Carnegie

by Peter Krass

  Turmoil and dissension among Carnegie lieutenants marked the years immediately after the armor scandal, with each man suspecting the other of negligence or meddling or disloyalty. During this period, two of Carnegie’s more disagreeable traits, vanity and paranoia, commanded his actions. At first oblivious to any internal company conflicts, Carnegie told Frick in September 1894 that he was “sanguine that we are now entering upon smooth waters and will make a splendid record for years ahead. The only weak department is the armor department, which may have to close.”25 Frick responded with a stab at Schwab: “This armor mess handicaps us in many ways, as the Navy Department are anything but friendly to Schwab, and have no confidence in him.”26 Instead of directly confronting Frick’s apparent doubts about Schwab, Carnegie, who had unshakable trust in the young superintendent, chose to avoid any confrontation. As blindly as he worshiped heroes, Carnegie, unwilling to accept he may have erred in promoting a particular man, faithfully believed in lieutenants he deemed to be geniuses. Three months later, he paid the price for not recognizing Frick’s discontentment with the armor mess.

  It was the week before Christmas. The crisp air carried the sound of jingling bells. Holiday decorations graced storefront windows. Thanks to Thomas Edison, colored globes shone on Christmas trees. Crowds scurried through the streets with armfuls of presents. It was a time of goodwill for all men. Carnegie was enjoying the holiday season at home when a letter from Frick arrived. As his eyes traversed the page, his face turned as white as his Santa Claus beard. Frick was resigning, effective January 1. “The affairs of this association are in splendid shape as you know from examination made during your recent visit here,” Frick wrote matter-of-factly. “In every way better than at any time in the past and the outlook for the future very bright, otherwise I should not think of retiring now. The past six years have been trying ones to me, and my mind from necessity has been so absorbed in looking after the interests of this great concern, I have had no time for anything else and feel now that I need such a rest as is only obtained by almost entire freedom from business cares.”27 Flabbergasted, Carnegie couldn’t comprehend how Frick could act so cruelly as to resign suddenly in the midst of the holiday season. He also couldn’t afford to lose Frick, the man who did his dirty work, who brought a strong hand to everyday management, who generated a superlative $4 million in profits in 1894 despite the depression. But Carnegie had brought it upon himself by acting vainly and infringing on Frick’s responsibilities during two recent episodes—one dealing with armor sales to Russia, the other with consolidating the coke industry—that resulted in a serious breach of trust between the two men and precipitated the resignation.

  Despite his pessimism about armor, in the fall of 1894, Carnegie was still in the hunt for a very profitable order from Russia and sent his salesman Millard Hunsiker overseas in an attempt to win the contract. In October, stories that Carnegie Steel was seeking the Russian armor contract, as well as what would be required to secure it, made the newspapers—this despite the fact that all of the partners had agreed to an absolute code of silence concerning all aspects of business. Frick, knowing the stories would hurt Hunsiker’s chances, unleashed his potent anger. “To my mind,” he wrote Lieutenant C. A. Stone, the ex-navy man they astutely hired to be their representative in Washington, “this could only have reached the public through one source (through our leading stockholder) who, it seems, is not able to contain himself at any time or under any conditions. I will have this traced and ascertain. If it was an employee of this company, we would have no further use for his services.”28 Unafraid to level his criticism at the guilty party, Frick wrote the compromised Hunsiker: “It is unfortunate of course that our leading stockholder is a little injudicious at times, but we cannot have everything as we should like it.”29 Regardless of what the “leading stockholder” had leaked, Frick was treading on dangerous ground; Carnegie didn’t tolerate backstabbing when it was he who suffered.

  As Frick feared, in December, Bethlehem won the Russian contract by bidding a much lower price. Surprised by being undercut, Carnegie suggested to Frick that he visit Bethlehem’s president Robert Linderman and find out the whys and hows of Bethlehem bidding so low. Partly appalled and partly outraged, Frick responded, “As I told you (and you seem to have forgotten it), I happened to be with Mr. Linderman when he received news of their success in Russia, and, of course, congratulated him most heartily. Bethlehem, as you say, is certainly a lively competitor, made more so from the fact that they were told by you, before they put in their bid, if they took the contract they would have to take it at a very low price. They entered the race with some other advantages over us, most unfortunately, which it would be well for you not to forget.”30 Carnegie, by bragging about how low his supremely efficient company could go and how low Bethlehem would have to go, had lowered himself into rather hot water.

  Adding to Frick’s exasperation, in one last scrape that brought their conflict to a climax, Carnegie alone had approached the Frick Coke Company’s archrival, W. J. Rainey and Company, to discuss a possible consolidation. Under the guise of solicitude, Carnegie had broken the chain of command and compromised Frick’s authority. For years, Frick, who considered his rival a thief, and Rainey had battled each other over pricing and territory. Nonetheless, there was now an ongoing dialogue between Carnegie and Rainey, with the former suggesting the consolidation be renamed the Frick-Rainey Company and promising Rainey executives excellent management positions. Frick was outraged that Carnegie, who was either oblivious to or indifferent to his partner’s feelings, would consider such a consolidation without consulting him. Unfortunately, when Carnegie took hold of an idea, he charged ahead like a bull, head down. The more Frick mulled over recent events and his contentious relationship with Carnegie, the more incensed he became. At his wit’s end, he submitted his resignation letter on December 18.

  If Frick thought Carnegie was just going to let him walk away, he was a damn fool, because no man was going to impose chaos on Carnegie’s well-ordered empire. After Carnegie read the letter, with the most unacceptable termination date of January 1, he composed his thoughts and drafted a response that was both pleading and castigating. He protested Frick’s intent to retire “without proper notice to your partners and friends”—a valid ethical point that was also a play for time—and he asked Frick to stay on for another full year, which would be “ample time to adjust matters.” As he had done with William Shinn years earlier, Carnegie also dangled an irresistible carrot: “I have told you of my desire to sell to you and my partners and that I only waited until our affairs were in order when such a proposition could be made without adding to your cares. It is I who should be relieved My Dear Friend not you. . . . You are yet young and should be my successor as chief owner a post I have told you I aimed at your being and left it to you to say when you felt the Company was ready to take my interest.” But then, in a postscript, Carnegie wrote, “You are not well my Friend you are not well. You would never never have done me this injustice were you well.”31 How was Frick to interpret such a mixed message? It was a sugarcoated, bitter pill that reflected Carnegie’s childish spitefulness and was difficult to swallow. Carnegie’s inconsistent message also reflected his anxiety in managing a man as strong in character as himself.

  Carnegie decided to play up Frick not being well in a second letter that day, in an attempt to convince him all he needed was a respite to rejuvenate himself and advised a vacation to Egypt.32 The strategy would backfire. At the same time, Carnegie cabled Phipps to return at once from Knebworth, a luxurious estate in southern England, in hopes that Frick would take no further action if he knew Phipps was on his way. The next day, Frick received Carnegie’s letters at his office. Realizing his responsibility to the other partners, Frick responded with a hint of conciliation by offering “to advise my successor in every way that I can when he may deem it necessary or until he gets everything well in hand.”33 Who would be the successor? the panic-stricken chorus sun
g.

  Roused from his retirement, Phipps became distraught when he read Carnegie’s cable and realized the company was about to lose its profit maker. Three days before Christmas, he cabled Carnegie: “Mr. Frick is first and there’s no second, nor fit successor, with him gone, a perfect Pandora box of cares and troubles would be upon our shoulders.” Blubbering with self-pity, Phipps claimed he was too old and weak to take on the “Herculean tasks” before them and concluded that Carnegie, Dod, and he should sell the company within the next year or two.34 That same day, both Carnegie and Frick were in Washington to meet with Navy Secretary Herbert to discuss armor, an awkward situation for all parties for varying reasons. Before the two partners parted ways, Carnegie pleaded with Frick to put off his termination date until later in January, so he could arrange for the buying of Frick’s interest and secure a new chairman. As an alternative to consider, he again pitched the idea of Frick buying his shares and ascending the throne, which would at long last free Carnegie to pursue his philanthropy, a vague dream since 1868. Desperate for a glimmer of hope, Carnegie thought Frick was interested in taking the crown and followed up with a letter confirming the plan.35 Frick slammed the door, however: “Yours of 23rd rec’d and carefully noted and is not—speaking for myself—satisfactory, as I do not desire to purchase your interest or any part of it.”36

  Henry Clay Frick, at age forty-five, shocked Carnegie by submitting his resignation. It was a mistake to think Carnegie would just let him walk away. (Courtesy of the Carnegie Library of Pittsburgh)

  Boyhood friend and long-time business partner Harry Phipps turned against Carnegie.

  As Carnegie, who was committed to promoting from within, reluctantly evaluated his executives for the presidency, he immediately determined that Vice President John Leishman, next in the line of command, was his only choice. Born in Allegheny in 1859, Leishman had been orphaned and forced to support himself as a boy, which had endeared him to Carnegie when the scrappy character joined the steel company in 1886 as a salesman. It was Leishman who saved Frick from imminent death during the Berkman attack. But it was now brought to Carnegie’s attention that Leishman had speculated in pig iron, committing the company to buying and selling substantial amounts at prices that might fluctuate radically and cost them tens of thousands of dollars.

  On Christmas Eve, distraught that his choice for succeeding Frick was a speculator, Carnegie wrote Leishman a long, punishing letter, a vein of hysteria running through his words. He lashed his lieutenant for making “tomorrow a sorry Christmas for me and for Mr. Phipps from whom I have heard” and for having “kept silence and deluded me.” Carnegie concluded with a postscript designed to fill Leishman with guilt: “This will not be sent until your Christmas day is over. I would make it less sad than mine.”37 Carnegie always took his lieutenants’ mistakes and indiscretions as personal attacks on himself. Realizing Frick was clearly a superior leader to any other partner, he quickly returned his attention to him, hoping to salvage their relationship.

  The day after Christmas, Carnegie, who was apt to see only what he wanted to, expressed genuine surprise that Frick rejected his plan to purchase his interest. “Well, let’s have your plan!” Carnegie wrote. “You seemed delighted in Washington with idea of my going out and giving you plenty to do, and I’m sure I was happy believing my aim was so near realization. . . . Won’t you please sketch it for me, that I may know just what it is you do desire.”38 In these waning days of 1894, paranoid and compulsive behavior got the better of Carnegie.

  Instead of Frick being the one who was sick and in need of rejuvenation, it was actually the Scotsman. He was manic, trying to woo Frick while torturing him with Rainey, and considering Leishman a worthy successor while attacking him mercilessly. Also heightening Carnegie’s anxiety was the unavoidable fact that the labor contracts at all Carnegie works expired on December 31: due to both the continuing depression and recent productivity increases, the company was demanding wage reductions ranging from 25 to 45 percent for skilled workers. He didn’t know how they would react, especially at Homestead. Taking in all of this conflict at once was as perplexing as watching a number of vignettes performed on stage simultaneously. The topping cherry in the midst of all this madness: Carnegie pressed his men to secure lower freight rates from the Pennsylvania Railroad.

  Now a letter Carnegie had written to Phipps, after his initial cable, concerning Frick’s alleged poor health sabotaged any hope for reconciliation. In the letter, Carnegie had made the mistake of overdramatizing the situation, as he was apt to do, by telling Phipps that he had to instruct Frick to “keep cool or I will have to treat you as a ‘disordered man.’” It was an error to confide in Phipps. While Carnegie had great loyalty to Allegheny City childhood comrades, Phipps did not, and he forwarded the slanderous letter to Frick. On New Year’s Day, while the men at all Carnegie works meekly agreed to wage reductions, the king of coke exploded: “It is high time you should stop this nonsensical talk about me being unwell overstrained etc and treat this matter between us in a rational business like way. If you don’t I will take such measures as will convince you that I am full competent to take care of myself in every way.” Following the veiled threat, Frick divulged his real reasons for leaving in a scalding assault:

  I desired to quietly withdraw, doing as little harm as possible to the interests of others, because I had become tired of your business methods, your absurd newspaper interviews and personal remarks and unwarranted interference in matters you knew nothing about.

  It has been your custom for years when any of your partners disagreed with you to say they were unwell needed a change etc.

  I warn you to carry this no farther with me but come forward like a man and purchase my interest, and let us part before it becomes impossible to continue to be friends.39

  Yes, it could be said that Frick was fed up with Carnegie’s vanity and deceit, his lies to the press about being retired during the Homestead crisis, his recent bragging to the press about armor contracts, his traitorous position on the tariff, and his meddling in the coke business.

  Although Carnegie would not admit his mistakes—he never did—he attempted to explain his letter to Phipps, but on his heels and off balance, he made a disjointed, rambling mess of it:

  Of course some mistake has happened about letter to Mr. Phipps. . . . What I scribbled I don’t know, but still, my friend, I do know you will recognize in it one who likes you and values you. . . . This is not the first you have resigned. . . . Well, you resign again and I have tried my best to be your friend again. It is simply ridiculous, my dear Mr. Frick, that any full grown man is not to make the acquaintance of Mr. Rainey, or anybody else without your august permission—really laughable—but I did not do it till you had given approval. . . . No one values you more highly as a partner, but as for being Czar and expecting a man shall not differ with you and criticise you, No. Find a slave elsewhere, I can only be a man and a friend.40

  Carnegie’s contemptuous ego could be intolerable and his sanctimoniousness repulsive, but his persuasiveness could also be irresistible; and so Frick, having second doubts about his decision, agreed to meet with him in Pittsburgh. It appeared Frick also put dollars before ideology. Meanwhile, Phipps cabled Carnegie that he would take his money and retire completely from the business if matters weren’t patched up with Frick. In an attempt to bring both men to their senses, Phipps also urged Frick to remain with the company.

  There may have been a mutual distrust and dislike, but there was also a mutual need that boiled down to the fact that Carnegie financed the operation and Frick did the dirty work—and both reaped profits. At the tête-à-tête on January 5 in Pittsburgh, Carnegie was surprised when Frick expressed a desire to remain president of the company. He had already offered the presidency to Leishman, so Frick, who wanted less involvement with the daily management anyway, suggested he be made chairman of the board of directors. He would save face; Phipps would be mollified; and Carnegie would still have a po
werful figure guarding his profit machine. Carnegie agreed on the condition that the chairman’s duties be strictly limited to presiding over the meetings of the board, which, he should have known, would be difficult for Frick to adhere to.41 Ah, if he’d only read Machiavelli, who warned, “An Army should have but one chief: a greater number is detrimental.” More chaos and dissension would ensue.

  Phipps summed up the situation to his son Jay: “This Christmas to me has been marked by a series of serious cables from A.C. in regard to the Chm. leaving us; of course it is the egotism and bad temper of the one who is not unknown for his exhibitions. It looked on the 21st as tho’ I must at once go home, and the strain has more or less continued until this morning when a cable from Mr. Frick said ‘Everything arranged satisfactorily.’ It seems A.C. must have climbed down a very long and steep way; in fact I went so far as to cable that unless something was done, I intimated I wished to retire. A.C. was awful hot at HCF who was the wronged one and had my sympathies and best support.”42 The truth was that both Carnegie and Frick had climbed down off their pedestals. And both were guilty of bad behavior, Frick for backstabbing and quitting with little notice and Carnegie for bragging to the press and emasculating his chief by dealing with Rainey. The curtain fell, but the most contentious act was still to come.