A new biography shows Andrew Carnegie as a wily deal-maker and zealous correspondent who used his desire to give away his fortune to justify his drive to get rich.
In l859 or so, as John Brown stormed the federal arsenal at Harper’s Ferry, as tavern and churchyard chatter across the county turned to the likelihood of civil war, young Andrew Carnegie took an interest in sleeping cars.
He was an unthreateningly tiny man (no more than 5 feet tall), an eager-to-please 24-year-old who had worked hard to erase the Scottish accent in his ready banter; he was also the protigi of Thomas A. Scott, a rising power in the mighty Pennsylvania Railroad. As Carnegie himself later told the tale, he was approached in 1858 or ’59 by an awkward but brilliant inventor, Theodore Woodruff, who had developed a new kind of sleeping berth for railway cars. The lad quickly saw its potential, and brought it to the notice of Scott and J. Edgar Thomson, the Pennsylvania’s president. They gave a contract to Woodruff, who gratefully offered Carnegie stock in his company. It was a turning point in the young man’s path from penniless immigrant to industrial capitalist.
“It is a charming story,” observes David Nasaw in this massive new biography, “Andrew Carnegie.” “The only problem is that it wasn’t true.” In reality, Carnegie facilitated nothing; Woodruff arranged his own contract with Scott and Thomson. The shares that Woodruff gave the young man were, in fact, a payoff to the two executives, “a kickback in the form of partial ownership of the company.” As Scott’s assistant, Carnegie “functioned instead as a sort of ‘bagman,’” holding his superiors’ stock — along with a few shares for himself.
In the last full-scale biography of the famous steel maker, written in 1970, Joseph Frazier Wall pointed out the same errors in Carnegie’s self-congratulatory account, but it took Nasaw to identify the kickback behind the entire transaction. “Capitalizing on insider information to invest in companies that were about to be enriched by lucrative contracts was standard operating procedure for railroad executives,” he writes.
It’s a nice piece of research and analysis — but a troublesome question lingers in its aftermath. If the kickback was legal, and perfectly ordinary for the time, why did Scott and Thomson try to hide it? Why did they need a bagman at all? Nasaw’s penetration of this tale speaks to the power of this important new work, but that unanswered — indeed, unasked — question suggests just how complicated the biographer’s task can be.
Make no mistake: David Nasaw (author of the highly regarded “The Chief: The Life of William Randolph Hearst”) has produced the most thorough, accurate and authoritative biography of Carnegie to date. Perhaps no story in the history of American business is more familiar than that of the poor 13-year-old who immigrated from Scotland in 1848, made himself into a fabulously wealthy steel maker, sold his company to J.P. Morgan to create U.S. Steel in 1901, then gave away his fortune and spoke out for world peace. Carnegie has been the subject of a number of studies, and authored an autobiography of lasting influence. It speaks highly of Nasaw’s prowess as a researcher, then, that he has uncovered entire episodes previously unknown to historians. I came away convinced that he has read everything Carnegie ever wrote — and suspecting that I had as well, thanks to the copious quotations that help swell the text to 800 pages.
Researcher, however, is only one of three roles played by a good biographer. Just as important are the parts of historian and writer — the first to explain the times, the second to craft a purposeful narrative. To put it another way, the researcher provides depth, the historian breadth, the writer life. Nasaw mines Carnegie’s life more deeply than anyone ever has, but he often fails to look up from his digging to engage the wider world or to shape the story in a way that would bring out its full meaning and drama.
To be fair, balancing the three roles is never easy. The process of picking through letters and other papers demands an intense focus on the subject, but context and good storytelling require panoramas and tracking shots of secondary characters. In the case of Carnegie, the balance is even harder to maintain, for the perverse reason that he wrote so much. In this, he could not have been more unlike the typical Gilded Age tycoon (if there were such a thing). Jay Gould preferred to plant stories in the press rather than give interviews; Cornelius Vanderbilt wrote, in one of his few surviving letters, that he hated writing letters; Daniel Drew was so silent that some contemporaries thought he was illiterate.
Carnegie, on the other hand, wouldn’t shut up. At the age of 18, he waged a political debate with his cousin via transatlantic correspondence, comparing American and British institutions. (“We have given to the world a Washington, a Franklin, a Fulton, a Morse,” he wrote. “What has Canada ever produced?”) A fanatical autodidact, he spurted a steady stream of literary quotations at Scott and Thomson. Eager for literary acclaim, he began to publish as soon as his wealth gave him the leisure to do so — battering the world with article after article, book after book, good, bad and infinite, or so they must have seemed.
Like a dogged private investigator, Nasaw tracks his subject relentlessly through this processed forest of paper, following him from business meetings with his partners to a late-night rendezvous with an apparent mistress. Sometimes, however, Nasaw needs to follow less obvious leads to tell us what we really need to know.
Take the story of the Woodruff payoff. The setting seems familiar enough: a corporation, a contract, a few venal officials. But the past is indeed a foreign country, where familiar words have unfamiliar meanings, where our most basic assumptions do not apply. Nasaw correctly explains the prevalence of insider trading, but he does the reader a disservice by failing to ask why this supposedly commonplace kickback was kept secret. The answer is that the corruption of Thomas A. Scott and J. Edgar Thomson was not so commonplace after all. Once we understand how and why it differed from ordinary insider trading, we see the full significance of this period in Carnegie’s life.
In 1859, when Carnegie served as bagman, American society was in the midst of confusion, even torment, over the emergence of the corporation. For most Americans, this new and invisible creature was a mystery, known only by reputation. Corporations were so few that the New York Stock Exchange traded stocks (and bonds) one at a time. Brokers on the trading floor shouted out their bids as each security was called from the chair. Then they had lunch. Then they ran through the whole list once more.
As early as 1819, Chief Justice John Marshall had expounded on the corporation as an “artificial being, invisible, intangible,” but this kind of abstract thinking largely eluded the public mind. Jacksonian Democrats considered it a kind of unholy incarnation. “Corporations have neither bodies to be kicked, nor souls to be damned,” growled William Gouge in 1833. They resisted the notion of an entity that could exist separately from those who owned it. Even corporate managers used “company” as a plural noun — as in, “The company are in renewed trouble for their floating debts.” They saw it as a gathering of individuals, a kind of partnership — which the 19th century corporation usually was, since few were very large or had widely traded stock.
Why does all this matter? First, despite the lack of government regulation, mid-19th-century corporations operated under a great deal of political suspicion. Second, their limited number and size meant that they were often managed by their largest stockholders (including such giants as Vanderbilt’s New York Central and Gould’s Union Pacific). That gave rise to the standard form of corporate corruption: These stockholder-managers manipulated their own share prices up and down to profit on Wall Street.
The Pennsylvania Railroad was different, in ways that explain the Woodruff payoff, and show how important this corporation was to Carnegie’s rise. For one thing, it was huge, vastly larger than any company in America at the time, except for two or three other major railroads. Equally important, it was a forerunner of the modern corporation, run by professional executives who weren’t significant shareholders. As representatives of a new kind of manager in a new kind of corporation, Scott and Thomson invented a new kind of corruption: They skimmed money as it flowed in and out. For example, they demanded shares in companies that contracted with the Pennsylvania, as in Woodruff’s case. They also pioneered the use of shell corporations, channeling the railroad’s business through companies they personally controlled, from fast-freight lines to the infamous South Improvement Co. This behavior angered the Pennsylvania’s shareholders, who finally launched a major investigation of management in the 1870s.
This is what Nasaw doesn’t explain, and what we need to know. Scott and Thomson most definitely needed a bagman; their actions, though legal, were highly controversial in both the wider culture and business circles. A fuller context also reveals that young Carnegie studied the ways of the corporation in the Harvard of companies, in terms of scale, organization and, especially (as Nasaw notes), self-dealing. Even before he resigned from the Pennsylvania, just shy of his 30th birthday, he started a series of businesses that fed the railroad’s voracious demands — and exploited his connection to Scott and Thomson. The two men gave him a steady stream of contracts for bridges and rails, in return for a stake in Carnegie’s firms. In other words, the celebrated self-made man earned his initial fortune through cronyism and sweetheart deals, just as he had been taught.
Carnegie showed his mastery of his mentors’ mysterious arts by conjuring his own invisible structure of corporations and financial instruments, to drain money from every aspect of, say, building a bridge. In the case of St. Louis’ famous Eads Bridge, he profited from trading the shares of the bridge company, from a commission on sales of that company’s bonds, from the contract he gave to his own construction company, and from the iron he bought from his own mill. By the time the enterprise proved to be a financial disaster, Carnegie had already severed his ties — after making a lot of money. But there is an irony here that Nasaw lets slip by unnoticed. In 1872, when Carnegie organized the company that would become Carnegie Steel — that would make him the richest man in America — he shunned the Pennsylvania model. His firm operated as a partnership, restricted to a small group of men. Carnegie would have no independent professional managers operating without supervision, skimming profits for personal gain; nor would he have angry stockholders poring over his books.
Nasaw tells us enough about such financial manipulations to follow Carnegie’s progress, and he is consistently perceptive — pointing out, for example, that despite Carnegie’s reputation as a competitor, he cooperated with other steel makers to set prices and divide orders. (And, to be fair, Nasaw’s historical grasp grows strong and sure as he moves toward the turn of the century and into the 1900s.) But it takes a curiosity about the undergirdings of the past to arrive at truly surprising realizations. Nineteenth-century business history is not simply the tale of rich men getting richer. It’s the story of the human mind coming to grips with abstractions on a scale perhaps never known before in daily life. Property had always been physical stuff, whether land, buildings or animals; now much of it was counted in the dry rustle of stocks and bonds. Money had always been gold and silver coin; now it melted through the paper filter of currency and evaporated into bank accounts.
As a writer, Nasaw’s allegiance is to the physical world, and his evocation of it is superb. He brilliantly describes Carnegie’s first steel mill (named, in a bit of industrial-strength toadying, the “J. Edgar Thomson”) — the grid of rails that crosshatched the factory floor, “the explosion of flame and sparks from the top of the converter,” the dirty belly of smoke that pressed down on Pittsburgh, the endless hours endured by the workers.
Labor conflict lies at the heart of the story he wishes to tell, and it is viscerally physical indeed. In a groundbreaking feat of research, he identifies a previously unknown battle in which Carnegie busted the union at his original steelworks in 1888. He vividly recounts the infamously bloody encounter at the Homestead plant in 1892, when a crowd of angry workers exchanged fire with Pinkerton strikebreakers. (Confusingly, he calls the Pinkertons a “so-called detective agency”; in addition to brutally breaking strikes, the agency pursued Jesse James, Butch Cassidy and countless other criminals, and even investigated a theft in Secret Service headquarters.) Homestead provides a climax to the book, though it comes at the halfway point. Long anticipated, long remembered, it represents the culmination of Carnegie’s many contradictions, a bitter exposure of the self-deception of this self-proclaimed friend of labor.
Self-congratulatory and insecure, a champion philanthropist who crushed out strikes, Carnegie hid his complications behind a relentlessly cheerful, chatty manner. His letters, however, gave them voice, in the unfolding of his prolonged engagement to his articulate (and patient) fiancie, Louise Whitfield; his fruitless quest for respect and affection from his finest subordinate, the combative Henry Clay Frick; and his obsequious courtship of Herbert Spencer, the misanthropic Englishman who gave social Darwinism to countless ballrooms of self-satisfied industrialists.
Carnegie’s letters marvelously illustrate one of Nasaw’s central points: that the steel maker’s determination to give away his fortune came to justify, in his own mind, any means of getting richer, to allow him to donate more. Over time, the notion trampled his other moral standards, including his pacificism. “My feeling is that if Carnegie Bros. and Co. cannot earn a living by making instruments of peace,” he wrote in 1886, “they will conclude to starve, rather than make those of war.” Within a few years, however, he had constructed a massive armor-plate mill, and he was hungry for orders. “The destruction of the Chinese and Japanese fleets … will bring both of these nations into the market for armor-ships,” he wrote to Frick, after the first Sino-Japanese War. “I cannot but feel there is an opening for us to sell armor to builders here.”
Raw self-interest makes this contradiction predictable, perhaps; more interesting is the petulance and insecurity that marbled his correspondence with Louise Whitfield. “Believe me,” he huffed, after he failed to receive the affection he craved, “when the man comes whom alone you should marry, your nature will thaw and burst into flame. You can never be more than a friend to me, as you know. Don’t try.” Then she sent a letter that detailed her love, and he replied with an outburst as vulnerable as it was passionate. “Is it really true that you are at last sure as the rock, that your destiny has come? I can scarcely rest in this assurance. I read and re-read and tremble lest it isn’t certain for all time,” he wrote. And hovering over their relationship was his mother, a titanic figure who resided with him until she died, at which point he finally married Louise.
The very abundance of Carnegie’s writings, however, weighs upon this account. In one of Nasaw’s finest passages, he explores the steel maker’s peculiar mix of vanity and self-doubt by quoting one of his friends. “He never has any but one theme, himself,” Mark Twain wrote of Carnegie in 1907. “He is himself his one darling subject, the only subject he.” As strange as it sounds to say this of a biographer, Nasaw shares this weakness, this overly tight focus on Carnegie himself. With so much material to move through, he sometimes declines to look beyond it to fully develop important characters — Thomas A. Scott, for example, the mentor whom Carnegie refused to save in the panic of 1873, or Andrew Kloman, the technically brilliant but paranoid iron maker, maneuvered out of his own mill by the smiling Scotsman.
There’s a drama to these tales that Nasaw sometimes rushes past, as if overly conscious of the many letters he must lay before the reader, as if his very strength as a researcher saps his skill as a writer. Plot, according to my favorite definition, is the creation of expectations, followed by their fulfillment. In a good writer’s hands, even so unplanned and chaotic a succession of events as a human life unfolds under firm control. This is more than a matter of the reader’s pleasure: A well-shaped narrative often gives the greatest justice to the truth, by drawing out the larger significance of events. For too many stretches, however, the book plods along plotlessly. Carnegie’s life becomes the proverbial one damn thing after another. Coaching expeditions, speaking engagements, club memberships, articles and books, and acts of philanthropy run on and on, with little sense of where the narrative is leading. The sentences are clean, often powerfully evocative, but they sometimes fail to point us to what matters. It all makes for a book that is definitive, but often less than superlative.
Perhaps Andrew Carnegie’s significance is obvious enough. Forefather of U.S. Steel, epic philanthropist, “moral philosopher of industrial capitalism,” as Nasaw calls him, he yearned to be more than the excellent businessman he was. As if striving to outgrow his sub-60-inch height, to overshadow the shame of a shiftless father and an abbreviated education, he tried to move the world with his mental power and moral passion. But the man who both armored America’s battleships and denounced its occupation of the Philippines may have been doomed to disappointment. After years as a self-appointed ambassador for world peace, befriending emperors and presidents, he lived to see civilization collapse into the savagery of the First World War, and ended his days in bitter disillusionment.
He was, until the end, a contradiction. He consciously squeezed every copper out of his steelworks — out of every one of his workers — in order to give away even more, trusting himself better than anyone else (let alone the government) to use wealth wisely. And yet, no one can say that he did not leave a lasting mark. His philanthropy lives on, as does our fascination with this rapacious gift-giver, this master of moneymaking who loved words best of all. As Twain wrote, “I like him; I am ashamed of him; and it is a delight to me to be where he is if he has new material on which to work his vanities.”
T.J. Stiles is the author of Jesse James: Last Rebel of the Civil War (Knopf, 2002) and is currently writing a biography of Cornelius Vanderbilt, 1794-1877, the founder of the Vanderbilt dynasty. More T.J. Stiles.
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