Autobiography of Andrew Carnegie
Atlantic seaboard. This placed his company beyond all possible rivals.
Mr. Pullman was one of the ablest men of affairs I have ever known,
and I am indebted to him, among other things, for one story which
carried a moral.
Mr. Pullman, like every other man, had his difficulties and
disappointments, and did not hit the mark every time. No one does.
Indeed, I do not know any one but himself who could have surmounted
the difficulties surrounding the business of running sleeping-cars in
a satisfactory manner and still retained some rights which the railway
companies were bound to respect. Railway companies should, of course,
operate their own sleeping-cars. On one occasion when we were
comparing notes he told me that he always found comfort in this story.
An old man in a Western county having suffered from all the ills that
flesh is heir to, and a great many more than it usually encounters,
and being commiserated by his neighbors, replied:
"Yes, my friends, all that you say is true. I have had a long, long
life full of troubles, but there is one curious fact about them--nine
tenths of them never happened."
True indeed; most of the troubles of humanity are imaginary and should
be laughed out of court. It is folly to cross a bridge until you come
to it, or to bid the Devil good-morning until you meet him--perfect
folly. All is well until the stroke falls, and even then nine times
out of ten it is not so bad as anticipated. A wise man is the
confirmed optimist.
Success in these various negotiations had brought me into some notice
in New York, and my next large operation was in connection with the
Union Pacific Railway in 1871. One of its directors came to me saying
that they must raise in some way a sum of six hundred thousand dollars
(equal to many millions to-day) to carry them through a crisis; and
some friends who knew me and were on the executive committee of that
road had suggested that I might be able to obtain the money and at the
same time get for the Pennsylvania Railroad Company virtual control of
that important Western line. I believe Mr. Pullman came with the
director, or perhaps it was Mr. Pullman himself who first came to me
on the subject.
I took up the matter, and it occurred to me that if the directors of
the Union Pacific Railway would be willing to elect to its board of
directors a few such men as the Pennsylvania Railroad would nominate,
the traffic to be thus obtained for the Pennsylvania would justify
that company in helping the Union Pacific. I went to Philadelphia and
laid the subject before President Thomson. I suggested that if the
Pennsylvania Railroad Company would trust me with securities upon
which the Union Pacific could borrow money in New York, we could
control the Union Pacific in the interests of the Pennsylvania. Among
many marks of Mr. Thomson's confidence this was up to that time the
greatest. He was much more conservative when handling the money of the
railroad company than his own, but the prize offered was too great to
be missed. Even if the six hundred thousand dollars had been lost, it
would not have been a losing investment for his company, and there was
little danger of this because we were ready to hand over to him the
securities which we obtained in return for the loan to the Union
Pacific.
My interview with Mr. Thomson took place at his house in Philadelphia,
and as I rose to go he laid his hand upon my shoulder, saying:
"Remember, Andy, I look to you in this matter. It is you I trust, and
I depend on your holding all the securities you obtain and seeing
that the Pennsylvania Railroad is never in a position where it can
lose a dollar."
I accepted the responsibility, and the result was a triumphant
success. The Union Pacific Company was exceedingly anxious that Mr.
Thomson himself should take the presidency, but this he said was out
of the question. He nominated Mr. Thomas A. Scott, vice-president of
the Pennsylvania Railroad, for the position. Mr. Scott, Mr. Pullman,
and myself were accordingly elected directors of the Union Pacific
Railway Company in 1871.
The securities obtained for the loan consisted of three millions of
the shares of the Union Pacific, which were locked in my safe, with
the option of taking them at a price. As was to be expected, the
accession of the Pennsylvania Railroad party rendered the stock of the
Union Pacific infinitely more valuable. The shares advanced
enormously. At this time I undertook to negotiate bonds in London for
a bridge to cross the Missouri at Omaha, and while I was absent upon
this business Mr. Scott decided to sell our Union Pacific shares. I
had left instructions with my secretary that Mr. Scott, as one of the
partners in the venture, should have access to the vault, as it might
be necessary in my absence that the securities should be within reach
of some one; but the idea that these should be sold, or that our party
should lose the splendid position we had acquired in connection with
the Union Pacific, never entered my brain.
I returned to find that, instead of being a trusted colleague of the
Union Pacific directors, I was regarded as having used them for
speculative purposes. No quartet of men ever had a finer opportunity
for identifying themselves with a great work than we had; and never
was an opportunity more recklessly thrown away. Mr. Pullman was
ignorant of the matter and as indignant as myself, and I believe that
he at once re-invested his profits in the shares of the Union Pacific.
I felt that much as I wished to do this and to repudiate what had been
done, it would be unbecoming and perhaps ungrateful in me to separate
myself so distinctly from my first of friends, Mr. Scott.
At the first opportunity we were ignominiously but deservedly expelled
from the Union Pacific board. It was a bitter dose for a young man to
swallow. And the transaction marked my first serious difference with a
man who up to that time had the greatest influence with me, the kind
and affectionate employer of my boyhood, Thomas A. Scott. Mr. Thomson
regretted the matter, but, as he said, having paid no attention to it
and having left the whole control of it in the hands of Mr. Scott and
myself, he presumed that I had thought best to sell out. For a time I
feared I had lost a valued friend in Levi P. Morton, of Morton, Bliss
& Co., who was interested in Union Pacific, but at last he found out
that I was innocent.
The negotiations concerning two and a half millions of bonds for the
construction of the Omaha Bridge were successful, and as these bonds
had been purchased by persons connected with the Union Pacific before
I had anything to do with the company, it was for them and not for the
Union Pacific Company that the negotiations were conducted. This was
not explained to me by the director who talked with me before I left
for London. Unfortunately, when I returned to New York I found that
the entire proceeds of the bonds, including my profit, had been
appropriated by the parties to pay their own debts, and I was thus
beaten out of a handsome sum, and had to credit to profit and loss my
expenses and time. I had never before been cheated and found it out so
positively and so clearly. I saw that I was still young and had a good
deal to learn. Many men can be trusted, but a few need watching.
CHAPTER XII
BUSINESS NEGOTIATIONS
Complete success attended a negotiation which I conducted about this
time for Colonel William Phillips, president of the Allegheny Valley
Railway at Pittsburgh. One day the Colonel entered my New York office
and told me that he needed money badly, but that he could get no house
in America to entertain the idea of purchasing five millions of bonds
of his company although they were to be guaranteed by the Pennsylvania
Railroad Company. The old gentleman felt sure that he was being driven
from pillar to post by the bankers because they had agreed among
themselves to purchase the bonds only upon their own terms. He asked
ninety cents on the dollar for them, but this the bankers considered
preposterously high. Those were the days when Western railway bonds
were often sold to the bankers at eighty cents on the dollar.
Colonel Phillips said he had come to see whether I could not suggest
some way out of his difficulty. He had pressing need for two hundred
and fifty thousand dollars, and this Mr. Thomson, of the Pennsylvania
Railroad, could not give him. The Allegheny bonds were seven per
cents, but they were payable, not in gold, but in currency, in
America. They were therefore wholly unsuited for the foreign market.
But I knew that the Pennsylvania Railroad Company had a large amount
of Philadelphia and Erie Railroad six per cent gold bonds in its
treasury. It would be a most desirable exchange on its part, I
thought, to give these bonds for the seven per cent Allegheny bonds
which bore its guarantee.
I telegraphed Mr. Thomson, asking if the Pennsylvania Railroad Company
would take two hundred and fifty thousand dollars at interest and lend
it to the Allegheny Railway Company. Mr. Thomson replied, "Certainly."
Colonel Phillips was happy. He agreed, in consideration of my
services, to give me a sixty-days option to take his five millions of
bonds at the desired ninety cents on the dollar. I laid the matter
before Mr. Thomson and suggested an exchange, which that company was
only too glad to make, as it saved one per cent interest on the bonds.
I sailed at once for London with the control of five millions of first
mortgage Philadelphia and Erie Bonds, guaranteed by the Pennsylvania
Railroad Company--a magnificent security for which I wanted a high
price. And here comes in one of the greatest of the hits and misses of
my financial life.
I wrote the Barings from Queenstown that I had for sale a security
which even their house might unhesitatingly consider. On my arrival in
London I found at the hotel a note from them requesting me to call. I
did so the next morning, and before I had left their banking house I
had closed an agreement by which they were to bring out this loan, and
that until they sold the bonds at par, less their two and a half per
cent commission, they would advance the Pennsylvania Railroad Company
four millions of dollars at five per cent interest. The sale left me a
clear profit of more than half a million dollars.
The papers were ordered to be drawn up, but as I was leaving Mr.
Russell Sturgis said they had just heard that Mr. Baring himself was
coming up to town in the morning. They had arranged to hold a
"court," and as it would be fitting to lay the transaction before him
as a matter of courtesy they would postpone the signing of the papers
until the morrow. If I would call at two o'clock the transaction would
be closed.
Never shall I forget the oppressed feeling which overcame me as I
stepped out and proceeded to the telegraph office to wire President
Thomson. Something told me that I ought not to do so. I would wait
till to-morrow when I had the contract in my pocket. I walked from the
banking house to the Langham Hotel--four long miles. When I reached
there I found a messenger waiting breathless to hand me a sealed note
from the Barings. Bismarck had locked up a hundred millions in
Magdeburg. The financial world was panic-stricken, and the Barings
begged to say that under the circumstances they could not propose to
Mr. Baring to go on with the matter. There was as much chance that I
should be struck by lightning on my way home as that an arrangement
agreed to by the Barings should be broken. And yet it was. It was too
great a blow to produce anything like irritation or indignation. I was
meek enough to be quite resigned, and merely congratulated myself that
I had not telegraphed Mr. Thomson.