by Peter Krass
On September 13, Shinn submitted his resignation, but added, “I have full confidence in the pecuniary success of the E.T. S. Co. Limited and purpose to remain your business associate; and it will be my interest, to advance its success by any and all means in my power.”6 It was a gutsy play on Shinn’s part, who was hoping to retain his interest in E.T. and reap the profits, especially considering he had originally been given his share on credit, to be paid off by future dividends, and had now secured a job at Vulcan. Carnegie didn’t have to sniff out the double-dealing—it was so obvious. He simply decided to cut all ties, urging Shinn that he should “go, but in that case I cannot concur with your idea that you should remain interested with us at all—surely you don’t want your colleagues to do all the work & you sit down only to share ingloriously in their triumphs. No, no, if you go, go. Sell out & try another party. We want no drones in E.T. if we can help it.”7 No drones, no parasites— the message was clear.
Later that month, the Edgar Thomson board met, appointed Tom chairman, and accepted Shinn’s resignation. Now there remained the issue of compensating Shinn for his shares. At the meeting’s conclusion, Carnegie, Shinn, and the man who brought him into the firm, John Scott, remained in the room. Carnegie offered Shinn $105,000, the book value of his shares, only to have Shinn argue for his corresponding piece of the Kloman and McCandless interests the company had absorbed. This request, Carnegie told him, would not be considered, period. Fed up with the autocracy, Shinn spat out that working under Carnegie amounted to slavery, and the discussions came to an abrupt conclusion. Both men did agree the dispute should go to arbitration, with B. F. Jones and two other prominent Pittsburgh businessmen agreeing to arbitrate.
During the hearing, Shinn charged Carnegie with “willful and malicious mendacity,” otherwise known as deceptive dealing, and Carnegie countered that Shinn was scheming to fleece Edgar Thomson.8 That was that. Shinn withdrew from arbitration and filed suit in the Allegheny County Court. Hoping for a sympathetic judge, Carnegie petitioned that the case be removed to the U.S. Circuit Court, which was granted. Hoping to shame Carnegie into capitulating, in a clever tit for tat, Shinn secured an order for the E.T. ledger books to be submitted as evidence. The idea of exposing his company to public scrutiny was indeed anathema to Carnegie, so he quickly took a conciliatory tone and they returned to the arbitration table. With no squirming room, he handed over what Shinn demanded, close to $200,000, ending a rather ugly episode.9
What had gone wrong? After all, Carnegie was to become renowned for his selection of lieutenants. Inflating the ego, overpromising, and microman-agement, all of which poisoned the relationship, fell on Carnegie’s liability side of the ledger. In other words, extremely resolute to succeed at Edgar Thomson, he had wooed Shinn so fervently, pushed him so hard, and promised so much that Shinn rightly expected the chairmanship. On Shinn’s side, lies, double-dealing, ambition, and greed were his undoing. Too late, Carnegie had recognized what Niccolo Machiavelli had warned against more than four hundred years earlier: “When you see the minister think more of himself than of you, and in all his actions seek his own profit, such a man will never be a good minister, and you can never rely on him.”10 Prince Carnegie had no choice but to purge his minister.
When Shinn became chief of Vulcan, a strong enemy on the western front, it served to harden Carnegie’s resolve and desire to crush any competition. The move also precipitated a conflict between Captain Jones and Carnegie, whose heavy-handedness and absentee ownership could very well be his undoing. Again, due to his prolonged absence, Carnegie wasn’t aware of any problems until he sent an innocent note to his superintendent suggesting they build a library at Braddock. (With prodigious profits in his pocket, Carnegie was beginning to consider more notable beneficence.) Jones’s reply started off benign enough as he fully approved of “the Library idea, but think we can wait awhile until we get all the main improvements completed about the Works.” But then Jones, who was well aware of the prodigious profits, decided it was time to make a bid for a larger share for himself. He bluntly stated, “On my present salary, I can never expect to accumulate competency for myself or family. You will admit that the career of the E.T. has been unexampled in every respect to attain this, has cost me many a severe headache and many a sleepless night.” He also made it clear he would prefer to remain in his current position than find work elsewhere: “Your brother, T.C. suits me exactly, and is a far more sagacious business man than the late Gen. Man [Shinn]. It is a pleasure to me to be associated with him in the management of these works and I only give utterance to my earnest convictions when I say of him, that he is the clearest brained business man I ever had connections with. You may well repose confidence in him. To you and him I appeal and with you and him I will leave this question. I can only say that I think I am worth more money than I am getting.”11
Fearing Jones might defect to a rival concern, Carnegie immediately cabled his brother, to whom the fiery Welshman was endeared, with instructions to meet with Jones and ascertain what he was thinking.
He also wrote Jones: “I like yours of 5th much,—always be frank with us—As for you leaving your own works—that’s absurd—You could never be so proud of any other—As for compensation we never have differed about that & wont—Tom & I appreciate you I believe more than you do yourself. All you have to do is say what you want & don’t put it low either. . . . Tell me confidentially what would not only satisfy you—but gratify you as well.”12 As he had with Shinn, Carnegie offered lavish praise, yet there was the possibility that if he overindulged Jones he could set the stage for a future rift. There seemed to be no middle ground for the reactionary Carnegie; he was either extravagant with praise or brutal in his condemnation.
On the other hand, if Jones wasn’t content, there was no telling what he would do, so appeasing his most important employee quickly was paramount. The Captain, after all, was known for his impulsive behavior and propensity to lather himself up into a “towering rage.” Inflicted with a speech impediment, Jones’s words became garbled when raging, sometimes leading to humorous castigations of subordinates—humorous to those avoiding his wrath.13 Temper aside, the undisputed czar of Braddock was revered by the thirteen-year-old water boys and hardened mill hands alike. Most pleasant evenings would find him buying peanuts from a street vendor and then walking the town’s streets as though he owned them, cracking peanut shells and greeting the men cordially.
Tom, who was forever smoothing over the feathers his brother ruffled, discovered in his talk with Jones that he had actually been to Shinn’s Vulcan works for an interview and offered a substantial sum to leave E.T.—an offer still on the table. Since it was his older brother who wielded the ultimate power, Tom suggested that Jones play hardball with him because only then would he procure the money he wanted from the tightfisted Carnegie. Jones did so without delay and informed Carnegie that three different firms were vying for his services and that he was worth $15,000 a year—$5,000 more than Shinn had been making as chairman. Aware he couldn’t afford to lose Jones, Carnegie offered him not only a salary increase, but a piece of the partnership, which he had wisely done for several managers at the Keystone Bridge Company, fully vesting them in the business’s success.14
To Carnegie’s surprise, Jones declined the partnership. Unknown to his boss, there were two reasons: Jones didn’t want the men to think he was sharing in the profits of the company at their expense, and he had not forgotten how Shinn used to complain about Carnegie using the partnership to enslave him.15 Rather than elaborate on his reasoning, Jones simply said, “No, I don’t want to have my thoughts running on business. I have enough trouble looking after these works. Just give me a hell of a salary if you think I’m worth it.”
“All right, Captain, the salary of the President of the United States is yours.”
“That’s the talk,” said Jones.16
They ultimately settled on $25,000.
Jones was quite invigorated by the generou
s salary, and not long after E.T. beat Bethlehem’s production. “I told you so,” he crowed to the Little Boss. “Their old nag aint got the blood; wont stand a hard race.”17 Such proclamations never appeased Carnegie’s appetite, however. Competition was particularly intense between E.T. and Bethlehem and Pennsylvania Steel—the latter firms headed by Carnegie’s aristocratic adversaries, the patricians—and he hated to lose. Rivalry between the mills was trumpeted in the American Manufacturer and Iron Age, as daily, weekly, and monthly production records were big news, and the ironmasters and steel masters were considered the heroes of their age, literally building America.
When Cambria suddenly posted a strong production increase in November 1880, Carnegie demanded an explanation. The Captain minced no words in explaining the spike: he blamed it on Andy for allowing Cambria executives to tour E.T. “and stay with us for four days to learn how it is done,” and he chastised him for being “a little too generous with the lunk heads of rival establishments.” But even if the competition did glean a nugget or two of useful information, Jones was supremely confident and bet Carnegie that E.T. would beat all rival concerns in production and quality. He also warned, “Information in the future will not be so freely given.”18
Carnegie was a victim of vanity, a deadly sin. He couldn’t help but show off his steelworks, like a peacock its plumage, to Cambria executives, among others. To the arrogant Carnegie they were lunkheads, along with most of the world, for as he once told Phipps, he thought the public fools: “Where would you and I be if they weren’t?”19 Such self-promotion was anathema to brother Tom, however. “Andrew’s craze for publicity was abhorrent to Tom,” recalled a Carnegie lieutenant. “He used to ridicule Andrew’s self-advertising tendencies.”20 Another Carnegie ally was forced to admit, “His one fault was vanity, and he was overwhelmingly vain. His pride was easily hurt, and he loved to consider himself supreme in everything.”21 If only Carnegie had studied the Bible thoroughly, in particular Ecclesiastes 1:14, he would have read, “I have seen all the works that are done under the sun; and, behold, all is vanity and vexation of spirit.” Vanity in the business arena boiled down to Carnegie wanting to rub his success in the face of his competition. This form of arrogance was once again similar to his radical ancestors’ brash condemnations of the British aristocracy, only Carnegie transferred it on his competitors.
For Carnegie, both business (and life in general) was about beating the privileged, well-moneyed interests. His obsession for besting them was typified when an explosion rocked one of his furnaces for making pig iron. In the fall of 1870, several Pittsburgh firms had organized an effort to build a jointly owned blast furnace to make their own pig iron from the raw iron ore, which was then used in manufacturing iron and steel. Instead of joining the consortium, the independent Carnegie gang had decided to build their own.22 The company immediately purchased property at Fifty-first Street, conveniently located along the Allegheny River and the Allegheny Valley Railroad. It was a step toward vertical integration—a corporate structure then stumbled upon by only a few firms—giving Carnegie continuous control from the pig-iron-making stage to manufacturing beams and bridge superstructures.
The furnace was christened Lucy, after Tom’s wife, for good luck; she was prolific at having children—nine over fourteen years—and the men hoped their furnace would be just as productive. Carnegie, who preferred a decentralized organization, insisted they establish a separate company, the Lucy Furnace Company, to manage the business. It took about a year to build, and when completed it was an impressive brick structure, one of the largest furnaces in the country, towering seventy-five feet high and evoking power and awe. Meanwhile, the rival group—the aristocracy—had constructed their own furnace, almost identical in size and christened Isabella, after a sister of one of the partners. When the Lucy and Isabella furnaces were put in blast in 1872, an immediate rivalry erupted as to which concern could produce the most tons. The contest was tracked by the newspapers and industry rags for all the country to see. A dozen years later, both sides had added furnaces and the competition remained fierce, so when the explosion shut down one of Carnegie’s furnaces he was distraught.
His concern was not with injured or dead victims, but with beating their competitor’s furnaces for production of pig iron, with beating the furnaces on the other side of the river—the Isabella furnaces. When Carnegie heard of the accident, which occurred on a Mr. Mulligan’s watch, he angrily wrote his general manager of the blast furnaces, Julian Kennedy:
My Dear Mr. Kennedy
Your action, or rather lack of action, in Mr Mulligan’s case, has laid the foundation for non-success of your management—
Within one hour after you had heard the accident, the man who caused it, no matter who he was, should have been suspended that every Employee might see how determined you were to have success. You have passed it over, no moral effect has been produced upon your men—Yes, a bad moral effect has been produced—
You will suffer from it now until a second opportunity occurs to show that you are a strict, exacting manager. I write to you as one who is most anxious you will succeed as a manager—I have resolved you shall have the fairest of trials, but I have only one gauge. Mr. Macrum & you must produce equal, or better, results than your Brother at Isabella or you must give place to others—I shall blow up the Lucy Furnace or get some man to run them successfully.
We are disgraced by such accidents as the last & more disgraced by passing them over as Mr. Macrum & you have done. I am very anxious now about you and him.23
To suggest he would blow up the furnaces was so reactionary it called into question the forty-eight-year-old Carnegie’s mental stability, but that was how intent he was on beating the Isabella furnaces.
Belatedly, the disgraced Mr. E. A. Macrum, Kennedy’s right-hand man, scribbled off a note in pencil to Carnegie, reporting the accident, but he offered no further details. Carnegie’s reply was even more scathing than his note to Kennedy:
I am not satisfied to allow this serious matter to pass. The least you could have done would have been to have suspended Mr. Mulligan, so as to show the other employees that a high standard of attention was required.
This whole matter shows that neither the Chairman nor the Manager of the Lucy Furnace Co insist fully on discipline; and I have lost confidence in their success.
You will find that nothing but a series of accidents will result from such management as this, and the Furnaces on the other side of the River will continue to do better than we do [emphasis added], as long as you continue such a policy.24
With all the flogging, there was not one inquiry into which men were hurt; Carnegie was simply too engrossed in beating the Pittsburgh aristocracy across the river, beating them at any cost.
Even though Carnegie had a pooling agreement with Cambria in the early 1880s, he still wanted to beat them in terms of production, along with everyone else, and demanded an assessment from Jones. The superintendent reported: “I anticipate a hard struggle for the supremacy this year. Cambria has an immense advantage over us in having big 18” ingots, powerful and well constructed blowing engines that stand right up to the works, greater superiority in steaming capacity, having more steaming capacity for their bessemer works and blooming, than we have for our entire Steel Works. Yet I know we will lather the very devil out of them. We intend to watch the points closely. Keep sober, and thereby keep our brains clear—No ‘Wine & Woman in ours.’ We expect you and John Scott to attend to that part of the business.”25 (Jones expected the chaste and sober Carnegie to attend to the wine and women? Apparently, Louise Whitfield had made enough of an impact on Carnegie that more than once he had mentioned her to Jones.)
To ensure he lathered the devil out of the competition, Carnegie had few options with E.T. already running efficiently, wages cut to the bone, and railroad freight rates acceptable courtesy of Tom Scott, but two possibilities included ringing more effort from his men and procuring cheaper sources for raw m
aterials that went into making steel. In 1881, he procured both, with Jones handling the first and Carnegie the second. Jones’s action, both revolutionary and unprecedented, was to reorganize the mill into three shifts of men working eight hours each, instead of two shifts working twelve. “In increasing the output of these works,” he explained in a speech to steel executives, “I soon discovered it was entirely out of the question to expect human flesh and blood to labor incessantly for twelve hours, and therefore it was decided to put on three turns, reducing the hours of labor to eight. This proved to be of immense advantage to both the company and the workmen, the latter now earning more in eight hours than they formerly did in twelve hours, while the men can work harder constantly for eight hours, having sixteen hours for rest.”26 Whereas Carnegie viewed men solely as a cost on the ledger, Jones included the flesh-and-blood factor. Much has been written about Carnegie’s progressive labor policy, but it was Jones who often promoted the men’s needs and demanded the eight-hour day, which would prove a very fragile condition.
An excellent evaluator of men, like Carnegie, Jones was always on the lookout for a prospective star. A frequent patron of McDevitt’s, a grocery and dried-goods emporium just outside E.T.’s gates, he had recently become acquainted with the store’s seventeen-year-old clerk, Charlie Schwab, who was fresh from the countryside. Although Jones was only buying cigars, he couldn’t help but notice the clerk’s confidence and intelligence, and asked him if he had any skills that might be useful at Edgar Thomson. As it turned out, Charlie had attended St. Francis College and had received some instruction in surveying and engineering. Jones, who was currently erecting two furnaces and was sure the boy would be of some use, hired him in 1879. Charlie would remain with the firm for the next twenty-two years, eventually becoming president.27