While visiting the Continent of Europe in 1867 and deeply interested in what I saw, it must not be thought that my mind was not upon affairs at home. Frequent letters kept me advised of business matters. The question of railway communication with the Pacific had been brought to the front by the Civil War, and Congress had passed an act to encourage the construction of a line. The first sod had just been cut at Omaha and it was intended that the line should ultimately be pushed through to San Francisco. One day while in Rome it struck me that this might be done much sooner than was then anticipated. The nation, having made up its mind that its territory must be bound together, might be trusted to see that no time was lost in accomplishing it. I wrote my friend Mr. Scott, suggesting that we should obtain the contract to place sleeping-cars upon the great California line. His reply contained these words:
"Well, young man, you do take time by the forelock."
Nevertheless, upon my return to America. I pursued the idea. The sleeping-car business, in which I was interested, had gone on increasing so rapidly that it was impossible to obtain cars enough to supply the demand. This very fact led to the forming of the present Pullman Company. The Central Transportation Company was simply unable to cover the territory with sufficient rapidity, and Mr. Pullman beginning at the greatest of all railway centers in the world—Chicago—soon rivaled the parent concern. He had also seen that the Pacific Railroad would be the great sleeping-car line of the world, and I found him working for what I had started after. He was, indeed, a lion in the path. Again, one may learn, from an incident which I had from Mr. Pullman himself, by what trifles important matters are sometimes determined.
The president of the Union Pacific Railway was passing through Chicago. Mr. Pullman called upon him and was shown into his room. Lying upon the table was a telegram addressed to Mr. Scott, saying, "Your proposition for sleeping-cars is accepted." Mr. Pullman read this involuntarily and before he had time to refrain. He could not help seeing it where it lay. When President Durrant entered the room he explained this to him and said:
"I trust you will not decide this matter until I have made a proposition to you."
Mr. Durrant promised to wait. A meeting of the board of directors of the Union Pacific Company was held soon after this in New York. Mr. Pullman and myself were in attendance, both striving to obtain the prize which neither he nor I undervalued. One evening we began to mount the broad staircase in the St. Nicholas Hotel at the same time. We had met before, but were not well acquainted. I said, however, as we walked up the stairs:
"Good-evening, Mr. Pullman! Here we are together, and are we not making a nice couple of fools of ourselves?" He was not disposed to admit anything and said:
"What do you mean?"
I explained the situation to him. We were destroying by our rival propositions the very advantages we desired to obtain.
"Well," he said, "what do you propose to do about it?"
"Unite," I said. "Make a joint proposition to the Union Pacific, your party and mine, and organize a company."
"What would you call it?" he asked.
"The Pullman Palace Car Company," I replied.
This suited him exactly; and it suited me equally well.
"Come into my room and talk it over," said the great sleeping-car man.
I did so, and the result was that we obtained the contract jointly. Our company was subsequently merged in the general Pullman Company and we took stock in that company for our Pacific interests. Until compelled to sell my shares during the subsequent financial panic of 1873 to protect our iron and steel interests, I was, I believe, the largest shareholder in the Pullman Company.
This man Pullman and his career are so thoroughly American that a few words about him will not be out of place. Mr. Pullman was at first a working carpenter, but when Chicago had to be elevated he took a contract on his own account to move or elevate houses for a stipulated sum. Of course he was successful, and from this small beginning he became one of the principal and best-known contractors in that line. If a great hotel was to be raised ten feet without disturbing its hundreds of guests or interfering in any way with its business, Mr. Pullman was the man. He was one of those rare characters who can see the drift of things, and was always to be found, so to speak, swimming in the main current where movement was the fastest. He soon saw, as I did, that the sleeping-car was a positive necessity upon the American continent. He began to construct a few cars at Chicago and to obtain contracts upon the lines centering there.
The Eastern concern was in no condition to cope with that of an extraordinary man like Mr. Pullman. I soon recognized this, and although the original patents were with the Eastern company and Mr. Woodruff himself, the original patentee, was a large shareholder, and although we might have obtained damages for infringement of patent after some years of litigation, yet the time lost before this could be done would have been sufficient to make Pullman's the great company of the country. I therefore earnestly advocated that we should unite with Mr. Pullman, as I had united with him before in the Union Pacific contract. As the personal relations between Mr. Pullman and some members of the Eastern company were unsatisfactory, it was deemed best that I should undertake the negotiations, being upon friendly footing with both parties. We soon agreed that the Pullman Company should absorb our company, the Central Transportation Company, and by this means Mr. Pullman, instead of being confined to the West, obtained control of the rights on the great Pennsylvania trunk line to the Atlantic seaboard. This placed his company beyond all possible rivals. Mr. Pullman was one of the ablest men of affairs I have ever known, and I am indebted to him, among other things, for one story which carried a moral.
Mr. Pullman, like every other man, had his difficulties and disappointments, and did not hit the mark every time. No one does. Indeed, I do not know any one but himself who could have surmounted the difficulties surrounding the business of running sleeping-cars in a satisfactory manner and still retained some rights which the railway companies were bound to respect. Railway companies should, of course, operate their own sleeping-cars. On one occasion when we were comparing notes he told me that he always found comfort in this story. An old man in a Western county having suffered from all the ills that flesh is heir to, and a great many more than it usually encounters, and being commiserated by his neighbors, replied:
"Yes, my friends, all that you say is true. I have had a long, long life full of troubles, but there is one curious fact about them—nine tenths of them never happened."
True indeed; most of the troubles of humanity are imaginary and should be laughed out of court. It is folly to cross a bridge until you come to it, or to bid the Devil good-morning until you meet him—perfect folly. All is well until the stroke falls, and even then nine times out of ten it is not so bad as anticipated. A wise man is the confirmed optimist.
Success in these various negotiations had brought me into some notice in New York, and my next large operation was in connection with the Union Pacific Railway in 1871. One of its directors came to me saying that they must raise in some way a sum of six hundred thousand dollars (equal to many millions to-day) to carry them through a crisis; and some friends who knew me and were on the executive committee of that road had suggested that I might be able to obtain the money and at the same time get for the Pennsylvania Railroad Company virtual control of that important Western line. I believe Mr. Pullman came with the director, or perhaps it was Mr. Pullman himself who first came to me on the subject.
I took up the matter, and it occurred to me that if the directors of the Union Pacific Railway would be willing to elect to its board of directors a few such men as the Pennsylvania Railroad would nominate, the traffic to be thus obtained for the Pennsylvania would justify that company in helping the Union Pacific. I went to Philadelphia and laid the subject before President Thomson. I suggested that if the Pennsylvania Railroad Company would trust me with securities upon which the Union Pacific could borrow money in New York, we could control the Union Pacific in the interests of the Pennsylvania. Among many marks of Mr. Thomson's confidence this was up to that time the greatest. He was much more conservative when handling the money of the railroad company than his own, but the prize offered was too great to be missed. Even if the six hundred thousand dollars had been lost, it would not have been a losing investment for his company, and there was little danger of this because we were ready to hand over to him the securities which we obtained in return for the loan to the Union Pacific.
My interview with Mr. Thomson took place at his house in Philadelphia, and as I rose to go he laid his hand upon my shoulder, saying:
"Remember, Andy, I look to you in this matter. It is you I trust, and I depend on your holding all the securities you obtain and seeing that the Pennsylvania Railroad is never in a position where it can lose a dollar."
I accepted the responsibility, and the result was a triumphant success. The Union Pacific Company was exceedingly anxious that Mr. Thomson himself should take the presidency, but this he said was out of the question. He nominated Mr. Thomas A. Scott, vice-president of the Pennsylvania Railroad, for the position. Mr. Scott, Mr. Pullman, and myself were accordingly elected directors of the Union Pacific Railway Company in 1871.
The securities obtained for the loan consisted of three millions of the shares of the Union Pacific, which were locked in my safe, with the option of taking them at a price. As was to be expected, the accession of the Pennsylvania Railroad party rendered the stock of the Union Pacific infinitely more valuable. The shares advanced enormously. At this time I undertook to negotiate bonds in London for a bridge to cross the Missouri at Omaha, and while I was absent upon this business Mr. Scott decided to sell our Union Pacific shares. I had left instructions with my secretary that Mr. Scott, as one of the partners in the venture, should have access to the vault, as it might be necessary in my absence that the securities should be within reach of some one; but the idea that these should be sold, or that our party should lose the splendid position we had acquired in connection with the Union Pacific, never entered my brain.
I returned to find that, instead of being a trusted colleague of the Union Pacific directors, I was regarded as having used them for speculative purposes. No quartet of men ever had a finer opportunity for identifying themselves with a great work than we had; and never was an opportunity more recklessly thrown away. Mr. Pullman was ignorant of the matter and as indignant as myself, and I believe that he at once re-invested his profits in the shares of the Union Pacific. I felt that much as I wished to do this and to repudiate what had been done, it would be unbecoming and perhaps ungrateful in me to separate myself so distinctly from my first of friends, Mr. Scott.
At the first opportunity we were ignominiously but deservedly expelled from the Union Pacific board. It was a bitter dose for a young man to swallow. And the transaction marked my first serious difference with a man who up to that time had the greatest influence with me, the kind and affectionate employer of my boyhood, Thomas A. Scott. Mr. Thomson regretted the matter, but, as he said, having paid no attention to it and having left the whole control of it in the hands of Mr. Scott and myself, he presumed that I had thought best to sell out. For a time I feared I had lost a valued friend in Levi P. Morton, of Morton, Bliss & Co., who was interested in Union Pacific, but at last he found out that I was innocent.
The negotiations concerning two and a half millions of bonds for the construction of the Omaha Bridge were successful, and as these bonds had been purchased by persons connected with the Union Pacific before I had anything to do with the company, it was for them and not for the Union Pacific Company that the negotiations were conducted. This was not explained to me by the director who talked with me before I left for London. Unfortunately, when I returned to New York I found that the entire proceeds of the bonds, including my profit, had been appropriated by the parties to pay their own debts, and I was thus beaten out of a handsome sum, and had to credit to profit and loss my expenses and time. I had never before been cheated and found it out so positively and so clearly. I saw that I was still young and had a good deal to learn. Many men can be trusted, but a few need watching.
Complete success attended a negotiation which I conducted about this time for Colonel William Phillips, president of the Allegheny Valley Railway at Pittsburgh. One day the Colonel entered my New York office and told me that he needed money badly, but that he could get no house in America to entertain the idea of purchasing five millions of bonds of his company although they were to be guaranteed by the Pennsylvania Railroad Company. The old gentleman felt sure that he was being driven from pillar to post by the bankers because they had agreed among themselves to purchase the bonds only upon their own terms. He asked ninety cents on the dollar for them, but this the bankers considered preposterously high. Those were the days when Western railway bonds were often sold to the bankers at eighty cents on the dollar.
Colonel Phillips said he had come to see whether I could not suggest some way out of his difficulty. He had pressing need for two hundred and fifty thousand dollars, and this Mr. Thomson, of the Pennsylvania Railroad, could not give him. The Allegheny bonds were seven per cents, but they were payable, not in gold, but in currency, in America. They were therefore wholly unsuited for the foreign market. But I knew that the Pennsylvania Railroad Company had a large amount of Philadelphia and Erie Railroad six per cent gold bonds in its treasury. It would be a most desirable exchange on its part, I thought, to give these bonds for the seven per cent Allegheny bonds which bore its guarantee.
I telegraphed Mr. Thomson, asking if the Pennsylvania Railroad Company would take two hundred and fifty thousand dollars at interest and lend it to the Allegheny Railway Company. Mr. Thomson replied, "Certainly." Colonel Phillips was happy. He agreed, in consideration of my services, to give me a sixty-days option to take his five millions of bonds at the desired ninety cents on the dollar. I laid the matter before Mr. Thomson and suggested an exchange, which that company was only too glad to make, as it saved one per cent interest on the bonds. I sailed at once for London with the control of five millions of first mortgage Philadelphia and Erie Bonds, guaranteed by the Pennsylvania Railroad Company—a magnificent security for which I wanted a high price. And here comes in one of the greatest of the hits and misses of my financial life.
I wrote the Barings from Queenstown that I had for sale a security which even their house might unhesitatingly consider. On my arrival in London I found at the hotel a note from them requesting me to call. I did so the next morning, and before I had left their banking house I had closed an agreement by which they were to bring out this loan, and that until they sold the bonds at par, less their two and a half per cent commission, they would advance the Pennsylvania Railroad Company four millions of dollars at five per cent interest. The sale left me a clear profit of more than half a million dollars.
The papers were ordered to be drawn up, but as I was leaving Mr. Russell Sturgis said they had just heard that Mr. Baring himself was coming up to town in the morning. They had arranged to hold a "court," and as it would be fitting to lay the transaction before him as a matter of courtesy they would postpone the signing of the papers until the morrow. If I would call at two o'clock the transaction would be closed.
Never shall I forget the oppressed feeling which overcame me as I stepped out and proceeded to the telegraph office to wire President Thomson. Something told me that I ought not to do so. I would wait till to-morrow when I had the contract in my pocket. I walked from the banking house to the Langham Hotel—four long miles. When I reached there I found a messenger waiting breathless to hand me a sealed note from the Barings. Bismarck had locked up a hundred millions in Magdeburg. The financial world was panic-stricken, and the Barings begged to say that under the circumstances they could not propose to Mr. Baring to go on with the matter. There was as much chance that I should be struck by lightning on my way home as that an arrangement agreed to by the Barings should be broken. And yet it was. It was too great a blow to produce anything like irritation or indignation. I was meek enough to be quite resigned, and merely congratulated myself that I had not telegraphed Mr. Thomson.
I decided not to return to the Barings, and although J.S. Morgan & Co. had been bringing out a great many American securities I subsequently sold the bonds to them at a reduced price as compared with that agreed to by the Barings. I thought it best not to go to Morgan & Co. at first, because I had understood from Colonel Phillips that the bonds had been unsuccessfully offered by him to their house in America and I supposed that the Morgans in London might consider themselves connected with the negotiations through their house in New York. But in all subsequent negotiations I made it a rule to give the first offer to Junius S. Morgan, who seldom permitted me to leave his banking house without taking what I had to offer. If he could not buy for his own house, he placed me in communication with a friendly house that did, he taking an interest in the issue. It is a great satisfaction to reflect that I never negotiated a security which did not to the end command a premium. Of course in this case I made a mistake in not returning to the Barings, giving them time and letting the panic subside, which it soon did. When one party to a bargain becomes excited, the other should keep cool and patient.
As an incident of my financial operations I remember saying to Mr. Morgan one day:
"Mr. Morgan, I will give you an idea and help you to carry it forward if you will give me one quarter of all the money you make by acting upon it."
He laughingly said: "That seems fair, and as I have the option to act upon it, or not, certainly we ought to be willing to pay you a quarter of the profit."
I called attention to the fact that the Allegheny Valley Railway bonds which I had exchanged for the Philadelphia and Erie bonds bore the guarantee of the Pennsylvania Railroad Company, and that that great company was always in need of money for essential extensions. A price might be offered for these bonds which might tempt the company to sell them, and that at the moment there appeared to be such a demand for American securities that no doubt they could be floated. I would write a prospectus which I thought would float the bonds. After examining the matter with his usual care he decided that he would act upon my suggestion.
Mr. Thomson was then in Paris and I ran over there to see him. Knowing that the Pennsylvania Railroad had need for money I told him that I had recommended these securities to Mr. Morgan and if he would give me a price for them I would see if I could not sell them. He named a price which was then very high, but less than the price which these bonds have since reached. Mr. Morgan purchased part of them with the right to buy others, and in this way the whole nine or ten millions of Allegheny bonds were marketed and the Pennsylvania Railroad Company placed in funds.
The sale of the bonds had not gone very far when the panic of 1873 was upon us. One of the sources of revenue which I then had was Mr. Pierpont Morgan. He said to me one day:
"My father has cabled to ask whether you wish to sell out your interest in that idea you gave him."
I said: "Yes, I do. In these days I will sell anything for money."
"Well," he said, "what would you take?"
I said I believed that a statement recently rendered to me showed that there were already fifty thousand dollars to my credit, and I would take sixty thousand. Next morning when I called Mr. Morgan handed me checks for seventy thousand dollars.
"Mr. Carnegie," he said, "you were mistaken. You sold out for ten thousand dollars less than the statement showed to your credit. It now shows not fifty but sixty thousand to your credit, and the additional ten makes seventy."
The payments were in two checks, one for sixty thousand dollars and the other for the additional ten thousand. I handed him back the ten-thousand-dollar check, saying:
"Well, that is something worthy of you. Will you please accept these ten thousand with my best wishes?"
"No, thank you," he said, "I cannot do that."
Such acts, showing a nice sense of honorable understanding as against mere legal rights, are not so uncommon in business as the uninitiated might believe. And, after that, it is not to be wondered at if I determined that so far as lay in my power neither Morgan, father or son, nor their house, should suffer through me. They had in me henceforth a firm friend.
A great business is seldom if ever built up, except on lines of the strictest integrity. A reputation for "cuteness" and sharp dealing is fatal in great affairs. Not the letter of the law, but the spirit, must be the rule. The standard of commercial morality is now very high. A mistake made by any one in favor of the firm is corrected as promptly as if the error were in favor of the other party. It is essential to permanent success that a house should obtain a reputation for being governed by what is fair rather than what is merely legal. A rule which we adopted and adhered to has given greater returns than one would believe possible, namely: always give the other party the benefit of the doubt. This, of course, does not apply to the speculative class. An entirely different atmosphere pervades that world. Men are only gamblers there. Stock gambling and honorable business are incompatible. In recent years it must be admitted that the old-fashioned "banker," like Junius S. Morgan of London, has become rare.
Soon after being deposed as president of the Union Pacific, Mr. Scott resolved upon the construction of the Texas Pacific Railway. He telegraphed me one day in New York to meet him at Philadelphia without fail. I met him there with several other friends, among them Mr. J.N. McCullough, vice-president of the Pennsylvania Railroad Company at Pittsburgh. A large loan for the Texas Pacific had fallen due in London and its renewal was agreed to by Morgan & Co., provided I would join the other parties to the loan. I declined. I was then asked whether I would bring them all to ruin by refusing to stand by my friends. It was one of the most trying moments of my whole life. Yet I was not tempted for a moment to entertain the idea of involving myself. The question of what was my duty came first and prevented that. All my capital was in manufacturing and every dollar of it was required. I was the capitalist (then a modest one, indeed) of our concern. All depended upon me. My brother with his wife and family, Mr. Phipps and his family, Mr. Kloman and his family, all rose up before me and claimed protection.
[Footnote 31: Colonel Thomas A. Scott left the Union Pacific in 1872. The same year he became president of the Texas Pacific, and in 1874 president of the Pennsylvania.]
I told Mr. Scott that I had done my best to prevent him from beginning to construct a great railway before he had secured the necessary capital. I had insisted that thousands of miles of railway lines could not be constructed by means of temporary loans. Besides, I had paid two hundred and fifty thousand dollars cash for an interest in it, which he told me upon my return from Europe he had reserved for me, although I had never approved the scheme. But nothing in the world would ever induce me to be guilty of endorsing the paper of that construction company or of any other concern than our own firm.
I knew that it would be impossible for me to pay the Morgan loan in sixty days, or even to pay my proportion of it. Besides, it was not that loan by itself, but the half-dozen other loans that would be required thereafter that had to be considered. This marked another step in the total business separation which had to come between Mr. Scott and myself. It gave more pain than all the financial trials to which I had been subjected up to that time.
It was not long after this meeting that the disaster came and the country was startled by the failure of those whom it had regarded as its strongest men. I fear Mr. Scott's premature death can measurably be attributed to the humiliation which he had to bear. He was a sensitive rather than a proud man, and his seemingly impending failure cut him to the quick. Mr. McManus and Mr. Baird, partners in the enterprise, also soon passed away. These two men were manufacturers like myself and in no position to engage in railway construction.
[Footnote 32: Died May 21, 1881.]
The business man has no rock more dangerous to encounter in his career than this very one of endorsing commercial paper. It can easily be avoided if he asks himself two questions: Have I surplus means for all possible requirements which will enable me to pay without inconvenience the utmost sum for which I am liable under this endorsement? Secondly: Am I willing to lose this sum for the friend for whom I endorse? If these two questions can be answered in the affirmative he may be permitted to oblige his friend, but not otherwise, if he be a wise man. And if he can answer the first question in the affirmative it will be well for him to consider whether it would not be better then and there to pay the entire sum for which his name is asked. I am sure it would be. A man's means are a trust to be sacredly held for his own creditors as long as he has debts and obligations.
Notwithstanding my refusal to endorse the Morgan renewal, I was invited to accompany the parties to New York next morning in their special car for the purpose of consultation. This I was only too glad to do. Anthony Drexel was also called in to accompany us. During the journey Mr. McCullough remarked that he had been looking around the car and had made up his mind that there was only one sensible man in it; the rest had all been "fools." Here was "Andy" who had paid for his shares and did not owe a dollar or have any responsibility in the matter, and that was the position they all ought to have been in.
Mr. Drexel said he would like me to explain how I had been able to steer clear of these unfortunate troubles. I answered: by strict adherence to what I believed to be my duty never to put my name to anything which I knew I could not pay at maturity; or, to recall the familiar saying of a Western friend, never to go in where you couldn't wade. This water was altogether too deep for me.
Regard for this rule has kept not only myself but my partners out of trouble. Indeed, we had gone so far in our partnership agreement as to prevent ourselves from endorsing or committing ourselves in any way beyond trifling sums, except for the firm. This I also gave as a reason why I could not endorse.
During the period which these events cover I had made repeated journeys to Europe to negotiate various securities, and in all I sold some thirty millions of dollars worth. This was at a time when the Atlantic cable had not yet made New York a part of London financially considered, and when London bankers would lend their balances to Paris, Vienna, or Berlin for a shadow of difference in the rate of interest rather than to the United States at a higher rate. The Republic was considered less safe than the Continent by these good people. My brother and Mr. Phipps conducted the iron business so successfully that I could leave for weeks at a time without anxiety. There was danger lest I should drift away from the manufacturing to the financial and banking business. My successes abroad brought me tempting opportunities, but my preference was always for manufacturing. I wished to make something tangible and sell it and I continued to invest my profits in extending the works at Pittsburgh.
The small shops put up originally for the Keystone Bridge Company had been leased for other purposes and ten acres of ground had been secured in Lawrenceville on which new and extensive shops were erected. Repeated additions to the Union Iron Mills had made them the leading mills in the United States for all sorts of structural shapes. Business was promising and all the surplus earnings I was making in other fields were required to expand the iron business. I had become interested, with my friends of the Pennsylvania Railroad Company, in building some railways in the Western States, but gradually withdrew from all such enterprises and made up my mind to go entirely contrary to the adage not to put all one's eggs in one basket. I determined that the proper policy was "to put all good eggs in one basket and then watch that basket."
I believe the true road to preeminent success in any line is to make yourself master in that line. I have no faith in the policy of scattering one's resources, and in my experience I have rarely if ever met a man who achieved preeminence in money-making—certainly never one in manufacturing—who was interested in many concerns. The men who have succeeded are men who have chosen one line and stuck to it. It is surprising how few men appreciate the enormous dividends derivable from investment in their own business. There is scarcely a manufacturer in the world who has not in his works some machinery that should be thrown out and replaced by improved appliances; or who does not for the want of additional machinery or new methods lose more than sufficient to pay the largest dividend obtainable by investment beyond his own domain. And yet most business men whom I have known invest in bank shares and in far-away enterprises, while the true gold mine lies right in their own factories.
I have tried always to hold fast to this important fact. It has been with me a cardinal doctrine that I could manage my own capital better than any other person, much better than any board of directors. The losses men encounter during a business life which seriously embarrass them are rarely in their own business, but in enterprises of which the investor is not master. My advice to young men would be not only to concentrate their whole time and attention on the one business in life in which they engage, but to put every dollar of their capital into it. If there be any business that will not bear extension, the true policy is to invest the surplus in first-class securities which will yield a moderate but certain revenue if some other growing business cannot be found. As for myself my decision was taken early. I would concentrate upon the manufacture of iron and steel and be master in that.
My visits to Britain gave me excellent opportunities to renew and make acquaintance with those prominent in the iron and steel business—Bessemer in the front, Sir Lothian Bell, Sir Bernard Samuelson, Sir Windsor Richards, Edward Martin, Bingley, Evans, and the whole host of captains in that industry. My election to the council, and finally to the presidency of the British Iron and Steel Institute soon followed, I being the first president who was not a British subject. That honor was highly appreciated, although at first declined, because I feared that I could not give sufficient time to its duties, owing to my residence in America.
As we had been compelled to engage in the manufacture of wrought-iron in order to make bridges and other structures, so now we thought it desirable to manufacture our own pig iron. And this led to the erection of the Lucy Furnace in the year 1870—a venture which would have been postponed had we fully appreciated its magnitude. We heard from time to time the ominous predictions made by our older brethren in the manufacturing business with regard to the rapid growth and extension of our young concern, but we were not deterred. We thought we had sufficient capital and credit to justify the building of one blast furnace.
The estimates made of its cost, however, did not cover more than half the expenditure. It was an experiment with us. Mr. Kloman knew nothing about blast-furnace operations. But even without exact knowledge no serious blunder was made. The yield of the Lucy Furnace (named after my bright sister-in-law) exceeded our most sanguine expectations and the then unprecedented output of a hundred tons per day was made from one blast furnace, for one week—an output that the world had never heard of before. We held the record and many visitors came to marvel at the marvel.
It was not, however, all smooth sailing with our iron business. Years of panic came at intervals. We had passed safely through the fall in values following the war, when iron from nine cents per pound dropped to three. Many failures occurred and our financial manager had his time fully occupied in providing funds to meet emergencies. Among many wrecks our firm stood with credit unimpaired. But the manufacture of pig iron gave us more anxiety than any other department of our business so far. The greatest service rendered us in this branch of manufacturing was by Mr. Whitwell, of the celebrated Whitwell Brothers of England, whose blast-furnace stoves were so generally used. Mr. Whitwell was one of the best-known of the visitors who came to marvel at the Lucy Furnace, and I laid the difficulty we then were experiencing before him. He said immediately:
"That comes from the angle of the bell being wrong."
He explained how it should be changed. Our Mr. Kloman was slow to believe this, but I urged that a small glass-model furnace and two bells be made, one as the Lucy was and the other as Mr. Whitwell advised it should be. This was done, and upon my next visit experiments were made with each, the result being just as Mr. Whitwell had foretold. Our bell distributed the large pieces to the sides of the furnace, leaving the center a dense mass through which the blast could only partially penetrate. The Whitwell bell threw the pieces to the center leaving the circumference dense. This made all the difference in the world. The Lucy's troubles were over.
What a kind, big, broad man was Mr. Whitwell, with no narrow jealousy, no withholding his knowledge! We had in some departments learned new things and were able to be of service to his firm in return. At all events, after that everything we had was open to the Whitwells. [To-day, as I write, I rejoice that one of the two still is with us and that our friendship is still warm. He was my predecessor in the presidency of the British Iron and Steel Institute.]
THE AGE OF STEEL
Looking back to-day it seems incredible that only forty years ago (1870) chemistry in the United States was an almost unknown agent in connection with the manufacture of pig iron. It was the agency, above all others, most needful in the manufacture of iron and steel. The blast-furnace manager of that day was usually a rude bully, generally a foreigner, who in addition to his other acquirements was able to knock down a man now and then as a lesson to the other unruly spirits under him. He was supposed to diagnose the condition of the furnace by instinct, to possess some almost supernatural power of divination, like his congener in the country districts who was reputed to be able to locate an oil well or water supply by means of a hazel rod. He was a veritable quack doctor who applied whatever remedies occurred to him for the troubles of his patient.
The Lucy Furnace was out of one trouble and into another, owing to the great variety of ores, limestone, and coke which were then supplied with little or no regard to their component parts. This state of affairs became intolerable to us. We finally decided to dispense with the rule-of-thumb-and-intuition manager, and to place a young man in charge of the furnace. We had a young shipping clerk, Henry M. Curry, who had distinguished himself, and it was resolved to make him manager.
Mr. Phipps had the Lucy Furnace under his special charge. His daily visits to it saved us from failure there. Not that the furnace was not doing as well as other furnaces in the West as to money-making, but being so much larger than other furnaces its variations entailed much more serious results. I am afraid my partner had something to answer for in his Sunday morning visits to the Lucy Furnace when his good father and sister left the house for more devotional duties. But even if he had gone with them his real earnest prayer could not but have had reference at times to the precarious condition of the Lucy Furnace then absorbing his thoughts.
The next step taken was to find a chemist as Mr. Curry's assistant and guide. We found the man in a learned German, Dr. Fricke, and great secrets did the doctor open up to us. Iron stone from mines that had a high reputation was now found to contain ten, fifteen, and even twenty per cent less iron than it had been credited with. Mines that hitherto had a poor reputation we found to be now yielding superior ore. The good was bad and the bad was good, and everything was topsy-turvy. Nine tenths of all the uncertainties of pig-iron making were dispelled under the burning sun of chemical knowledge.
At a most critical period when it was necessary for the credit of the firm that the blast furnace should make its best product, it had been stopped because an exceedingly rich and pure ore had been substituted for an inferior ore—an ore which did not yield more than two thirds of the quantity of iron of the other. The furnace had met with disaster because too much lime had been used to flux this exceptionally pure ironstone. The very superiority of the materials had involved us in serious losses.
What fools we had been! But then there was this consolation: we were not as great fools as our competitors. It was years after we had taken chemistry to guide us that it was said by the proprietors of some other furnaces that they could not afford to employ a chemist. Had they known the truth then, they would have known that they could not afford to be without one. Looking back it seems pardonable to record that we were the first to employ a chemist at blast furnaces—something our competitors pronounced extravagant.
The Lucy Furnace became the most profitable branch of our business, because we had almost the entire monopoly of scientific management. Having discovered the secret, it was not long (1872) before we decided to erect an additional furnace. This was done with great economy as compared with our first experiment. The mines which had no reputation and the products of which many firms would not permit to be used in their blast furnaces found a purchaser in us. Those mines which were able to obtain an enormous price for their products, owing to a reputation for quality, we quietly ignored. A curious illustration of this was the celebrated Pilot Knob mine in Missouri. Its product was, so to speak, under a cloud. A small portion of it only could be used, it was said, without obstructing the furnace. Chemistry told us that it was low in phosphorus, but very high in silicon. There was no better ore and scarcely any as rich, if it were properly fluxed. We therefore bought heavily of this and received the thanks of the proprietors for rendering their property valuable.
It is hardly believable that for several years we were able to dispose of the highly phosphoric cinder from the puddling furnaces at a higher price than we had to pay for the pure cinder from the heating furnaces of our competitors—a cinder which was richer in iron than the puddled cinder and much freer from phosphorus. Upon some occasion a blast furnace had attempted to smelt the flue cinder, and from its greater purity the furnace did not work well with a mixture intended for an impurer article; hence for years it was thrown over the banks of the river at Pittsburgh by our competitors as worthless. In some cases we were even able to exchange a poor article for a good one and obtain a bonus.
But it is still more unbelievable that a prejudice, equally unfounded, existed against putting into the blast furnaces the roll-scale from the mills which was pure oxide of iron. This reminds me of my dear friend and fellow-Dunfermline townsman, Mr. Chisholm, of Cleveland. We had many pranks together. One day, when I was visiting his works at Cleveland, I saw men wheeling this valuable roll-scale into the yard. I asked Mr. Chisholm where they were going with it, and he said:
"To throw it over the bank. Our managers have always complained that they had bad luck when they attempted to remelt it in the blast furnace."
I said nothing, but upon my return to Pittsburgh I set about having a joke at his expense. We had then a young man in our service named Du Puy, whose father was known as the inventor of a direct process in iron-making with which he was then experimenting in Pittsburgh. I recommended our people to send Du Puy to Cleveland to contract for all the roll-scale of my friend's establishment. He did so, buying it for fifty cents per ton and having it shipped to him direct. This continued for some time. I expected always to hear of the joke being discovered. The premature death of Mr. Chisholm occurred before I could apprise him of it. His successors soon, however, followed our example.
I had not failed to notice the growth of the Bessemer process. If this proved successful I knew that iron was destined to give place to steel; that the Iron Age would pass away and the Steel Age take its place. My friend, John A. Wright, president of the Freedom Iron Works at Lewiston, Pennsylvania, had visited England purposely to investigate the new process. He was one of our best and most experienced manufacturers, and his decision was so strongly in its favor that he induced his company to erect Bessemer works. He was quite right, but just a little in advance of his time. The capital required was greater than he estimated. More than this, it was not to be expected that a process which was even then in somewhat of an experimental stage in Britain could be transplanted to the new country and operated successfully from the start. The experiment was certain to be long and costly, and for this my friend had not made sufficient allowance.
At a later date, when the process had become established in England, capitalists began to erect the present Pennsylvania Steel Works at Harrisburg. These also had to pass through an experimental stage and at a critical moment would probably have been wrecked but for the timely assistance of the Pennsylvania Railroad Company. It required a broad and able man like President Thomson, of the Pennsylvania Railroad, to recommend to his board of directors that so large a sum as six hundred thousand dollars should be advanced to a manufacturing concern on his road, that steel rails might be secured for the line. The result fully justified his action.
The question of a substitute for iron rails upon the Pennsylvania Railroad and other leading lines had become a very serious one. Upon certain curves at Pittsburgh, on the road connecting the Pennsylvania with the Fort Wayne, I had seen new iron rails placed every six weeks or two months. Before the Bessemer process was known I had called President Thomson's attention to the efforts of Mr. Dodds in England, who had carbonized the heads of iron rails with good results. I went to England and obtained control of the Dodds patents and recommended President Thomson to appropriate twenty thousand dollars for experiments at Pittsburgh, which he did. We built a furnace on our grounds at the upper mill and treated several hundred tons of rails for the Pennsylvania Railroad Company and with remarkably good results as compared with iron rails. These were the first hard-headed rails used in America. We placed them on some of the sharpest curves and their superior service far more than compensated for the advance made by Mr. Thomson. Had the Bessemer process not been successfully developed, I verily believe that we should ultimately have been able to improve the Dodds process sufficiently to make its adoption general. But there was nothing to be compared with the solid steel article which the Bessemer process produced.
Our friends of the Cambria Iron Company at Johnstown, near Pittsburgh—the principal manufacturers of rails in America—decided to erect a Bessemer plant. In England I had seen it demonstrated, at least to my satisfaction, that the process could be made a grand success without undue expenditure of capital or great risk. Mr. William Coleman, who was ever alive to new methods, arrived at the same conclusion. It was agreed we should enter upon the manufacture of steel rails at Pittsburgh. He became a partner and also my dear friend Mr. David McCandless, who had so kindly offered aid to my mother at my father's death. The latter was not forgotten. Mr. John Scott and Mr. David A. Stewart, and others joined me; Mr. Edgar Thomson and Mr. Thomas A. Scott, president and vice-president of the Pennsylvania Railroad, also became stockholders, anxious to encourage the development of steel. The steel-rail company was organized January 1, 1873.
The question of location was the first to engage our serious attention. I could not reconcile myself to any location that was proposed, and finally went to Pittsburgh to consult with my partners about it. The subject was constantly in my mind and in bed Sunday morning the site suddenly appeared to me. I rose and called to my brother:
"Tom, you and Mr. Coleman are right about the location; right at Braddock's, between the Pennsylvania, the Baltimore and Ohio, and the river, is the best situation in America; and let's call the works after our dear friend Edgar Thomson. Let us go over to Mr. Coleman's and drive out to Braddock's."
We did so that day, and the next morning Mr. Coleman was at work trying to secure the property. Mr. McKinney, the owner, had a high idea of the value of his farm. What we had expected to purchase for five or six hundred dollars an acre cost us two thousand. But since then we have been compelled to add to our original purchase at a cost of five thousand dollars per acre.
There, on the very field of Braddock's defeat, we began the erection of our steel-rail mills. In excavating for the foundations many relics of the battle were found—bayonets, swords, and the like. It was there that the then provost of Dunfermline, Sir Arthur Halkett, and his son were slain. How did they come to be there will very naturally be asked. It must not be forgotten that, in those days, the provosts of the cities of Britain were members of the aristocracy—the great men of the district who condescended to enjoy the honor of the position without performing the duties. No one in trade was considered good enough for the provostship. We have remnants of this aristocratic notion throughout Britain to-day. There is scarcely any life assurance or railway company, or in some cases manufacturing company but must have at its head, to enjoy the honors of the presidency, some titled person totally ignorant of the duties of the position. So it was that Sir Arthur Halkett, as a gentleman, was Provost of Dunfermline, but by calling he followed the profession of arms and was killed on this spot. It was a coincidence that what had been the field of death to two native-born citizens of Dunfermline should be turned into an industrial hive by two others.
Another curious fact has recently been discovered. Mr. John Morley's address, in 1904 on Founder's Day at the Carnegie Institute, Pittsburgh, referred to the capture of Fort Duquesne by General Forbes and his writing Prime Minister Pitt that he had rechristened it "Pittsburgh" for him. This General Forbes was then Laird of Pittencrieff and was born in the Glen which I purchased in 1902 and presented to Dunfermline for a public park. So that two Dunfermline men have been Lairds of Pittencrieff whose chief work was in Pittsburgh. One named Pittsburgh and the other labored for its development.
In naming the steel mills as we did the desire was to honor my friend Edgar Thomson, but when I asked permission to use his name his reply was significant. He said that as far as American steel rails were concerned, he did not feel that he wished to connect his name with them, for they had proved to be far from creditable. Uncertainty was, of course, inseparable from the experimental stage; but, when I assured him that it was now possible to make steel rails in America as good in every particular as the foreign article, and that we intended to obtain for our rails the reputation enjoyed by the Keystone bridges and the Kloman axles, he consented.
He was very anxious to have us purchase land upon the Pennsylvania Railroad, as his first thought was always for that company. This would have given the Pennsylvania a monopoly of our traffic. When he visited Pittsburgh a few months later and Mr. Robert Pitcairn, my successor as superintendent of the Pittsburgh Division of the Pennsylvania, pointed out to him the situation of the new works at Braddock's Station, which gave us not only a connection with his own line, but also with the rival Baltimore and Ohio line, and with a rival in one respect greater than either—the Ohio River—he said, with a twinkle of his eye to Robert, as Robert told me:
"Andy should have located his works a few miles farther east." But Mr. Thomson knew the good and sufficient reasons which determined the selection of the unrivaled site.
The works were well advanced when the financial panic of September, 1873, came upon us. I then entered upon the most anxious period of my business life. All was going well when one morning in our summer cottage, in the Allegheny Mountains at Cresson, a telegram came announcing the failure of Jay Cooke & Co. Almost every hour after brought news of some fresh disaster. House after house failed. The question every morning was which would go next. Every failure depleted the resources of other concerns. Loss after loss ensued, until a total paralysis of business set in. Every weak spot was discovered and houses that otherwise would have been strong were borne down largely because our country lacked a proper banking system.
We had not much reason to be anxious about our debts. Not what we had to pay of our own debts could give us much trouble, but rather what we might have to pay for our debtors. It was not our bills payable but our bills receivable which required attention, for we soon had to begin meeting both. Even our own banks had to beg us not to draw upon our balances. One incident will shed some light upon the currency situation. One of our pay-days was approaching. One hundred thousand dollars in small notes were absolutely necessary, and to obtain these we paid a premium of twenty-four hundred dollars in New York and had them expressed to Pittsburgh. It was impossible to borrow money, even upon the best collaterals; but by selling securities, which I had in reserve, considerable sums were realized—the company undertaking to replace them later.
It happened that some of the railway companies whose lines centered in Pittsburgh owed us large sums for material furnished—the Fort Wayne road being the largest debtor. I remember calling upon Mr. Thaw, the vice-president of the Fort Wayne, and telling him we must have our money. He replied:
"You ought to have your money, but we are not paying anything these days that is not protestable."
"Very good," I said, "your freight bills are in that category and we shall follow your excellent example. Now I am going to order that we do not pay you one dollar for freight."
"Well, if you do that," he said, "we will stop your freight."
I said we would risk that. The railway company could not proceed to that extremity. And as a matter of fact we ran for some time without paying the freight bills. It was simply impossible for the manufacturers of Pittsburgh to pay their accruing liabilities when their customers stopped payment. The banks were forced to renew maturing paper. They behaved splendidly to us, as they always have done, and we steered safely through. But in a critical period like this there was one thought uppermost with me, to gather more capital and keep it in our business so that come what would we should never again be called upon to endure such nights and days of racking anxiety.
Speaking for myself in this great crisis, I was at first the most excited and anxious of the partners. I could scarcely control myself. But when I finally saw the strength of our financial position I became philosophically cool and found myself quite prepared, if necessary, to enter the directors' rooms of the various banks with which we dealt, and lay our entire position before their boards. I felt that this could result in nothing discreditable to us. No one interested in our business had lived extravagantly. Our manner of life had been the very reverse of this. No money had been withdrawn from the business to build costly homes, and, above all, not one of us had made speculative ventures upon the stock exchange, or invested in any other enterprises than those connected with the main business. Neither had we exchanged endorsements with others. Besides this we could show a prosperous business that was making money every year.
I was thus enabled to laugh away the fears of my partners, but none of them rejoiced more than I did that the necessity for opening our lips to anybody about our finances did not arise. Mr. Coleman, good friend and true, with plentiful means and splendid credit, did not fail to volunteer to give us his endorsements. In this we stood alone; William Coleman's name, a tower of strength, was for us only. How the grand old man comes before me as I write. His patriotism knew no bounds. Once when visiting his mills, stopped for the Fourth of July, as they always were, he found a corps of men at work repairing the boilers. He called the manager to him and asked what this meant. He ordered all work suspended.
"Work on the Fourth of July!" he exclaimed, "when there's plenty of Sundays for repairs!" He was furious.
When the cyclone of 1873 struck us we at once began to reef sail in every quarter. Very reluctantly did we decide that the construction of the new steel works must cease for a time. Several prominent persons, who had invested in them, became unable to meet their payments and I was compelled to take over their interests, repaying the full cost to all. In that way control of the company came into my hands.
The first outburst of the storm had affected the financial world connected with the Stock Exchange. It was some time before it reached the commercial and manufacturing world. But the situation grew worse and worse and finally led to the crash which involved my friends in the Texas Pacific enterprise, of which I have already spoken. This was to me the severest blow of all. People could, with difficulty, believe that occupying such intimate relations as I did with the Texas group, I could by any possibility have kept myself clear of their financial obligations.
Mr. Schoenberger, president of the Exchange Bank at Pittsburgh, with which we conducted a large business, was in New York when the news reached him of the embarrassment of Mr. Scott and Mr. Thomson. He hastened to Pittsburgh, and at a meeting of his board next morning said it was simply impossible that I was not involved with them. He suggested that the bank should refuse to discount more of our bills receivable. He was alarmed to find that the amount of these bearing our endorsement and under discount, was so large. Prompt action on my part was necessary to prevent serious trouble. I took the first train for Pittsburgh, and was able to announce there to all concerned that, although I was a shareholder in the Texas enterprise, my interest was paid for. My name was not upon one dollar of their paper or of any other outstanding paper. I stood clear and clean without a financial obligation or property which I did not own and which was not fully paid for. My only obligations were those connected with our business; and I was prepared to pledge for it every dollar I owned, and to endorse every obligation the firm had outstanding.
Up to this time I had the reputation in business of being a bold, fearless, and perhaps a somewhat reckless young man. Our operations had been extensive, our growth rapid and, although still young, I had been handling millions. My own career was thought by the elderly ones of Pittsburgh to have been rather more brilliant than substantial. I know of an experienced one who declared that if "Andrew Carnegie's brains did not carry him through his luck would." But I think nothing could be farther from the truth than the estimate thus suggested. I am sure that any competent judge would be surprised to find how little I ever risked for myself or my partners. When I did big things, some large corporation like the Pennsylvania Railroad Company was behind me and the responsible party. My supply of Scotch caution never has been small; but I was apparently something of a dare-devil now and then to the manufacturing fathers of Pittsburgh. They were old and I was young, which made all the difference.
The fright which Pittsburgh financial institutions had with regard to myself and our enterprises rapidly gave place to perhaps somewhat unreasoning confidence. Our credit became unassailable, and thereafter in times of financial pressure the offerings of money to us increased rather than diminished, just as the deposits of the old Bank of Pittsburgh were never so great as when the deposits in other banks ran low. It was the only bank in America which redeemed its circulation in gold, disdaining to take refuge under the law and pay its obligations in greenbacks. It had few notes, and I doubt not the decision paid as an advertisement.
In addition to the embarrassment of my friends Mr. Scott, Mr. Thomson, and others, there came upon us later an even severer trial in the discovery that our partner, Mr. Andrew Kloman, had been led by a party of speculative people into the Escanaba Iron Company. He was assured that the concern was to be made a stock company, but before this was done his colleagues had succeeded in creating an enormous amount of liabilities—about seven hundred thousand dollars. There was nothing but bankruptcy as a means of reinstating Mr. Kloman.
This gave us more of a shock than all that had preceded, because Mr. Kloman, being a partner, had no right to invest in another iron company, or in any other company involving personal debt, without informing his partners. There is one imperative rule for men in business—no secrets from partners. Disregard of this rule involved not only Mr. Kloman himself, but our company, in peril, coming, as it did, atop of the difficulties of my Texas Pacific friends with whom I had been intimately associated. The question for a time was whether there was anything really sound. Where could we find bedrock upon which we could stand?
Had Mr. Kloman been a business man it would have been impossible ever to allow him to be a partner with us again after this discovery. He was not such, however, but the ablest of practical mechanics with some business ability. Mr. Kloman's ambition had been to be in the office, where he was worse than useless, rather than in the mill devising and running new machinery, where he was without a peer. We had some difficulty in placing him in his proper position and keeping him there, which may have led him to seek an outlet elsewhere. He was perhaps flattered by men who were well known in the community; and in this case he was led by persons who knew how to reach him by extolling his wonderful business abilities in addition to his mechanical genius—abilities which his own partners, as already suggested, but faintly recognized.
After Mr. Kloman had passed through the bankruptcy court and was again free, we offered him a ten per cent interest in our business, charging for it only the actual capital invested, with nothing whatever for good-will. This we were to carry for him until the profits paid for it. We were to charge interest only on the cost, and he was to assume no responsibility. The offer was accompanied by the condition that he should not enter into any other business or endorse for others, but give his whole time and attention to the mechanical and not the business management of the mills. Could he have been persuaded to accept this, he would have been a multimillionaire; but his pride, and more particularly that of his family, perhaps, would not permit this. He would go into business on his own account, and, notwithstanding the most urgent appeals on my part, and that of my colleagues, he persisted in the determination to start a new rival concern with his sons as business managers. The result was failure and premature death.
How foolish we are not to recognize what we are best fitted for and can perform, not only with ease but with pleasure, as masters of the craft. More than one able man I have known has persisted in blundering in an office when he had great talent for the mill, and has worn himself out, oppressed with cares and anxieties, his life a continual round of misery, and the result at last failure. I never regretted parting with any man so much as Mr. Kloman. His was a good heart, a great mechanical brain, and had he been left to himself I believe he would have been glad to remain with us. Offers of capital from others—offers which failed when needed—turned his head, and the great mechanic soon proved the poor man of affairs.
[Footnote 33: Long after the circumstances here recited, Mr. Isidor Straus called upon Mr. Henry Phipps and asked him if two statements which had been publicly made about Mr. Carnegie and his partners in the steel company were true. Mr. Phipps replied they were not. Then said Mr. Straus:
"Mr. Phipps, you owe it to yourself and also to Mr. Carnegie to say so publicly."
This Mr. Phipps did in the New York Herald, January 30, 1904, in the following handsome manner and without Mr. Carnegie's knowledge:
Question: "In a recent publication mention was made of Mr. Carnegie's not having treated Mr. Miller, Mr. Kloman, and yourself properly during your early partnership, and at its termination. Can you tell me anything about this?"
Answer: "Mr. Miller has already spoken for himself in this matter, and I can say that the treatment received from Mr. Carnegie during our partnership, so far as I was concerned, was always fair and liberal.
"My association with Mr. Kloman in business goes back forty-three years. Everything in connection with Mr. Carnegie's partnership with Mr. Kloman was of a pleasant nature.
"At a much more recent date, when the firm of Carnegie, Kloman and Company was formed, the partners were Andrew Carnegie, Thomas M. Carnegie, Andrew Kloman, and myself. The Carnegies held the controlling interest.
"After the partnership agreement was signed, Mr. Kloman said to me that the Carnegies, owning the larger interest, might be too enterprising in making improvements, which might lead us into serious trouble; and he thought that they should consent to an article in the partnership agreement requiring the consent of three partners to make effective any vote for improvements. I told him that we could not exact what he asked, as their larger interest assured them control, but I would speak to them. When the subject was broached, Mr. Carnegie promptly said that if he could not carry Mr. Kloman or myself with his brother in any improvements he would not wish them made. Other matters were arranged by courtesy during our partnership in the same manner."
Question: "What you have told me suggests the question, why did Mr. Kloman leave the firm?"
Answer: "During the great depression which followed the panic of 1873, Mr. Kloman, through an unfortunate partnership in the Escanaba Furnace Company, lost his means, and his interest in our firm had to be disposed of. We bought it at book value at a time when manufacturing properties were selling at ruinous prices, often as low as one third or one half their cost.
"After the settlement had been made with the creditors of the Escanaba Company, Mr. Kloman was offered an interest by Mr. Carnegie of $100,000 in our firm, to be paid only from future profits. This Mr. Kloman declined, as he did not feel like taking an interest which formerly had been much larger. Mr. Carnegie gave him $40,000 from the firm to make a new start. This amount was invested in a rival concern, which soon closed.
"I knew of no disagreement during this early period with Mr. Carnegie, and their relations continued pleasant as long as Mr. Kloman lived. Harmony always marked their intercourse, and they had the kindliest feeling one for the other."]
PARTNERS, BOOKS, AND TRAVEL
When Mr. Kloman had severed his connection with us there was no hesitation in placing William Borntraeger in charge of the mills. It has always been with especial pleasure that I have pointed to the career of William. He came direct from Germany—a young man who could not speak English, but being distantly connected with Mr. Kloman was employed in the mills, at first in a minor capacity. He promptly learned English and became a shipping clerk at six dollars per week. He had not a particle of mechanical knowledge, and yet such was his unflagging zeal and industry for the interests of his employer that he soon became marked for being everywhere about the mill, knowing everything, and attending to everything.
William was a character. He never got over his German idioms and his inverted English made his remarks very effective. Under his superintendence the Union Iron Mills became a most profitable branch of our business. He had overworked himself after a few years' application and we decided to give him a trip to Europe. He came to New York by way of Washington. When he called upon me in New York he expressed himself as more anxious to return to Pittsburgh than to revisit Germany. In ascending the Washington Monument he had seen the Carnegie beams in the stairway and also at other points in public buildings, and as he expressed it:
"It yust make me so broud dat I want to go right back and see dat everyting is going right at de mill."
Early hours in the morning and late in the dark hours at night William was in the mills. His life was there. He was among the first of the young men we admitted to partnership, and the poor German lad at his death was in receipt of an income, as I remember, of about $50,000 a year, every cent of which was deserved. Stories about him are many. At a dinner of our partners to celebrate the year's business, short speeches were in order from every one. William summed up his speech thus:
"What we haf to do, shentlemens, is to get brices up and costs down and efery man stand on his own bottom." There was loud, prolonged, and repeated laughter.
Captain Evans ("Fighting Bob") was at one time government inspector at our mills. He was a severe one. William was sorely troubled at times and finally offended the Captain, who complained of his behavior. We tried to get William to realize the importance of pleasing a government official. William's reply was:
"But he gomes in and smokes my cigars" (bold Captain! William reveled in one-cent Wheeling tobies) "and then he goes and contems my iron. What does you tinks of a man like dat? But I apologize and dreat him right to-morrow."
The Captain was assured William had agreed to make due amends, but he laughingly told us afterward that William's apology was:
"Vell, Captain, I hope you vas all right dis morning. I haf noting against you, Captain," holding out his hand, which the Captain finally took and all was well.
William once sold to our neighbor, the pioneer steel-maker of Pittsburgh, James Park, a large lot of old rails which we could not use. Mr. Park found them of a very bad quality. He made claims for damages and William was told that he must go with Mr. Phipps to meet Mr. Park and settle. Mr. Phipps went into Mr. Park's office, while William took a look around the works in search of the condemned material, which was nowhere to be seen. Well did William know where to look. He finally entered the office, and before Mr. Park had time to say a word William began:
"Mr. Park, I vas glad to hear dat de old rails what I sell you don't suit for steel. I will buy dem all from you back, five dollars ton profit for you." Well did William know that they had all been used. Mr. Park was non-plussed, and the affair ended. William had triumphed.
Upon one of my visits to Pittsburgh William told me he had something "particular" he wished to tell me—something he couldn't tell any one else. This was upon his return from the trip to Germany. There he had been asked to visit for a few days a former schoolfellow, who had risen to be a professor:
"Well, Mr. Carnegie, his sister who kept his house was very kind to me, and ven I got to Hamburg I tought I sent her yust a little present. She write me a letter, then I write her a letter. She write me and I write her, and den I ask her would she marry me. She was very educated, but she write yes. Den I ask her to come to New York, and I meet her dere, but, Mr. Carnegie, dem people don't know noting about business and de mills. Her bruder write me dey want me to go dere again and marry her in Chairmany, and I can go away not again from de mills. I tought I yust ask you aboud it."
"Of course you can go again. Quite right, William, you should go. I think the better of her people for feeling so. You go over at once and bring her home. I'll arrange it." Then, when parting, I said: "William, I suppose your sweetheart is a beautiful, tall, 'peaches-and-cream' kind of German young lady."
"Vell, Mr. Carnegie, she is a leetle stout. If I had the rolling of her I give her yust one more pass." All William's illustrations were founded on mill practice. [I find myself bursting into fits of laughter this morning (June, 1912) as I re-read this story. But I did this also when reading that "Every man must stand on his own bottom."]
Mr. Phipps had been head of the commercial department of the mills, but when our business was enlarged, he was required for the steel business. Another young man, William L. Abbott, took his place. Mr. Abbott's history is somewhat akin to Borntraeger's. He came to us as a clerk upon a small salary and was soon assigned to the front in charge of the business of the iron mills. He was no less successful than was William. He became a partner with an interest equal to William's, and finally was promoted to the presidency of the company.
Mr. Curry had distinguished himself by this time in his management of the Lucy Furnaces, and he took his place among the partners, sharing equally with the others. There is no way of making a business successful that can vie with the policy of promoting those who render exceptional service. We finally converted the firm of Carnegie, McCandless & Co. into the Edgar Thomson Steel Company, and included my brother and Mr. Phipps, both of whom had declined at first to go into the steel business with their too enterprising senior. But when I showed them the earnings for the first year and told them if they did not get into steel they would find themselves in the wrong boat, they both reconsidered and came with us. It was fortunate for them as for us.
My experience has been that no partnership of new men gathered promiscuously from various fields can prove a good working organization as at first constituted. Changes are required. Our Edgar Thomson Steel Company was no exception to this rule. Even before we began to make rails, Mr. Coleman became dissatisfied with the management of a railway official who had come to us with a great and deserved reputation for method and ability. I had, therefore, to take over Mr. Coleman's interest. It was not long, however, before we found that his judgment was correct. The new man had been a railway auditor, and was excellent in accounts, but it was unjust to expect him, or any other office man, to be able to step into manufacturing and be successful from the start. He had neither the knowledge nor the training for this new work. This does not mean that he was not a splendid auditor. It was our own blunder in expecting the impossible.
The mills were at last about ready to begin and an organization the auditor proposed was laid before me for approval. I found he had divided the works into two departments and had given control of one to Mr. Stevenson, a Scotsman who afterwards made a fine record as a manufacturer, and control of the other to a Mr. Jones. Nothing, I am certain, ever affected the success of the steel company more than the decision which I gave upon that proposal. Upon no account could two men be in the same works with equal authority. An army with two commanders-in-chief, a ship with two captains, could not fare more disastrously than a manufacturing concern with two men in command upon the same ground, even though in two different departments. I said:
"This will not do. I do not know Mr. Stevenson, nor do I know Mr. Jones, but one or the other must be made captain and he alone must report to you."
[Footnote 34: The steel-rail mills were ready and rails were rolled in 1874.]
The decision fell upon Mr. Jones and in this way we obtained "The Captain," who afterward made his name famous wherever the manufacture of Bessemer steel is known.
The Captain was then quite young, spare and active, bearing traces of his Welsh descent even in his stature, for he was quite short. He came to us as a two-dollar-a-day mechanic from the neighboring works at Johnstown. We soon saw that he was a character. Every movement told it. He had volunteered as a private during the Civil War and carried himself so finely that he became captain of a company which was never known to flinch. Much of the success of the Edgar Thomson Works belongs to this man.
In later years he declined an interest in the firm which would have made him a millionaire. I told him one day that some of the young men who had been given an interest were now making much more than he was and we had voted to make him a partner. This entailed no financial responsibility, as we always provided that the cost of the interest given was payable only out of profits.
"No," he said, "I don't want to have my thoughts running on business. I have enough trouble looking after these works. Just give me a h—l of a salary if you think I'm worth it."
"All right, Captain, the salary of the President of the United States is yours."
"That's the talk," said the little Welshman.
[Footnote 35: The story is told that when Mr. Carnegie was selecting his younger partners he one day sent for a young Scotsman, Alexander R. Peacock, and asked him rather abruptly:
"Peacock, what would you give to be made a millionaire?"
"A liberal discount for cash, sir," was the answer.
He was a partner owning a two per cent interest when the Carnegie Steel Company was merged into the United States Steel Corporation.]
Our competitors in steel were at first disposed to ignore us. Knowing the difficulties they had in starting their own steel works, they could not believe we would be ready to deliver rails for another year and declined to recognize us as competitors. The price of steel rails when we began was about seventy dollars per ton. We sent our agent through the country with instructions to take orders at the best prices he could obtain; and before our competitors knew it, we had obtained a large number—quite sufficient to justify us in making a start.
So perfect was the machinery, so admirable the plans, so skillful were the men selected by Captain Jones, and so great a manager was he himself, that our success was phenomenal. I think I place a unique statement on record when I say that the result of the first month's operations left a margin of profit of $11,000. It is also remarkable that so perfect was our system of accounts that we knew the exact amount of the profit. We had learned from experience in our iron works what exact accounting meant. There is nothing more profitable than clerks to check up each transfer of material from one department to another in process of manufacture.
The new venture in steel having started off so promisingly, I began to think of taking a holiday, and my long-cherished purpose of going around the world came to the front. Mr. J.W. Vandevort ("Vandy") and I accordingly set out in the autumn of 1878. I took with me several pads suitable for penciling and began to make a few notes day by day, not with any intention of publishing a book; but thinking, perhaps, I might print a few copies of my notes for private circulation. The sensation which one has when he first sees his remarks in the form of a printed book is great. When the package came from the printers I re-read the book trying to decide whether it was worth while to send copies to my friends. I came to the conclusion that upon the whole it was best to do so and await the verdict.
The writer of a book designed for his friends has no reason to anticipate an unkind reception, but there is always some danger of its being damned with faint praise. The responses in my case, however, exceeded expectations, and were of such a character as to satisfy me that the writers really had enjoyed the book, or meant at least a part of what they said about it. Every author is prone to believe sweet words. Among the first that came were in a letter from Anthony Drexel, Philadelphia's great banker, complaining that I had robbed him of several hours of sleep. Having begun the book he could not lay it down and retired at two o'clock in the morning after finishing. Several similar letters were received. I remember Mr. Huntington, president of the Central Pacific Railway, meeting me one morning and saying he was going to pay me a great compliment.
"What is it?" Tasked.
"Oh, I read your book from end to end."
"Well," I said, "that is not such a great compliment. Others of our mutual friends have done that."
"Oh, yes, but probably none of your friends are like me. I have not read a book for years except my ledger and I did not intend to read yours, but when I began it I could not lay it down. My ledger is the only book I have gone through for five years."
I was not disposed to credit all that my friends said, but others who had obtained the book from them were pleased with it and I lived for some months under intoxicating, but I trust not perilously pernicious, flattery. Several editions of the book were printed to meet the request for copies. Some notices of it and extracts got into the papers, and finally Charles Scribner's Sons asked to publish it for the market. So "Round the World" came before the public and I was at last "an author."
[Footnote 36: Round the World, by Andrew Carnegie. New York and London, 1884.]
A new horizon was opened up to me by this voyage. It quite changed my intellectual outlook. Spencer and Darwin were then high in the zenith, and I had become deeply interested in their work. I began to view the various phases of human life from the standpoint of the evolutionist. In China I read Confucius; in India, Buddha and the sacred books of the Hindoos; among the Parsees, in Bombay, I studied Zoroaster. The result of my journey was to bring a certain mental peace. Where there had been chaos there was now order. My mind was at rest. I had a philosophy at last. The words of Christ "The Kingdom of Heaven is within you," had a new meaning for me. Not in the past or in the future, but now and here is Heaven within us. All our duties lie in this world and in the present, and trying impatiently to peer into that which lies beyond is as vain as fruitless.
All the remnants of theology in which I had been born and bred, all the impressions that Swedenborg had made upon me, now ceased to influence me or to occupy my thoughts. I found that no nation had all the truth in the revelation it regards as divine, and no tribe is so low as to be left without some truth; that every people has had its great teacher; Buddha for one; Confucius for another; Zoroaster for a third; Christ for a fourth. The teachings of all these I found ethically akin so that I could say with Matthew Arnold, one I was so proud to call friend:
"Children of men! the unseen Power, whose eye For ever doth accompany mankind Hath looked on no religion scornfully That men did ever find.
Which has not taught weak wills how much they can? Which has not fall'n in the dry heart like rain? Which has not cried to sunk, self-weary man, Thou must be born again."
"The Light of Asia," by Edwin Arnold, came out at this time and gave me greater delight than any similar poetical work I had recently read. I had just been in India and the book took me there again. My appreciation of it reached the author's ears and later having made his acquaintance in London, he presented me with the original manuscript of the book. It is one of my most precious treasures. Every person who can, even at a sacrifice, make the voyage around the world should do so. All other travel compared to it seems incomplete, gives us merely vague impressions of parts of the whole. When the circle has been completed, you feel on your return that you have seen (of course only in the mass) all there is to be seen. The parts fit into one symmetrical whole and you see humanity wherever it is placed working out a destiny tending to one definite end.
The world traveler who gives careful study to the bibles of the various religions of the East will be well repaid. The conclusion reached will be that the inhabitants of each country consider their own religion the best of all. They rejoice that their lot has been cast where it is, and are disposed to pity the less fortunate condemned to live beyond their sacred limits. The masses of all nations are usually happy, each mass certain that:
"East or West Home is best."
Two illustrations of this from our "Round the World" trip may be noted:
Visiting the tapioca workers in the woods near Singapore, we found them busily engaged, the children running about stark naked, the parents clothed in the usual loose rags. Our party attracted great attention. We asked our guide to tell the people that we came from a country where the water in such a pond as that before us would become solid at this season of the year and we could walk upon it and that sometimes it would be so hard horses and wagons crossed wide rivers on the ice. They wondered and asked why we didn't come and live among them. They really were very happy.
On the way to the North Cape we visited a reindeer camp of the Laplanders. A sailor from the ship was deputed to go with the party. I walked homeward with him, and as we approached the fiord looking down and over to the opposite shore we saw a few straggling huts and one two-story house under construction. What is that new building for? we asked.
"That is to be the home of a man born in Tromso who has made a great deal of money and has now come back to spend his days there. He is very rich."
"You told me you had travelled all over the world. You have seen London, New York, Calcutta, Melbourne, and other places. If you made a fortune like that man what place would you make your home in old age?" His eye glistened as he said:
"Ah, there's no place like Tromso." This is in the arctic circle, six months of night, but he had been born in Tromso. Home, sweet, sweet home!
Among the conditions of life or the laws of nature, some of which seem to us faulty, some apparently unjust and merciless, there are many that amaze us by their beauty and sweetness. Love of home, regardless of its character or location, certainly is one of these. And what a pleasure it is to find that, instead of the Supreme Being confining revelation to one race or nation, every race has the message best adapted for it in its present stage of development. The Unknown Power has neglected none.
COACHING TRIP AND MARRIAGE
The Freedom of my native town (Dunfermline) was conferred upon me July 12, 1877, the first Freedom and the greatest honor I ever received. I was overwhelmed. Only two signatures upon the roll came between mine and Sir Walter Scott's, who had been made a Burgess. My parents had seen him one day sketching Dunfermline Abbey and often told me about his appearance. My speech in reply to the Freedom was the subject of much concern. I spoke to my Uncle Bailie Morrison, telling him I just felt like saying so and so, as this really was in my heart. He was an orator himself and he spoke words of wisdom to me then.
"Just say that, Andra; nothing like saying just what you really feel."
It was a lesson in public speaking which I took to heart. There is one rule I might suggest for youthful orators. When you stand up before an audience reflect that there are before you only men and women. You should speak to them as you speak to other men and women in daily intercourse. If you are not trying to be something different from yourself, there is no more occasion for embarrassment than if you were talking in your office to a party of your own people—none whatever. It is trying to be other than one's self that unmans one. Be your own natural self and go ahead. I once asked Colonel Ingersoll, the most effective public speaker I ever heard, to what he attributed his power. "Avoid elocutionists like snakes," he said, "and be yourself."
I spoke again at Dunfermline, July 27, 1881, when my mother laid the foundation stone there of the first free library building I ever gave. My father was one of five weavers who founded the earliest library in the town by opening their own books to their neighbors. Dunfermline named the building I gave "Carnegie Library." The architect asked for my coat of arms. I informed him I had none, but suggested that above the door there might be carved a rising sun shedding its rays with the motto: "Let there be light." This he adopted.
We had come up to Dunfermline with a coaching party. When walking through England in the year 1867 with George Lauder and Harry Phipps I had formed the idea of coaching from Brighton to Inverness with a party of my dearest friends. The time had come for the long-promised trip, and in the spring of 1881 we sailed from New York, a party of eleven, to enjoy one of the happiest excursions of my life. It was one of the holidays from business that kept me young and happy—worth all the medicine in the world.
All the notes I made of the coaching trip were a few lines a day in twopenny pass-books bought before we started. As with "Round the World," I thought that I might some day write a magazine article, or give some account of my excursion for those who accompanied me; but one wintry day I decided that it was scarcely worth while to go down to the New York office, three miles distant, and the question was how I should occupy the spare time. I thought of the coaching trip, and decided to write a few lines just to see how I should get on. The narrative flowed freely, and before the day was over I had written between three and four thousand words. I took up the pleasing task every stormy day when it was unnecessary for me to visit the office, and in exactly twenty sittings I had finished a book. I handed the notes to Scribner's people and asked them to print a few hundred copies for private circulation. The volume pleased my friends, as "Round the World" had done. Mr. Champlin one day told me that Mr. Scribner had read the book and would like very much to publish it for general circulation upon his own account, subject to a royalty.
The vain author is easily persuaded that what he has done is meritorious, and I consented. [Every year this still nets me a small sum in royalties. And thirty years have gone by, 1912.] The letters I received upon the publication of it were so numerous and some so gushing that my people saved them and they are now bound together in scrapbook form, to which additions are made from time to time. The number of invalids who have been pleased to write me, stating that the book had brightened their lives, has been gratifying. Its reception in Britain was cordial; the "Spectator" gave it a favorable review. But any merit that the book has comes, I am sure, from the total absence of effort on my part to make an impression. I wrote for my friends; and what one does easily, one does well. I reveled in the writing of the book, as I had in the journey itself.
[Footnote 37: Published privately in 1882 under the title Our Coaching Trip, Brighton to Inverness. Published by the Scribners in 1883 under the title of An American Four-in-Hand in Britain.]
The year 1886 ended in deep gloom for me. My life as a happy careless young man, with every want looked after, was over. I was left alone in the world. My mother and brother passed away in November, within a few days of each other, while I lay in bed under a severe attack of typhoid fever, unable to move and, perhaps fortunately, unable to feel the full weight of the catastrophe, being myself face to face with death.
I was the first stricken, upon returning from a visit in the East to our cottage at Cresson Springs on top of the Alleghanies where my mother and I spent our happy summers. I had been quite unwell for a day or two before leaving New York. A physician being summoned, my trouble was pronounced typhoid fever. Professor Dennis was called from New York and he corroborated the diagnosis. An attendant physician and trained nurse were provided at once. Soon after my mother broke down and my brother in Pittsburgh also was reported ill.
I was despaired of, I was so low, and then my whole nature seemed to change. I became reconciled, indulged in pleasing meditations, was without the slightest pain. My mother's and brother's serious condition had not been revealed to me, and when I was informed that both had left me forever it seemed only natural that I should follow them. We had never been separated; why should we be now? But it was decreed otherwise.
I recovered slowly and the future began to occupy my thoughts. There was only one ray of hope and comfort in it. Toward that my thoughts always turned. For several years I had known Miss Louise Whitfield. Her mother permitted her to ride with me in the Central Park. We were both very fond of riding. Other young ladies were on my list. I had fine horses and often rode in the Park and around New York with one or the other of the circle. In the end the others all faded into ordinary beings. Miss Whitfield remained alone as the perfect one beyond any I had met. Finally I began to find and admit to myself that she stood the supreme test I had applied to several fair ones in my time. She alone did so of all I had ever known. I could recommend young men to apply this test before offering themselves. If they can honestly believe the following lines, as I did, then all is well:
"Full many a lady I've eyed with best regard: for several virtues Have I liked several women, never any With so full soul, but some defect in her Did quarrel with the noblest grace she owed, And put it to the foil; but you, O you, So perfect and so peerless are created Of every creature's best."
[Footnote 38: Ferdinand to Miranda in The Tempest.]
In my soul I could echo those very words. To-day, after twenty years of life with her, if I could find stronger words I could truthfully use them.
My advances met with indifferent success. She was not without other and younger admirers. My wealth and future plans were against me. I was rich and had everything and she felt she could be of little use or benefit to me. Her ideal was to be the real helpmeet of a young, struggling man to whom she could and would be indispensable, as her mother had been to her father. The care of her own family had largely fallen upon her after her father's death when she was twenty-one. She was now twenty-eight; her views of life were formed. At times she seemed more favorable and we corresponded. Once, however, she returned my letters saying she felt she must put aside all thought of accepting me.