Soon after being deposed as president of the Union Pacific, Mr. Scott[31] resolved upon the construction of the Texas Pacific Railway. He telegraphed me one day in New York to meet him at Philadelphia without fail. I met him there with several other friends, among them Mr. J.N. McCullough, vice-president of the Pennsylvania Railroad Company at Pittsburgh. A large loan for the Texas Pacific had fallen due in London and its renewal was agreed to by Morgan & Co., provided I would join the other parties to the loan. I declined. I was then asked whether I would bring them all to ruin by refusing to stand by my friends. It was one of the most trying moments of my whole life. Yet I was not tempted for a moment to entertain the idea of involving myself. The question of what was my duty came first and prevented that. All my capital was in manufacturing and every dollar of it was required. I was the capitalist (then a modest one, indeed) of our concern. All depended upon me. My brother with his wife and family, Mr. Phipps and his family, Mr. Kloman and his family, all rose up before me and claimed protection.
I told Mr. Scott that I had done my best to prevent him from beginning to construct a great railway before he had secured the necessary capital. I had insisted that thousands of miles of railway lines could not be constructed by means of temporary loans. Besides, I had paid two hundred and fifty thousand dollars cash for an interest in it, which he told me upon my return from Europe he had reserved for me, although I had never approved the scheme. But nothing in the world would ever induce me to be guilty of endorsing the paper of that construction company or of any other concern than our own firm.
I knew that it would be impossible for me to pay the Morgan loan in sixty days, or even to pay my proportion of it. Besides, it was not that loan by itself, but the half-dozen other loans that would be required thereafter that had to be considered. This marked another step in the total business separation which had to come between Mr. Scott and myself. It gave more pain than all the financial trials to which I had been subjected up to that time.
It was not long after this meeting that the disaster came and the country was startled by the failure of those whom it had regarded as its strongest men. I fear Mr. Scott's premature death[32] can measurably be attributed to the humiliation which he had to bear. He was a sensitive rather than a proud man, and his seemingly impending failure cut him to the quick. Mr. McManus and Mr. Baird, partners in the enterprise, also soon passed away. These two men were manufacturers like myself and in no position to engage in railway construction.
The business man has no rock more dangerous to encounter in his career than this very one of endorsing commercial paper. It can easily be avoided if he asks himself two questions: Have I surplus means for all possible requirements which will enable me to pay without inconvenience the utmost sum for which I am liable under this endorsement? Secondly: Am I willing to lose this sum for the friend for whom I endorse? If these two questions can be answered in the affirmative he may be permitted to oblige his friend, but not otherwise, if he be a wise man. And if he can answer the first question in the affirmative it will be well for him to consider whether it would not be better then and there to pay the entire sum for which his name is asked. I am sure it would be. A man's means are a trust to be sacredly held for his own creditors as long as he has debts and obligations.
Notwithstanding my refusal to endorse the Morgan renewal, I was invited to accompany the parties to New York next morning in their special car for the purpose of consultation. This I was only too glad to do. Anthony Drexel was also called in to accompany us. During the journey Mr. McCullough remarked that he had been looking around the car and had made up his mind that there was only one sensible man in it; the rest had all been "fools." Here was "Andy" who had paid for his shares and did not owe a dollar or have any responsibility in the matter, and that was the position they all ought to have been in.
Mr. Drexel said he would like me to explain how I had been able to steer clear of these unfortunate troubles. I answered: by strict adherence to what I believed to be my duty never to put my name to anything which I knew I could not pay at maturity; or, to recall the familiar saying of a Western friend, never to go in where you couldn't wade. This water was altogether too deep for me.
Regard for this rule has kept not only myself but my partners out of trouble. Indeed, we had gone so far in our partnership agreement as to prevent ourselves from endorsing or committing ourselves in any way beyond trifling sums, except for the firm. This I also gave as a reason why I could not endorse.
During the period which these events cover I had made repeated journeys to Europe to negotiate various securities, and in all I sold some thirty millions of dollars worth. This was at a time when the Atlantic cable had not yet made New York a part of London financially considered, and when London bankers would lend their balances to Paris, Vienna, or Berlin for a shadow of difference in the rate of interest rather than to the United States at a higher rate. The Republic was considered less safe than the Continent by these good people. My brother and Mr. Phipps conducted the iron business so successfully that I could leave for weeks at a time without anxiety. There was danger lest I should drift away from the manufacturing to the financial and banking business. My successes abroad brought me tempting opportunities, but my preference was always for manufacturing. I wished to make something tangible and sell it and I continued to invest my profits in extending the works at Pittsburgh.
The small shops put up originally for the Keystone Bridge Company had been leased for other purposes and ten acres of ground had been secured in Lawrenceville on which new and extensive shops were erected. Repeated additions to the Union Iron Mills had made them the leading mills in the United States for all sorts of structural shapes. Business was promising and all the surplus earnings I was making in other fields were required to expand the iron business. I had become interested, with my friends of the Pennsylvania Railroad Company, in building some railways in the Western States, but gradually withdrew from all such enterprises and made up my mind to go entirely contrary to the adage not to put all one's eggs in one basket. I determined that the proper policy was "to put all good eggs in one basket and then watch that basket."