Autobiography of Andrew Carnegie
"Well, if you do that," he said, "we will stop your freight."
I said we would risk that. The railway company could not proceed to
that extremity. And as a matter of fact we ran for some time without
paying the freight bills. It was simply impossible for the
manufacturers of Pittsburgh to pay their accruing liabilities when
their customers stopped payment. The banks were forced to renew
maturing paper. They behaved splendidly to us, as they always have
done, and we steered safely through. But in a critical period like
this there was one thought uppermost with me, to gather more capital
and keep it in our business so that come what would we should never
again be called upon to endure such nights and days of racking
anxiety.
Speaking for myself in this great crisis, I was at first the most
excited and anxious of the partners. I could scarcely control myself.
But when I finally saw the strength of our financial position I became
philosophically cool and found myself quite prepared, if necessary, to
enter the directors' rooms of the various banks with which we dealt,
and lay our entire position before their boards. I felt that this
could result in nothing discreditable to us. No one interested in our
business had lived extravagantly. Our manner of life had been the very
reverse of this. No money had been withdrawn from the business to
build costly homes, and, above all, not one of us had made speculative
ventures upon the stock exchange, or invested in any other enterprises
than those connected with the main business. Neither had we exchanged
endorsements with others. Besides this we could show a prosperous
business that was making money every year.
I was thus enabled to laugh away the fears of my partners, but none of
them rejoiced more than I did that the necessity for opening our lips
to anybody about our finances did not arise. Mr. Coleman, good friend
and true, with plentiful means and splendid credit, did not fail to
volunteer to give us his endorsements. In this we stood alone; William
Coleman's name, a tower of strength, was for us only. How the grand
old man comes before me as I write. His patriotism knew no bounds.
Once when visiting his mills, stopped for the Fourth of July, as they
always were, he found a corps of men at work repairing the boilers. He
called the manager to him and asked what this meant. He ordered all
work suspended.
"Work on the Fourth of July!" he exclaimed, "when there's plenty of
Sundays for repairs!" He was furious.
When the cyclone of 1873 struck us we at once began to reef sail in
every quarter. Very reluctantly did we decide that the construction of
the new steel works must cease for a time. Several prominent persons,
who had invested in them, became unable to meet their payments and I
was compelled to take over their interests, repaying the full cost to
all. In that way control of the company came into my hands.
The first outburst of the storm had affected the financial world
connected with the Stock Exchange. It was some time before it reached
the commercial and manufacturing world. But the situation grew worse
and worse and finally led to the crash which involved my friends in
the Texas Pacific enterprise, of which I have already spoken. This was
to me the severest blow of all. People could, with difficulty, believe
that occupying such intimate relations as I did with the Texas group,
I could by any possibility have kept myself clear of their financial
obligations.
Mr. Schoenberger, president of the Exchange Bank at Pittsburgh, with
which we conducted a large business, was in New York when the news
reached him of the embarrassment of Mr. Scott and Mr. Thomson. He
hastened to Pittsburgh, and at a meeting of his board next morning
said it was simply impossible that I was not involved with them. He
suggested that the bank should refuse to discount more of our bills
receivable. He was alarmed to find that the amount of these bearing
our endorsement and under discount, was so large. Prompt action on my
part was necessary to prevent serious trouble. I took the first train
for Pittsburgh, and was able to announce there to all concerned that,
although I was a shareholder in the Texas enterprise, my interest was
paid for. My name was not upon one dollar of their paper or of any
other outstanding paper. I stood clear and clean without a financial
obligation or property which I did not own and which was not fully
paid for. My only obligations were those connected with our business;
and I was prepared to pledge for it every dollar I owned, and to
endorse every obligation the firm had outstanding.
Up to this time I had the reputation in business of being a bold,
fearless, and perhaps a somewhat reckless young man. Our operations
had been extensive, our growth rapid and, although still young, I had
been handling millions. My own career was thought by the elderly ones
of Pittsburgh to have been rather more brilliant than substantial. I
know of an experienced one who declared that if "Andrew Carnegie's
brains did not carry him through his luck would." But I think nothing
could be farther from the truth than the estimate thus suggested. I am
sure that any competent judge would be surprised to find how little I
ever risked for myself or my partners. When I did big things, some
large corporation like the Pennsylvania Railroad Company was behind me
and the responsible party. My supply of Scotch caution never has been
small; but I was apparently something of a dare-devil now and then to
the manufacturing fathers of Pittsburgh. They were old and I was
young, which made all the difference.
The fright which Pittsburgh financial institutions had with regard to
myself and our enterprises rapidly gave place to perhaps somewhat
unreasoning confidence. Our credit became unassailable, and thereafter
in times of financial pressure the offerings of money to us increased
rather than diminished, just as the deposits of the old Bank of
Pittsburgh were never so great as when the deposits in other banks ran
low. It was the only bank in America which redeemed its circulation in
gold, disdaining to take refuge under the law and pay its obligations
in greenbacks. It had few notes, and I doubt not the decision paid as
an advertisement.
In addition to the embarrassment of my friends Mr. Scott, Mr. Thomson,
and others, there came upon us later an even severer trial in the
discovery that our partner, Mr. Andrew Kloman, had been led by a party
of speculative people into the Escanaba Iron Company. He was assured
that the concern was to be made a stock company, but before this was
done his colleagues had succeeded in creating an enormous amount of
liabilities--about seven hundred thousand dollars. There was nothing
but bankruptcy as a means of reinstating Mr. Kloman.
This gave us more of a shock than all that had preceded, because Mr.
Kloman, being a partner, had no right to invest in another iron
company, or in any other company involving personal debt, without
informing his partners. There is one imperative rule for men in
business--no secrets from partners. Disregard of this rule involved
not only Mr. Kloman himself, but our company, in peril, coming, as it
did, atop of the difficulties of my Texas Pacific friends with whom I
had been intimately associated. The question for a time was whether
there was anything really sound. Where could we find bedrock upon
which we could stand?
Had Mr. Kloman been a business man it would have been impossible ever
to allow him to be a partner with us again after this discovery. He
was not such, however, but the ablest of practical mechanics with some
business ability. Mr. Kloman's ambition had been to be in the office,
where he was worse than useless, rather than in the mill devising and
running new machinery, where he was without a peer. We had some
difficulty in placing him in his proper position and keeping him
there, which may have led him to seek an outlet elsewhere. He was
perhaps flattered by men who were well known in the community; and in
this case he was led by persons who knew how to reach him by extolling
his wonderful business abilities in addition to his mechanical
genius--abilities which his own partners, as already suggested, but
faintly recognized.
After Mr. Kloman had passed through the bankruptcy court and was again
free, we offered him a ten per cent interest in our business, charging
for it only the actual capital invested, with nothing whatever for
good-will. This we were to carry for him until the profits paid for
it. We were to charge interest only on the cost, and he was to assume
no responsibility. The offer was accompanied by the condition that he
should not enter into any other business or endorse for others, but
give his whole time and attention to the mechanical and not the
business management of the mills. Could he have been persuaded to
accept this, he would have been a multimillionaire; but his pride, and
more particularly that of his family, perhaps, would not permit this.
He would go into business on his own account, and, notwithstanding
the most urgent appeals on my part, and that of my colleagues, he
persisted in the determination to start a new rival concern with his
sons as business managers. The result was failure and premature death.
How foolish we are not to recognize what we are best fitted for and
can perform, not only with ease but with pleasure, as masters of the
craft. More than one able man I have known has persisted in blundering
in an office when he had great talent for the mill, and has worn
himself out, oppressed with cares and anxieties, his life a continual
round of misery, and the result at last failure. I never regretted
parting with any man so much as Mr. Kloman. His was a good heart, a
great mechanical brain, and had he been left to himself I believe he
would have been glad to remain with us. Offers of capital from
others--offers which failed when needed--turned his head, and the
great mechanic soon proved the poor man of affairs.[33]
[Footnote 33: Long after the circumstances here recited, Mr. Isidor
Straus called upon Mr. Henry Phipps and asked him if two statements
which had been publicly made about Mr. Carnegie and his partners in
the steel company were true. Mr. Phipps replied they were not. Then
said Mr. Straus:
"Mr. Phipps, you owe it to yourself and also to Mr. Carnegie to say so
publicly."
This Mr. Phipps did in the _New York Herald_, January 30, 1904, in the
following handsome manner and without Mr. Carnegie's knowledge:
_Question:_ "In a recent publication mention was made of Mr.
Carnegie's not having treated Mr. Miller, Mr. Kloman, and yourself
properly during your early partnership, and at its termination. Can
you tell me anything about this?"
_Answer:_ "Mr. Miller has already spoken for himself in this matter,
and I can say that the treatment received from Mr. Carnegie during our
partnership, so far as I was concerned, was always fair and liberal.
"My association with Mr. Kloman in business goes back forty-three
years. Everything in connection with Mr. Carnegie's partnership with
Mr. Kloman was of a pleasant nature.
"At a much more recent date, when the firm of Carnegie, Kloman and
Company was formed, the partners were Andrew Carnegie, Thomas M.
Carnegie, Andrew Kloman, and myself. The Carnegies held the
controlling interest.
"After the partnership agreement was signed, Mr. Kloman said to me
that the Carnegies, owning the larger interest, might be too
enterprising in making improvements, which might lead us into serious
trouble; and he thought that they should consent to an article in the
partnership agreement requiring the consent of three partners to make
effective any vote for improvements. I told him that we could not