By the end of 1885 he had formulated a plan to buy into the Carnegie interests, a move that he intended to finance by selling off most of his remaining stock in H. C. Frick Coke. Though it would leave him with a mere 4 percent of the company that bore his name, Frick was as resolute about his entry into steel as Carnegie had been some fifteen years earlier.
Henry Phipps, a childhood friend of the Carnegies’ and a partner since the days of Cyclops Iron, encouraged Frick, but the Carnegies were more resistant. When he heard of Frick’s plans, Tom Carnegie wrote back a less than enthusiastic note: “In the matter of your prospective interest with CB [Carnegie Brothers] and Co. I cannot help but think that you should become a manager. . . . I wish you to reconsider and submit the matter to AC—good bye—I’m off to Florida—nothing can trouble me further for months, Yours TMC.”
“AC” was even more pointed in his response. In late February 1886 he composed a lengthy letter to Frick that began by saying, “[I]n my opinion you propose what would be the mistake of your life. Your career must be identified with the Frick Coke Co. You never could become the Creator of CB and Co. Twenty years from now you might be a large owner in it, perhaps be the principal, still the concern would not be your work and you could not be proud of it.”
Carnegie carried on at some length in this scolding tone: “I cannot imagine how your pride permitted you to think for one moment of sinking to an insignificant holder of 4 percent in your own Creation. To think that you could ever be influential in its councils with such a petty interest is absurd. You would merely be the agent of the real men in the concern. . . . The idea is suicidal.”
He urged Frick to set his sights instead on reacquiring control of his own company and concluded with a reprise of his own advice to himself from the eggs-and-basket days: “I believe you will make more millions by concentrating than by scattering. . . . I never could advise you to divide your thoughts and time between concerns when your own field was fully open before you. Go and possess it or sink into merited insignificance.”
It was hardly the response that Frick had hoped for, and the prospect of being dictated to by “real men” whose virility was measured by the size of their holdings must have stung. But whether as a result of dispassionate calculation or pure intuition or some combination of both, Frick was determined to find a way into steel.
There is, it should be noted, a school of thought among historians which posits that the notion of genius is misguided, that the emergence of a Vanderbilt or a Carnegie or a Rockefeller onto the world stage is a kind of accident. In 1950, the historian Thomas C. Cochran published a paper urging the adoption of a new form of “entrepreneurial history” that would focus not on the anecdotal and unique qualities of individual business leaders, but upon the cultural and social structures that produced such men.
In this view, had Rockefeller inadvertently stepped into the path of a train as he scurried about northern Pennsylvania tying up oil leases, forces greater than the will of any single individual would have given rise to a replacement, with the result that skaters might today circle endlessly about an ice rink in Someotherperson Center. Similarly, had the Black Death in Europe claimed the right (or wrong) ancestor, the world might be celebrating the plays of Smithy rather than Shakespeare.
Part of Cochran’s aim was to discredit the nineteenth-century myth of rags-to-riches achievement. In truth, the vast majority of men who rose to prominence in the iron and steel industry were white, Anglo-Saxon Protestants whose parents were of the upper class or the upper middle class, whose families had lived in the United States since well before the Civil War, and whose fathers and grandfathers had been involved directly or indirectly in the iron business from its earliest days. According to a study undertaken by industry historian John N. Ingham (The Iron Barons: A Social Analysis of an American Urban Elite), only 12 percent of iron and steel manufacturers were born outside the United States. According to Ingham, all of 1 percent of manufacturers had fathers who had been unskilled workmen in the iron and steel trades before them.
The figures are interesting to the modern eye, of course, and Cochran’s is an intriguing notion, inviting any number of fanciful scenarios. But such thinking undervalues individual brilliance and achievement, and the statistics actually make the accomplishment of such men as Frick and Flagler and Carnegie all the more impressive. As the late cable TV programming pioneer Peter Barton put it in his memoir, Not Fade Away, “Ninety-nine percent of people in business just move preexisting pieces around the board. Entrepreneurs create. If they are very good at what they do . . . they may leave behind something that will continue after they’re gone.”
In his Giants of Enterprise (2002), Harvard Business School professor Richard S. Tedlow expands on this view. There was nothing inevitable about the accomplishments of men such as Carnegie, Tedlow says. “No theory of institutions which does not take account of the talent, genius, idiosyncrasy, and, at times, idiocy of the individual leader can explain how American came to do best what it does best.”
Tedlow argues that had men such as Carnegie and Frick been born in Italy at a certain time in history, they might have become composers. Had they been Russians, they might have been novelists. If born Portuguese, they might have become navigators. But, born in a country that has excelled in the production of entrepreneurs, that was what they became.
For whatever reason, Henry Clay Frick made it his business to make steel his business, and not even such stinging rebukes as those he received from one of the most powerful tycoons of the day could dissuade him. For the moment, however, there was little he could do but bide his time.
NO ONE WHO LIVED in the 1880s could be deceived concerning the frailty of human existence, not even those who enjoyed the fullest bounty of a “Gilded Age.” Fully 215 of every thousand children born did not survive the first year of life. At the turn of the twenty-first century, in contrast, the infant mortality rate was 7.7 per thousand. A person born in 1880 might have expected to live all of forty years. Today the average life expectancy stands at seventy-six.
Actuarial statistics of the Frick and Carnegie era dictated that one in four children would not survive to celebrate an eighteenth birthday, and deadly epidemics of cholera, yellow fever, typhoid fever, and influenza were a part of everyday life. As recently as 1866, a cholera outbreak claimed the lives of nearly 1,200 New York City residents, and physicians of the 1880s were divided on the question of whether the still highly suspect “germ theory” explained the transmission of disease, or whether those who succumbed were simply genetically, psychologically, or spiritually predisposed to fall ill and die.
In any case, most cities still lacked piped water, processes of chlorination, and sanitary sewers; and the development of sulfa drugs, penicillin, and antibiotics was still a half-century away. Even as the United States prepared to take command of the industrialized world, the prospect of serious illness and death was a constant threat to the rich as well as the poor.
Henry Frick had himself contracted scarlet fever as a boy and later suffered an attack of rheumatic fever. The effects of the diseases would haunt him all his life, making him prone to stress-related flare-ups of rheumatoid arthritis that rendered him helpless for days or weeks at a time.
Nor were the Carnegies immune to ill health. In the fall of 1886, Andrew Carnegie fell ill with typhoid. As he lay gravely ill at his Cresson, Pennsylvania, summer home, where it was hoped that the cool, clean air of the Alleghenies would assist his recovery, his brother, Tom, hard at work in Pittsburgh, was stricken with pneumonia.
An alarmed Henry Phipps contacted fellow partner John Walker to express his fears that both would die. Walker, the no-nonsense emissary who had once dictated terms to Henry Frick, observed that while the notoriously hard-drinking Tom Carnegie might have a tough go of it, it would take more than typhoid to finish off the abstemious and iron-willed Andrew, even if the older brother was over fifty at the time.
Walker’s prophecy proved correct on b
oth counts. Andrew Carnegie would survive. But his beloved brother Tom died, on October 19, just five days after he fell ill.
While Henry Phipps was pressed into service as chairman of Carnegie Brothers, everyone understood that it was a stopgap arrangement. Phipps was a lifelong and loyal friend to the Carnegies and was the possessor of a keen financial mind. But he had neither the will nor the temperament of a leader.
Managers within the ranks were already consulting Henry Frick on pressing issues of purchasing, and on November 1, 1886, a still-grieving Andrew Carnegie offered Frick the opportunity he had coveted for so long, and at terms Frick could scarcely have hoped for: Frick would receive $100,000 of Carnegie Brothers stock for the sum of $184,000, all of it payable upon receipt of future dividends.
While the death of his brother (and principal firm manager) had been a severe blow, Carnegie saw advantages in promoting Frick to fill the void at Carnegie Brothers. Tom had always exhibited a ready grasp of the complexities of the steelmaking business, and he had been a well-respected manager. But to hard-charging Andrew Carnegie, his brother had sometimes proven to be a bit reluctant and risk-averse as a competitor and entrepreneur. There would be no such timidity with Frick, of that much Carnegie was certain, and if it meant allowing Frick his wish to buy into the company, it was a small price to pay. It had taken the death of Tom Carnegie to accomplish it, but Henry Frick was now a partner in steel.
7
A ROCK AND A HARD PLACE
THE SERIOUS ILLNESS THAT HAD BEFALLEN Andrew Carnegie and the death of his friend Tom Carnegie had not only saddened but jolted principal partner and company chairman Henry Phipps. To ensure that the company would never again face the prospect of collapse or takeover owing to the death of its founder, Phipps convinced Carnegie that they should prepare the first of what became known as the “Iron Clad Agreements.”
As Phipps pointed out, though Tom Carnegie’s holdings in the company were sizable (about 17 percent), Andrew had the wherewithal to absorb most of his brother’s interests and reach a settlement with his brother’s widow to pay for them over time. But had it been Andrew Carnegie who died, his majority interests in the Carnegie companies would have required immediate liquidation of the entire enterprise, thereby ensuring bankruptcy for the company.
The Iron Clad Agreement that Phipps devised functioned as a safety net, ensuring that the company had ample time to arrange for the purchase of a deceased partner’s shares, at book value. The period varied according to the size of the interest held, from four months to acquire holdings of 4 percent or less to fifteen years in the case of Carnegie’s vast holdings.
It sounded reasonable, especially in the light of recent events. But a closer look at the terms of the agreement revealed that Phipps and Carnegie had taken advantage of the situation to leverage greater control over the company’s fortunes. The agreement included a provision that required any partner, dead or living, to sell his interest upon a vote of three-quarters of the other parties and interests in the firm. As a result, though he himself would never be subject to such provisions, Carnegie could easily marshal the forces necessary to squeeze out any partner who became troublesome.
It is doubtful that either Phipps or Carnegie was prompted to draft the clause by the entrance of Frick into the firm, though one day it would seem so. Moreover, there is no record of Frick objecting to the terms; like the other partners, he signed the agreement, thus indissolubly wedding his fortunes to Carnegie’s.
If Carnegie had envisioned a long and blissful honeymoon with the new partner he had hailed as a management genius, his hopes were soon dashed. Over the course of the 1880s, steel had become increasingly important within the allied metals industry, and the demand for coke had risen to unprecedented levels. The situation was good for coke producers, obviously, but it placed a strain on steel manufacturers to maintain a steady supply of coke at a reasonable price. The situation also emboldened laborers in the coke fields, who began to sense the increasing leverage they held in demanding a fair wage.
In addition, railroading had returned from the recession of the late 1870s with a vengeance. The year 1886 would prove to be a record setter, with rail production reaching 120 percent of any previous year’s output. At the same time, men who saw owners profiting at record levels were being forced to work in the coke regions at rates agreed upon in 1884. Old grievances concerning the mandated use of company stores and traditional accusations that the company was shorting men on the weights of coal and coke they produced also resurfaced.
Nor were Carnegie’s works safe from labor agitation. In late 1885, recognizing that his own workers would become restless once they learned of the record $3 million in profits accrued by his firm, Carnegie sought to forestall trouble by issuing a blanket 10-percent raise. But for the more skilled and experienced workers it was not enough. They were also restless for a return to the eight-hour shifts that had been rescinded during a business downturn.
When the furnace men began to organize, Captain Jones, with his employer’s blessing, launched a preemptive move of his own, dismissing seven hundred skilled operators and calling in strikebreakers or “scabs” to replace them. The actions so outraged the rank and file that a general walkout began, bringing a complete halt to production. By April, Jones and Carnegie were forced to give in to the demands of the striking workers, and the men went back to their jobs, the eight-hour shifts restored.
Labor unrest was not confined to the arena of steel. Everywhere new immigrants were gaining perspective on their place in the scheme of things and demanding a say in their working conditions as well as a share in the soaring profits enjoyed by owners. In March 1886, New York City horse-car drivers and conductors went on strike to demand, among other things, that their workday be reduced from sixteen to twelve hours. When scabs were brought in to replace them, riots broke out, bringing transport within the city to a halt.
On May 4, a rally in support of the growing call for a nationally mandated eight-hour work shift was called in Chicago’s Haymarket Square, galvanized by an ongoing strike by workers at the nearby McCormick Harvesting Machine Company. On the previous day, police had fired into a group of protesting strikers, killing four. The May 4 rally was one of several organized by labor and anarchist groups in Chicago, and elsewhere, to protest the killings.
Though about thirteen hundred showed up at Haymarket Square, many left when it began to rain. Only three hundred or so die-hards remained when a squadron of two hundred or so policemen descended on the square, demanding that the assembly disperse. As angry shouts flew back and forth and nightsticks began to flail, a bomb exploded in the midst of a knot of policemen. One died instantly, and seven more would succumb to their wounds. Panicked officers began to fire indiscriminately at anyone who moved. Eight people in the crowd were killed, and another hundred were wounded, as many of them officers as protestors.
The Haymarket Riot spurred a nationwide wave of fear, much of it directed at recent immigrants, who formed the majority of unskilled labor’s rank and file. Though the person who’d thrown the bomb was never identified, eight anarchists were charged, and seven received death sentences, further inflaming passions on both sides of the issues.
When unrest threatened to spill over to the immigrant-heavy workforce in the coal and coke fields of Pennsylvania, Carnegie, whose own unskilled labor force included a sizable contingent of the newly arrived, dashed off an overheated note to Frick: “I agree that these foreigners must learn they can’t quit work and riot in this free country.”
It was quite an about-face for a man who, in response to the growing labor difficulties of the day, had just published a pair of hotly debated articles in Forum, the recently minted New York “magazine of controversy.” In the first, published in April 1886, Carnegie traced what he called the “triumphal march” of labor’s three-hundred-year struggle against capital, and observed that a contemporary laborer stood on equal terms with his employer and enjoyed the “dignity of an independen
t contractor.”
He concluded with a statement that infuriated any number of his fellow capitalists: “The right of the working-men to combine and to form trades-unions is no less sacred than the right of the manufacturer to enter into associations and conferences with his fellows.”
Those who had witnessed Carnegie’s unsuccessful efforts to lock out his furnace tenders at the Edgar Thomson works in 1885 must have wondered if the author of the Forum article was truly the same man. If he saw the contradiction, however, Carnegie did not let it deter him. After all, this was the same year that would see the publication of his most popular volume (he would publish eight books in all), Triumphant Democracy.
With the help of James Bridge, who polished and extended Carnegie’s pithy if sometimes overly telegraphic prose, Carnegie had delivered to Charles Scribner’s Sons a five-hundred-plus-page paean to the superiority of the American system, where, in his eyes, democracy and capitalist enterprise were entwined in a fashion far more productive than—as well as morally superior to—the workings of the British and European monarchies. He boasted that America’s workingmen were of a much more refined class than their British counterparts, living a lifestyle where “wife-beating is scarcely ever heard of, and drunkenness is quite rare.”
And in an equally ingenuous tone, he proclaimed that his adopted nation maintained no imperialist armies, but “spends her money for better ends and has nothing worthy to rank as a ship of war.” If he had any notion that within a few months he would approve the building of a specialty mill within the Homestead works devoted to the production of ships’ armor, Carnegie was not admitting to it in Triumphant Democracy. Whatever its factual and logical shortcomings, the book’s unfailing optimism proved popular both at home and abroad. Even workingmen found the book easy to come by, for a number of labor organizations underwrote sizable purchases of the volume for distribution among the ranks.
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