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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
Nevertheless, with enormous success came problems. One of these was the restiveness of certain partners, under the “Iron-Clad” agreement, which prevented any of them from selling their shares to anyone but the company itself—an arrangement which meant, of course, that the far higher valuation of an outside purchaser could not be realized. Particularly chagrined was Frick, when, as the culmination of other disagreements between them, Carnegie sought to buy him out “at the value appearing on the books.” Another problem was a looming competitive struggle in the steel industry itself that presaged a period of bitter industrial warfare ahead. And last was Carnegie’s own growing desire to “get out.”
Already he was spending half of each year abroad, first traveling, and then, after his late marriage, in residence in the great Skibo Castle he built for his wife on Dornoch Firth, Scotland. There he ran his business enterprises with one hand while he courted the literary and creative world with the other, entertaining Kipling and Matthew Arnold, Paderewski and Lloyd George, Woodrow Wilson and Theodore Roosevelt, Gladstone, and of course, Herbert Spencer, the Master. But even his career as “Laird” of Skibo could not remove him from the worries—and triumphs—of his business: a steady flow of cables and correspondence intruded on the “serious” side of life.
It was Schwab who cut the knot. Having risen to the very summit of the Carnegie concern he was invited in December, 1900, to give a speech on the future of the steel industry at the University Club in New York. There, before eighty of the nation’s top business leaders he painted a glowing picture of what could be done if a super-company of steel were formed, integrated from top to bottom, self-sufficient with regard to its raw materials, balanced in its array of final products. One of the guests was the imperious J. P. Morgan, and as the speech progressed it was noticed that his concentration grew more and more intense. After dinner Morgan rose and took the young steel man by the elbow and engaged him in private conversation for half an hour while he plied him with rapid and penetrating questions; then a few weeks later he invited him to a private meeting in the great library of his home. They talked from nine o’clock in the evening until dawn. As the sun began to stream in through the library windows, the banker finally rose. “Well,” he said to Schwab, “if Andy wants to sell, I’ll buy. Go and find his price.”
Carnegie at first did not wish to sjfill. Faced with the actual prospect of a withdrawal from the business he had built into the mightiest single industrial empire in the world, he was frightened and dismayed. He sat silent before Schwab’s report, brooding, loath to inquire into details. But soon his enthusiasm returned. No such opportunity was likely to present itself again. In short order a figure of $492,000,000 was agreed on for the entire enterprise, of which Carnegie himself was to receive $300,000,000 in five per cent gold bonds and preferred stock. Carnegie jotted down the terms of the transaction on a slip of paper and told Schwab to bring it to Morgan. The banker glanced only briefly at the paper. “I accept,” he said.
After the formalities were in due course completed, Carnegie was in a euphoric mood. “Now, Pierpont, I am the happiest man in the world,” he said. Morgan was by no means unhappy himself: his own banking company had made a direct profit of $12,500,000 in the underwriting transaction, and this was but a prelude to a stream of lucrative financings under Morgan’s aegis, by which the total capitalization was rapidly raised to $1,400,000,000. A few years later, Morgan and Carnegie found themselves aboard the same steamer en route to Europe. They fell into talk and Carnegie confessed, “I made one mistake, Pierpont, when I sold out to you.”
“What was that?” asked the banker.
“I should have asked you for $100,000,000 more than I did.”
Morgan grinned. “Well,” he said, “you would have got it if you had.”
Thus was written finis to one stage of Carnegie’s career. Now it would be seen to what extent his “radical pronouncements” were serious. For in the Gospel of Wealth —the famous article combined with others in book form—Carnegie had proclaimed the duty of the millionaire to administer and distribute his wealth during his lifetime . Though he might have “proved” his worth by his fortune, his heirs had shown no such evidence of their fitness. Carnegie bluntly concluded: “By taxing estates heavily at his death, the State marks its condemnation of the selfish millionaire’s unworthy life.”
Coming from the leading millionaire of the day, these had been startling sentiments. So also were his views on the “labor question” which, if patronizing, were nonetheless humane and advanced for their day. The trouble was, of course, that the sentiments were somewhat difficult to credit. As one commentator of the day remarked, “His vision of what might be done with wealth had beauty and breadth and thus serenely overlooked the means by which wealth had been acquired.”