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Epitaph For The Steel Master
Who dies rich, dies disgraced, said Andrew Carnegie. An economist re-examines his brash career in the light of that noble philosophy
August 1960 | Volume 11, Issue 5
Investments now began to play an increasingly important role in Carnegie’s career. Through his railroad contacts he came to recogni/e the possibilities in manufacturing the heavy equipment needed by the rapidly expanding lines, and soon he was instrumental in organizing companies to meet these needs. One of them, the Keystone Bridge Company, was the first successful manufacturer of iron railway bridges. Another, the Pittsburgh Locomotive Works, made engines. And most important of all, an interest in a local iron works run by an irascible German named Andrew Kloman brought Carnegie into actual contact with the manufacture of iron itself.
None of these new ventures required any substantial outlay of cash. His interest in the Keystone Bridge Company, for instance, which was to earn him $15,000 in 1868, came to him “in return for services rendered in its promotion"—services which Carnegie, as a young railroad executive, was then in a highly strategic position to deliver. Similarly the interest in the Kloman works reflected no contribution on Carnegie’s part except that of being the human catalyst and buffer between some highly excitable participants.
By 1865 his “side” activities had become so important that he decided to leave the Pennsylvania Railroad. He was by then superintendent, Scott having moved up to a vice presidency, but his salary of $2,400 was already vastly overshadowed by his income from various ventures. One purchase alone—the Storey farm in Pennsylvania oil country, which Carnegie and a lew associates picked up for $40,000—was eventually to pay the group a million dollars in dividends in one year. About this time a friend dropped in on Carnegie and asked him how he was doing. “Oh, I’m rich, I’m rich!” he exclaimed.
He was indeed embarked on the road to riches, and determined, as he later wrote in his Autobiography , that “nothing could be allowed to interfere for a moment with my business career.” Hence it comes as a surprise to note that it was at this very point that Carnegie retired to his suite to write his curiously introspective and troubled thoughts about the pursuit of wealth. But the momentum of events was to prove far too strong for these moralistic doubts. Moving his headquarters to New York to promote his various interests, he soon found himself swept along by a succession of irresistible opportunities for money-making. One of these took place quite by chance. Carnegie was trying to sell the Woodruff sleeping car at the same time that a formidable rival named George Pullman was also seeking to land contracts for his sleeping car, and the railroads were naturally taking advantage of the competitive situation. One summer evening in 1869 Carnegie found himself mounting the resplendent marble stairway of the St. Nicholas Hotel side by side with his competitor.
“Good evening, Mr. Pullman,” said Carnegie in his ebullient manner. Pullman was barely cordial.
“How strange we should meet here,” Carnegie went on, to which the other replied nothing at all.
“Mr. Pullman,” said Carnegie, after an embarrassing pause, “don’t you think we are making nice fools of ourselves?” At this Pullman evinced a glimmer of interest: “What do you mean?” he inquired. Carnegie quickly pointed out that competition between the two companies was helping no one but the railroads. “Well,” said Pullman, “what do you suggest we do?”
“Unitel” said Carnegie. “Let’s make a joint proposition to the Union Pacific, your company and mine. Why not organize a new company to do it?” “What would you call it?” asked Pullman suspiciously. “The Pullman Palace Car Company,” said Carnegie and with this shrewd psychological stroke won his point. A new company was formed, and in time Carnegie became its largest stockholder.
Meanwhile, events pushed Carnegie into yet another lucrative field. To finance the proliferating railway systems of America, British capital was badly needed, and with his Scottish ancestry, his verve, and his excellent railroad connections Carnegie was the natural choice for a go-between. His brief case stuffed with bonds and prospectuses, Carnegie became a transatlantic commuter, soon developing intimate relations both with great bankers like Junius Morgan (the father of J. P. Morgan), and with the heads of most of the great American roads. These trips earned him not only large commissions—exceeding on occasion $100,000 for a single turn—but even more important, established connections that were later to be of immense value. He himself later testified candidly on their benefits before a group of respectfully awed senators: For instance, I want a great contract for rails. Sidney Dillon of the Union Pacific was a personal friend of mine. Huntington was a friend. Dear Butler Duncan, that called on me the other day, was a friend. Those and other men were presidents of railroads … Take Huntington; you know C. P. Huntington. He was hard up very often. He was a great man, but he had a great deal of paper out. I knew his things were good. When he wanted credit I gave it to him. If you help a man that way, what chance has any paid agent going to these men? It was absurd.
But his trips to England brought Carnegie something still more valuable. They gave him steel. It is fair to say that as late as 1872 Carnegie did not see the future that awaited him as the Steel King of the world. The still modest conglomeration of foundries and mills he was gradually assembling in the Allegheny and Monongahela valleys was but one of many business interests, and not one for which he envisioned any extraordinary future. Indeed, to repeated pleas that he lead the way in developing a steel industry for America by substituting steel for iron rails, his reply was succinct: “Pioneering don’t pay.”