The day Andrew Carnegie decided there was more to life than money

Published on Monday 2 December 2002 00:00

IN 1848, the Carnegies emigrate from Dunfermline to America and Andrew works as a bobbin boy in a textile mill, earning $1.20 a week.

Andrew Carnegie was certain his destiny lay among the lions of Wall Street; during business negotiations he had been seduced by New York, the pre-eminent financial centre in the United States. In late 1867, he decided to move there to take up residence in a city ruled over by the notorious “Boss” Tweed and his Tammany Hall cronies, as well as Wall Street scoundrels such as “Jubilee” Jim Fisk and Jay Gould.

“No large concern could very well get on without being represented there,” he later wrote, explaining his decision, and he had grand visions of an empire, no doubt. In New York, the streets were awash with money, and there was ample opportunity for him to secure more lucrative contracts for his iron and bridge-building concerns, as well as to capitalise on investment prospects not available in Pittsburgh. The move also made sense for the Carnegie family because it amounted to a divide-and-conquer manoeuvre, with his brother Tom overseeing affairs in Pittsburgh.

Another motivating factor in Carnegie’s move was that New York, like London, was alluringly cosmopolitan, had a strong intellectual presence and offered a plethora of music, opera, and theatre, among other arts agreeable to him. Tom, who had finally married Lucy Coleman, took the Homewood house in Pittsburgh, while Andrew, who got to “keep” Mom, took up residence on lower Broadway in the plush St Nicholas Hotel, which had greatly impressed him when there for the Union Pacific meetings. He rented an office at 19 Broad Street and hung a sign on the door: Investments. That said it all – except that a year after his move an episode suggested Carnegie harboured doubts about the direction his life was taking. Exactly four years after his first crisis of conscience, when he had sought a consular position in Scotland, a second attacked Carnegie. In December 1868, he penned a surprising letter to himself: it was wrought with introspection as he questioned the purpose of his existence; it was a desperate attempt to reconcile his Scottish past with his American present; and it was a violent reaction to what he discovered in Gomorrah, the underside of Gotham, his newly adopted city.

The Christmas holiday season was in full swing and the St Nicholas Hotel shone, itself a spectacular ornament. Promoted as “the largest house of public entertainment in the world,” the six-story hotel boasted 600 rooms. Behind the white marble faade rising above Broadway were Carrara stairways and balustrades, fluted Corinthian columns, crystal gas-lit chandeliers, lofty frescoed ceilings, walnut wainscoting, hot running water, central heating, steam-powered washing machines and a telegraph in the lobby. There was even an army of private detectives to protect the clientele from prying eyes and unwanted visitors.

Here Carnegie and his mother were ensconced in adjoining apartments, pampered by servants on duty in the hotel’s opulent parlours and stately dining room. But as Carnegie sat at his desk on that cold December night and evaluated his various business endeavours and portfolio, the sparkling opulence faded and a certain year-end melancholy took hold. There was little satisfaction as he scribbled down his investments, noting the number of shares, dollar holdings, and income from more than 20 concerns. His personal assets were $400,000 that year, yielding a bountiful return of more than $56,000.

The top money winner was the Union Mills, which generated $20,000, while income from an old favourite, the Columbia Oil Company, had fallen to $2,000. Despite the material triumphs, something nagged at him. He wasn’t satisfied and, after completing his financial review, he mulled over his station in life. It was, he knew, of singular dimension: money. With deliberate penmanship, reflecting Carnegie’s deep reflection and forethought, he concisely expressed his thoughts:

December 1868

St Nicholas Hotel, N York

Thirty-three and an income of $50,000 per annum.

BY THIS two years I can so arrange all my business as to secure at least 50,000 per annum. Beyond this never earn – make no effort to increase fortune, but spend the surplus each year for benevolent purposes. Cast aside business forever except for others. Settle in Oxford and get a thorough education, making the acquaintance of literary men this will take three years active work – pay especial attention to speaking in public.

Settle then in London & purchase a controlling interest in some newspaper or live review & give the general management of it attention, taking a part in public matters especially those connected with education & improvement of the poorer classes.

Man must have an idol – the amassing of wealth is one of the worst species of idolatry. No idol more debasing than the worship of money. Whatever I engage in I must push inordinately therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery. I will resign business at 35, but during the ensuing two years, I wish to spend the afternoons in securing instruction, and in reading systematically.

A simple breakdown of the letter revealed both his internal turmoil and a template for living to purge his self-doubts. In the letter’s opening line was a simple statement of fact: he was rich. But then Carnegie’s thoughts immediately turned to philanthropy – not in the way of a charitable donation here and there, but as a continuous process, like running a business. Philanthropy as a business was a unique, bold and gratifying concept to him. To complement the enrichment of others, he would further improve himself, too, by seeking a better education, a desire lost in his pursuit of material progress.

Then, in the letter, he added the clause on public speaking. Why? So he could effectively take his message, whether it be on benevolence or improvement of the poorer classes, to the people as did his uncle Tom Morrison, a renowned public speaker. Also towards that end, like his hero Horace Greeley, Carnegie dreamed of owning a newspaper to serve as a platform for championing the lower class – only it was to be in London, a city that embodied culture and offered a stronger connection to his Scottish heritage than New York ever could.

In this enlightened course of life, words and money would be his weapons. Ah, money. Carnegie was surrounded by it at the St Nicholas, yet in the second half of his meditative letter he spurns it, condemns it and fears it. Not too long ago, however, he himself had worshipped money. He had gloated over his wealth to his friend Tom David. He had revelled in the pleasures and comforts money brought. He had believed his accumulation of the material reflected America’s grand progress. Not now. Yes, man must have an idol, he knew that, but not mammon.

Carnegie’s voice was pleading as he feared money would forever corrupt him, destroy any shred of his radical heritage, and he would become degraded beyond hope. Sadly, he recognised that no matter what course of life he pursued, he was condemned to always push inordinately – he must to avenge his father and to please his mother – so he had to be very careful to choose a dignified path. Just as his flitting to New York raised so many questions, so did this letter. Why the radical change in perspective? Did Carnegie really mean what he wrote or was he just being too hard on himself in a year-end fit of melancholy? Was it reactionary and impetuous? J Pierpont Morgan and John D Rockefeller were incapable of writing such a note, according to historian Joseph Frazier Wall, “nor would they have understood the man who did”.

In contrast to Carnegie, both Morgan and Rockefeller were secure in their respective industries and quite settled at home, and there was no impetus for them to question their purpose. Perhaps, after a year in New York, Carnegie simply missed Pittsburgh and his friends there, which forced emotions to the surface. He readily admitted his defection to New York was not easy: “The change was hard enough for me. For some time the Pittsburgh friends who came to New York were our chief source of happiness, and the Pittsburgh papers seemed necessary to our existence.”

Spiritual emptiness was certainly a factor; after all, Tom had married and was starting his own family, while Carnegie remained a bachelor, pampered and bullied by an overbearing mother. The notion of passionately loving a woman remained alien to him, except for the complicated bond with his heroic mother. Mother and son remained inseparable, she a haunting reminder of his father’s failure and the driving force in his metamorphosis from bobbin boy to capitalist.

Because he could only equate love to his mother, love was a platonic thing without physical desires. In fact, carnal love was repulsive to him, for as one of his close business associates reflected years later: “Carnegie frowned on anything savouring of the flesh and the devil.” Not that the puritan had much spare time for wooing, anyway. Like one of his other heroes, J Edgar Thomson, who didn’t marry until late in life, Carnegie was continuously travelling and deeply immersed in the man’s world of railroads and iron. Still, having a spouse was a piece of life Carnegie missed and began to explain why he desired the contrary: a semi-monastic existence studying at Oxford and becoming acquainted with literary men.

But there had to be even more behind the radical letter. New York City also inspired much of Carnegie’s severe backlash against money. Pittsburgh had its share of corruption and seedy politicians, and yes, Carnegie had dabbled in speculating before the railroad and insider stock trading. But all of this was nothing close to the scale of political corruption and crooked business ventures he discovered in New York.

While he was not a churchgoer, the city truly appeared to him not as Gotham, but as Gomorrah, the biblical city of sin upon which the Lord rained brimstone and fire. With the post-war reconstruction under way, money poured in from foreign lands as international bankers sought high returns from American industrialists thirsting for capital at any cost; money poured in to feed the steel buffaloes racing across the Great Plains; money poured in to develop the West and spur mining, lumbering, and cattle ranching; and money poured into the burgeoning brokerage houses that after the introduction of the stock ticker, patented in 1867, began to proliferate.

Opportunities for spectacular get-rich-quick schemes were also plentiful, especially in railroad stocks. Dirty speculators continuously knocked on Carnegie’s office door. “I was besieged with inquiries from all quarters in regard to the various railway enterprises with which I was connected,” he recalled.

The stock-market games played in 1867 and 1868 by Daniel Drew, Jim Fisk, and Jay Gould were particularly galling, especially their attempt to seize control of the Erie Railroad from Cornelius Vanderbilt, who was attempting to monopolise New York State railroads. It became known as the Erie War. And then there was Boss Tweed, who made money both on stock manipulation and from bribes. He epitomised the New York government’s corruption, which embarrassed the city’s elite.

In 1868, a prominent lawyer and diarist, George Templeton Strong, noted: “To be a citizen of New York is a disgrace. A domicile on Manhattan Island is a thing to be confessed with apologies and humiliation. The New Yorker belongs to a community worse governed by lower and baser blackguard scum than any city in Western Christendom.” New York had once been called the London of America, and that was what Carnegie was naively expecting. Instead, the sin of New York pricked his social conscience, which had been so callused in Blackstock’s and Hay’s factories, and he was suddenly inspired to lift mankind up.

But first he was resigned to working for two more years to ensure his financial independence. Then what? Would he be able to adhere to his proclamations? Would there still be a need? After all, New York did have a pleasant upside that might entice him and compromise his resolutions. As he and his mother strolled through the streets, they encountered all the luxuries affluence could buy.

At Stewart’s new department store on Broadway and Ninth Street was the coup de grce for shoppers. The five-story structure, built with cast iron and painted white, boasted 2,000 panes of French glass windows and Venetian-style arches, and it served customers with an army of 500 clerks and cash boys. RH Macy was busily expanding his four-story shop at Fourteenth and Sixth; toys could be had at FAO Schwarz; suits at Brooks Brothers and books at Brentano’s, including Horatio Alger’s first rags-to-riches novel, Ragged Dick, published in 1867.

The American Museum of Natural History would open in 1869 and the Metropolitan Museum of Art in 1870, providing Carnegie with some of the culture he craved. A favourite pastime he could indulge in for now was horseback riding in scenic 843-acre Central Park, which, after the Civil War, had become the fashionable place to walk, ride and drive. To reach the park, he was able to take a public omnibus from Wall Street, passing by the square, squat, fortress-like Croton Reservoir on Fifth Avenue and Forty-second Street, the future site of the magnificent public library. At the park, he was introduced to many strong-willed, independent women who relished riding and would suit Carnegie perfectly as a wife. Perhaps prior to his self-imposed exile to a monk-like existence in Britain, he would find a fine woman there among the throngs.

Two years to retire. In that time Carnegie would “push inordinately” to achieve complete financial independence and he would focus his efforts on the two firms in which he held a sizeable interest: the Piper and Shiffler bridge building concern and Union Mills. His second-biggest earner in 1868, after Union Mills, was Piper and Shiffler, which brought in $15,000, and he had grand visions for the operation. From New York, he tracked proposals to build bridges across the mighty Mississippi – at St Louis and other points – which had yet to be breached by the railroad, and eagerly anticipated bidding on each.

Much of the multi-million dollar financing of these projects originated in New York, and Carnegie diligently sought out the men involved and ingratiated himself before the bids were requested. After all, winning the contracts to build such bridges would not only be lucrative, but would represent monuments to man’s ingenuity, to the progress of America, and to the river itself, eulogised by Mark Twain in Life on the Mississippi. Carnegie dreamed of the Piper and Shiffler Company building glorious structures spanning America’s mighty rivers and canyons, intertwining himself with the land as well as conquering it.

Beginning to fully assert himself in the everyday management of the firm, two years prior he had insisted on a reorganisation to boost its capital to support expansion and proudly renamed it the Keystone Bridge Company – after Pennsylvania, the Keystone State. It was incorporated on May 16, 1865, and capitalised at $200,000. Investor Tom Scott bought one half of Carnegie’s $80,000 allocation but kept it in his protg’s name, while Thomson held about 5 per cent of the stock in his wife’s name.

By securing relatively independent financial strength through investors like Thomson and Scott, Carnegie enjoyed a freer hand in managing his companies than men indebted to banks or Wall Street. He was free to make quick decisions and take sweeping action without answering to anyone first, which often gave him the upper hand on competitors; he could lowball a bid or make costly capital improvements without reprisals. Carnegie’s superb instinct of attaching himself to talented men also served him well, but he knew he was the spirit that brought them together and gave them direction. It was his vision, optimism, determination and resourcefulness that attracted these men like moths to a light, and through good-natured cajoling and ferocious demands he brought out the best in them.

Carnegie’s Keystone partners, however, were overwhelmed with work and were not so enthusiastic about pursuing large, complicated projects. With no patience for those unable to keep the pace, Carnegie wrote a blistering letter to President JH Linville, whom he thought spent too much time in Philadelphia as opposed to Pittsburgh. Five days after his pointed critique, he sent a long letter to Linville and the directors, demanding investment in plant and equipment to expand their bridge-building capacity and to prevent any potential competitors from gaining a foothold.

As for upcoming bids, Carnegie had the Mississippi bridges in mind, and he concluded his letter with an exhortation in favour of expansion, pointing out that their industry was still in its infancy and that a mere $40,000 investment could double their firm’s revenue to $600,000. There laid another dimension to Carnegie’s genius: never taking a narrow view and pushing an idea to its full potential. Carnegie’s drive paid off less than a year later when on 10 December, 1868, he signed the coveted contract with the Keokuk and Hamilton Bridge Company to supply a superstructure to span the Mississippi River, connecting Illinois with Iowa.

When Carnegie later said that this was his most important project since moving to New York, he was not exaggerating; he was involved at all levels. To begin, Carnegie was compensated for his personal services in overseeing the project with sizeable chunks of stock in the Keokuk and Hamilton Bridge Company, and he would eventually become the company’s president. The bridge company, of course, had signed with Keystone, which in turn subcontracted work to Union Mills, where Andrew Kloman’s mechanical genius greatly aided developments in shaping beams and cutting precise pieces for bridges.

But now, in yet another dimension, not only was Carnegie responsible for building the bridge, but he took on the added responsibility of managing the construction of the railroad that would cross it. He was like an octopus, wrapping each arm around a tasty morsel as each new project offered new opportunities. Backed by Scott and Thomson, Carnegie organised the Iowa Contracting Company to build a railroad from Keokuk through southern Iowa to Nebraska City, where it would connect with a line being built from Lincoln, all of these lines partly owned by the Pennsylvania Railroad, now a gorged behemoth.

Naturally, Carnegie’s Iowa Contracting Company would also subcontract to Union Mills for the iron rails, stakes, and sundry needs. Completely engrossed in his industrious and industrial web, Carnegie neglected to inform brother Tom of all his actions, so when Tom received an order for iron rails from some unknown outfit called the Iowa Contracting Company, he balked at filling the order until he knew if the company’s credit was good. To ascertain more on the firm, he wrote to his brother’s personal secretary, Gardner McCandless.

Humoured by the inquiry, McCandless responded, “We consider the company good. We would add that such men as Messrs J Edgar Thomson, Thos A Scott & c & c are interested in the building of the road, and the Treasurer of the Company is a reliable New York gentleman, a Mr Andrew Carnegie with whose name you are perhaps not unfamiliar.”

Keystone, having just completed a 320ft span across the Ohio River as well as winning the Keokuk contract, now enjoyed national prominence – precisely what Carnegie desired for himself. Although the Keokuk Bridge was 2,300ft long, it didn’t require the engineering ingenuity required for the St Louis Bridge, making the latter the prize Carnegie would continue to pursue for the next two years. A bridge across the Mississippi at St Louis required an unparalleled engineering feat of sinking two piers in the middle of the river, which measured 1,500ft wide at this point, with 225,000 cubic feet of water rushing by every second.

To finance the construction, St Louis-area businessmen eager to encourage local trade formed the St Louis and Illinois Bridge Company and hired Col James B Eads as their chief engineer. The Civil War veteran, a slight figure but with great physical strength like a lithe jungle cat, designed a colossal bridge that was to be a 54ft-wide two-deck roadway – a highway above and two rail lines below – with a spectacular centre arch 515ft long resting on two piers, and two additional spans of 497 feet that would connect with each shore. The crucial ingredient was high-quality steel.

It took Eads time to solve the challenge of sinking the two piers in the middle of the Mississippi, but he eventually discovered the solution on a trip to Europe, where he learned about French engineers using caissons, sealed chambers of compressed air with open bottoms that rested on the water’s bed, to allow the men to work underwater. In October 1869, the first caisson was floated into the Mississippi and construction on the east pier finally started.

With construction successfully under way on the project’s most difficult segment, the St Louis and Illinois Bridge Company could now consider bids for the superstructure and seek capital to complete the project. Carnegie’s patient courting of Eads paid off as Keystone won the contract in February 1870. Financing the project, which was to cost more than $5 million, was now the main obstacle that the directors of the St. Louis and Illinois Bridge Company solved by deciding to sell bonds, just like the railroads did.

When Carnegie read the published reports that $4 million in first-mortgage bonds were to be sold in New York and London to finance the completion of the St Louis bridge, he pounced on the opportunity. Having proved himself the consummate salesman in peddling iron, bridges, and sleeping cars, why not bonds? With Thomson and Scott's backing, he approached the chairman of the bridge company’s executive and finance committee, William Taussig, with a proposal that he sell the bonds for a commission of $50,000 in St Louis and Illinois Bridge Company stock.

Again, Carnegie was willing to sacrifice a short-term gain in cash for a higher long-term bonanza, a fantastic profit considering $50,000 was as much as he had made in all of 1868. Taussig agreed. With letters of reference tucked away, Carnegie sailed for London to penetrate the hallowed halls of finance and to curry favour with the redoubtable Junius Morgan, a rising American banker operating out of London who excelled at selling US investments to Europeans. This marked the beginning of a brief but wild career as a bond salesman.

As Morgan listened to the little Scotsman, it was difficult to resist Carnegie’s charm. The ebullient salesman described the monumental bridge, its significance to local trade, and the tollgate that would generate generous profits for the St Louis and Illinois Bridge Company.

Nothing before had been so glorious to Carnegie than this selling of America to Britain. Using bonds to pay for a bridge was an entirely new concept, but Morgan was intrigued with such a “novel” project, and submitted the papers to his lawyers for review. After they scrutinised the terms, he requested a number of necessary changes before he would agree to handle the floating of the bonds. “You told me that you were going up to Scotland,” Morgan said. “Write your people and get the changes made and stop by here on your way back to America. If the changes are put through satisfactorily, I will buy some of your bonds.”

That meant a five or six-week time period, and Carnegie, the consummate salesman, had no intention of “allowing the fish to play so long”. Instead, he made good use of the transatlantic cable, which had been laid in 1866, and two days later he surprised Morgan by having the approved changes in hand. Before a week passed, he was able to report home that Morgan, who appreciated the young man’s resourcefulness, had agreed to take at least $1 m of the offering.

Carnegie was frenetic to the point of being manic as he pursued, created, and promoted moneymaking deals. Thomas Miller was amazed by all of the “things” his friend was into in “those active years”, and later in life, Carnegie himself was surprised and had to be reminded of them all.

On top of his sleeping car, oil, iron, telegraphy, and bridge enterprises, as well as his stock speculation, he participated in land deals and coal mining, and invested in a coal machinery patent, among other ventures. He was making investments for his immediate family, relatives and even friends from the Slabtown days who were now counting on him.

Carnegie wanted “to make Uncle Lauder comfortable in his old age from his American investments”, and he was managing investments for the Hogans, as well as for the families of Original Six member James R Wilson and Leila Addison. And, of course, there remained his mother to please, and his brother to protect.

Sadly, it would be many years before he realised the dream laid out in the December 1868 letter. When the day of reckoning knocked in December 1870, the day Andrew Carnegie was to retire from active business on his own terms and pursue a more noble life, his introspective letter was tucked safely away, but no concrete plans had been laid. For now he was making over $100,000 annually, and it was no time to relent – certainly not while accepted in the world of Junius Morgan.

And yet the harder Carnegie pushed into high finance, the more repulsed he was by deceitful men and deals gone bad due to any number of uncontrollable factors. In this realm, he did not have command of his own destiny. Fate was pulling him away from the likes of Morgan and pushing him toward steel.

Extracted with permission of the publisher John Wiley & Sons, Ltd. from Carnegie 2003 by Peter Krass. This book is available at all bookstores, online booksellers and from the Wiley website at www.wileyeurope.com.

Tomorrow: An expanding empire, marriage … and a defining tragedy