott, he took a paternalistic liking to Andy and his brother, Tom, who would marry Coleman’s daughter, Lucy. He also appreciated Andy’s energy and resourcefulness, and figured he would be an asset to the group. Certain a brush with the fever would convince the young man to invest, in the fall of 1861 Coleman persuaded Andy to visit the oil region. The two men traveled by steamer up the Allegheny River to the mouth of Oil Creek. From there they took a five-mile rickety carriage ride north, across rutted roads and through wild scenery, both natural and the human kind in a region where raucous men seeking treasure overwhelmed the preachers.
As Andy surveyed the scene, he was amazed to discover twenty-four-hour saloons filled with brawlers and gamblers, and suspicious houses filled with self-styled ladies, servicing the drillers and other laborers who made anywhere from $2 to $5 a day. As one visitor noted, “The orgies in Petroleum Centre sometimes eclipsed Monte Carlo and the Latin Quarter combined.”18 Conditions were definitely sordid. Even though the cheaply constructed but expensive hotels offered only scratchy straw pallets, these were in short supply, forcing many drillers to share beds. The food was worse. It included half-baked water biscuits with salt pork, pallid beans drowned in molasses, and steak so leathery it required a hatchet to cut. The streets of the mushrooming towns were cluttered with shanties, precarious pyramids of barrels, and strewn garbage, and the air was thick with the stench of oil, turning Andy’s stomach as it brought back memories of the days at John Hay’s bobbin factory. Due to the sin and mud and oil all churned together, the inferno area became known as Sodden and Gomorrah.
Accustomed to the rough railroad men, Andy was relatively immune to the bawdy chaos, which was later extremely glossed over in his censored memoirs: “What surprised me was the good humor which prevailed everywhere. It was a vast picnic, full of amusing incidents. Everybody was in high glee; fortunes were supposedly within reach; everything was booming. On the tops of the derricks floated flags on which strange mottoes were displayed. I remember looking down toward the river and seeing two men working their treadles boring for oil upon the banks of the stream and inscribed upon their flag
was ‘Hell or China.’ They were going down, no matter how far.”19
Waste, chaos, and sin aside, Andy knew a good investment. The Storey farm site was a relatively orderly affair with a tough foreman who allowed no riffraff on the property, and by 1862, the farm had twelve flowing wells. On the return trip home, Andy agreed to join Coleman in the Columbia Oil Company, which was originally capitalized at $200,000 with ten thousand shares issued. He used his dividend proceeds from the Woodruff sleeping car business to buy a block of discounted $10 shares.20 In 1863, the company paid stockholders over $300,000 in dividends, with Andy receiving a tremendous $17,868.67 for the year. To reflect the great success, the company recapitalized at $2.5 million, or $50 a share, which was $40 more than Andy had paid, or a phenomenal 400 percent increase in value. Never one to forget his loyalties, he invited Scott, Thomson, brother Tom, and friend Tom Miller to invest. Again, instead of squandering the dividends, Andy would use them to make further investments.
The sleeping car business, being neatly interlocked with the Pennsylvania Railroad, had been so easy to exploit that when a similar prospect emerged in 1862 Andy pursued it diligently. This second wartime venture would also involve a modest investment that yielded a tremendous return—the one Andy considered to “have always been my pet as being the parent of all other works.”21 It was a bridge-building concern, and this time it was the Pennsylvania Railroad’s very own Altoona yard that provided the opportunity.
When Andy had been transferred to Altoona, he met Colonel John L. Piper, who was then the railroad’s chief mechanic, charged with keeping the tracks and the trains in operation. A rough-mannered hulk, Piper took an immediate liking to the Scotch Devil, a delicate lad with spunk, and although side by side the two made a comical pair, they discovered they shared a love for horses. Two other members of Piper’s team were Aaron Shiffler, whose specialty was maintaining the bridges, and J. H. Linville, who was chief bridge engineer. With the rampant sabotage during the Civil War, iron bridges were suddenly in high demand. This provided the impetus for Thomson and Scott to have Andy discreetly approach Piper—or Pipe, as he was known—about organizing a bridge-building company that would initially operate out of Altoona as a private company hidden within the Pennsylvania Railroad. Pipe then recruited Shiffler and Linville, who were only too happy to pocket some side profits.
The Piper and Shiffler Company was formed on February 1, 1862, and soon relocated to Pittsburgh, at Andy’s suggestion, to take advantage of the many iron mills there. Thomson, Scott, Andy, Pipe, Shiffler, and Linville, who was made president, each invested $1,250 for a one-sixth interest, and once again Andy held Scott’s share in his name.22 Per the impervious Scott-Thomson modus operandi, the Pennsylvania Railroad was an instant large customer, all but guaranteeing success. Even though operations were modest in the first years, in 1863 Andy made $7,500 on his initial investment. Within ten years, the bridge-building operations would generate hundreds of thousands of dollars, clearly why Andy considered it his pet.
While Andy had built himself quite a portfolio with an income to be envied—he suddenly found himself among the wealthiest of young men in Pittsburgh—the genesis of his greatest investment during the Civil War had yet to come.
Juggling his wartime responsibilities at the railroad and his investments in oil, sleeping cars, and iron bridges was a heavy strain, and by late spring of 1862 Andy was burned out. He wasn’t the only one. The stoic Thomson collapsed in April and was confined to bed for exhaustion and a pulmonary infection. A month passed before he was back in the office on a regular basis, and he would travel to Europe that summer to recuperate further.23 Also desperate for relief and dreaming of a glorious return to Scotland, Andy applied for a leave of absence, which was granted. He received the good news while in Altoona and, with the enthusiasm of a boy going to the circus, immediately dashed off a letter to his cousin Dod: “The dream of a dozen years is at last on the very threshold of realization. Yes I am to visit Scotland, see and talk with you all again!—Uncles, Aunts and Cousins, my schoolfellows and companions of my childhood—all are to be greeted again. . . . Hurrah! Three cheers for this! There is nothing on earth I would ask in preference to what has just been given me. The exuberance of my joy I find is tempered by a deep feeling of thankfulness for the privilege vouchsafed—it seems so much in advance of my deserts.” Andy’s plans involved more than just Dunfermline; he also intended to tour the Continent and invited Dod to join him. “Whew! that’s enough to make one jolly, isn’t it? I confess I’m clean daft about it. I fancy I look like an ardent lover who has just obtained a flattering ‘yes.’”24 All his boyish vitality, drained by grueling work and brutal war, gushed forth in the letter. He needed not only to regain his health, but to rejuvenate his spirit and to reconnect with the past he had lost in shaping himself into an ardent Republican.
By 1862, the Civil War had taken its toll on Carnegie, who, despite his eternal optimism, could be dour and gloomy. (Courtesy of the Carnegie Library of Pittsburgh)
Andy invited his friend Thomas Miller, now the purchasing agent for the Fort Wayne & Pittsburgh Railroad, to accompany him and his mother, while Tom, now nineteen and serving as his personal secretary, remained to mind the store. Miller stood a head taller than Andy and, with a goatee and black, curly locks, had roguish good looks. He was a stormy-tempered Irishman willing to debate any topic with his Scottish friend, which made them lively traveling companions; even so, the two maintained a mutual respect. No time was to be wasted during this three-month leave of absence, so they departed for Dunfermline on June 28, three days before the leave was official, aboard a steamer far more luxurious than the Wiscasset, which had brought the Carnegies to America years earlier. After the ship landed in Liverpool two weeks later, the trio proceeded immediately to Scotland. As soon as they crossed the border, Andy felt like throwing himself to the sacred soil and kissing it.25 His attitude changed, however, as they rode their carriage into town like returning heroes. The glorified image of Dunfermline he had cherished and embellished over the last fourteen years, was suddenly diminished:
Every object we passed was recognized at once, but everything seemed so small, compared with what I had imagined it, that I was completely puzzled. Finally, reaching Uncle Lauder’s and getting into the old room where he had taught Dod and myself so many things, I exclaimed:
“You are all here; everything is just as I left it, but you are now playing with toys.”
The High Street, which I had compared with some New York establishments, the little mounds about the town, to which we had run on Sundays to play, the distances, the height of the houses, all had shrunk. Here was a city of the Lilliputians.26
From his perspective, life was on a much grander scale in the United States, and now Dunfermline wilted under the bright glory of America. Yet if Andy had demonstrated more insight, he would have realized that as a child— the last time he was in Dunfermline—everything appeared much larger than it was.
His tone was almost contemptuous in addressing his relatives and old acquaintances who were “playing with toys.” When his Aunt Charlotte exulted, “Oh, you will just be coming back here some day and keep a shop in the High Street,” he thought to himself, “That’s her idea of triumph.”27 Once upon a time, a shop on High Street epitomized success to his mother, but that was no longer so for the Carnegie family. Still, Andy was excited to be there, and his Uncle Lauder, for one, remained of tall stature. They enjoyed long walks and talks about life in America; but to his chagrin, Andy discovered Uncle Lauder was the only one in the family supporting the Union cause.
Many in Scotland were suffering because of the Civil War. The Union’s naval blockade of the South had strangled the flow of needed cotton to Scotland while at the same time U.S. orders for linen had dropped dramatically, depressing the economy in towns like Dunfermline. Uncle Thomas, among others, blamed the Union government for their privations. Such people were quite cynical in analyzing the North’s true motives, convi
nced the North was not fighting a righteous battle to free the slaves, but to strengthen its own industrial grip on the nation. Because of their own fight for autonomy over the centuries, the Scottish radicals linked themselves romantically to the Southern rebels.
Other relatives were not so politically minded. Cousin Dod and Andy fell in together as though never separated by the Atlantic. Framed by a full brown beard flowing over his collar and accentuated by the brooding, dark Morrison eyes, Dod’s stern face lighted up when the two cousins reenacted their swordplay from youth. Now an engineer, he divulged his dream of coming to America to seek his fortune. The old aunties relished telling Andy stories about his childhood, from his eating habits as a baby—he preferred to have two spoons going at once—to riding his father’s shoulders as though on a mule. Between the heated political debate and Aunt Charlotte recalling his childhood days and the town itself appearing to be Lilliputian, the Dunfermline visit was a surreal experience for Andy. Sleepless nights and a head cold soon dampened the visit. He then came down with a fever, and when his condition showed no signs of improving his stern nursemaids became determined to bleed him of his ills. The ancient art of bleeding was so successful that it almost killed him in the process. To regain strength, Andy escaped to the shores of picturesque Loch Leven. All told, he spent six weeks confined to bed. Plans to visit the Continent were canceled, and once strong enough, he sailed for home in the autumn of 1862, his ill-fated visit coming to an abrupt end. Andy had found himself a foreigner in his native land and estranged from his radical heritage.
Andrew Carnegie, his cousin, George “Dod” Lauder, and Thomas Miller were together in Dunfermline in 1862. While there, Carnegie fell ill and submitted to bleeding in hopes of regaining his health. (Courtesy of the Carnegie Library of Pittsburgh)