The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supercompany
Page 1
Praise for The Tycoons
“Thorough and highly readable, Morris’ exemplary volume does a superb job. . . . Gracefully and eloquently clarifies these men’s frequently misunderstood roles in the shaping of modern U.S. commerce.”
—The Providence Journal
“Engaging and credible.”
—The Washington Post Book World
“Too often presented either as demigods or mythical beasts, [these men] are returned to their proper stature as mere people by Charles Morris. . . . He also paints rich, intriguing and at times, harrowing descriptions of the extraordinary age of innovation in which they starred—the late 19th century, when the U.S. came into its own.”
—Barron’s
“Morris writes with an uncommonly light touch, even on complex financial matters, and his brisk summary of the achievements and chicaneries of his tycoons makes for . . . a very rewarding evening.”
—Commonweal
“Morris may change your impression of these men—some for the better (Gould), some for the worse (Morgan)—as he tells their stories against the backdrop of America’s rise to power. . . . A forceful storyteller.”
—Harvard Business School, Working Knowledge
“Morris has a striking command of his material and his analysis is highlighted time and again by vivid sketches and thought-provoking comparisons with contemporary circumstances. Altogether, The Tycoons is a valuable contribution to the presentation and interpretation of one of the most vital, yet all too often romanticized periods of American economic growth.”
—Kenneth Warren, fellow emeritus, Jesus College,
Oxford University, and author of Big Steel
“A fascinating revisionist interpretation.”
—Publishers Weekly
“An excellent picture of the growth of American business that made the United States an economic powerhouse.”
—Library Journal
THE TYCOONS
Also by Charles R. Morris
Money, Greed, and Risk
American Catholic
The AARP: America’s Most Powerful Lobby
and the Clash of Generations
Computer Wars (with Charles H. Ferguson)
The Coming Global Boom
Iron Destinies, Lost Opportunities:
The Postwar Arms Race
A Time of Passion: America, 1960–1980
The Cost of Good Intentions: New York City
and the Liberal Experiment, 1960–1975
THE TYCOONS
How Andrew Carnegie,
John D. Rockefeller, Jay Gould,
and J. P. Morgan Invented
the American Supereconomy
CHARLES R. MORRIS
AN OWL BOOK
HENRY HOLT AND COMPANY • NEW YORK
Owl Books
Henry Holt and Company, LLC
Publishers since 1866
175 Fifth Avenue
New York, New York 10010
www.henryholt.com
An Owl Book® and ® are registered trademarks of
Henry Holt and Company, LLC.
Copyright © 2005 by Charles R. Morris
All rights reserved.
Distributed in Canada by H. B. Fenn and Company Ltd.
Library of Congress Cataloging-in-Publication Data
Morris, Charles R.
The tycoons : how Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan invented the American supereconomy.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-8050-8134-3
ISBN-10: 0-8050-8134-8
1. Industrial management—United States—History. 2. Industrialists— United States—Biography. 3. Rockefeller, John D. (John Davison), 1839–1937.
4. Carnegie, Andrew, 1835–1919. 5. Gould, Jay, 1836–1892.
6. Morgan, J. Pierpont (John Pierpont), 1837–1913. I. Title.
HD70.U5M67 2005
338.092'273—dc22
2005041637
Henry Holt books are available for special promotions
and premiums. For details contact: Director, Special Markets.
Originally published in hardcover in 2005 by Times Books
First Owl Books Edition 2006
Designed by Victoria Hartman
Printed in the United States of America
1 3 5 7 9 10 8 6 4 2
To Leo, for freely sharing his extensive
knowledge of railroad technology
Contents
Preface
Acknowledgments
1 Prelude
2 “. . . glorious Yankee Doodle”
3 Bandit Capitalism
4 Wrenchings
5 Mega-Machine
6 The First Mass Consumer Society
7 Paper Tigers
8 The Age of Morgan
9 America Rules
10 The Wrong Lessons
Appendix I: The Carnegie Company’s 1900 Earnings
Appendix II: Standard Oil Earnings
Notes
Index
Preface
There are no official league tables for “most powerful country,” but by about 1895 America had clearly outdistanced the pack. Few people recognized it at the time. British officials were merely annoyed in 1899 when they realized that they would have to finance their Boer War in America. Just a dozen or so years later, however, the British were in a near panic at the possibility that America might put its financial weight behind Germany.
America was not only the most populous of industrial countries but the richest by any standard—per capita income, natural resource endowment, industrial production, the value of its farmlands and factories. It dominated world markets—not just in steel and oil but in wheat and cotton. It ran huge trade surpluses in goods, and was gaining preeminence in financial services. Its people were the most mobile, the most productive, the most inventive, and, on average, the best educated. It did not have much to say for itself in literature and the arts, but that time would come. Nor did it have the biggest army nor nearly the biggest navy, but no thinking person doubted those deficiencies could be remedied with but a few years’ attention.
Attentive European elites were shocked as they came to understand the scale and speed of America’s ascendancy. Hardly three decades before, America was still torn and bleeding from a savage civil war, making its living exporting raw cotton, grain, and timber in exchange for Europe’s surplus manufactures. The sustained American growth spurt was the fastest in history, at least until the Pacific Rim countries made their run for daylight a century later.
The Tycoons is the story of that leap, told primarily through the lens of a handful of extraordinary men who stood in the vanguard of the surge. But while “Great Men” can dominate historical epochs, they are never the whole story. The America of the tycoons really was different from all other countries. Their stories are therefore interleaved with an account of the characteristics of America, and its people, that made it such fertile ground for the transition.
Andrew Carnegie, John D. Rockefeller, Jay Gould, and John Pierpont Morgan were all in their late twenties or early thirties, all on the first rungs of their careers, in the waning days of the Civil War. In an age of outsized business leaders, no others played so great a role in shaping and channeling the American boom. They forced the pace, drove the transition to ever-larger scales, and, for good and for ill, imposed person
al stamps on the national economy that persisted well into the twentieth century.
They were quite different people. Carnegie, Rockefeller, and Gould tapped into the national predilection for speed, the obsession with “moving ahead,” the tolerance for experimentalism, to create one of history’s purest laboratories of creative destruction. Most businessmen of the time believed in orderly markets and gentlemanly fair profits, but these three came with flaming swords. Morgan was the regulator, always on the side of reining in “ruinous competition,” most especially of the kind regularly unleashed by the other three.
The American steel industry was settling into a comfortable cartel when Carnegie commenced his career of disruption. He was no technologist, but rather a masterful consumer of invention. His plants were always the biggest, the most automated, the most focused on pushing prices down. He had the simplest of business mantras: cut costs, take share, gain scale. Profits would take care of themselves.
Gould was a provocateur, a master of public securities markets as no one before him, and few since, always attacking, always pushing the possible to precarious new heights. Gould’s arena was railroads and the telegraph, the critical infrastructure of the period. Pre–Civil War railroads had expanded cautiously and almost always profitably, staying carefully within their natural territories, and resolving conflicts with gentlemanly “pools.” To Gould railroad pools were as steel cartels to Carnegie—sitting targets for attack.
Rockefeller may have been the greatest visionary and the supreme manager: he took over world oil markets so quickly and effortlessly that it was over before most people noticed, even as he taught the world its first lessons in the power of large-scale distribution. A host of other enterprises followed his lead; within a decade after Rockefeller first sold his kerosene in the Far East, American meatpackers had distribution centers in China and Japan.
Morgan, the most traditional figure of the four, was the one American whom overseas financiers trusted. After mediating the crucial capital flows that supported the extraordinary pace of American investment, he transmuted into a one-man proto–Securities Exchange Commission, and occasionally even a proto–Federal Reserve, laying down the rules for corporate finance, demanding honest accounting, an end to the looting, and fair treatment for securities holders.
Carnegie, Rockefeller, Gould, and Morgan would have been dominant figures anywhere, but few places have ever been as open to people of talent as post–Civil War America; and in America, no field offered opportunities as unlimited as business. America’s radically different manufacturing culture, its cult of the innovative entrepreneur, its obsession with “getting ahead” even on the part of ordinary people, its enthusiasm for the new—the new tool, the new consumer product—were all unique.
The final ascension of big companies around the turn of the century can properly be called the Age of Morgan, who asserted control just as the long American boom was visibly running out of energy. Indeed, he helped slow it down. With Gould dead, and Carnegie gone after Morgan’s U. S. Steel buyout, he reimposed a gentlemen’s version of orderly markets and “administered” prices. U. S. Steel was the paradigm for a broad wave of consolidations, many of them stage-managed by Morgan.
Morgan’s consolidations represent both the capstone and the end to the story. It took another seventy-five years, and the root-and-branch assaults by Japan and other countries, before American companies understood the degree to which they had been living off the capital bequeathed by the nineteenth-century tycoons, the founding fathers of the American industrial superpower.
Acknowledgments
One of the pleasures of this book was the discovery of how easily, via Web searches and e-mail, I could drop in unannounced on senior scholars with questions or proposed formulations of events. I often got multipage responses, which led to further exchanges. A special word of thanks to Ken Warren, perhaps the leading historian of the nineteenth-century steel industry, who engaged in an extended correspondence and then read the entire manuscript, saving me from many errors. My gratitude also to Nancy Bryk, David Hounshell, Douglas Irwin, Thomas Johnson, Maury Klein, Thomas Misa, Clayne Pope, and Merritt Roe Smith. My appreciation also to the librarians and archivists at the Library of Congress, the Pierpont Morgan Library, the Rockefeller Archive Center, and the Historical Society of Western Pennsylvania, and a special word of thanks to John Alexander of the American Precision Museum. Charles Kaczynski was a competent and careful research assistant. Responsibility for errors and omissions is, of course, my own.
Charles Ferguson suggested the original idea for the book and read portions of the manuscript. Kim Malone, Dan Woods, Steve Ross, Andrew Kerr, and Sam Solie read most, or all, of the manuscript and made many useful suggestions. Mike Bessie was, as usual, a benevolent presence and sharp critic throughout. I enjoyed being reunited with Paul Golob at Times Books, and my appreciation to Robin Dennis for her very intelligent and professional editing. And this book marks twenty pleasurable years of working with my agent, Tim Seldes.
Finally, my thanks and love to my wife, Beverly, who endured the production of yet another book with her usual affection and good humor.
1
PRELUDE
Abraham Lincoln was pronounced dead shortly after seven o’clock on a rain-soaked Holy Saturday morning, April 15, 1865. It was less than a week after Gen. Robert E. Lee’s surrender at Appomattox. The little group of officials and family gathered around the blood-soaked bed in Will Peterson’s boardinghouse across from Ford’s Theater stood silently for several minutes. Then Mary Lincoln’s pastor, Phineas Gurley, said a short prayer, and a detachment of soldiers was summoned into the room. They placed the body in a military coffin and whisked it through the sodden crowd keeping vigil outside to the hearse that would carry it to the White House.
The autopsy and embalming were performed in the east wing’s second-floor guest room. Edwin Stanton, the volcanic secretary of war, chose the president’s funeral garb and insisted that the undertaker leave the black residue of intracranial bleeding that had formed under Lincoln’s right eye. Construction started almost immediately on a catafalque, modeled after a Masonic “Lodge of Sorrow,” in the first-floor East Room for the public viewing. As the hammering went on through Easter Sunday and the following Monday, a distraught Mary Lincoln pleaded that the blows sounded like pistol shots. The men who carried Lincoln’s body to the first floor on Monday night removed their shoes so as not to disturb Mrs. Lincoln.
There was a public viewing in the East Room on Tuesday. With special trains ferrying tens of thousands of people into the capital, the lines—for the opportunity to file through the darkened room and gaze down for barely a second at the dead president—stretched out for hours. A series of private viewings on Tuesday evening included a delegation of Illinois citizens who had come to demand that Lincoln be buried in his home state; Stanton was planning an interment in Washington. The following morning, six hundred guests packed into the East Room for the funeral service. Even men like Gen. Ulysses S. Grant and Stanton openly wept. Some twenty-five million people attended similar services held more or less simultaneously throughout the United States and Canada.
The massive funeral procession on Wednesday afternoon, before some seventy-five thousand spectators, included detachments of black fighting units and crippled veterans, and, most dramatically, the traditional commander-in-chief’s horse following the hearse, with empty saddle and boots facing backward in the stirrups. It was the same image that so stirred television audiences at John F. Kennedy’s funeral procession a century later.
The procession terminated at the Capitol, where another ornately rendered catafalque awaited the president’s coffin. After lying in state for two days, the body was transferred to a special Baltimore & Ohio railroad car for the first leg of the trip back to Springfield, for Stanton had finally acceded to the Illinoisans’ demands. Adding a final grace note of sadness, Lincoln’s coffin was accompanied by that of his young son, Willie, whom he had ad
ored, and who had died, probably of pneumonia, in 1862. Willie’s little metal coffin was removed from its crypt in Washington and encased in a finer walnut container to rest with his father’s in Springfield.
On the Brink
A stop-action frame of the United States at Lincoln’s death would have caught the mourning nation frozen for the moment in mid-leap, aimed headlong into modernity. The route chosen for Lincoln’s last trip home—up the East Coast to New York, then westward along the Great Lakes to the Midwest and Springfield—itself traced a kind of fault line through the stresses of a society moving rapidly away from its preindustrial roots, roughly tracking the shape of a new American commercial geography.
Most notably, because it was by railroad, the trip took just days, instead of the weeks or months it would have consumed not many years before. The locomotives appear small and quaint today, with their big inverted-bell smokestacks and wood-burning fireboxes. But when they jumped across the Alleghenies in the 1850s, the nation shrank radically; for the first time, the urban East Coast was joined in a single national system with the farmlands and resources of the “Northwest”—the name still used for the states and territories between the original northern colonies and the eastern banks of the Mississippi.
A dozen cities along the route hosted formal funeral ceremonies, all of them vying in the rococo excesses of the catafalques, the funeral orations, and the strutting ranks of portly men in costumes and plumes. The first stop after Washington was Baltimore. Both essentially were the same cities as before the war—the capital, disgracefully enough, a malarial mudhole, although now with an array of almost-finished Greek revival buildings, while Baltimore, a thriving mercantile port, was bloated and bilious from its fat-rich diet of wartime trading.