Carnegie

by Peter Krass

too irreconcilable, if both parties realized as I do, the mutual advantage of such an alliance, and were prepared to meet each other halfway.

  When Mr. Gates submits the matter to you, as I suppose he will, and you concur in this, I believe you and I could fix it in a few minutes, and I shall be very glad to go and see you if you think it worth while to take the matter up.21

  Carnegie’s willingness to go to Rockefeller was an acknowledgement that the oilman was the ruling power and a sign of humility that Rockefeller appreciated. The two parties struck a fifty-year agreement in which Carnegie would purchase at least six hundred thousand tons of ore a year at a rate Oliver calculated would initially save Carnegie about $1.50 a ton, almost another million in savings on top of the railroad rebates.22 In addition to the six hundred thousand tons the company agreed to purchase a year, Carnegie Steel also had to ship another six hundred thousand tons of ore from its own mines via Rockefeller railroads and steamships, and Carnegie had to agree to not invade any more territory in the Mesabi Range for the next ten years. For Rockefeller’s part, he had to vow he would never enter the steel business. Many years later, Carnegie would crow, “Don’t you know, it does my heart good to think I got ahead of John D. Rockefeller on a bargain.”23

  He was talking cocky now, but it had taken several years for Oliver and company to drag him into the “Rockafellow” ore deal. He was no visionary this time. At least, even though Carnegie wouldn’t have acknowledged he was eating crow, he did pay Oliver a tribute: “Harry Oliver was a man who saw far ahead. He could not carry all the game he had captured, and he appealed to the Carnegie Company to join him. It did, and carried the treasure safely through with its money and credit.”24 The foresight of Oliver saved Carnegie Steel millions of dollars, and, with the company’s supply chain complete, observed Iron Age, it gave Carnegie “a position unequalled by any steel producer in the world.”25

  The deal with Rockefeller depressed the iron ore market, and as other mining operators lost money and folded, Carnegie and Rockefeller realized more opportunities to utterly dominate the entire market. Under Oliver’s fervent leadership, Carnegie Steel secured three Lake Superior area mines: the Pioneer in the Vermillion Range, and the Norrie and Tilden mines in the Gogebic Range.26 Carnegie agreed to lease the Tilden and Pioneer mines and to purchase the Norrie mine. When news of these latest ore triumphs reached the press, the New York Daily Tribune unabashedly announced: “Andrew Carnegie has perfected the largest iron-producing combination in the world. . . .”27 And Carnegie admitted to Frick, “I am happy that we are now in our ore supply; it was the only element needed to give us an impregnable position.”28

  On New Year’s Eve, Carnegie reflected on his triumphs. Despite the challenges, profits had increased from $5 million in 1895 to $6 million in 1896, thanks to the historic ore deal, armor contracts, and pools. He heartily congratulated his board of managers: “Let me wish you all the best of New Year’s, and congratulate you upon the prospects of THE CARNEGIE STEEL COMPANY, and also THE FRICK COKE COMPANY. You have read the paragraph in to-day’s ‘Iron Age,’ . . . which does not exaggerate, I think, what the company is to do, but which is slightly premature. . . . All hail 1897! No New Year in the history of the Company so heavy with result ensuring our preeminence.” He concluded with a commanding flourish: “Our policy should be, THE FRIEND OF ALL, THE ALLY OF NONE.”29

  The most immediate reward of the Rockefeller iron deal, in addition to cheap ore, was that Carnegie could sever all alliances with his competition and go to war against them. The sixty-one-year-old remained a formidable Scotsman, as bold as William Wallace, who confronted, pummeled, and pillaged the armies of England, and as politically manipulative as the Robert the Bruce, who negotiated truces and alliances with the clans of Scotland and then shattered them when no longer convenient, a necessary strategy to win Scotland’s independence. Carnegie, with a hard line to his mouth and white-bearded chin, struck a hostile pose. His battle cry: “THE FRIEND OF ALL, THE ALLY OF NONE.”30

  The relationships between the rail pool members had already been particularly chilly during the depression. The pool had collapsed in 1893; then was resuscitated; and now, in February 1897, was shattered. On Friday, February 5, Lackawanna Iron and Steel cut its rail price to $20 a ton, signaling a willingness to go it alone, and an emergency conference of the pool members was immediately scheduled for the following Monday in Pittsburgh. Carnegie, whose firm had been given a 53.5 percent share of the pool, saw no reason to cooperate with the others, however, and by Tuesday afternoon he was selling rails for $17 a ton. As he told Frick, he was going to teach them a lesson, and he expected Pennsylvania Steel to fail, if not Illinois Steel.31

  The other steelmakers recognized that Carnegie had an opportunity to destroy them, and they were soon running scared. The very month Carnegie Steel bought the Norrie mine, September 1897, Illinois Steel president Bet-a-Million Gates wrote Frick a “strictly personal and absolutely confidential” letter in which he urged the consolidation of his company and Carnegie Steel. “If the concerns are all in one company,” he argued, “there will not be the temptation to hammer the price of soft steel down to such a point that there will be practically no profit left to the maker.”32 Gates should not have shown weakness. Frick passed the message on to Carnegie, who merely chortled at the thought of bringing one of his top rivals to his knees. The letter was filed away for posterity’s sake.

  Desperate for an alliance, Gates now suggested reestablishing the rail pool; however, Carnegie was extremely wary of cooperating with him. Even Charlie Schwab, who occasionally played poker with Gates, considered him as crooked as they came without breaking the law. In addition, pools weren’t so easily arranged anymore with more stringent commerce laws being passed; and, as Schwab recalled, they had to start meeting in New Jersey instead of New York.

  On one such occasion, John Gates and I were going across on the ferry, I was very perturbed about something or other we had agreed upon, and John said to me, “Now you just leave this to me. I’ll straighten it out. I have always been able to explain everything—everything except one thing, and for that I never could find any excuse whatsoever.”

  I asked him what that one thing was and he said, “Well, a while ago my wife took a little vacation, and then, thinking I’d be lonesome, came home without telling me she was coming. She thought she’d like to surprise me. Well, I wasn’t home when she arrived, and after she sat up a while and waited, she went to bed. But when two or three o’clock came and I hadn’t shown up, she became worried and went down to her maid’s room to see whether the girl knew anything about my coming in or not. Well, she found me in bed with the maid, and I couldn’t think up any really adequate excuse for being there.”33

  Gates could not be trusted.

  “I would not have anything to do with Illinois Steel Company under present management. . .,” Carnegie advised Frick. His opinion of Gates was rather low; as a businessman he considered him “dull of sight” and as a person he despised him for gambling.34 Carnegie wanted “to stand by ourselves alone” and, in his letter to Frick, continued: “You began a great struggle wisely; it has been fought vigorously and we have triumphed. Now you are a good fighter, but there is something that comes after the fight is over, namely reaping the rewards of victory. Very few commanders have been able to do this. They fight well but are poor reapers. Now let us see that you can not only win victory, but also know how to gather in the fruits.”35 The tone was sharp; Carnegie’s independence was flaring, and he demanded absolute victory.

  Carnegie’s assessment concerning Illinois’s vulnerability was on the mark. When, in December, Carnegie Steel quoted rails at $18 to Illinois’s $20, Gates panicked and cheerfully reiterated he hoped they could again cooperate, but no agreements were immediately forthcoming.36 Flush with bringing Illinois Steel to its knees, Carnegie exulted to Frick: “Lauder writes our business never in such fine form and all pulling together. Let us . . . defy the world.”37 The hunger was neve
r satisfied. This sparring with Illinois Steel would ultimately result in a final showdown, a last gunfight at the Carnegie Corral.

  From the battles with the Pennsylvania Railroad and Rockefeller, there emerged one prominent casualty in the Carnegie regime—President John Leishman. The strain of being under Carnegie’s thumb was crushing the life from him. The flogging had started from the time of his nomination for the presidency of Carnegie Steel and had never stopped. And even though he had taken a severe beating for speculating in pig iron in the winter of 1894–1895, Leishman continued to involve the company in risky ore deals. Making matters worse, he was using his own money to speculate on iron ore and stocks. He had become caught up in the Gilded Age; he had gambled to attain riches beyond his means. The odds were against him, especially during the depression. His personal debts mounted, and by January 1896 stories reached Carnegie at his Fifty-first Street home.

  Despising Wall Street, its trappings, and those who become trapped, Carnegie, who was extremely sensitive to the firm’s image in light of the prior scandals, lashed out with a venomous tongue:

  When a President has left business methods and brought a great concern into disrepute many tongues wag which other wise would remain silent. . . . Now there may be other complications in your private affairs. You conceal, keep silent, when no man can obtain firm standing with partners who keeps any business investments from them. Our President should have reputation, hence influence and financial strength, if not from capital, yet from character. The Carnegie Steel Co. is daily compromised by its President owing private debts. I am told of an instance where you borrowed from a subordinate. This is madness. . . . Every dinner you attend, every lunch at the Club at which you may linger, every act affects the Company; every word you speak; but every financial step in your private affairs has serious consequences.38

  For once, it appeared his tone of righteous indignation was justified. Suspecting the worst, Carnegie had his trusted financial secretary Robert Franks investigate Leishman’s account with Carnegie Steel: What did he owe for his interest in the firm? Had he borrowed more for personal reasons? Was he indebted to anyone who might make claims on the company?

  Carnegie himself traveled to Pittsburgh to meet with Leishman, who considered the attack unfair and unsubstantiated. At his office in the Carnegie Building, Leishman admitted to buying some stock in phonograph, gas, and ore companies, but only on the advice of company attorney Philander Knox, Phipps, and Frick, who all had investments, too. Carnegie appeared to accept the explanation and promised to not discuss it again. But he did—with Schwab, Gayley, and even Frew over at the library, among others.

  Deeply hurt, Leishman protested: “And to make matters worse, although you promised me on the Sunday morning after your arrival that you would say nothing further about it—you have spoken about it to a number of my subordinates in a way that had a decided tendency to belittle me and lessen my influence and standing and I have now heard outside that you have spoken very unkindly if not harshly to Frew and others—and you know that any unfriendly statement coming from you is not only very humiliating but calculated to affect my standing.”39 It didn’t matter what Carnegie, who could be exceptionally spiteful despite his claims otherwise, had said or promised in their meeting, he was determined to eject Leishman from the company, and he continued his assault just as he had on William Shinn years earlier, sneering he couldn’t “have the Carnegie Steel Company degraded to the level of speculators and Jim Cracks, men who pass as manufacturers, but who look to the market and not to manufacturing, and who buy up bankrupt concerns only to show their incapacity.”40

  Frick suggested that Leishman, who had become a physical wreck under the strain, take a vacation. This option didn’t strike Carnegie favorably at all— a vacation was the last thing Leishman deserved—and he thrashed his president again over his management skills, concluding, “Frankly, I must say, that if you do not look out, you will bring even our firm into serious trouble. . . . I scarcely know what next to expect. These things cause me great anxiety.”41 To relieve the anxiety, Leishman resigned on February 12. Because Carnegie had handpicked Leishman, his own leadership had to be called into question. Leishman’s tenure as Carnegie Steel president was two years. Before him, there had been Frick, Stewart, Walker, Phipps, Tom Carnegie, and Shinn—a veritable graveyard of destroyed chairmen, presidents, and managers.

  Next up was wonder boy Charles M. Schwab. Unknown to his patron Carnegie, Schwab had secrets, too. He engaged in extramarital affairs; and, while not a stock speculator, he enjoyed gambling at cards and roulette. Schwab was well aware that he would have to hide these sins from Carnegie’s prudish Victorian sensibilities. For now, the oblivious Carnegie couldn’t compliment his new president enough, writing Frick: “You are no doubt feeling as I do that a great load is off your shoulders. We have got the man, and having him, there is no reason why we should hesitate about going forward and keeping the lead.”42 He had been equally effusive about Shinn, Abbott, and Frick, and one can’t help wondering if Carnegie was talking himself into feeling so positive about Schwab. To ensure Schwab’s loyalty, he boosted his interest in the firm from 1 to 3 percent.

  Throughout the triumphs of and upheavals at Carnegie Steel, the depression remained severe. If Republican presidential candidate McKinley didn’t win the 1896 election by a landslide, Carnegie was certain a severe panic on Wall Street would ensue and the country’s economy would be devastated. Unfortunately for the Republicans, William Jennings Bryan was a great orator and took the early lead in the public’s eye. Bryan, flashing steel-blue eyes and well-kept teeth, vowed to fight the money kings of Wall Street and wholly supported unlimited coinage of silver.

  McKinley’s campaign manager, Mark Hanna, a wealthy Cleveland businessman, undertook the Herculean task of educating the American public on the critical money question and of portraying Bryan as a crackpot economist. As part of the propaganda campaign, Hanna dug up Carnegie’s 1891 essay, “ABC of Money,” and had millions of copies printed. “It required but a moment for us to see that the leaflet was admirably calculated to make the money issue of this campaign clear to the simplest mind,” Hanna wrote Carnegie. “We therefore printed and have circulated more than 5,000,000 copies of the leaflet, and the demand for it was as great as for that of any document we have issued. This of itself is evidence of its worth, but the scores of letters we have received commending the paper, attest its value, and the powerful influence for good we feel it has exerted. . . . and at this late day, I want, in the name of and on behalf of the National Republican Committee, to thank you for your work, and assure you that we appreciate the service you have rendered the party and the country.”43 Nothing could have pleased Carnegie more, and he donated generously to the campaign—as did Rockefeller’s Standard Oil and J. P. Morgan, with commitments of $250,000 each. Bryan, whom Carnegie characterized as a “light-headed-blathering demagogue,” had to be defeated for the good of the country.44

  Notes

  1. AC to Henry C. Frick, December 9, 1896, ACLOC, vol. 40.

  2. Warren, p. 196.

  3. New York Daily Tribune, February 20, 1896.

  4. James H. Creery to AC, October 25, 1895, quoted in Warren, p. 191.

  5. AC to Henry C. Frick, February 7, 1896, ACLOC, vol. 36; Andrew Carnegie, “My Experience with Railway Rates and Rebates,” Century Illustrated Monthly (March 1908), p. 725.

  6. AC to J. G. A. Leishman, February 4, 1896, ACLOC, vol. 36.

  7. AC to John Stewart, April 18, 1896, ACLOC, vol. 37.

  8. AC to George Lauder Jr., April 16, 1896, ACLOC, vol. 37.

  9. AC to Frank Thomson, May 5, 1896, ACLOC, vol. 37.

  10. Hendrick, Carnegie, vol. 2, pp. 30–33; Carnegie, “My Experience with Railway Rates and Rebates,” pp. 10–14; Warren, p. 175; also see agreement dated May 16, 1896, ACLOC, vol. 37.

  11. AC to Henry C. Frick, March 30, 1898, quoted in Warren, p. 193.

  12. See Strouse, pp. 339–358, for more detai
ls of the monetary crisis and Morgan’s involvement.

  13. AC to J. G. A. Leishman, August 21, 1896, ACLOC, vol. 32.

  14. AC to President and the Board, August 6, 1896, ACLOC, vol. 38.

  15. Warren, p. 162.

  16. AC to Henry C. Frick, August 29, 1892, quoted in Warren, pp. 162–163.

  17. Bridge, p. 259; AC to Henry C. Frick, September 4, 1894, quoted in Warren, p. 163.

  18. AC to Henry M. Curry, December 9, 1895, ACLOC, vol. 35.

  19. Letter in the Board of Managers Meeting Minutes, January 21, 1896, ACLOC, vol. 36.

  20. AC to the Board of Managers, August 21, 1896, ACLOC, vol. 39.

  21. AC to John D. Rockefeller, October 30, 1896, ACLOC, vol. 39.

  22. Warren, p. 104.

  23. United States Steel Corporation. Hearings before the Committee on Investigation of United States Steel Corporation, House of Representatives (Washington, D.C.: Government Printing Office, 1911–1912), p. 2392. (Hereafter to be cited as U.S. Steel Hearings.)

  24. George T. Fleming, History of Pittsburgh and Environs (New York: American Historical Society, 1922), p. 172.

  25. Iron Age, December 17, 1896, quoted in Warren, p. 104.

  26. Henry Oliver to Henry C. Frick, July 27, 1897, ACLOC, vol. 43.

  27. New York Daily Tribune, October 13, 1897.

  28. AC to Henry C. Frick, October 9, 1897, quoted in Warren, pp. 165–166.

  29. AC to Chairman, President, and Managers of Carnegie Steel, December 31, 1896, ACLOC, vol. 40.

  30. Ibid.

  31. AC to Henry C. Frick, February 15, 1897, ACLOC, vol. 41; AC to Henry C. Frick, February 7, 1897, quoted in Warren, p. 133.

  32. John Gates to Henry C. Frick, September 24, 1897, quoted in Warren, p. 282.

  33. Whipple, p. 53.

  34. AC to Henry C. Frick, December 11, 1896, ACLOC, vol. 40.

  35. AC to Henry C. Frick, September 20, 1897, quoted in Warren, pp. 135–136.