Random Reminiscences of Men and Events
Even at this time I had been planning to relieve myself of business
cares, and the panic only caused me to postpone taking the long
holiday to which I had been looking forward. I was fortunate in making
the acquaintance of Mr. Frederick T. Gates, who was then engaged in
some work in connection with the American Baptist Education Society,
which required him to travel extensively over the country, north,
south, east, and west.
It occurred to me that Mr. Gates, who had a great store of common
sense, though no especial technical information about factories and
mills, might aid me in securing some first-hand information as to how
these concerns were actually prospering. Once, as he was going South,
I suggested that he look over an iron mill in which I had some
interest which happened to be on his route.
His report was a model of what such a report should be. It stated the
facts, and in this case they were almost all unfavourable. A little
later he happened to be going West, and I gave him the name and
address of property in that region in which I held a minority
interest. I felt quite sure that this particular property was doing
well, and it was somewhat of a shock to me to learn through his clear
and definite account that it was only a question of time before this
enterprise, too, which had been represented as rolling in money, would
get into trouble if things kept on as they were going.
NURSING THE COMMERCIALLY ILL
I then arranged with Mr. Gates to accept a position whereby he could
help me unravel these tangled affairs, and become, like myself, a man
of business, but it was agreed between us that he should not abandon
his larger and more important plans for working out some philanthropic
aspirations that he had.
Right here I may stop to give credit to Mr. Gates for possessing a
combination of rare business ability, very highly developed and very
honourably exercised, overshadowed by a passion to accomplish some
great and far-reaching benefits to mankind, the influence of which
will last. He is the chairman of the General Education Board and
active in many other boards, and for years he has helped in the
various plans that we have been interested in where money was given in
the hope that it would do something more than temporary service.
Mr. Gates has for many years been closely associated with my personal
affairs. He has been through strenuous times with me, and has taken
cares of many kinds off my shoulders, leaving me more time to play
golf, plan roads, move trees, and follow other congenial occupations.
His efforts in the investigations in connection with our educational
contributions, our medical research, and other kindred works have been
very successful. During the last ten or twelve years my son has shared
with Mr. Gates the responsibility of this work, and more recently Mr.
Starr J. Murphy has also joined with us to help Mr. Gates, who has
borne the heat and burden of the day, and has well earned some leisure
which we have wanted him to enjoy.
But to return to the story of our troubled investments: Mr. Gates went
into the study of each of these business concerns, and did the best he
could with them. It has been our policy never to allow a company in
which we had an interest to be thrown into the bankruptcy court if we
could prevent it; for receiverships are very costly in many ways and
often involve heavy sacrifices of genuine values. Our plan has been to
stay with the institution, nurse it, lend it money when necessary,
improve facilities, cheapen production, and avail ourselves of the
opportunities which time and patience are likely to bring to make it
self-sustaining and successful. So we went carefully through the
affairs of these crippled enterprises in the hard times of 1893 and
1894, carrying many of them for years after; sometimes buying the
interests of others and sometimes selling our own interest, but all or
nearly all escaped the expenses and humiliation of bankruptcy,
receivership, and foreclosure.
Before these matters were entirely closed up we had a vast amount of
experience in the doctoring of the commercially ill. My only excuse
for dwelling upon the subject at this late day is to point out the
fact to some business men who get discouraged that much can be done by
careful and patient attention, even when the business is apparently in
very deep water. It requires two things: some added capital, put in
by one's self or secured from others, and a strict adherence to the
sound natural laws of business.
THE ORE MINES
Among these investments were some shares in a number of ore mines and
an interest in the stocks and bonds of a railroad being built to carry
the ore from the mines to lake ports. We had great faith in these
mines, but to work them the railroad was necessary. It had been begun,
but in the panic of 1893 it and all other developments were nearly
ruined. Although we were minority holders of the stock, it seemed to
be "up to us" to keep the enterprise alive through the harrowing panic
days. I had to loan my personal securities to raise money, and finally
we were compelled to supply a great deal of actual cash, and to get it
we were obliged to go into the then greatly upset money market and buy
currency at a high premium to ship west by express to pay the
labourers on the railroad and to keep them alive. When the fright of
the panic period subsided, and matters became a little more settled,
we began to realize our situation. We had invested many millions, and
no one wanted to go in with us to buy stock. On the contrary,
everybody else seemed to want to sell. The stock was offered to us in
alarming quantities--substantially all of the capital stock of the
companies came without any solicitation on our part--quite the
contrary--and we paid for it in cash.
We now found ourselves in control of a great amount of ore lands, from
some of which the ore could be removed by a steam shovel for a few
cents a ton, but we still faced a most imperfect and inadequate method
of transporting the ore to market.
When we realized that events were shaping themselves so that to
protect our investments we should be obliged to go into the business
of selling in a large way, we felt that we must not stop short of
doing the work as effectively as possible; and having already put in
so much money, we bought all the ore land that we thought was good
that was offered to us. The railroad and the ships were only a means
to an end. The ore lands were the crux of the whole matter, and we
believed that we could never have too many good mines.
It was a surprise to me that the great iron and steel manufacturers
did not place what seemed to be an adequate value on these mines. The
lands which contained a good many of our best ore mines could have
been purchased very cheaply before we became interested. Having
launched ourselves into the venture, we decided to supply ore to every
one who needed it, by mining and transporting with the newest and most
effective facilities, and our profits we invested in more ore lands.
Mr. Gates became the president of the various companies which owned
the mines and the railroad to the lake to transport the ores, and he
started to learn and develop the business of ore mining and
transportation. He not only proved to be an apt scholar, but he really
mastered the various complexities of the business. He did all the
work, and only consulted me when he wished to; yet I remember several
interesting experiences connected with the working out of these
problems.
BUILDING THE SHIPS
After this railroad problem was solved, it was apparent that we needed
our own ships to transport the ore down the lakes. We knew absolutely
nothing of building ships for ore transportation, and so, following
out our custom, we went to the man who, in our judgment, had the
widest knowledge of the subject. He was already well known to us, but
was in the ore transportation business on a large scale on his own
account and, of course, the moment we began to ship ore we realized
that we would become competitors. Mr. Gates got into communication
with this expert, and came with him one evening to my house in New
York just before dinner. He said he could stay only a few minutes, but
I told him that I thought we could finish up our affairs in ten
minutes and we did. This is the only time I remember seeing personally
any one on the business of the ore company. All the conferences, as I
said before, were carried on by Mr. Gates, who seemed to enjoy work,
and he has had abundant privileges in that direction.
We explained to this gentleman that we were proposing to transport our
ore from these Lake Superior lands ourselves, and that we should like
to have him assume charge of the construction of several ships, to be
of the largest and most approved type, for our chance of success lay
in having boats which could be operated with the greatest efficiency.
At that time the largest ships carried about five thousand tons, but
in 1900, when we sold out, we had ships that carried seven thousand or
eight thousand tons, and now there are some that transport as much as
ten thousand tons and more.
This expert naturally replied that as he was in the ore-carrying trade
himself, he had no desire to encourage us to go into it. We explained
to him that as we had made this large investment, it seemed to us to
be necessary for the protection of our interests to control our own
lake carriers, so we had decided to mine, ship, and market the ore;
that we came to him because he could plan and superintend the
construction of the best ships for us, and that we wanted to deal with
him for that reason; that notwithstanding that he represented one of
the largest firms among our competitors, we knew that he was honest
and straightforward; and that we were most anxious to deal with him.
EMPLOYING A COMPETITOR
He still demurred, but we tried to convince him that we were not to be
deterred from going into the trade, and that we were willing to pay
him a satisfactory commission for looking after the building of the
ships. Somebody, we explained, was going to do the work for us, and he
might as well have the profit as the next man. This argument finally
seemed to impress him and we then and there closed an agreement, the
details of which were worked out afterward to our mutual
satisfaction. This gentleman was Mr. Samuel Mather of Cleveland. He
spent only a few minutes in the house, during which time we gave him
the order for about $3,000,000 worth of ships and this was the only
time I saw him. But Mr. Mather is a man of high business honour, we
trusted him implicitly although he was a competitor, and we never had
occasion to regret it.
At that time there were some nine or ten shipbuilding companies
located at various points on the Great Lakes. All were independent of
each other and there was sharp competition between them. Times were
pretty hard with them; their business had not yet recovered from the
panic of 1893, they were not able to keep their works in full
operation; it was in the fall of the year and many of their employees
were facing a hard winter. We took this into account in considering
how many ships we should build, and we made up our minds that we would
build all the ships that could be built and give employment to the
idle men on the Great Lakes. Accordingly we instructed Mr. Mather to
write to each firm of shipbuilders and ascertain how many ships they
could build and put in readiness for operation at the opening of
navigation the next spring. He found that some companies could build
one, some could build two, and that the total number would be twelve.
Accordingly we asked him to have constructed twelve ships, all of
steel, all of the largest capacity then understood to be practicable