Such was Andrew Carnegie, the poor boy, the great manufacturer of steel and after 1901 the possessor of two hundred and fifty millions. Of course he was helped by the high tariff and he took advantage of all the conditions in the country that he had made his own. Men may poke fun at him because he wrote, "I sympathize with the rich man's boy and congratulate the poor man's boy," for most of the "immortals" have been born to "the precious heritage of poverty," but it was the sincere observation of a poor boy, who during his life had amassed millions. We now return to the organization of the United States Steel Corporation in which were displayed some of Morgan's best and doubtful qualities. He was keen enough to see that the Carnegie Steel Company must be in the combination and while Carnegie was desirous of selling, the Scotchman was determined to get a good price. His policy of threat was effectually used. According to Bridge, he wrought through a "press agent" and by newspaper interviews. It was given out that owing to a disagreement with the Pennsylvania Railroad he would give all possible business to the railroad running from Pittsburg to Conneaut, the Lake Erie terminus, and would also take advantage of the cheap water transportation. Striking thus directly at the Pennsylvania Railroad, he also threatened to build at Conneaut the largest 1 The Gospel of Wealth, xii. In his Autobiography, 31, Carnegie gave a charming picture of the life of his family after they had left Scotland and settled in Allegheny City and then wrote: "The children of honest poverty have the most precious of all advantages over those of wealth. The mother, nurse, cook, governess, teacher, saint, all in one; the father, exemplar, guide, counsellor and friend! Thus were my brother and I brought up. What has the child of millionaire or nobleman that counts compared to such a heritage?" and best equipped tube works in the country, giving a direct blow to Morgan who was largely interested in the National Tube Company, one of the combining concerns. It was likewise well known that the Carnegie Steel Company could make steel cheaper than any other company in the world. Carnegie had his price which Morgan, with apparently little hesitation, paid. It was said at the time that the canny Scotchman had outwitted the New England Yankee. Thus the so-called "billion dollar trust" was launched. It consisted of 550 million common stock, 550 million preferred, and 304 million 1 5 per cent bonds; all of the bonds went to the Carnegie Steel Company of which Andrew Carnegie got the lion's share. The Carnegie Steel Company also received $98,277,120 in preferred stock and $90,279,040 in common stock at par. Reckoning the bonds of $303,450,000 worth one hundred cents on the dollar, the preferred stock at 82 and the common stock at 38, the Carnegie Steel Company received $418,343,273 for their property. It was no wonder then that Andrew Carnegie was counted worth $250,000,000. The other combining companies 2 took stock. Of the 1,100,000,000 stock all of the common and some of the preferred was "water"; but as there was an abundance of "water" in the combining companies, the increase of stock and the increase of "water" do not seem to have been objected to. For their services the Morgan syndicate received 649,897 shares of the common stock of the 1 Probably $303,450,000. There were also about 56 million of bonds owned by the combining companies which the U. S. Steel Corporation assumed. Berglund, 71. * See again Cotter, 22; Berglund, 102. United States Steel Corporation and an equal number of the preferred. At $38 a share for the common and $82 a share for the preferred, this amounted to $77,987,640. This was all effected on a cash capital of 25 millions, which the syndicate received back, plus 200 per cent in dividends. Although J. P. Morgan himself never speculated in the way of buying or selling stocks on a margin, he comprehended the stock market well and engaged a celebrated manipulator to market the shares, which were put upon the market as paying dividends of four per cent on the common and seven per cent on the preferred. Starting on the curb at 38 for "steel common" and 82 for "steel preferred," these stocks were soon admitted on the Stock Exchange and within a month advanced to 55 and 101% respectively, although perhaps considerable of this advance was due merely to "matching of orders." 2 It was popularly supposed that the United States Steel Corporation possessed about two-thirds of the Lake Superior iron ore and Connellsville coal of the country, although the actual figures of production do not substantiate the popular belief. In the four years, 1902-1905 inclusive, the United States Steel Corporation shipped 56 per cent of the Lake Superior ore, produced 36 per cent of the Connellsville coke, 70 per cent of Bessemer steel ingots, 60 per cent of Bessemer steel rails and 51 per cent of open hearth steel ingots and castings. There was naturally some efficiency in operation by bringing so many plants under one head and management, and there was 1 American Finance, Noyes, 300; Life of Morgan, Hovey, 216. a praiseworthy effort to get workingmen, superintendents and other employés interested in the Company by selling them shares at lucrative rates. The United States Steel Corporation constantly stabilized prices. After its formation there was no violent enhancement of values during a time of "boom," no "runaway market" in steel. On the other hand, during times of depression, prices never went below what would give a fair profit. The distribution of interests by Jupiter does not work in our common world and did not under Morgan. In short, the United States Steel Corporation was too big for effective work. As Morgan discovered, it is exceedingly difficult to find a man of sufficient ability and character to head so large a concern. His first efforts were failures and while the present "chief executive officer," Judge Elbert H. Gary, is a decided success, it is doubtful whether his successor will possess his eminent qualities. But at no time has the United States Steel Corporation made steel absolutely or comparatively as cheap as did the Carnegie Steel Company just before the combination was made. Carnegie said that "his partners knew nothing about making stocks and bonds but only the making of steel." The difference lies in the combination of companies and the adjustment of interests with a sharpened pencil on a writing pad in a Wall Street office and presence at the works among the men where steel is turned out. Charles M. Schwab, the first President of the United States Steel Corporation, in New York 1 1920. 2 2 Trusts of To-Day, Montague, 37. "America is soon to change from being the dearest steel manufacturing country to the cheapest." Written before the sale to J. P. Morgan. Autobiography of Andrew Carnegie, 227. City and Europe, was a different Schwab from him who, in the grime and dirt of Pittsburg, administered the affairs of the Carnegie Steel Company. "Schwab had graduated at Braddock under Captain Jones and, displaying exceptional ability as a manager of men, had quickly won his way from one of the lowest positions in the yards to the highest in the office. His cheery friendliness made him especially popular among the workmen."1 Anyone who knew personally William R. Jones, or as he was familiarly called, Captain Bill Jones, and what he stood for, may well join in this tribute which Bridge paid him: "Greater than all of Jones's inventions was his progressive policy. . . . The young men whom he trained ably seconded him. . . . The famous scrap heap for outgrown, not outworn, machinery was instituted by Jones, who never hesitated to throw away a tool that had cost half a million if a better one became available. And as his own inventions saved the company a fortune every year, he was given a free hand. Under this greatest of all the captains of the American steel industry [Jones] a group of younger men grew up, trained in his broad views and habituated to his progressive methods; so that when in 1889 he was killed in a horribly tragic way by the explosion of one of his furnaces, there were men ready trained to take up his work and continue it."2 Carnegie said that he owed his success to Jones and to Schwab; 3 and 1 1 Bridge, 245. Schwab wrote, July 24, 1919, on his photograph which is reproduced in Carnegie's Autobiography opposite 256: "To my dearest friend and 'Master' with the sincere love of 'His Boy."" ⚫ Bridge, 105. * Cotter, 89. 'Jones," so wrote Andrew Carnegie in his Autobiography, "bore traces of his Welsh descent. . . . He came to us a two-dollar |