Meet You in Hell

Fortunes and Foundations

If the present value of Carnegie’s haul from the sale of his companies in 1901 were computed based on changes in the Consumer Price Index it would be about $8 billion, making him a relative piker compared to modern-day tycoons. However, according to a formula devised by Michael Klepper and Robert Gunther in their 1996 book The Wealthy 100, the value of a personal fortune is better understood in relation to the total gross national product of an individual’s era. By that measure, Carnegie was worth $112 billion in his day, far ahead of Bill Gates ($85 billion), Sam Walton ($42 billion), or Warren Buffett ($31 billion). Carnegie was to remain the world’s wealthiest individual for more than a decade, and he is number two on the all-time list, behind only John D. Rockefeller, whose forced liquidation of Standard Oil in 1913 netted him $212 billion in today’s dollars.

Frick had been the man Carnegie trusted above all others to manage the affairs of Carnegie Steel, a manufacturing combine so vast that its output surpassed that of the entire British Empire.

…while Carnegie had gone to great pains to portray himself as a benevolent friend to his workers, he had delegated the job of holding the line on wages and other demands to Frick—a Patton to Carnegie’s FDR, as it were.

“Yes, you can tell Carnegie I’ll meet him,” Frick said finally, wadding the letter and tossing it back at Bridge. “Tell him I’ll see him in Hell, where we both are going.”

The citizens of Pittsburgh could point to their own boys of the streets who had made fabulously good, among them the Scottish immigrant Andrew Carnegie and his rags-to-riches Swiss-German partner, Henry Clay Frick, now steel barons and multimillionaires both. Not only had Carnegie and Frick started with nothing and worked their way to the top, they were local heroes whose accomplishments had provided a livelihood for thousands in the Monongahela Valley and its environs. If penniless upstarts like Flagler, Carnegie, and Frick could do it, then why couldn’t anyone? And if some of their fellow dreamers tumbled beneath the wheels in the attempt, wasn’t that just the way of the world?

By the turn of the century Pittsburgh would account for more than half of all the iron and steel made in the United States, and twice as much as was then being made in all of England.

What would transpire there would become known as the Battle of Homestead, the deadliest clash between workers and owners in American labor history, one that would forever tarnish the image of the country’s richest man and drive a wedge of acrimony between him and his former partner and right-hand man that would endure to the grave.

Carnegie Rising

Carnegie was diligent and hardworking, however, and what scant schooling he had received in Scotland stuck with him. He found a clerk’s position in another mill, and then happened into a position as a delivery boy for a telegraph company in downtown Pittsburgh for what must have seemed the princely sum of $2.50 a week. Before long, Carnegie had picked up telegrapher’s skills, including the ability to translate the clicks and clacks of Morse code directly into text or speech. His skill and self-confidence attracted the notice of a number of influential customers, including Thomas Scott, who was then an assistant superintendent for the western division of the Pennsylvania Railroad. Scott had recently made the decision to string his own telegraph lines for the railroad, and had it in the back of his mind to hire an assistant who would serve as his personal telegraph operator. In February 1853, Andrew Carnegie, not yet eighteen, accepted Scott’s offer of the job for thirty-five dollars a month, the first step along his path to greatness.

While he lacked the five hundred dollars he needed to invest—“Five hundred cents was nearer my capital,” Carnegie wrote in his autobiography—the young telegrapher persuaded Scott to advance him the money, then scurried about to various friends for help in repaying the loan. (Until the day he died, Carnegie perpetuated the myth that his mother mortgaged the family home so that the investment could be made, but biographer Joseph Frazier Wall points to a promissory note in Carnegie’s papers that suggests otherwise.)

Now the neighbor and regular houseguest of former secretary of war and foreign diplomat William Wilkins, Carnegie resolved to better himself in a fashion that Horatio Alger might have charted for one of his protagonists. He took French lessons, read the classics, refined his table manners, and studied the likes and dislikes of the American leisure class until he felt at ease among his new neighbors.

To help with the charge of moving men and matériel expeditiously across the North’s network of rail lines, Scott summoned Carnegie, whose brief but vivid experiences in a panicked Washington convinced him that private enterprise was far more capably organized and directed than government. His disdain for government may have insulated him from guilt regarding later charges that the Pennsylvania Railroad, among others, had gouged the United States for transportation costs of matériel and was thereby profiting from the war. Although those charges, which ultimately led to a congressional investigation, were indisputably true, the results of the inquiry proved fruitless.

By 1863 Carnegie was earning more than $45,000 a year from this and all his other investments, compared with a mere $2,400 from his railroad salary. Yet he understood that it was the contacts he made and the information he derived from his association with the railroad that made everything else possible.

When he found himself called up by the Union to fight in the Civil War in mid-1864, a stunned Carnegie pondered the alternatives, then spent $850 to hire a substitute to undertake his service for him. It was an option that was legal and often exercised by young men of means at the time, and one that Carnegie defended as a patriotic gesture. After all, he reasoned, the draft law of 1863 gave him the choice of paying the government a mere $300 to avoid service altogether. In Carnegie’s eyes, he had expended $550 that he didn’t have to, and, instead of evading service, had seen to it that another body had been added to the fray.

Carnegie had been drawn to New York by the same charms that had lured other tycoons of the day, including the Vanderbilts and the Rockefellers. He had also decided that if he aspired to join the ranks of society’s greats, he should have a presence among them. The fact was that, at the tender age of thirty-three, he listed personal assets of some $400,000 and, at a time when an average wage earner might bring home about $300, Carnegie enjoyed an annual income of more than $50,000 (equivalent to about $10 million in current dollars).

Even in the relatively unregulated business climate of 1872 (the Sherman Anti-Trust Act would not become a reality for another eighteen years), moral indignation was high. The resulting scandal forced Carnegie and his friends out of the Union Pacific and engendered a round of finger-pointing as to whose idea the sell-off had been. Although he would escape any legal consequences, it was a bitter lesson for the Calvinist-born Carnegie, and provides a glimpse of the internal contradictions that would bedevil him throughout his life. Carnegie’s upbringing had predisposed him toward honesty and a high regard for the opinion of others. But those attributes sometimes collided with his overwhelming ambition.

Carnegie sought to resolve the matter by shifting the blame for the 1872 scandal to the Union Pacific founders. And he would later write self-servingly of his disappointment in his autobiography. “I saw that I was still young and still had a good deal to learn,” he concluded. “Many men can be trusted, but a few need watching.”

And while his steadfast desire to “improve himself” despite his scanty formal education might be viewed only as an effort to gain entrance to circles of influence from which he would otherwise be excluded, the record suggests otherwise. According to biographer Wall, it was an enduring disappointment for Carnegie, whose expectations had been colored by the example of his widely read father and uncles, to discover that so many of the successful men with whom he now hobnobbed were so limited culturally. He complained that he had only met one railroad executive capable of quoting a line from Burns or Shakespeare.

If Carnegie had succeeded, then anyone could succeed, and those who fell by the wayside did society a favor. The central tenets of Social Darwinism appeared to Carnegie to explain the mysteries of existence itself; he would evermore fasten upon the principles of just reward when he found them convenient, and just as conveniently ignore the implications for the less fortunate.

Costs and Control

The collapse of railroad projects in which Carnegie was involved led his old mentor Thomas Scott to beg his former protégé for loans that would shore him up. Carnegie, however, stood resolute. He had sunk what he had into the construction of the Edgar Thomson Mill, and his loyalty and his capital would reside there. Carnegie would write that spurning Scott’s pleas “gave me more pain than all the financial trials to which I had been subjected up to that time,” but his course was set. The Edgar Thomson Mill was his first priority and its stacks would rise, no matter what.

The depression actually played into his hands; as he pointed out in an 1877 letter to the plant’s first general manager, William Shinn, the decreased demand for materials and labor caused by the economic downturn resulted in a nearly 25-percent savings over the costs Carnegie had projected. For Carnegie, it was another invaluable business lesson: the best time to expand was when no one else dared to take the risks.

For key positions, he hired the best and paid top dollar, though he held all who worked for him strictly accountable, demanding no less dedication and effort from others than from himself. He also preferred to compensate his chief executives with an interest in the company that would supplement a modest salary. For one thing, he had discovered for himself that ownership rather than salary provided the true path to riches. He also understood that making a man a partner bound him to the firm far more effectively than did a handsome salary, which could easily be outbid by a rival concern.

Carnegie’s success can be attributed to another lesson he had learned on the way up: the value of meticulous cost accounting. This was likely the most valuable legacy from his days working under Edgar Thomson at the Pennsylvania Railroad. After forming the Cyclops/Union Iron Works, Carnegie revolutionized that industry’s practice by applying the same standards he had learned in freight hauling to the foundry’s production line. As a result, when Union Iron or Keystone Bridge submitted a bid on a project, there was no guesswork involved. If Carnegie chose to undercut a rival’s figure, he did so with absolute confidence that he could deliver what he promised and make a profit, for his was the only firm in the field with near-fanatical devotion to cost accounting. As Charles Schwab would later put it, “Carnegie never wanted to know the profits. He always wanted to know the costs.”

While other manufacturers were charging seventy dollars a ton for their rails, Carnegie offered his for sixty-five dollars, following another of his well-known dictums: “Cut the prices, scoop the market … watch the costs and the profits will take care of themselves.”

…five-foot-three-inch frame…

After months of cajoling and pushing, Jones, a hands-on manager, determined that it was simply impossible for human beings to expend maximum effort for so long a period, and came up with a suggestion. They could simply divide the workday into three shifts rather than two. Men could maintain almost any pace for eight hours, Jones reasoned, and after sixteen hours of rest they would return refreshed, ready for more of anything. The company would thereby gain a greatly increased output while expending the very same amount on wages. Jones’s elegant notion was not only wildly popular with the men, it proved to be as effective in practice as it seemed on paper, and the eight-hour workday was born to steel.

…because the mines and the ovens in which his laborers worked were often located far from towns where food and other necessities could be easily purchased, the company began to open and stock its own stores. Workers could not use cash in the company stores and were often required to “charge” a certain percentage of their wages as a condition of employment, or take some of their pay in company scrip that could only be redeemed in a Frick store, where prices were generally inflated.

During the inevitable periods of slack demand for coke, he was invariably called upon to lend his support to various coalitions of coke manufacturers formed in order to avert price wars as well as the outright collapse of coke interests. On one such occasion in 1884, recounted by Kenneth Warren in Triumphant Capitalism, at a time when nearly half the coke ovens in the Connellsville area sat idle, a group of producers known as the “Coke Syndicate” met and agreed to fix the price of coke at $1.50 per ton. Having got wind of this, Carnegie sent an emissary, John Walker, to the coke producers’ meeting to inquire what the price would be for him. Without hesitation, Frick told Walker, “A dollar-fifty a ton.” Walker shook his head. Whatever price Frick and his fellow coke makers might be able to squeeze out of his other customers was of little consequence: Carnegie would pay H. C. Frick $1.15 per ton and there would be no further discussion of the matter. Frick was stunned, but he also realized how the power had shifted. “Gentlemen,” he said to his fellow coke producers, “you have just heard what the worthy representative of the majority stockholders in the H. C. Frick Coke Company said.” In the next breath, he resigned his position in the Coke Syndicate, then left the room to embark upon a voyage to Europe, returning only when Carnegie cabled an apology through a mutual friend.

Frick and Labor

…it took no particular genius for an ambitious man to see where the future lay. Andrew Carnegie had become immensely successful as one of the leaders of the emerging steel industry, and Frick was determined to grow beyond his role as mere purveyor to the mighty, no matter how lucrative and secure that post might be. Furthermore, he was willing to divest himself almost completely of his holdings in coal and coke if that was what it would take to accomplish his goal.

“[I]n my opinion you propose what would be the mistake of your life. Your career must be identified with the Frick Coke Co. You never could become the Creator of CB and Co. Twenty years from now you might be a large owner in it, perhaps be the principal, still the concern would not be your work and you could not be proud of it.” Carnegie carried on at some length in this scolding tone: “I cannot imagine how your pride permitted you to think for one moment of sinking to an insignificant holder of 4 percent in your own Creation. To think that you could ever be influential in its councils with such a petty interest is absurd. You would merely be the agent of the real men in the concern… . The idea is suicidal.”

NO ONE WHO LIVED in the 1880s could be deceived concerning the frailty of human existence, not even those who enjoyed the fullest bounty of a “Gilded Age.” Fully 215 of every thousand children born did not survive the first year of life.

In late 1885, recognizing that his own workers would become restless once they learned of the record $3 million in profits accrued by his firm, Carnegie sought to forestall trouble by issuing a blanket 10-percent raise. But for the more skilled and experienced workers it was not enough. They were also restless for a return to the eight-hour shifts that had been rescinded during a business downturn.

Carnegie, whose own unskilled labor force included a sizable contingent of the newly arrived, dashed off an overheated note to Frick: “I agree that these foreigners must learn they can’t quit work and riot in this free country.”

Historians have labored long to explain the contradictions between Carnegie’s public statements and his zealous anti-union practices. Some point to the influence of his impoverished childhood and his awareness of his forebears’ democratic leanings. Had Carnegie been challenged, he would surely have defended himself vigorously as the possessor of a special understanding of the laborer, having himself been “one of the downtrodden.” And he would always on some sentimental level identify with the less fortunate. But for all his noble sentiments, he had long ago ceased to be a workingman, and whatever the tenor of his public statements, his energies were now devoted to preserving his new status as an accumulator. Nevertheless, Carnegie continued to make noble statements about the workingman to the very end of his life, seemingly untroubled by those who criticized his business and labor practices. As to why he might have done so, the most cursory examination of the history of American business shows that Carnegie is scarcely the only man of prominence who wanted very much to be liked.

Phipps had given in to workers’ demands and production had resumed at H. C. Frick Coke. This “return to normalcy” had, however, come at considerable cost. Carnegie might have been relieved to see his furnaces fired up again and steel rolling out the doors, but it troubled him greatly to realize that he was paying twelve and a half percent more than his competitors for his coke. Perhaps Frick had been right.

Carnegie saw that Frick was no puppet, but rather a man willing to take considerable risks in defense of his principles. If Frick’s actions made clear that he was less pliable than others in Carnegie’s circle, they also indicated a strength of will that might be useful if applied to others. On the other hand, Frick’s admiration and awe of Carnegie were tempered by the realization that Carnegie’s self-interest reigned supreme. Given Frick’s diminished interest in H. C. Frick Coke, it was more important than ever to carve out an enhanced position in the steel concern. It was a matter of self-preservation. Carnegie was wise enough to grasp Frick’s point of view, given that he was the one who had pointed out to Frick the inevitability of this very lesson. And because he had also seen in Frick a managerial capacity second to none, he was willing to overlook Frick’s resignation as the understandable act of a proud man. If Frick had been a competitor, he might well have been consigned “to the cart,” but as a partner with valuable skills, he deserved a second opportunity.

For Frick, there were no paeans to his former brethren among the ranks and no convoluted justifications as to just how and why the rights of workers might somehow be maintained without interfering with a steady flow of profit. Men worked in Frick’s plants under the conditions dictated by a competitive marketplace. You either liked it or you went flying down an embankment with your worldly goods hurtling right after you. To operate otherwise was, in Frick’s view, financial suicide.

Building Carnegie Steel

Carnegie agreed to buy out Pittsburgh Bessemer’s stock at face value, and even offered an exchange of Carnegie Brothers stock for those who preferred it. As it turned out, nearly everyone took the cash, except for one W. H. Singer, who exchanged his $50,000 stake for Carnegie stock. Singer’s choice was a wise one: by 1902 his investment had grown to be worth $8,000,000.

Carnegie anticipated a leveling-off in the rail business and accurately predicted that the next boom in steel would come from its use as a structural material in building. By 1885, when 70 percent of steel production was still in rails, Carnegie’s new Homestead operation was rolling I-beams off the line. (By the early 1900s, rails would constitute only 28 percent of total steel production.)

He might have combined all his operations under one umbrella but for his concerns about the growing “trust-busting” tendencies among politicians. By keeping the two entities distinct, Carnegie could more easily maintain that they were independent, even though he, as majority partner in both, could easily manipulate the flow of materials and services whenever he saw the advantage. Though antitrust law would one day put an end to such maneuvering, Carnegie reasoned that he was only employing sound business practice.

Carnegie, distraught when he got the news that a competitor had found a leg up on costs, came up with one of his more imaginative responses. Knowing he could never match the price of steel produced in this way, he sent a letter to every railroad company in the United States, advising them of the new process known to be in use at Allegheny Bessemer and warning that the elimination of the time-honored second heating of ingots would result in a lack of “homogeneity” in the rails, even implying that this could lead to rail failure and fatalities. There was not one scintilla of evidence for Carnegie’s claim, scientific or otherwise; he had simply plucked the “homogeneity” concept out of thin air, and he couched his warning in language vague enough to preclude a legal response. But if the implications were subtle, the effect was profound and immediate. Orders to Allegheny dried up in an eyeblink. Even the investment partners at the firm began to question their plant managers about the validity of their methods.

And then in stepped Frick to the rescue, offering the major stockholders in Allegheny Bessemer $600,000 for a plant that had cost more than $1 million to build. Frick’s initial offer was rejected, but he had expected as much. When he returned with an offer of $1 million, to be paid in the form of bonds issued by Carnegie Brothers (and not to mature for five years), the anxious partners snapped it up. By the time the bonds matured, operations at the innovative Duquesne mill—their supposedly inferior practices having been put immediately into place at all Carnegie plants—had paid for themselves half a dozen times over.

Whether or not he endorsed such specious logic, Carnegie was ecstatic about the acquisition of Allegheny Bessemer, and his faith in his new manager was validated: “F. is a marvel,” he exclaimed to his partners. “Let’s get all F’s.”

What he had purchased in terms of know-how would pay far greater dividends at Carnegie Steel than would ever show up in the balance sheet at Duquesne. As more than one of Carnegie’s managers would recall, the owner was always more interested in what it cost to produce goods than in revenues or profits. Carnegie would repeat the mantra time and again: profits and prices were cyclical, subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled, and in Carnegie’s view, any savings achieved in the cost of goods were permanent. Carnegie rarely balked when his managers suggested improvements to the physical plants of his operations, not if the goal was greater efficiency in production.

Though at the time the open-hearth process was almost unknown within the United States steel industry, Carnegie had learned of Siemens’s work early on and had authorized the installation of two open-hearth furnaces at the Edgar Thomson works in 1873.

Although it meant scrapping hundreds of thousands of dollars’ worth of Bessemer converters, Carnegie was undeterred. As he wrote to William Abbott, Frick’s counterpart at Carnegie, Phipps and Company, “Even if we save half a dollar per ton by the changes, it would justify a large additional expenditure now.” If he had to make a case concerning costs with Abbott, Carnegie had no such difficulty with Frick, for on this issue the two men were of one mind. Frick had made his way in coke by the same reckoning that Carnegie had in rail and then in steel: if you knew your costs down to the penny, you were always on firm ground. Furthermore, Frick had always understood how essential new technologies were in driving costs down.

Morgan and Rivals

Fearful that such impending competition would prove ruinous to both railway interests in which he had placed substantial bond offerings, Wall Street mogul J. P. Morgan, the son of former Carnegie benefactor Junius Morgan, intervened and brokered a compromise between Vanderbilt and Roberts. According to the agreement, Vanderbilt would give up his charter for the South Pennsylvania Line in exchange for the Pennsylvania Railroad’s interest in the West Shore, a New York–to-Buffalo line that, when completed, would have gone into competition with Vanderbilt.

When Carnegie discovered what had happened, he was furious, but with a minority control over the project there was little he could do but vow never again to trust the banking house of Morgan.

Even Frick took a dim view of Carnegie’s histrionics over Morgan’s tactics, suggesting that he would have been better off keeping his $5 million in his pocket to defray rail costs than going up against the impregnable Pennsylvania Railroad.

While Frick did not hesitate to differ with Carnegie, he held his superior in high regard. They were indeed kindred spirits, risen up from the ranks of store clerkdom to become captains of industry and united in their determination to amass great personal wealth. Furthermore, they shared a business philosophy that set them apart from their peers, most of whom were more concerned with net profits and dividends than with the reduction of fixed costs.

And Pat Barnett, a librarian at the Frick Art Reference Library and the granddaughter of a Frick acquaintance, tells of an epic practical joke he played on his friend Andrew Mellon, who often traveled with his wife on a private railcar attached to a regular Pennsylvania Railroad train. On one occasion a conductor entered and demanded their tickets. Mellon explained who they were and that it was their car, but the conductor announced, “This is my train and if you don’t have tickets, you’re not going anywhere.” The conductor signaled the engineer to brake at the next stop, and they were summarily ejected onto an empty station platform somewhere in the Pennsylvania hinterlands. The dumbfounded Mellons were at a loss—until another train pulled up, and a familiar figure emerged from the train’s stairwell, wreathed in steam. “Andrew!” came the voice of Henry Clay Frick. “Fancy meeting you here!”

Carnegie, on the other hand, had a troublesome need for approval (grandchildren visiting in later years were often bribed by their parents to let “Grandpa Negie” win at cards), a trait that led him to behave in contradictory ways—lauding the efforts of unions even as he sought to undermine them. In fact, it is said that he kept a special file in his desk where any favorable public utterances concerning him were tucked away.

Wages and Unions

…one workman stood and began to stammer, “Mr. Carnegie, take my job, for instance …” At which point Carnegie interrupted, delivering one of his most inspired lines: “Mr. Carnegie takes no man’s job.” Almost as one, the workers exploded in laughter and, as they stamped their feet, began to chant the now-famous mantra, “Thou shalt not take thy neighbor’s job.”

With Frick in charge, Carnegie could step farther away from day-to-day operations, and the other partners could rest assured that their interests had nowhere to go but up. As for Frick, he had managed to beat the odds and the grim scenario Carnegie had painted upon his entry into the company, rising from the apex of one industry to become the chief operating officer of the largest and most powerful steelmaking company on earth, all in the space of a decade.

Frick stated his position succinctly: “We believe that if earnings based on the selling price of steel can advance without limit, the workmen should be willing to follow the selling price down to a reasonable minimum, and so this figure was finally fixed by the Carnegie Company at the rate of $23 instead of $25.

In Carnegie’s mind, nothing had changed in the intervening years. If costs could be cut, then cut they must be, and never mind if the category read “minerals” or “vegetables” or “men.” And if he was tough on matters pertaining to the production line, he was even more demanding when it came to the support staff.

Carnegie hastened to add that this would not mean lower wages. Without reference to the unionized skilled workers paid at tonnage rates, he pointed out that most of the workers at non-unionized E.T. and Duquesne were making higher wages than their counterparts at Homestead and that steps would be taken to see that Homestead workers were brought up to par. While admitting that improvements on the production line would mean a reduction in the workforce at Homestead, he “hoped” that such layoffs would prove temporary. He concluded on a note that was conciliatory but brooked no dissent: “This action is not taken in any spirit of hostility to labor organizations, but every man will see that the firm cannot run Union and Non-Union. It must be either one or the other.” Frick took one look at the notice and determined that posting it would be a terrible tactical blunder—why warn the enemy what was coming when no good could come of it for the company?

Despite such statements, Carnegie would, for all the rest of his days, disavow any knowledge of the letter that Frick penned to a third party shortly thereafter.

Homestead Battle

In 1861, while investigating a railway case, Pinkerton—an ardent abolitionist who believed that labor unions seldom represented the best interests of the workingman—got wind of a plot to assassinate President Lincoln during a train stop in Baltimore. As a result, Lincoln’s train steamed right through Baltimore and on to his inauguration ceremony in Washington. With the plot foiled, Pinkerton became a household name, his firm often called upon to provide presidential security and to direct Secret Service operations for the Union during the Civil War. The company’s logo featured a rendering of an unblinking eye with the accompanying legend “We Never Sleep,” and gave rise to the term “private eye.”

It was enough for even the most seasoned of the Pinkertons. If they did not surrender, they all would lose their lives. A white flag was thrust up from a gap in one barge’s side. In seconds, a marksman’s bullet shot it down. Disbelieving Pinkertons raised a second flag, and another volley from the riverbank blew it to smithereens as well. According to historian Krause, there was a reason for such disregard: workers had learned that a call had gone out from company headquarters to Pennsylvania governor Robert E. Pattison requesting that state militia be sent in. The workers wanted to finish off the hated Pinkertons before outside aid could arrive.

THE DECISION TO SURRENDER had not been easily made aboard the barges. According to a report in the St. Louis Post-Dispatch, one of the Pinkerton men remained adamantly opposed to going ashore, even with their ammunition virtually gone and most of his colleagues joined against him. Death was preferable to crawling ashore like a whipped dog, he said. He would stay on board and fight it out to the end. Another Pinkerton, a hard-bitten veteran, hefted the Winchester that he carried under one arm. “You’ll come in or I will blow your brains out,” he told the holdout, adding a few choice epithets that contemporary sources declined to specify. The holdout stared back contemptuously, then turned and began to walk away, toward the stern of the boat. As the other men looked on, he suddenly stopped and whipped his Colt pistol from his holster. Before anyone could react, he raised the Colt’s barrel to his head and fired. He toppled over as the stunned men looked on, “his brains oozing out on the already blood-soaked boards.”

Meanwhile, the finger-pointing within company ranks had already begun. Despite his avowed support of “company officials,” Carnegie was furious. Had it been his decision, he reminded partners Phipps and Lauder, he would simply have closed the plant and waited the workers out. Furthermore, given the fact that the Pinkertons had been called in, how could things have been bungled so badly?

Carnegie even threatened to return to Pittsburgh at once and take over the situation himself, a possibility that dismayed both Phipps and Lauder. Carnegie’s return would signal an unequivocal loss of confidence in Frick. Any such action might easily prompt another resignation on the part of the volatile Frick, and thereby send a signal to the union that they had won yet another victory. No, they quickly responded to Carnegie. What had been done was done. The best thing to do now was sit pat, continue to support Frick, and keep up the pressure on the governor to send in troops so that the mill could be reopened without any concessions to the union.

Carnegie Steel would ultimately find itself paying higher wages than competitors who had not been compelled to submit to union demands, and that would spell doom, for the company and for the workers as well. Whether anyone thought him sincere as to the latter was of no concern to Frick. He had been given a job to do and he intended to do it. As for Carnegie’s favored tactic of simply closing the works down until starving workers cried to be brought back to work, where was the sense of that? Weeks or months of production lost, and the effect on the lives of workers and their families just as debilitating in the end. No, there would be no glad-handing from Henry Clay Frick, no smile and wink and handshake while the knife was slipped into the ribs from behind.

When a surgeon was rushed to the office to tend to his wounds, it was said that Frick refused any anesthetic, and calmly assisted the doctor as he probed the wounds for the bullets. “There, that feels like it, Doctor,” Frick said, on two different occasions. And each time, the doctor extracted a slug with his tongs. With the removal of the bullets, the doctor advised that his patient be removed immediately to the nearest hospital, but, according to Harvey, Frick would have none of it. He insisted that his wounds be sewed up then and there, and next had himself propped up in his chair, where he completed the letter he had been working on when Berkman attacked, stipulating the final terms for a loan he sought.

“Was shot twice but not dangerously,” the message to Scotland read. “There is no necessity for you to come home. I am still in shape to fight the battle out.”

“This incident will not change the attitude of the Carnegie Steel Company toward the Amalgamated Association. I do not think I shall die, but whether I do or not, the Company will pursue the same policy and it will win.”

Aftermath and Costs

Reeling now from the loss of two children, Frick forced himself from his bed to attend the funeral service of his infant son on August 4, held in the downstairs parlor at Clayton. On the following morning, as if driven away by death or resolved to defy it, he rose to leave the house for the first time since the attack. He rode a streetcar to his downtown offices and began his day promptly at 8:00 a.m., thirteen days after being gunned down. “At office feeling first class,” he cabled Carnegie. “Everything assuming good shape.”

Frick thanked the officers, then immediately sent them home. “If an honest American cannot live in his own home without being surrounded by a bodyguard,” he told a reporter for the New York Times, “it is time to quit.”

“Say what you will of Frick, he is a brave man,” concluded with this: “Say what you will of Carnegie, he is a coward. And gods and men hate cowards.” Despite all his proclamations of support for Frick, the criticism he received stung Carnegie badly. As he would write to his friend, the British prime minister William Gladstone, in the aftermath, “The Works are not worth one drop of human blood. I wish they had sunk.” Later, in his posthumously published autobiography, Carnegie would add, “Nothing I have ever had to meet in all my life, before or since, wounded me so deeply. No pangs remain of any wound received in my business career save that of Homestead.”

“We cannot expect that the public should understand just how kindly we do feel toward those who are in our service; that we are just as anxious for their welfare as we are for our own,” Frick wrote. “We must expect to be misrepresented, but time will cure this all.”

According to company reports, total crude steel production at Homestead dipped from 253,000 tons in 1891 to about 190,000 for 1892; steel plate tonnage was down from 44,000 tons to about 33,000; and beams were down from approximately 34,000 tons to about 22,000. Carnegie wrote to Frick that, by his reckoning, “We have lost a million in ore and another [million] trying to run Homestead with new men.” Overall profits for Carnegie Steel were down by about $300,000, a bit less than 10 percent, and the AAISW estimated that the workforce had lost about $1.25 million in wages. The cost to taxpayers for sending in the state militia was estimated at about $500,000. In the final analysis, and including not only direct casualties but ensuing accident, disease, and suicide, it was determined that the battle had taken thirty-five lives in total.

Within a year of the strike’s failure, wages for many skilled workers had fallen by more than half, and the much-debated “minimum” floor upon which wages were to be based was abolished altogether. The eight-hour day was a thing of the past; shifts were once again twelve hours long, and the plant operated seven days a week.

He lost forty pounds in the first three weeks he worked at the mill, the man tells him, his sweat often puddling in his shoes, and that for the rate of $2.25 per day, not nearly what a tonnage man might make at $10 under the revised rates, but not so bad when compared to shovelers and other bottom-rung laborers who made less than $1.50 for their dozen hours in hell.

“Upon such toil rests the splendor of American civilization.”

Hellish though the conditions were, Garland found little sympathy for the strike among the laborers with whom he spoke. “It was the tonnage men brought it on,” one of the men told him. “They can afford to strike, but we couldn’t.” When Garland probed, the man shrugged. “We can’t hurt Carnegie by six months’ starving. It’s our ribs that’ll show through our shirts. A man working for fourteen cents an hour hasn’t got any surplus for a strike.” This line of inquiry also led more than one worker to point out that neither Carnegie nor the steel industry itself offered the worst employment opportunities around. “There are lots of other jobs as bad,” one worker said.

…the most profound effect of the unwinding at Homestead was to put an ignominious end to unionization within the industry.

As for men such as Hugh O’Donnell and John McLuckie, they may have escaped prison sentences, but their lives within steel, and as they had known them, were ended forever. They and other leaders were not only denied reemployment with Carnegie Steel, but were blacklisted throughout the entire industry. McLuckie lost his home, said to be worth $30,000, and soon after, his wife died of illness exacerbated by her sorrow.

Rifts and Reforms

Frick was a fighter, and when war loomed, he prepared himself for it. In Frick’s mind, the fact that shooting had started at Homestead was the fault of the union; if the men had listened to reason and behaved in a law-abiding fashion, there would have been no violence. And the end result would have been the same. Frick saw his own approach as direct and at least honest, if brutal. He viewed Carnegie’s tactics as underhanded by comparison.

Carnegie wrote Frick, “[and] partakes of personal issue. It is very bad indeed for you—very, and also bad for the interests of the firm… . There is another point which troubles me on your account, the danger that the public, and hence all our men, get the impression that it is all Frick… . You don’t deserve a bad name, but then one is sometimes wrongfully got. Your partners should be as much identified with this struggle as you. Think over this counsel. It is from a very wise man, as you know, and a true friend.” Frick’s response, in which he was quick to apologize lest any action of his seem to reflect badly on the firm, apparently missed the essential thrust of Carnegie’s self-serving “advice” altogether. Instead of pointing out that Carnegie was the chief “partner” who had condoned everything and anything from the beginning, Frick seemed to think Carnegie was questioning his ability to buck up his subordinates. “I am not naturally inclined to push myself into prominence under any circumstances,” Frick wrote back. “It seems to me wherever it was possible to put any of our people forward I have not let the opportunity go by.”

Carnegie wrote to Whitelaw Reid, “I have been in misery since July, but I am reconciled somewhat since I have visited Homestead… . No one knows the virtues, the noble traits of the working-man who has not lived with them, as I have, and there’s one consolation in all my sorrow; not one of them but said, ‘Ah, Mr. Carnegie, if you had only been here it never would have happened.’ ”

Within five years, Schwab raised production at the plant more than 25 percent above its highest previous levels, and by the turn of the twentieth century, the Homestead works were far and away the largest steel manufacturing facility in the world. The fact that he was able to do this without any significant progress on the labor relations front is a testimony to his organizational and cost-accounting skills.

In 1897 alone, the plant made 28 percent more steel than in 1896, and yet Schwab had cut his payroll by nearly $500,000 in the process.

Schwab stayed in contact with Carnegie as well as Frick, of course, and with the former he was apt to discuss his attempts to keep their men reasonably contented. “Homestead shall never again have strikes, if I can avoid it,” he told Carnegie in an 1896 letter, “and I think I can.”

“Splendid,” Carnegie wrote back to his rapidly rising star in Homestead. “No strikes in future. There would not have been any had you been in charge.” It was doubtless not a message intended to be shared with Frick.

Armor Controversy

Herbert, representing four unnamed employees who wished to sell information concerning acts of fraud at the Homestead armor installation. Plating that did not conform to contract standards was being manufactured, they claimed. And test results were being cooked to cover the matter up. As it turned out, the group had also approached Frick with the same offer, but the chairman, believing the matter to be yet another bogus plot by disgruntled ex-workers, had run the attorney out of his office.

Secretary Herbert offered the informants 25 percent of any penalties assessed against Carnegie Steel, then convened a secret navy panel to investigate the claimants’ charges. Without ever contacting the company, the panel declared the charges accurate.

Carnegie wrote to President Cleveland to express his outrage and ask for a new panel, but Cleveland only offered to reduce the penalty to 10 percent. The offer was an insult to the aggrieved Carnegie, who was aghast that anyone would question his patriotism. It was unthinkable to him that he or his company would defraud the government by producing shoddy armor plating, Carnegie declared.

While it was difficult to ascertain an intention to defraud, it seemed irrefutable that certain tests of the plating had been “helped along.”

Resignation and Schemes

Carnegie had been interested in acquiring the coke holdings of W. J. Rainey, a former competitor of Frick’s, for much the same reason he had coveted Frick’s ovens years before. Frick, however, considered Rainey “a thief” and saw the acquisition as a threat to his own role as the company’s primary supplier of coke. When he learned that Carnegie had actually met with Rainey without informing him, Frick tendered his resignation from the chairmanship. Company affairs were in “splendid shape,” Frick wrote on December 18, 1894, so this action should have no adverse effect on operations. He advised Carnegie to purchase his shares in the company and begin an immediate search for his successor. Frick closed by invoking reasons for his decision that, coming from a noted workaholic, were surprising. The past six years, he told Carnegie, had been extremely taxing, “and my mind from necessity has been so absorbed in looking after the interests of this great concern I have not had time for anything else and feel now that I need such a rest as is only obtained by almost complete freedom from business affairs.”

In the little time that passed between his letter of resignation and Carnegie’s reply, Frick had learned that a broker was attempting to sell a block of 32,000 Frick Coke Company bonds—bonds that Carnegie had received as part of their original partnership agreement. To Frick it was treachery beyond bounds, selling H. C. Frick Coke and marrying a thief from the same industry!

“In all my dealings want of frankness with you on all subjects has not been a failing. [Though] it might from some points of view be considered a fault.”

Yet, despite such staggering success, there were signs that Carnegie missed his former “management genius” at the helm. From the very beginning he wrote scolding notes to Leishman, urging the new chairman to keep a closer eye on costs, warning, “If you do not look out, you will bring even our firm into serious trouble.” During his annual retreat to Scotland, Carnegie wrote again to Leishman, complaining that “Mr. Frick used to send me monthly costs and also monthly reports of Blast Furnace products and these were very interesting… . Please remember how much you can oblige us by keeping us in touch with important events.” Accordingly, Leishman had the necessary figures compiled and the report sent off to Cluny Castle, but it is doubtful that the reply he got from Carnegie filled him with confidence. Though Carnegie thanked Leishman for his trouble, he concluded, “You can scarcely realize how anxious in these times your absent partners necessarily are, and how much they have missed Mr. Frick’s admirable correspondence and statements.”

In addition, he had never felt closer to Frick. In March 1897, Carnegie, then sixty-one, became a father for the first time. The birth of his daughter, Margaret, became a conduit through which he and Frick—whose surviving daughter, Helen, was eight—could communicate. Here was a human dimension that had been lacking when Frick was in charge of the company.

Since Carnegie had always opposed periodic revaluation of the company, the book value of Carnegie Steel in 1899 remained at $50 million, even though the most conservative estimates placed its true value at between $200 and $250 million, around ten to twelve times its net earnings of $21 million. While Phipps reckoned the actual value of his 11-percent interest to be $27.5 million, the Iron Clad Agreement dictated that a sale would bring him only $5.5 million. Frick’s 6 percent would bring him $3 million instead of $15 million; and Lauder’s 4 percent would get him a paltry $2 million instead of $10 million. No wonder, then, that all three were now on the lookout for a potential buyer.

Carnegie pondered the offer only briefly. While he had always condemned the growing practice of companies overstating their value in advance of a public offering, thus allowing the principals to profit “by manufacturing nothing but stocks,” he privately agreed with the $250 million valuation of Carnegie Steel and felt that continued operations would easily support his annual payments of $5 million.

But Frick and Phipps told Carnegie that they had been sworn to secrecy by this prospective suitor and that they were acting solely as intermediaries. There was one other thing as well: the buyer was asking for a ninety-day option to prepare for this sizable transaction. Carnegie must have worked hard to conceal his incredulity. Just how naïve did his partners think he was? Yes, they were all friends and longtime associates, but this was business, and very big business at that. For all he knew, there was no buyer. Frick and Phipps could be asking him to sign an irrevocable agreement to sell at a fixed price. Once he’d put his name on the dotted line, there would be nothing to stop the pair from scurrying off with carte blanche to sell his holdings to any “Jim Crack” who fancied becoming a steel baron. With $157 million dangling before him, a lesser man might have signed and taken his chances. But Andrew Carnegie was hardly a desperate man. After some reflection, he told Frick and Phipps that he would go along with this proposal but would require a $2 million payment for the ninety-day option. If the offer was genuine, he reasoned, such a payment would be no obstacle. It…

As it turned out, the men who intended to buy the Carnegie Steel Company were, in the eyes of its majority stockholders, common scoundrels and speculators. The principals included William H. Moore of Chicago, who, along with his brother, had formed the ill-fated Diamond Match Company consortium, the collapse of which had closed the Chicago Stock Exchange for three months in 1896. Another principal was John W. Gates, a notorious Wall Street speculator and a storied gambler who had once placed a sizable wager on which of two fat raindrops…

Carnegie divined the worst of it. Gates and the Moore brothers had persuaded Phipps and Frick to put forward their offer to Carnegie in return for a broker’s fee of $5 million, which would be paid to them once the sale went through. Even more galling was the discovery that Frick and Phipps had put up $170,000 of the $1,170,000 paid to Carnegie to secure the option. The truth was that neither the Moores nor Gates had anything approaching the capital necessary to make the purchase. It was just what Carnegie had suspected: a despicable exercise in speculation, made all the more distasteful by the secretive and self-serving participation of his longtime partners. Over the years, Carnegie had put up with a great deal from Frick. And he understood the Machiavellian impulse at the heart of mergers and buyouts. But the fact that Frick and Phipps had tried to dupe him and stood to profit at the expense of the other partners by the sale of their company was more than he could bear. Good old-fashioned business machinations were one thing; outright thievery was another.

But, despite his outrage, Carnegie, for the moment, had little recourse. He had taken the option, signed the agreement, and was obligated to accept the payment for his share of Carnegie Steel the moment that the Moores and “Bet A Million” Gates showed up with the cash in hand. All Carnegie could do was wait and stew … … until fate once again saved him. A sudden downturn on Wall Street made many investors skittish, and even those with the wherewithal, such as J. P. Morgan, shied away from dealing with the likes of Moore and Gates. In the end, no one stepped forward with the necessary funds.

At the time they had made the option payment, they had extracted a verbal promise from Carnegie that he would refund any part that had been put up by Carnegie Steel partners. But the Scotsman drew the line at honoring promises made to men he now considered thieves, and his refusal to return any monies to Frick and Phipps must have given him great glee.

Whatever the truth, it is said that, in later years, Carnegie would delight in taking guests on a tour of his new manor at Skibo, renovations to which had cost just a bit over $1 million. Following the inevitable burst of compliments, Carnegie would respond with an airy wave of his hand. “It’s nothing,” he would say. “Just a nice little present from Mr. Frick.”

Final Break

ONE WONDERS HOW MUCH of Frick’s so-called villainy—actual or embellished—would have been forgiven by Carnegie had Charles Schwab not been on the scene. Frick had resigned twice before, only to be coaxed back into the fold. But now, with profits headed for an astronomical $40 million in 1900, Carnegie and those around him could afford to spurn the manager they had once touted as without peer.

It seems likely that Frick had some premonition of what was coming, but his response was hardly less than if he’d been blindsided. Schwab recalled that as he sat in the quiet drawing room, watching Frick read through his painstakingly composed letter, he had seldom seen a person so consumed by fury. Moments later, Schwab was fleeing out the door, with Frick’s angry imprecations cutting the chill December air in his wake. For all his attempts at diplomacy, it was Schwab who’d had to bear the brunt of Frick’s temper. To the board itself, Frick’s written response was uncharacteristically mild. When that body convened on the fifth of December, they read simply this: Gentlemen: I beg to present my resignation as a member of your Board. Yours very truly, H. C. Frick Never had a coup d’état gone more smoothly—or so it must have seemed. With the troublesome Frick out of the way at last and the able Schwab maintaining a firm hand on the controls, Carnegie could envision only smooth sailing. But then, so did the passengers on the Titanic.

As Frick had proven to be an obstruction to the continued and efficient operation of their mighty leviathan of steel, the document stated, the board had no choice but to invoke the provisions of the Iron Clad Agreement. Frick’s interest in the company must forthwith be surrendered, his compensation fixed at book value and not a penny more. Frick would receive about $1.5 million for stock that was worth at least ten times as much. Next door, Schwab might not have been able to make out the exact words the two men traded next, but he understood that the air had become plenty “thick.” Frick was on his feet by now, his chair tipping backward with a crash. “For years I have been convinced there is not an honest bone in your body,” he shouted at Carnegie. “Now I know that you are a god damned thief.” He crumpled up the document and tossed it aside. “We’ll have a judge and jury of Allegheny County decide what you are to pay me,” he added. He spun around his desk, advancing on Carnegie with his fists raised.

…it was the last meeting between Andrew Carnegie and Henry Clay Frick.

Frick filed suit, charging, among other things, that Carnegie had unjustly attempted to force him out of the company and acquire his holdings at a sum far below their value. Most distressing to Carnegie was the fact that the details of the company’s business affairs were laid out in the accompanying brief.

Furthermore, Frick’s attempt to force a revaluation of the company was bad enough, but if documents held by Frick were widely publicized—revealing that Carnegie had refused to renew the option for the Moore brothers’ purchase unless the value of the property was raised to a more rightful (by Carnegie’s own reckoning) $500 million—it would forever hamstring efforts to manipulate the value of his holdings and buy out troublesome partners for a song.

To Carnegie, that such information concerning the inner workings of the company should be made public was an affront, an embarrassment, and, most important, a disadvantage to doing business.

Carnegie found himself under pressure from Republican Party leaders desperate to avoid another scandal that might sway the upcoming presidential election, as the Homestead Strike had done in 1892.

In the end, and for once, reason prevailed between the two men, and a Solomonic compromise was laid out: Carnegie Steel, to be valued at $250 million, and Henry Frick Coke, to be valued at $70 million, would be merged.

…on March 19, 1900, Henry Clay Frick would remove himself from any role in the management of the new company. In return, he would receive about $15.5 million in stock and nearly $16 million in 5-percent first-mortgage bonds. It was a tidy sum compared to the $1.5 million pittance he would have received under the Iron Clad Agreement, and also a sight better than if the Moore deal had gone through. Incidentally, Frick also received some relief in the dispute over coke prices: the two would split the difference, with Carnegie paying HCF Coke half of its outstanding bill. Perhaps it had cost him a job and the friendship of Andrew Carnegie. Then again, he had $31 million with which to console himself.

U.S. Steel Sale

Instead of being content to purchase from Carnegie the raw steel from which they made such finished products as wire and nails and tubes and tin plate, they had begun to produce steel billets themselves, pioneering the concept of vertical integration.

Carnegie Steel could use its own rail line to carry coke from Pittsburgh to Conneaut to fuel the furnaces, then use the same cars to return to Pittsburgh with Minnesota iron ore offloaded at the Conneaut docks. Thus they could transport the raw materials for virtually nothing.

Morgan understood the folly of a long-term battle with the Carnegie Company, a firm that controlled its own sources of raw materials, transport, and manufacture, and that was far more deeply capitalized than his or any other of the upstarts. They might stay in the game for a while, and they might put a dent in Carnegie’s armor, but in the end, Carnegie would run them into the ground, every one. In Morgan’s mind there was only one course of action, and he did not hesitate. Key to his plan was Carnegie’s alter ego, Charles Schwab.

It took the whole of the night, but in the end this group gave to Schwab’s utopian concepts a habitation and a name. The United States Steel Corporation would be the embodiment of all that Schwab had envisioned. Only one question remained: How much would it take to get Andrew Carnegie to sell?

Over lunch, Schwab may not have admitted throwing the golf match, but he made a clean breast of his intentions. He was sitting across from Carnegie with what was essentially a blank check. What figure did Carnegie want him to insert?

“Name your price, Andy. Just name your price.” Schwab’s words echoed in his mind.

When Morgan examined this penciled document, he glanced casually up at Schwab and said, simply, “I accept this price.” With that, one of the most storied deals in the history of American business had been done.

As he was leaving, Morgan took Carnegie’s hand and said, “Mr. Carnegie, I want to congratulate you on being the richest man in the world.” Whether that was an overstatement is difficult to say. But Carnegie’s share—about $225 million—did represent the largest liquid fortune in the world at the time.

Legacy and Peace

Less than two years into his tenure, often at odds with the “outsiders” who had purchased the Carnegie Company, and piqued by Frick’s continuing influence on the board, Schwab resigned, to be replaced by Elbert H. Gary, one of the firm’s original architects. Gary remained at the helm of U.S. Steel for more than twenty-six years, until his death in 1927. And for more than fifteen of those years, he counted on the advice of his partner and senior board member, Henry Clay Frick.

…in 1905, Frick made what for him was a momentous concession. No longer could any company find its way by running roughshod over its competition, Frick said. “Gradually the whole fabric of American industry, commerce, and finance has grown into intersupporting relationships, the result of a sensible understanding of the present and the future.” It is debatable whether the man who had once thrown a striking miner into a creek had altogether lost the desire to grind the competition into dust. But he had at least learned to pay lip service to the concept of mutual dependency.

In 1911, somewhat overwhelmed by the task of giving away money, he made his single greatest gift, endowing the Carnegie Corporation of New York, formed for “the advancement and diffusion of knowledge,” with $125 million. The corporation was to oversee many of the projects already undertaken, as well as to create a board of trustees that would assume the burden of determining worthy recipients for the remainder of Carnegie’s fortune, which totaled about $180 million. Today the Carnegie Corporation’s endowment is valued at about $1.8 billion and continues its work in teacher education, urban school development, the improvement of the economy, and increased participation of the citizenry in the political process.

In return for Taft’s efforts to secure a network of peace treaties between the United States and other major powers, Carnegie would contribute $10 million to endow the Carnegie Endowment for International Peace, “to promote a thorough and scientific investigation and study of the causes of war and of the practical methods to prevent and avoid it.” While Taft did succeed in reaching agreement with Britain and France, various political blunders resulted in the failure to have those agreements ratified by the U.S. Senate. It was a bitter blow to Carnegie, and the outbreak of hostilities in Europe affected him even more deeply. Informed by Louise in August 1914 of Britain’s declaration of war on Germany, Carnegie collapsed into a chair. “All my aircastles have fallen about me like a house of cards,” he muttered, presaging an emotional decline that would continue to the end of his days.

Still, America’s joining of the fray affected Carnegie profoundly, and this time the effects were physical as well as emotional. He suffered a severe attack of influenza that confined him to his bed for several days and weakened him so greatly that nurses would care for him in his New York home from that point forward.

The end of “the war to end all wars” renewed Carnegie’s sense of hope, for he saw in the aftermath the possibility of effecting treaties among nations that had been derailed just a few years before.

Though confined to a sickbed and apparently willing to let bygones be bygones when it came to the business battles of the past, the eighty-four-year-old Carnegie could not shake his dream of a world without war. Frick would have none of it. Though he would turn seventy in a few short months, he was still aghast at the notion of aligning oneself with the weaker or less fortunate, and bent on forging alliances with like-minded men of fiber.