- Historic Sites
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
What made him change his mind? The story goes that he was awe-struck by the volcanic, spectacular eruption of a Bessemer converter, which he saw for the first time during a visit to a British mill. It was precisely the sort of display that would have appealed to Carnegie’s mind—a wild, demonic, physical process miraculously contained and controlled by the dwarfed figures of the steel men themselves. At any rate, overnight Carnegie became the perfervid prophet of steel. Jumping on the first available steamer, he rushed home with the cry, “The day of iron has passed!” To the consternation of his colleagues, the hitherto reluctant pioneer became an advocate of the most daring technological and business expansion; he joined them enthusiastically in forming Carnegie, McCandless & Company, which was the nucleus of the empire that the next thirty years would bring forth.
The actual process of growth involved every aspect of successful business enterprise of the times: acquisition and merger, pools and commercial piracy, and even, on one occasion, an outright fraud in selling the United States government overpriced and underdone steel armor plate. But it would be as foolish to maintain that the Carnegie empire grew by trickery as to deny that sharp practice had its place. Essentially what lay behind the spectacular expansion were three facts.
The first of these was the sheer economic expansion of the industry in the first days of burgeoning steel use. Everywhere steel replaced iron or found new uses —and not only in railroads but in ships, buildings, bridges, machinery of all sorts. As Henry Frick himself once remarked, if the Carnegie group had not filled the need for steel another would have. But it must be admitted that Carnegie’s company did its job superlatively well. In 1885 Great Britain led the world in the production of steel. Fourteen years later her total output was 695,000 tons less than the output of the Carnegie Steel Company alone.
Second was the brilliant assemblage of personal talent with which Carnegie surrounded himself. Among them, three in particular stood out. One was Captain William Jones, a Homeric figure who lumbered through the glowing fires and clanging machinery of the works like a kind of Paul Bunyan of steel, skilled at handling men, inventive in handling equipment, and enough of a natural artist to produce papers for the British Iron and Steel Institute that earned him a literary as well as a technical reputation. Then there was Henry Frick, himself a self-made millionaire, whose coke empire naturally complemented Carnegie’s steelworks. When the two were amalgamated, Frick took over the active management of the whole, and under his forceful hand the annual output of the Carnegie works rose tenfold. Yet another was Charles Schwab, who came out of the tiny monastic town of Loretto, Pennsylvania, to take a job as a stake driver. Six months later he had been promoted by Jones into the assistant managership of the Braddock plant.
These men, and a score like them, constituted the vital energy of the Carnegie works. As Carnegie himself said, “Take away all our money, our great works, ore mines and coke ovens, but leave our organization, and in four years I shall have re-established myself.”
But the third factor in the growth of the empire was Carnegie himself. A master salesman and a skilled diplomat of business at its highest levels, Carnegie was also a ruthless driver of his men. He pitted his associates and subordinates in competition with one another until a feverish atmosphere pervaded the whole organization. “You cannot imagine the abounding sense of freedom and relief I experience as soon as I get on board a steamer and sail past Sandy Hook,” he once said to Captain Jones. “My God!” replied Jones. “Think of the relief to us!”
But Carnegie could win loyalties as well. All his promising young men were given gratis ownership participations—minuscule fractions of one per cent, which were enough, however, to make them millionaires in their own right. Deeply grateful to Jones, Carnegie once offered him a similar participation. Jones hemmed and hawed and finally refused; he would be unable to work effectively with the men, he said, once he was a partner. Carnegie insisted that his contribution be recognized and asked Jones what he wanted. “Well,” said the latter, “you might pay me a hell of a big salary.” “We’ll do it!” said Carnegie. “From this time forth you shall receive the same salary as the President of the United States.” “Ah, Andy, that’s the kind of talk,” said Captain Bill.
Within three decades, on the flood tide of economic expansion, propelled by brilliant executive work and relentless pressure from Carnegie, the company made
immense strides. “Such a magnificent aggregation of industrial power has never before been under the domination of a single man,” reported a biographer in 1902, describing the Gargantuan structure of steel and coke and ore and transport. Had the writer known of the profits earned by this aggregation he might have been even more impressed: three and a half million dollars in 1889, seven million in 1897, twenty-one million in 1899, and an immense forty million in 1900. “Where is there such a business!” Carnegie had exulted, and no wonder—the majority share of all these earnings, without hindrance of income tax, went directly into his pockets.