Carnegie
Page 63
Carnegie took a hard stand and refused to extend it, which Frick and Phipps expected now that their partner knew Moore was behind the deal. Carnegie did mollify them somewhat by assuring them the company would realize $40 to $50 million in profits the next year, profits that could be used by the partners to buy the company, as well as fattening everyone’s wallet. Frick and Phipps apprised Moore and then cabled the board of managers: “Pleasant interview at Skibo. Will not extend or modify present option. Have advised Chicago.”61 A triumphant Carnegie cabled Dod: “HP and HCF came & told me Moore wished an extension. I said not one hour.” It felt good.
Phipps now traveled to Beaufort Castle, in the Highland town of Beauly, sixty miles from Skibo, which he had rented for the summer season. All seemed amicable among the partners when in mid-July the Carnegies visited for two days. “Andrew was made happy by catching two fine salmon—17″ to 18″ long—hooked and landed them unaided—his first salmon,” Phipps wrote Frick. He also reported that Mrs. Phipps thought Carnegie was very anxious to sell, and he hoped Frick would have some good ideas on the subject when they next met, indulging his partner by adding: “Your opportunities and abilities are superior to Carnegie’s and mine.” Phipps did acknowledge one major catch to selling Carnegie Steel, or even Carnegie’s share of the company: it would require the movement of so much money within the market that it could touch off a financial panic.62 Carnegie had created a monster that could not be slain.
The August 4 deadline came and went. Moore failed and lost a cool million. As Carnegie had promised, it was time to return the $170,000 option money owed his pards; but when Phipps pressed him on the matter, Carnegie refused. Such was business, he explained; nothing personal. It had become personal, however.
Carnegie was livid that he had indirectly been involved with three gamblers, Gates, Moore, and Flower, the latter fortunately meeting a timely death, and he was embarrassed by the deal falling through. Also angering him were Frick and Phipps’s plans to siphon off $5 million for Moore and $5 million to split between themselves. Carnegie was feeling spiteful, and to discredit his partners in the eyes of history he later wrote on the back of the June 27 board meeting minutes: “Frick and Phipps. Secret bargain with Moores to get large sum for obtaining option. Never revealed to their partners.”63 Carnegie did take comfort in being $1,170,000 richer, which, coincidentally, was almost the exact cost of buying and completely renovating Skibo. The castle, he enjoyed joking, was “Just a nice little present from Frick!” Yes, there was definitely a malevolent streak to his humor.
By the end of August, Phipps was extremely embittered with Carnegie, too, setting the stage for future conflict. When he entertained the newly appointed U.S. ambassador to Great Britain, Joseph H. Choate, who had just seen Carnegie and now relayed to Phipps that the steel king was truly anxious to sell, Phipps passed the information along to Frick in a most acidic tone: “A visitor says the Senior is desperately anxious to sell. An obvious fact. If it had not been for you and me AC would never have gotten his $1,170,000. Mighty little thanks we get for our part.”64
Notes
1. Charles Schwab to AC, March 7, 1898, ACLOC, vol. 49.
2. Strouse, p. 396.
3. Hogan, p. 258.
4. Henry C. Frick to AC, March 22, 1898, ACLOC, vol. 50.
5. AC to Henry C. Frick, April 5, 1898, ACLOC, vol. 50.
6. See agreement, n.d., ACLOC, vol. 40.
7. John A. Potter to Charles Schwab, June 23, 1898, quoted in Warren, p. 202.
8. Hogan, p. 266.
9. AC to Board of Managers, July 25, 1898, ACLOC, vol. 54.
10. AC to Board of Managers, August 23, 1898, ACLOC, vol. 54.
11. Board of Managers Meeting Minutes, October 18, 1898, ACLOC, vol. 55.
12. New York Daily Tribune, December 3, 1898.
13. Richard Sassaman, “Carnegie Had a Dinosaur Too,” American Heritage (March 1988), pp. 72–73.
14. Henry Phipps to Henry C. Frick, November 23, 1898, quoted in Warren, p. 227.
15. George Lauder Jr. to Henry Phipps, November 28, 1898, quoted in Warren, p. 228.
16. Henry C. Frick to AC, December 10, 1898, ACLOC, vol. 58.
17. Reprinted in Andrew Carnegie, Empire of Business (New York: Doubleday, Page, 1902), pp. 303–307.
18. AC to George Lauder Jr., January 17, 1899, ACLOC, vol. 60.
19. AC to George Lauder Jr., n.d. (1898), ACLOC, vol. 59.
20. AC to Francis Lovejoy, December 30, 1898, and Board Meeting, January 3, 1899, ACLOC, vol. 60.
21. Board Meeting Minutes, March 4, 1899, ACLOC, vol. 63.
22. AC to Charles Schwab, December 22, 1898, ACLOC, vol. 58.
23. Board Meeting Minutes, January 31, 1899, ACLOC, vol. 61.
24. Board Meeting Minutes, February 7, 1899, ACLOC, vol. 62.
25. Board Meeting Minutes, February 14, 1899, ACLOC, vol. 62.
26. Board Meeting Minutes, February 21, 1899, ACLOC, vol. 62.
27. Henry Phipps to Henry C. Frick, April 17, 1899, quoted in Warren, p. 198.
28. New York Tribune, September 3, 1898.
29. New York Tribune, November 3, 1898.
30. AC to John Hay, November 24, 1898, ACLOC, vol. 57.
31. John Hay to Whitelaw Reid, November 29, 1898, quoted in Thayer, pp. 198–199.
32. AC to William McKinley, November 28, 1898, ACLOC, vol. 57.
33. New York Daily Tribune, March 4, 1898.
34. AC to John Hay, December 11, 1898, ACLOC, vol. 58.
35. Andrew Carnegie, “Americanism versus Imperialism,” North American Review (March 1899); New York Daily Tribune, December 22, 1898.
36. William Jennings Bryan to AC, December 24, 1898, ACLOC, vol. 59.
37. Ibid.
38. William Jennings Bryan to AC, December 30, 1898, ACLOC, vol. 59.
39. New York Journal, January 30, 1899; AC to Andrew D. White, March 16, 1899, ACLOC, vol. 63.
40. Brody, p. 87.
41. Board Meeting Minutes, May 28, 1898, ACLOC, vol. 52.
42. See T. J. Shaffer to Samuel Gompers, March 19, 1900, quoted in Fitch, pp. 298–299.
43. Charles Schwab to AC, May 26, 1899, ACLOC, vol. 65.
44. Board Meeting Minutes, June 13, 1899, ACLOC, vol. 66.
45. Board Meeting Minutes, June 27, 1899, ACLOC, vol. 66.
46. AC to Charles Schwab, July 1, 1899, ACLOC, vol. 66.
47. Charles Schwab to AC, July 6, 1899, ACLOC, vol. 67.
48. U.S. Steel Hearings, p. 2372.
49. Printed for the first time in Iron Age, August 14, 1899.
50. Agreement dated April 24, 1899, ACLOC, vol. 64.
51. New York Daily Tribune, May 6 and 7, 1899.
52. U.S. Steel Hearings, p. 2373.
53. New York Daily Tribune, May 13 and 17, 1899.
54. Hendrick and Henderson, p. 151.
55. AC to Louise Carnegie, n.d., quoted in Hendrick and Henderson, p. 155.
56. Ibid.
57. From the Keighley Library Dedication speech by Sir Swire Smith, quoted in Hendrick, Carnegie, vol. 2, pp. 162–163.
58. Henry C. Frick and Henry Phipps to AC, May 20, 1899, ACLOC, vol. 51.
59. Board Meeting Minutes, May 22, 1899, ACLOC, vol. 51.
60. “The Carnegie Fortune,” American Monthly Review of Reviews (June 1899).
61. Board Meeting Minutes, June 27, 1899, ACLOC, vol. 66.
62. Henry Phipps to Henry C. Frick, July 15, 1899, quoted in Warren, pp. 238–239.
63. Board Meeting Minutes, June 27, 1899, ACLOC, vol. 66.
64. Henry Phipps to Henry C. Frick, n.d. (late August), quoted in Warren, p. 239.
CHAPTER 27
UnCivil War
The first board meeting following Frick’s return from Skibo was tense. The junior partners were well aware of the conflict between the trio of Carnegie, Frick, and Phipps over the failed sale and of the riches they had come so close to winning. The September 11 meeting began with the usual review and approval of
the last minutes, but this time, before approval was given, Francis Lovejoy read a letter from the absent Carnegie. Displaying his disgust for Moore and his ilk, he demanded a section from the last minutes “be expunged” because it discussed doing business with speculators. “We do not need to take up with speculators,” he ranted, “or adopt unbusiness meth-ods—besides there is only loss and disgrace probably from doing so.”1
Carnegie also unilaterally demanded the cancellation of specific rail contracts he deemed having too small a profit margin. Frick had heard enough. Just waiting for an excuse to lash out at the absent partner, he attacked: “These contracts have been made, and we must live up to them. If Mr. Carnegie wishes to review past actions, we have as much right to review other things. . . . I think we have blundered about in proportion to our interests in the concern.” So, in translation, Carnegie blundered 58.5 percent to Frick’s 6. Frick was taking issue with Carnegie on two points: the first was that the prior fall Carnegie had insisted the company contract with their customers to provide rails at below-market prices in his overzealous hopes of knocking out the competition; and the second was that Carnegie had refused to join an industry-wide pool that would have protected their market share and supported prices. The two moves were particularly bad because the rail market had strengthened, with orders and prices on the rise.
When Carnegie read the September 11 minutes, he was embarrassed and angered by Frick’s brazen attack. “The Chairman says that we all have blundered,” Carnegie wrote the board, shrewdly including them in his collective we, in a psychological game to promote animosity toward Frick. “True, and always will blunder; no one is infallible, but suggestions of a change do not imply personal reflections. It is simply a business question as to what is best, and experience should teach us to change when thought best.” As for the rail contracts signed at below-market price that he insisted on to crush the competition, he admitted his mistake had “cost us a great deal of money.”2
In truth, not only had he cost the company money, but Carnegie’s multi-front war against the consolidations had bogged down; for all the bellicose posturing and talking, there were no pipe mills or other finished-product mills bringing the Morgan and Moore consolidations to their knees. There was a mutual loss of respect between the three senior partners—Carnegie, Frick, and Phipps—and, sadly, September 11 marked the beginning of the end for more than just their relationships. Battles between the partners would now escalate dramatically, as did those between the American and national armies in the Philippines. And the innocent suffered.
The newspapers were filled with graphic stories of horribly mutilated bodies of the American dead and of merciless American soldiers putting torches to entire villages. The U.S. Army’s policy was to take no prisoners—and with a killed-to-wounded ratio of five to one, the inverse of what might be expected in a war, the policy was working.3 At least New York had a reformer in its midst. Former war hero and now New York governor Teddy Roosevelt, with his trademark zest, was dueling with New York City’s Tammany Hall over reforms, corporate greed, and political graft. Thoroughly disgusted with Roosevelt, Tammany Hall boss Tom Platt said, “I want to get rid of the bastard. I don’t want him raising hell in my state any longer. I want to bury him.”4 When Carnegie returned to New York in October, he was in the same frame of mind concerning Frick.
“No Contract. Declaration of War,” Carnegie wrote across the top of his copy of the October 25 Frick Coke Company board meeting minutes. This latest conflict would become known as “the Clash of the Steel Men”—and it featured a perfect Machiavellian plot, driven by ego, money, power, and innuendo.
It was precipitated by Carnegie’s conviction that he and Frick had made an oral contract for the Frick Coke Company to supply Carnegie Steel with coke at $1.35 a ton, but at the October 25 meeting Frick denied any such agreement existed. Disputes over what Carnegie Steel paid the Frick Coke Company for coke were frequent, even though the very same investors controlled both companies. It was a clash of egos, with the respective company’s managers mimicking their respective bosses’ distrust for each other. Understandably, Carnegie wanted to make sure his mills were paying less than other Frick Coke Company customers, while Frick wanted to get what he could from every customer for those shareholders in his company who were not invested in Carnegie Steel. The current situation was unacceptable to Carnegie, but because Frick men outnumbered Carnegie men on the Coke board, he couldn’t simply demand a vote to secure the $1.35 price. He did the next best thing: he ordered his men to stop paying the coke bills. Regardless of whether there was an oral agreement, the next month the issue remained unresolved, with Carnegie and Frick on a collision course that would captivate the public.
Three weeks after the Frick Coke meeting, on November 15, Carnegie arrived in Pittsburgh to review the architect’s plans for his institute’s expansion. He also dazzled both supporters and detractors by finally committing $1,750,000 to enlarge the building to three and a half times its current size, with the new art and science wings and a larger library. Including this benefaction, the Library Journal estimated that in 1899 Carnegie promised or gave $3,503,500 to thirty-four American libraries in fifteen states. There were donations of $350,000 to Washington, D.C.; $50,000 to Dallas; $50,000 to Oakland, California; $4,000 to Prescott, Arizona; and even $500 to Bucyrus, Ohio.5 Many of the libraries Carnegie gave to in 1899, as before, were strategically located; they were in places where he desired to develop goodwill among the laborers who were key to his success, such as Connellsville, McKeesport, Beaver, and Oil City in Pennsylvania, and Conneaut, Steubenville, and San-dusky in Ohio. East Liverpool, home to relatives, received $50,000. His gospel was slowly coming to the fore.
While in town, Carnegie also reviewed his business operations. In particular, he was still concerned about the slim profit margin for rails, the rail contracts he had wanted to break back in September, and, of course, the October 25 Frick Coke Company board meeting. In reviewing the proceedings with Dod and Schwab, Carnegie masked his own anxiety about the rather sketchy contract he claimed to have made by calling Frick a coward for not taking the matter up directly with him. As he had with Leishman, he was talking behind Frick’s back, stabbing him and undercutting his position. If Frick heard of it there’d be hell, and he invariably did when either Schwab or Dod gossiped with the other junior partners.
When the Carnegie Steel Company board convened five days after Carnegie reviewed plans for his “great gift” to Pittsburgh, Frick stood before them, his face flushed. He again lambasted Carnegie for involving the company in unprofitable rail contracts, and then he addressed Carnegie’s charge of “cowardice in not bringing up question of price of coke as between Steel and Coke Companies.” According to Frick, neither he nor Carnegie had the power to make such a contract, which was technically true. “The Frick Coke Company has always been used as a convenience,” he countercharged, and then blurted, “Why was he not manly enough to say to my face what he said behind my back?” No one else said a word as Frick concluded, “Harmony is so essential for the success of any organization that I have stood a great many insults from Mr. Carnegie in the past, but I will submit to no further insults in the future.”6
Lovejoy quietly adjourned the meeting.
The compelling question was how would Carnegie, who was of course absent from the board meeting, react to Frick questioning his manhood? The day after the meeting, as soon as he had been debriefed, Carnegie did not parry with his double-edged sword, but rather took a defensive posture in replying to Frick’s charges. “If I have insulted you I have known it not. . .,” he wrote Frick. “When you get your usual calm and if you come to me, I shall tell you all the circumstances just as they occurred and you will be sorry for your hasty outburst to your partners. I am not guilty and can satisfy you of this, also of the folly of believing tale bearers, a mean lot.”7 The sidestepper denied backstabbing Frick and attempted to shift guilt to the unknown talebearer.
While playing in
nocent with Frick, two days later he told Dod that he was pursuing other coal lands to render the Frick Coke Company expend-able.8 His cousin, who considered Frick a troublemaker, replied with an insight worthy of Machiavelli: “Now the question keeps intruding itself into my mind all the time: would any possible sacrifice that could be entailed be much in order to cut loose from such a disturbing element? I am well aware the steps to be very grave but an enemy outside your lines is always less dangerous than inside no matter what the apparent sacrifice may be in putting him there.”9
“You voice my views exactly—” Carnegie answered. “Frick goes out of Chairmanship of Board next election or before. . . . He’s too old—too infirm in health and mind. . . . My birthday—never better or happier especially since I decided to tell Mr. Frick in kindest manner that I mean divorce under ‘Incompatibility of Temper.”10 Carnegie and Dod, allies from the days they fought the English with wooden swords, remained blood brothers, and together would fight a man they genuinely considered to be mentally unbalanced.
But was Frick as disruptive of an element as Carnegie and Dod claimed? Or was he simply not a yes-man? Was the “Incompatibility of Temper” reason sufficient? Was Frick’s mental constitution faulty? No more than Carnegie’s. Closest to the truth was the argument that both men were alike in too many ways; they were aggressive, intolerant of opposition, and driven by egos that refused to accept second place to anyone. Their mutual friend, John Walker, appraised the conflicting personalities:
[D]on’t ever forget that Carnegie was the Napoleon—that is the commander and intuitive genius, who planned campaigns and executed them with a rapidity and boldness that swept all enemies from his path; while Frick had the calm qualities of a von Moltke—long-headed, deliberate, a great tactician,— a man who acted from carefully reasoned premises, while Carnegie struck out boldly, burning all his bridges behind him, not necessarily knowing himself the stages of reasoning by which he reached his results. In fact, he didn’t reason much—he acted on impulse; but his impulses were usually far more accurate than others’ logical processes. But both were very big men—too big to enjoy each other’s presence in the same organization.11