Fiction Anecdote / Think and Grow Rich
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When on the evening of December 12th, 1900 some 80 of the nation's financial nobility gathered in the banquet hall of the University Club on Fifth Avenue to do honor to a young man from out of the West. Not half a dozen of the guests realized that they were to witness the most significant episode in American industrial history. J Edward Simmons and Charles Stuart Smith, their hearts full of gratitude for the lavish hospitality bestowed on them by Charles M Schwab. During a recent visit to Pittsburgh had arranged the dinner to introduce the 38 year old steel man to Eastern banking society, but they didn't expect him to stampede the convention. They warned him in fact that the bosoms within New York's stuffed shirts would not be responsive to oratory. And that if he didn't want to bore the Stillman's or the Harriman's or the Vanderbilts, he had better limit himself to 15 or 20 minutes of polite vapor rings and let it go with that. Even John Pierpont Morgan's sitting on the right hand of Schwab has become his imperial dignity intended to grace the banquet table with his presence only briefly. And so far as the press and public were concerned, the whole affair was of so little moment that no mention of it found its way into print the next day. So the two hosts and their distinguished guests ate their way through the usual seven or 8 courses. There was little conversation and what there was of it was restrained. Few of the bankers and brokers had met Schwab whose career had flowered along the banks of the Monongahela and none knew him well. But before the evening was over, they and with the money master Morrigan were to be swept off their feet and a billion dollar baby, the United States Steel Corporation was to be conceived. It is perhaps unfortunate for the sake of history that no record of Charlie Schwab's speech at the dinner ever was made. He repeated some parts of it at a later date during a similar meeting with Chicago bankers. And still later when the government brought suit to dissolve the Steel Trust, he gave his own version from the witness stand of the remarks that stimulated Morgen into a frenzy of financial activity. It is probable however, that it was a homely speech, somewhat ungrammatical for the niceties of language never bothered Schwab full of epigram and threaded with wit. But aside from that, it had a galvanic force and effect upon the five billions of estimated capital that was represented by the diners After it was over. And the gathering was still under its spell. Although Schwab had talked for 90 minutes, Morgen led the orator to a recessed window where dangling their legs from a high uncomfortable seat. They talked for an hour more. The magic of the Schwab personality had been turned on for force for what was more important and lasting was the full fledged clearcut program he laid down for the aggrandizement of steel. Many other men had tried to interest Morgen in slapping together a steel trust after the pattern of the biscuit y and heap sugar, rubber, whiskey, oil or chewing gum combinations. John W Gates, the gambler had urged it but Morgen distrusted him. The more boys, Bill and Jim Chicago's stock jobbers who had glued together a match trust and a cracker corporation had urged it and failed. Albert H. Gary, the sanctimonious country lawyer wanted to foster it, but he wasn't big enough to be impressive until Schwab's eloquence took Jpmorgan to the heights from which he could visualize the solid results of the most daring financial undertaking ever conceived. The project was regarded as a delirious dream of easy money crackpots. The financial magnetism that began a generation ago to attract thousands of small and sometimes inefficiently managed companies into large and competition crushing combinations had become operative in the steel world through the devices of that Joe Vo business pirate John W Gates Gates already had formed the American steel and wire company out of a chain of small concerns and together with Morrigan had created the Federal Steel Company, the National Tube and American Bridge Company's were two more Morgen concerns. And the more brothers had forsaken the match and Cookie business to form the American group, tinplate steel hoop, sheet steel and Nationals steel company. But by the side of Andrew Carnegie's giant vertical trust, a trust owned and operated by 53 partners. Those other combinations were picky yun. They might combine to their heart's content, but the whole lot of them knew they couldn't make a dent in the Carnegie organization. And Morrigan knew it. The eccentric called Scott knew it too from the magnificent heights of Skibo Castle he had viewed first with amusement. Then with resentment, the attempts of Morgan's smaller companies to cut into his business when the attempts became too bold. Carnegie's tempo was translated into anger and retaliation. He decided to duplicate every mill owned by his rivals hitherto. He hadn't been interested in wire pipe hoops or sheet instead he was content to sell such companies, the raw steel and let them work it into whatever shape they wanted. Now, with the Schwab's chief enable Lieutenant, he planned to drive his enemies to the wall. So it was in the speech of Charles M. Schwab Morgen saw the answer to his problem of combination, a trust without Carnegie giant of them all would be no trust at all. A plum pudding, as one writer said, without the plums, Schwab's speech on the night of December 12, undoubtedly carried the inference though not the pledge that the vast Carnegie Enterprise could be brought under the more content he talked of the word future for steel, of reorganization, for efficiency of specialization of the scrapping of unsuccessful mills and concentration of efforts on the flourishing properties of economies in the all traffic of economies in overhead and administration departments of capturing foreign markets. More than that He told the Buccaneers among them, wherein they lie, the errors of their customary piracy, their purposes he inferred had been to create monopolies, raise prices and pay themselves for fat dividends out of privilege. Schwab condemned the system in his heartiest manner. The short sightedness of such a policy. He told his heroes lay in the fact that it restricted the market in an era when everything cried for expansion by cheapening the cost of steel. He argued an ever expanding market would be created. More uses for steel would be devised and a goodly portion of the world trade could be captured actually though he did not know it. Schwab was an apostle of modern mass production. So the dinner at the University Club came to an end. Morgen went home to think about Schwab's rosy predictions. Schwab went back to Pittsburgh to run the steel business for We Andra Conde G. While Gary and the rest went back to the stock tickers to fiddle around in anticipation of the next move. It was not long coming. It took Morgen about one week to digest the feast of reason. Schwab had placed before him when he had assured himself that no financial indigestion was to result. He sent for Schwab and found the young man rather coy. Mr Carnegie Schwab indicated might not like it. If he found his trusted company, president had been flirting with the emperor of Wall Street. The street upon which Carnegie was resolved never to tread. Then it was suggested by John W Gates. The go between that if Schwab happened to be in the Bellevue hotel in Philadelphia. Jpmorgan might also happen to be there when Schwab arrived. However, Morgen was inconveniently ill at his New York home and so on the elder man's pressing invitation, Schwab went to New York and presented himself at the door of the financiers library. Now certain economic historians have professed the belief that from the beginning to the end of the drama, the stage was set by Andrew Carnegie that that did it to Schwab. The famous speech, the Sunday night conference between Schwab and the Money King were events arranged by the Canny Scot. The truth is exactly the opposite. When Schwab was called in to consummate the deal, he didn't even know whether the little boss as Andrew was called would so much as listened to an offer to sell, particularly to a group of men whom Andrew regarded as being endowed with something less than holiness. But Schwab did take into the conference with him in his own handwriting, six sheets of copper plate figures representing to his mind, the physical worth and the potential earning capacity of every steel company he regarded as an essential star in the new metal firmament foremen pondered over these figures all night. The chief of course, was more gun steadfast in his belief in the divine right of money with him was his aristocratic partner, Robert Bacon, a scholar and a gentleman. The third was John W Gates, who Morgen scorned as a gambler and used as a jewel. The fourth was Schwab who knew more about the processes of making and selling steel than any whole group of men than living throughout the conference. The Pittsburghers figures would never question if he said a company was worth so much, then it was worth that much and no more he was insistent to upon including in the combination, only those concerns he nominated. He had conceived a corporation in which there would be no duplication, not even to satisfy the greed of friends who wanted to unload their companies upon the broad Morgen shoulders. Thus, he left out by design, a number of the larger concerns upon which the Walruses and carpenters of Wall Street had cast hungry eyes. When dawn came, Morgen rose and straightened his back. Only one question remained. Do you think you can persuade Andrew Carnegie to sell? He asked, I can try said Schwab, if you can get him to sell. I will undertake the matter. Said Morrigan So far so good. But would Carnegie's sell? How much would he demand? Schwab? Thought around $320 million, what would he take payment in common or preferred stocks, bonds? Cash? Nobody could raise a third of a billion dollars in cash. There was a golf game in January on the frost cracking heath of the ST Andrews links in Westchester with Andrew bundled up in sweaters against the cold and Charlie talking valuably as usual to keep his spirits up, but no word of business was mentioned until the pair sat down in the cozy warmth of the Carnegie cottage hard by Then with the same persuasiveness that had hypnotized 80 millionaires at the university club. Schwab poured out the glittering promises of retirement in comfort of untold millions to satisfy the old man's social. Caprices. Carnegie capitulated, wrote a figure on a slip of paper handed it to Schwab and said, all right, that's what we sell for. The figure was approximately $400 million $320 million $80 million dollars to represent the increased capital value. Over the previous two years Later, on the deck of a transatlantic liner, the Scotsman said ruefully to more gun. I wish I had asked you for 100 million more if you had asked for it. You'd have gotten it. Morgen told him cheerfully.