Carnegie's other two more celebrated associates, Henry C. Frick and Charles M. Schwab, were younger men. Frick was cold and masterful, as hard, unyielding, and effective as the steel that formed the staple of his existence. Schwab was enthusiastic, warm-hearted, and happy-go-lucky; a man who ruled his employees and obtained his results by appealing to their sympathies. The men of the steel yards feared Frick as much as they loved "Charlie" Schwab. The earliest glimpses which we get of these remarkable men suggest certain permanent characteristics: Frick is pictured as the sober, industrious bookkeeper in his grandfather's distillery; Schwab as the rollicking, whistling driver of a stage between Loretto and Cresson. Frick came into the steel business as a matter of deliberate choice, whereas Schwab became associated with the Pittsburgh group more or less by accident.
The region of Connellsville contains almost 150 square miles underlaid with coal that has a particular heat value when submitted to the process known as coking. As early as the late eighties certain operators had discovered this fact and were coking this coal on a small scale. It is the highest tribute to Frick's intelligence that he alone foresaw the part which this Connellsville coal was to play in building up the Pittsburgh steel district. The panic of 1873, which laid low most of the Connellsville operators, proved Frick's opportunity. Though he was only twenty-four years old he succeeded, by his intelligence and earnestness, in borrowing money to purchase certain Connellsville mines, then much depreciated in price. From that moment, coke became Frick's obsession, as steel had been Carnegie's. With his early profits he purchased more coal lands until, by 1889, he owned ten thousand coke ovens and was the undisputed "coke king" of Connellsville. Several years before this, Carnegie had made Frick one of his marshals, coke having become indispensable to the manufacture of steel, and in 1889 the former distiller's accountant became Carnegie's commander-in-chief. Probably the popular mind associates Frick chiefly with the importation of Slavs as workmen, with the terrible strikes that followed in consequence at Homestead, with the murderous attack made upon him by Berkman, the anarchist, and with his bitter, long drawn-out quarrel with Andrew Carnegie. Frick's stormy career was naturally the product of his character.
On the other hand, temperamental pliability and lovableness were the directing traits of the man who, in his way, made contributions quite as solid to the extension of the Pittsburgh steel industry. Schwab worked with the human material quite as successfully as other men worked with iron ore, Bessemer furnaces, and coal. He handled successfully what was perhaps the greatest task in management ever presented to a manufacturer when to him fell the job of reorganizing the Homestead Works after the strike of 1892 and of transforming thousands of riotous workmen into orderly and interested producers of steel. In three or four years practically every man on the premises had become "Charlie" Schwab's personal friend, and the Homestead property which, until the day he took charge, had been a colossal failure, had developed into one of the most profitable holdings of the Carnegie Company. As his reward Schwab, at the age of thirty-four, was made President of the Carnegie corporation. Only sixteen years before he had entered the steel works as a stake driver at a dollar a day.
When the Carnegie group began operations in the early seventies, American steel, as a British writer remarked, was a "hot-house product"; yet in 1900 the Carnegie partners divided $40,000,000 as the profits of a single year. They had demonstrated that the United States, despite the high prices that prevailed everywhere, could make steel more cheaply than any other country. Foreign observers have offered several explanations for this achievement. American makers had an endless supply of cheap and high-grade ore, cheaper coke, cheaper transportation, and workmen of a superior skill. We must give due consideration to the fact that their organization was more flexible than those of older countries, and that it regulated promotion exclusively by merit and gave exceptional opportunities to young men. American steel makers also had scrap heaps whose size astounded the foreign observers; they never hesitated to discard the most expensive plants if by so doing they could reduce the cost of steel rails by a dollar a ton. Machinery for steel making had a more extensive development in this country than in England or Germany. Mr. Carnegie also enjoyed the advantages of a high protective tariff, though about 1900 he discovered that his extremely healthy infant no longer demanded this form of coddling. But probably the Carnegie Company's greatest achievement was the abolition of the middleman. In a few years it assembled all the essential elements of steel making in its own hands. Frick's entrance into the combination gave the concern an unlimited supply of the highest grade of coking coal. In a few years, the Carnegie interests had acquired great holdings in the Minnesota ore regions.
At first glance, the Pittsburgh region seems hardly the ideal place for the making of steel. Fortune first placed the industry there because all the raw materials, especially iron ore and coal, seemed to exist in abundance. But the discovery of the Minnesota ore field, which alone could supply this essential product in the amounts which the furnaces demanded, immediately deprived the Pittsburgh region of its chief advantage. As a result of this sudden development, the manufacturers of Pittsburgh awoke one morning and discovered that their ore was located a thousand miles away. To bring it to their converters necessitated a long voyage by water and rail, with several reloadings. They overcame these obstacles by developing machinery for handling ore and by acquiring the raw materials and the connecting links of transportation. Ore which had been lying in the wilds of Minnesota on Monday morning was thus brought to Pittsburgh and made into steel rails or bridges or structural shapes by Saturday night. The Carnegie Company first acquired sufficient mineral lands to furnish ore for several generations and organized an ore fleet which transported the products of the mines through the lakes to ports on Lake Erie, particularly Ashtabula and Conneaut. The purchase of the Bessemer and Lake Erie Railroad, which extended from Conneaut to Pittsburgh, made this great transportation route complete. Besides freeing their business from uncertainty, this elimination of middlemen naturally produced great economies.
Probably Andrew Carnegie's shrewdness in naming his first plant the J. Edgar Thompson Steel Works, after the powerful President of the Pennsylvania Railroad, and in making Thompson and his associate Scott partners, had much to do with his early success. These two gentlemen conferred two priceless favors upon the struggling enterprise. They became large purchasers of steel rails and their influence in this direction extended far beyond the Pennsylvania Railroad. What was perhaps even more important, they gave the Carnegie concerns railroad rebates. The use of rebates, as a method of stifling competition and building up a great industrial prosperity, is an offense which the popular mind associates almost exclusively with the Standard Oil Company, yet the Carnegie fortune, as well as that of John D. Rockefeller, received an artificial stimulation of this kind.
Though incomparably the greatest of the American steel companies, the Carnegie Steel Company by no means monopolized the field. In forty years, indeed, an enormous steel area had grown up, including western Pennsylvania, Ohio, Indiana, and Illinois, practically all of it drawing its raw materials from those same teeming ore lands in the Lake Superior region. Johnstown, Youngstown, Cleveland, Lorain, Chicago, and Joliet, became headquarters of steel production almost as important as Pittsburgh itself. Two entirely new steel kingdoms, each with its own natural reservoirs of ore, grew up in Colorado and Alabama. The Colorado Fuel and Iron Company, which possessed apparently inexhaustible mineral lands in Colorado, Wyoming, Utah, New Mexico, and California, itself produces not far from three million tons a year, almost half the present production of Great Britain. The Alabama steel country has developed in even more spectacular fashion. Birmingham, a hive of southern industry placed almost as if by magic in the leisurely cotton lands of the South, had no existence in 1870, when the Pittsburgh prosperity began. In the Civil War, the present site of a city with a population of 140,000 was merely a blacksmith shop in the fork of the roads. Yet this district has advantages for the manufacture of steel that have no parallel elsewhere. The steel companies which are located here do not have to bring their materials laboriously from a distance but possess, immediately at hand, apparently endless store of the three things needful for making steel—iron ore, coal, and limestone. All these territories have their personal romances and their heroes, many of them quite as picturesque as those of the Pittsburgh group.
It is doubtful indeed if American industry presents any figure quite as astonishing and variegated as that of John W. Gates, the man who educated farmers all over the world to the use of wire fencing. Half charlatan, half enthusiast, speculator, gambler, a man who created great enterprises and who also destroyed them, at times an upbuilding force and at other times a sinister influence, Gates completely typified a period in American history that, along with much that was heroic and splendid, had much also that was grotesque and sordid. The opera-bouffe performance that laid the foundations of Gates's great industry was in every way characteristic of this period. In 1871 Gates, then a clerk in a hardware store at twenty-five dollars a week, made his first attempt to sell barbed wire in the great cattle countries of the southwestern States. When the cattle men in Texas first saw this barbed wire, they ridiculed the idea that it could ever hold their steers. Gates selected a plaza in San Antonio, fenced it in with his new product, and invited the enemies to bring along their wildest specimens About thirty of Texas' most ferocious cattle, placed within the enclosure, spent a whole afternoon plunging at the barbs in a useless and tormenting attempt to escape. This spectacular demonstration of efficiency launched Gates fairly upon his career. He immediately began to sell his new fencing on an enormous scale; in a few years the whole world was demanding it, and it has become, as recent events have disclosed, a particularly formidable munition of war. The American Steel and Wire Company, one of the greatest of American corporations, was the ultimate outgrowth of that lively afternoon in San Antonio.
In 1900 the Carnegie Steel Company was making one-quarter of all the Bessemer steel produced in the United States. It owned in abundance all the properties which were essential to its completed output—coal, limestone, steel ships, railroads, and steel mills. In twenty-five years, from 1875 to 1900, this manufacturing enterprise had paid the Carnegie group profits aggregating $133,000,000, profits which, in the closing years of the century, had increased at a stupendous rate. In 1898 Carnegie and his associates had divided $11,500,000, in 1899 their earnings had grown to $25,000,000, and in 1900 the aggregate had suddenly jumped to $40,000,000. Of this latter sum Carnegie received $25,000,000, Phipps $5,500,000, Frick $2,600,000, and Schwab $1,300,000. And Carnegie's little group could see no limit to the growth of their business and the expansion of their personal fortunes. Yet at that very moment Carnegie was planning to play the part of a Charles V with the large empire which he had pieced together—to abdicate his throne, retire from business life, and spend his remaining days in quiet.
Many influences were impelling him to this decision. His triumph, stupendous as it had been, also had had its alloy of sorrow. Indeed this little Scotsman, now at the crowning of his glory, was one of the loneliest figures in the world. Practically all the forty men with whom he had been closely associated had vanished from the scene. He had quarreled with his playmate and lifelong partner, Henry Phipps, and was in the worst possible business and personal relations with Frick. He had no son to carry on his work. He had become greatly interested in his philanthropies, and he had declared that the man who died rich died disgraced. Moreover, new influences were rising in the steel trade with which Carnegie had little sympathy. Its national capital seemed to be shifting from Pittsburgh to Wall Street. New men who knew nothing about steel but who possessed an intimate acquaintance with stocks and bonds—J. Pierpont Morgan, George W. Perkins, and their associates—were branching out as controllers of large steel interests. Carnegie had no interest in Wall Street; he has declared that he never speculated in his life and that he would immediately dissociate himself from any partner who would do so. This Wall Street coterie, in the years from 1898 to 1900, had made several large combinations in the steel trade. That was the era when the trust mania had gained possession of the American mind and when its worst features displayed themselves. The Federal Steel Company, the American Bridge Company, the American Steel and Wire, the National Tube Company, all representing the assembling of large works which had been engaged as rivals in similar enterprises, were launched, with the usual accompaniments of "underwriting syndicates," watered stock, and Wall Street speculation. This sort of thing made no appeal to Andrew Carnegie. His huge enterprise had always remained essentially a copartnership, and he had frequently expressed his abhorrence of trusts. Yet, in spite of his wish to retire from business and in spite of his avowed intention to die poor, Carnegie now adopted the policy of the Sibylline leaves to all prospective purchasers. Moore and Reid would have purchased his interest for $157,000,000; when Rockefeller came along the price had risen to $250,000,000; when the oil man shook his head and retired, Carnegie immediately raised his price to $500,000,000. It is doubtful whether he would have sold at all had not his Wall Street competitors begun to encroach on a field which the little Scotsman understood quite as well as they—the production and merchandising of steel. The newly organized combinations were completing elaborate plans to go after Carnegie's business. Then Carnegie, who had practically retired from active life, again arrayed himself in his shirt-sleeves, abandoned his career of authorship, and resumed his early trade. His first attacks produced an immense reverberation in the House of Morgan. He purchased a huge tract at Conneaut and began building a gigantic plant for the manufacture of steel tubes, a business in which he had not hitherto engaged. This was a blow aimed at one of Morgan's pet new creations, the National Tube Company. Should Carnegie finish his works, there was no doubt the Morgan enterprise would be ruined, for the new plant would be far more modern and so could manufacture the product at a much lower price; and, with Charles M. Schwab as active manager, what possible chance would the older corporation have? But Carnegie struck his enemy at an even more vulnerable point. The Pennsylvania Railroad had a practical monopoly of traffic in and out of Pittsburgh, and Pittsburgh "created" more freight business than any other city in the world. Carnegie lent his powerful support to George J. Gould, who was then extending his railroad system into the preempted field and was also making surveys and had financed a company to build an entirely new railroad from Pittsburgh to the Atlantic Coast. As Carnegie himself controlled the larger part of the freight that made Pittsburgh such an essential feeder to railroads, his new enterprise caused the greatest alarm. At the same time Carnegie equipped a new and splendid fleet of ore ships, his purpose being to enter a field of transportation which John D. Rockefeller had found extremely profitable.