NEW YORK AS HEADQUARTERS
Our business continued to expand and required frequent visits on my
part to the East, especially to New York, which is as London to
Britain--the headquarters of all really important enterprises in
America. No large concern could very well get on without being
represented there. My brother and Mr. Phipps had full grasp of the
business at Pittsburgh. My field appeared to be to direct the general
policy of the companies and negotiate the important contracts.
My brother had been so fortunate as to marry Miss Lucy Coleman,
daughter of one of our most valued partners and friends. Our family
residence at Homewood was given over to him, and I was once more
compelled to break old associations and leave Pittsburgh in 1867 to
take up my residence in New York. The change was hard enough for me,
but much harder for my mother; but she was still in the prime of life
and we could be happy anywhere so long as we were together. Still she
did feel the leaving of our home very much. We were perfect strangers
in New York, and at first took up our quarters in the St. Nicholas
Hotel, then in its glory. I opened an office in Broad Street.
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. I made frequent visits there and my mother often
accompanied me, so that our connection with the old home was still
maintained. But after a time new friendships were formed and new
interests awakened and New York began to be called home. When the
proprietors of the St. Nicholas opened the Windsor Hotel uptown, we
took up our residence there and up to the year 1887 that was our New
York home. Mr. Hawk, the proprietor, became one of our valued friends
and his nephew and namesake still remains so.
Among the educative influences from which I derived great advantage in
New York, none ranks higher than the Nineteenth Century Club organized
by Mr. and Mrs. Courtlandt Palmer. The club met at their house once a
month for the discussion of various topics and soon attracted many
able men and women. It was to Madame Botta I owed my election to
membership--a remarkable woman, wife of Professor Botta, whose
drawing-room became more of a salon than any in the city, if indeed it
were not the only one resembling a salon at that time. I was honored
by an invitation one day to dine at the Bottas' and there met for the
first time several distinguished people, among them one who became my
lifelong friend and wise counselor, Andrew D. White, then president of
Cornell University, afterwards Ambassador to Russia and Germany, and
our chief delegate to the Hague Conference.
Here in the Nineteenth Century Club was an arena, indeed. Able men and
women discussed the leading topics of the day in due form, addressing
the audience one after another. The gatherings soon became too large
for a private room. The monthly meetings were then held in the
American Art Galleries. I remember the first evening I took part as
one of the speakers the subject was "The Aristocracy of the Dollar."
Colonel Thomas Wentworth Higginson was the first speaker. This was my
introduction to a New York audience. Thereafter I spoke now and then.
It was excellent training, for one had to read and study for each
appearance.
I had lived long enough in Pittsburgh to acquire the manufacturing, as
distinguished from the speculative, spirit. My knowledge of affairs,
derived from my position as telegraph operator, had enabled me to know
the few Pittsburgh men or firms which then had dealings upon the New
York Stock Exchange, and I watched their careers with deep interest.
To me their operations seemed simply a species of gambling. I did not
then know that the credit of all these men or firms was seriously
impaired by the knowledge (which it is almost impossible to conceal)
that they were given to speculation. But the firms were then so few
that I could have counted them on the fingers of one hand. The Oil and
Stock Exchanges in Pittsburgh had not as yet been founded and brokers'
offices with wires in connection with the stock exchanges of the East
were unnecessary. Pittsburgh was emphatically a manufacturing town.
I was surprised to find how very different was the state of affairs in
New York. There were few even of the business men who had not their
ventures in Wall Street to a greater or less extent. I was besieged
with inquiries from all quarters in regard to the various railway
enterprises with which I was connected. Offers were made to me by
persons who were willing to furnish capital for investment and allow
me to manage it--the supposition being that from the inside view which
I was enabled to obtain I could invest for them successfully.
Invitations were extended to me to join parties who intended quietly
to buy up the control of certain properties. In fact the whole
speculative field was laid out before me in its most seductive guise.
All these allurements I declined. The most notable offer of this kind
I ever received was one morning in the Windsor Hotel soon after my
removal to New York. Jay Gould, then in the height of his career,
approached me and said he had heard of me and he would purchase
control of the Pennsylvania Railroad Company and give me one half of
all profits if I would agree to devote myself to its management. I
thanked him and said that, although Mr. Scott and I had parted company
in business matters, I would never raise my hand against him.
Subsequently Mr. Scott told me he had heard I had been selected by New
York interests to succeed him. I do not know how he had learned this,
as I had never mentioned it. I was able to reassure him by saying that
the only railroad company I would be president of would be one I
owned.
Strange what changes the whirligig of time brings in. It was my part
one morning in 1900, some thirty years afterwards, to tell the son of
Mr. Gould of his father's offer and to say to him:
"Your father offered me control of the great Pennsylvania system. Now
I offer his son in return the control of an international line from
ocean to ocean."
The son and I agreed upon the first step--that was the bringing of his
Wabash line to Pittsburgh. This was successfully done under a contract
given the Wabash of one third of the traffic of our steel company. We
were about to take up the eastern extension from Pittsburgh to the
Atlantic when Mr. Morgan approached me in March, 1901, through Mr.
Schwab, and asked if I really wished to retire from business. I
answered in the affirmative and that put an end to our railway
operations.
I have never bought or sold a share of stock speculatively in my life,
except one small lot of Pennsylvania Railroad shares that I bought
early in life for investment and for which I did not pay at the time
because bankers offered to carry it for me at a low rate. I have
adhered to the rule never to purchase what I did not pay for, and
never to sell what I did not own. In those early days, however, I had
several interests that were taken over in the course of business. They
included some stocks and securities that were quoted on the New York
Stock Exchange, and I found that when I opened my paper in the morning
I was tempted to look first at the quotations of the stock market. As
I had determined to sell all my interests in every outside concern and
concentrate my attention upon our manufacturing concerns in
Pittsburgh, I further resolved not even to own any stock that was
bought and sold upon any stock exchange. With the exception of
trifling amounts which came to me in various ways I have adhered
strictly to this rule.
Such a course should commend itself to every man in the manufacturing
business and to all professional men. For the manufacturing man
especially the rule would seem all-important. His mind must be kept
calm and free if he is to decide wisely the problems which are
continually coming before him. Nothing tells in the long run like good
judgment, and no sound judgment can remain with the man whose mind is
disturbed by the mercurial changes of the Stock Exchange. It places
him under an influence akin to intoxication. What is not, he sees, and
what he sees, is not. He cannot judge of relative values or get the
true perspective of things. The molehill seems to him a mountain and
the mountain a molehill, and he jumps at conclusions which he should
arrive at by reason. His mind is upon the stock quotations and not
upon the points that require calm thought. Speculation is a parasite
feeding upon values, creating none.
My first important enterprise after settling in New York was
undertaking to build a bridge across the Mississippi at Keokuk.[29]
Mr. Thomson, president of the Pennsylvania Railroad, and I contracted
for the whole structure, foundation, masonry, and superstructure,
taking bonds and stocks in payment. The undertaking was a splendid
success in every respect, except financially. A panic threw the
connecting railways into bankruptcy. They were unable to pay the
stipulated sums. Rival systems built a bridge across the Mississippi
at Burlington and a railway down the west side of the Mississippi to
Keokuk. The handsome profits which we saw in prospect were never
realized. Mr. Thomson and myself, however, escaped loss, although
there was little margin left.
[Footnote 29: It was an iron bridge 2300 feet in length with a
380-foot span.]
The superstructure for this bridge was built at our Keystone Works in
Pittsburgh. The undertaking required me to visit Keokuk occasionally,
and there I made the acquaintance of clever and delightful people,
among them General and Mrs. Reid, and Mr. and Mrs. Leighton. Visiting
Keokuk with some English friends at a later date, the impression they
received of society in the Far West, on what to them seemed the very
outskirts of civilization, was surprising. A reception given to us one
evening by General Reid brought together an assembly creditable to any
town in Britain. More than one of the guests had distinguished himself
during the war and had risen to prominence in the national councils.
The reputation obtained in the building of the Keokuk bridge led to my
being applied to by those who were in charge of the scheme for
bridging the Mississippi at St. Louis, to which I have already
referred. This was connected with my first large financial
transaction. One day in 1869 the gentleman in charge of the
enterprise, Mr. Macpherson (he was very Scotch), called at my New York
office and said they were trying to raise capital to build the bridge.
He wished to know if I could not enlist some of the Eastern railroad
companies in the scheme. After careful examination of the project I
made the contract for the construction of the bridge on behalf of the
Keystone Bridge Works. I also obtained an option upon four million
dollars of first mortgage bonds of the bridge company and set out for
London in March, 1869, to negotiate their sale.
During the voyage I prepared a prospectus which I had printed upon my
arrival in London, and, having upon my previous visit made the
acquaintance of Junius S. Morgan, the great banker, I called upon him
one morning and opened negotiations. I left with him a copy of the
prospectus, and upon calling next day was delighted to find that Mr.
Morgan viewed the matter favorably. I sold him part of the bonds with
the option to take the remainder; but when his lawyers were called in
for advice a score of changes were required in the wording of the
bonds. Mr. Morgan said to me that as I was going to Scotland I had
better go now; I could write the parties in St. Louis and ascertain
whether they would agree to the changes proposed. It would be time
enough, he said, to close the matter upon my return three weeks hence.
But I had no idea of allowing the fish to play so long, and informed
him that I would have a telegram in the morning agreeing to all the
changes. The Atlantic cable had been open for some time, but it is
doubtful if it had yet carried so long a private cable as I sent that
day. It was an easy matter to number the lines of the bond and then
going carefully over them to state what changes, omissions, or
additions were required in each line. I showed Mr. Morgan the message
before sending it and he said:
"Well, young man, if you succeed in that you deserve a red mark."
When I entered the office next morning, I found on the desk that had
been appropriated to my use in Mr. Morgan's private office the colored
envelope which contained the answer. There it was: "Board meeting last
night; changes all approved." "Now, Mr. Morgan," I said, "we can
proceed, assuming that the bond is as your lawyers desire." The papers
were soon closed.
[Illustration: JUNIUS SPENCER MORGAN]
While I was in the office Mr. Sampson, the financial editor of "The
Times," came in. I had an interview with him, well knowing that a few
words from him would go far in lifting the price of the bonds on the
Exchange. American securities had recently been fiercely attacked,
owing to the proceedings of Fisk and Gould in connection with the Erie
Railway Company, and their control of the judges in New York, who
seemed to do their bidding. I knew this would be handed out as an
objection, and therefore I met it at once. I called Mr. Sampson's
attention to the fact that the charter of the St. Louis Bridge Company
was from the National Government. In case of necessity appeal lay
directly to the Supreme Court of the United States, a body vying with
their own high tribunals. He said he would be delighted to give
prominence to this commendable feature. I described the bridge as a
toll-gate on the continental highway and this appeared to please him.
It was all plain and easy sailing, and when he left the office, Mr.
Morgan clapped me on the shoulder and said:
"Thank you, young man; you have raised the price of those bonds five
per cent this morning."
"All right, Mr. Morgan," I replied; "now show me how I can raise them
five per cent more for you."
The issue was a great success, and the money for the St. Louis Bridge
was obtained. I had a considerable margin of profit upon the
negotiation. This was my first financial negotiation with the bankers
of Europe. Mr. Pullman told me a few days later that Mr. Morgan at a
dinner party had told the telegraphic incident and predicted, "That
young man will be heard from."
After closing with Mr. Morgan, I visited my native town, Dunfermline,
and at that time made the town a gift of public baths. It is notable
largely because it was the first considerable gift I had ever made.
Long before that I had, at my Uncle Lauder's suggestion, sent a
subscription to the fund for the Wallace Monument on Stirling Heights
overlooking Bannockburn. It was not much, but I was then in the
telegraph office and it was considerable out of a revenue of thirty
dollars per month with family expenses staring us in the face. Mother
did not grudge it; on the contrary, she was a very proud woman that
her son's name was seen on the list of contributors, and her son felt
he was really beginning to be something of a man. Years afterward my
mother and I visited Stirling, and there unveiled, in the Wallace
Tower, a bust of Sir Walter Scott, which she had presented to the
monument committee. We had then made great progress, at least
financially, since the early subscription. But distribution had not
yet begun.[30] So far with me it had been the age of accumulation.
[Footnote 30: The ambitions of Mr. Carnegie at this time (1868) are
set forth in the following memorandum made by him. It has only
recently come to light:
_St. Nicholas Hotel, New York, December, 1868_
Thirty-three and an income of $50,000 per annum! By this time 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 and purchase a
controlling interest in some newspaper or live review and give the
general management of it attention, taking a part in public matters,
especially those connected with education and 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 thirty-five, but during the ensuing two years
I wish to spend the afternoons in receiving instruction and in reading
systematically.]
While visiting the Continent of Europe in 1867 and deeply interested
in what I saw, it must not be thought that my mind was not upon
affairs at home. Frequent letters kept me advised of business matters.
The question of railway communication with the Pacific had been
brought to the front by the Civil War, and Congress had passed an act
to encourage the construction of a line. The first sod had just been
cut at Omaha and it was intended that the line should ultimately be
pushed through to San Francisco. One day while in Rome it struck me
that this might be done much sooner than was then anticipated. The
nation, having made up its mind that its territory must be bound
together, might be trusted to see that no time was lost in
accomplishing it. I wrote my friend Mr. Scott, suggesting that we
should obtain the contract to place sleeping-cars upon the great
California line. His reply contained these words:
"Well, young man, you do take time by the forelock."
Nevertheless, upon my return to America. I pursued the idea. The
sleeping-car business, in which I was interested, had gone on
increasing so rapidly that it was impossible to obtain cars enough to
supply the demand. This very fact led to the forming of the present
Pullman Company. The Central Transportation Company was simply unable
to cover the territory with sufficient rapidity, and Mr. Pullman
beginning at the greatest of all railway centers in the
world--Chicago--soon rivaled the parent concern. He had also seen that
the Pacific Railroad would be the great sleeping-car line of the
world, and I found him working for what I had started after. He was,
indeed, a lion in the path. Again, one may learn, from an incident
which I had from Mr. Pullman himself, by what trifles important
matters are sometimes determined.
The president of the Union Pacific Railway was passing through
Chicago. Mr. Pullman called upon him and was shown into his room.
Lying upon the table was a telegram addressed to Mr. Scott, saying,
"Your proposition for sleeping-cars is accepted." Mr. Pullman read
this involuntarily and before he had time to refrain. He could not
help seeing it where it lay. When President Durrant entered the room
he explained this to him and said:
"I trust you will not decide this matter until I have made a
proposition to you."
Mr. Durrant promised to wait. A meeting of the board of directors of
the Union Pacific Company was held soon after this in New York. Mr.
Pullman and myself were in attendance, both striving to obtain the
prize which neither he nor I undervalued. One evening we began to
mount the broad staircase in the St. Nicholas Hotel at the same time.
We had met before, but were not well acquainted. I said, however, as
we walked up the stairs:
"Good-evening, Mr. Pullman! Here we are together, and are we not
making a nice couple of fools of ourselves?" He was not disposed to
admit anything and said:
"What do you mean?"
I explained the situation to him. We were destroying by our rival
propositions the very advantages we desired to obtain.
"Well," he said, "what do you propose to do about it?"
"Unite," I said. "Make a joint proposition to the Union Pacific, your
party and mine, and organize a company."
"What would you call it?" he asked.
"The Pullman Palace Car Company," I replied.
This suited him exactly; and it suited me equally well.
"Come into my room and talk it over," said the great sleeping-car man.
I did so, and the result was that we obtained the contract jointly.
Our company was subsequently merged in the general Pullman Company and
we took stock in that company for our Pacific interests. Until
compelled to sell my shares during the subsequent financial panic of
1873 to protect our iron and steel interests, I was, I believe, the
largest shareholder in the Pullman Company.
This man Pullman and his career are so thoroughly American that a few
words about him will not be out of place. Mr. Pullman was at first a
working carpenter, but when Chicago had to be elevated he took a
contract on his own account to move or elevate houses for a
stipulated sum. Of course he was successful, and from this small
beginning he became one of the principal and best-known contractors in
that line. If a great hotel was to be raised ten feet without
disturbing its hundreds of guests or interfering in any way with its
business, Mr. Pullman was the man. He was one of those rare characters
who can see the drift of things, and was always to be found, so to
speak, swimming in the main current where movement was the fastest. He
soon saw, as I did, that the sleeping-car was a positive necessity
upon the American continent. He began to construct a few cars at
Chicago and to obtain contracts upon the lines centering there.
The Eastern concern was in no condition to cope with that of an
extraordinary man like Mr. Pullman. I soon recognized this, and
although the original patents were with the Eastern company and Mr.
Woodruff himself, the original patentee, was a large shareholder, and
although we might have obtained damages for infringement of patent
after some years of litigation, yet the time lost before this could be
done would have been sufficient to make Pullman's the great company of
the country. I therefore earnestly advocated that we should unite with
Mr. Pullman, as I had united with him before in the Union Pacific
contract. As the personal relations between Mr. Pullman and some
members of the Eastern company were unsatisfactory, it was deemed best
that I should undertake the negotiations, being upon friendly footing
with both parties. We soon agreed that the Pullman Company should
absorb our company, the Central Transportation Company, and by this
means Mr. Pullman, instead of being confined to the West, obtained
control of the rights on the great Pennsylvania trunk line to the
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.