Mr. CARNEGIE. We did not publish it in the newspapers. [Laughter.] The CHAIRMAN. It was not possible that Mr. Morgan or any of these people who owned the steel corporation ever knew that you had these big advantages, and that you had already got a site for that plant, was it? Mr. CARNEGIE. I would not say what they knew. The CHAIRMAN. Was anything ever said about this great steel plant that you were going to build and the tremendous advantages you had? Mr. CARNEGIE. We bought the land, and that was known. The CHAIRMAN. There has been some intimation that, even with your sanguine temperament, and your long experience, that the Carnegie works, like Napoleon at Waterloo, were face to face with a combination so extensive, manned by men so experienced, and sustained by resources so tremendous, with Judge Gary, for instance, in the Federal Steel Co., with Mr. Gates in the Steel & Wire Co., and with Mr. Morgan as godfather and titular head, that with their organization outside of the Carnegie Co. possessed sufficient power to have made it no longer interesting for you to have continued in the steel business; and that perhaps you escaped destructive competition by retiring from the field. Was it possible for the Carnegie Co. to have met these combined forces? Mr. CARNEGIE. Nonsense. [Laughter.] Why did Morgan send word to me that he would like to buy me out? The CHAIRMAN. I understand that he was uneasy about the condition of your health, and gave that as a reason. Mr. CARNEGIE. I was still able to take sustenance. [Laughter.] Mr. BARTLETT. And you were able to take notice, too, I think. Mr. CARNEGIE. There is a different story than that. But do not let us go into that. That is a good joke. Ask Schwab about that. Mr. YOUNG. One gentleman expressed it in this way: He said that these gentlemen who organized the Steel Corporation were about to make a very fine plum pudding, and that they ascertained that Mr. Carnegie had all the plums. [Laughter.] Mr. CARNEGIE. Gentlemen, it is a great pity that they approached me and asked if I would retire from business. I had formed my career, and laid down the law to myself that I would not spend my old age in accumulating more dollars. I showed that when we got the offer of $320,000,000 for our property, and when Mr. Schwab came and sat down and showed me what he thought I could get, I said: "Schwab, it is just as my partners say. That is entirely satisfactory to me. It is all the money I ever want to make." I did not realize then so fully that it takes a great deal more anxious thought and labor to distribute money wisely than it ever did to me to make it. I do not like to be called a philanthropist. That means a man, usually, with more money than brains. You can do more harm distributing money unwisely, and do more to pauperize people than you can do good, almost, in trying to assist them. I never like to help anybody who has not helped himself. I never give a library to a community that will not maintain it. Every community does a great deal more for its library than I do. I consider that what one does for himself has ten times more value than all that another man can do for him. The CHAIRMAN. Pursuing this inquiry a little further, Mr. Carnegie, because it is vastly interesting to me, I have often wondered what would have been the result if you had concluded to continue in the steel business. I shall be frank with you. I believe if you had, and had the strength that you thought you had, and had determined to see who could produce the better and the cheaper, it would have done even more good for this country than if you had distributed in beneficences every dollar that you had. Mr. CARNEGIE. That is pretty hard on a fellow who has worked so hard to distribute and acquired so easily. The CHAIRMAN. I do not mean to underrate the good that you have done, Mr. Carnegie. I mean only to speak of my high estimate of the good that you would have done if you had followed that course. Mr. CARNEGIE. Thank you. I am awfully glad. That will shed a ray of illumination around your signature in that picture they have in the newspapers. [Laughter.] The making of money was so easy that, really, it did not bother me a bit. You see how I put all the work on Schwab and Reed and all these fellows, and I do not know anything about it. The CHAIRMAN. With a very little knowledge of the steel business, this thing has been puzzling me. Take the case of the Federal Steel Co., for illustration. Mr. Gary was at the head of it, I believe. It was formed by the Morgan syndicate. I forget what the syndicate received. I think it was $16,000,000. This company was formed in September, 1898, with $200,000,000 authorized capital stock, of which about $100,000,000 was issued. It was a merger, through stock purchase, of the Illinois Steel Co., operating several large steel plants in or near Chicago, and another at Milwaukee; the Minnesota Iron Co., which had extensive ore properties on the Vermillion Range, and which also owned the Duluth & Iron Range Railroad and the Minnesota Steamship Co., thus providing for the transportation of its ore from mines to lower Lake ports; also the Lorain Steel Co. and the Johnstown Co., of Pennsylvania, with plants at Lorain, Ohio, and Johnstown, Pa. The consolidated company also acquired the stock of the Elgin, Joliet & Eastern Railway, a line of some 180 miles, intersecting practically every railroad entering Chicago. This road directly served the Joliet works of the company and afforded connections with its other plants. The Illinois Steel Co. itself also controlled a railroad, the Chicago, Lake Shore & Eastern, which connected its various plants in and about Chicago. Did you have the custom of the division of rates when you were in business? Did your roads make a division of rates with other roads of through rates? Mr. CARNEGIE. Surely. The CHAIRMAN. These companies, intersecting every road that came into Chicago, had the advantage of getting their ore from their own boats and railroads, and had the advantage of making this division of rates with every road into Chicago. What railroad advantage had the Carnegie Co. that could compensate for this enormous advantage, even if you had constructed your roads to the sea board-to tidewater? Had you railroad facilities that could cope with those? Mr. CARNEGIE. We were within 300 miles of the seaboard. We had the whole water route, everything, to New Orleans, and so on. We had the Ohio River. You can load rails in a flatboat and send them down that way. We loaded them to Fort Benton without a transfer. You know how far Fort Benton is? We had great advantages in the Ohio River. Then, Chicago had to get its coke from the Connellsville region, to pay the freights on carload coke-I think about $3 a ton. And, as I told you before, we never were in any doubt about our ability to maintain our position. The CHAIRMAN. If you had stayed in the business would you have completed that road to tidewater? Mr. CARNEGIE. I think not, because the Pennsylvania Railroad asked a conference with me The CHAIRMAN. I mean the last road you were surveying the road to Baltimore? Mr. GARDNER. To connect with the Western Maryland. Mr. CARNEGIE. Oh, yes. I can not tell you what we would have done. The CHAIRMAN. If you had completed that road, would you have had transportation facilities equal to those of the Federal Steel Co.! Mr. CARNEGIE. I think that the Baltimore & Ohio Railroad Co. that ran through our works and the Pennsylvania Railroad that ran through gave us rates over their lines which would be satisfactory. I would not want to build a new line. The CHAIRMAN. But the Federal Steel Co., through the Chicago, Lake Shore & Eastern and through the Elgin, Joliet & Eastern, could get divisions of the freight rates that were very advantageous from every road entering Chicago north, south, east, or west. Mr. CARNEGIE. Why would not the Pennsylvania Railroad and the Baltimore & Ohio give us the same? The CHAIRMAN. Had you a connecting road with all those lines by which you could get divisions of rates? Mr. CARNEGIE. The Pennsylvania Railroad ran through our works, alongside of the Braddock works, for miles. The CHAIRMAN. You do not catch my point, Mr. Carnegie. If you delivered your tonnage to the Pennsylvania Railroad or to the Baltimore & Ohio Railroad, passing your traffic directly from your mill to the Baltimore & Ohio or to the Pennsylvania Railroad, you could get no division of the rate, because they would have the entire haul. You had no connecting line. Mr. CARNEGIE. Oh! You mean they would not have called that a connecting line? Then, if I had a connecting line, I would have had to maintain it and pay the cost of transportation. The CHAIRMAN. Yes. Mr. CARNEGIE. I do not see that that is much advantage. It is a very small advantage, is it not? The CHAIRMAN. Take the works at Joliet, for illustration. I understand there is a road, the name of which I do not remember, that runs within 3 miles of the steel works there at Joliet. It is 600 miles from the point of junction to Kansas City. The United States Steel 17042-No. 36-12 Corporation to-day delivers a carload of freight at that point of junction there, which is 3 miles from the Joliet works, to the line of the nearest carrier. The initial carrier carries the freight 3 miles, the connecting line carries the freight 600 miles, and the steel company gets 20 per cent of the through rate. You see what that would be with thousands of tons of material. Had you any such advantages as that at Pittsburgh, or any such connections? Mr. CARNEGIE. I do not think I would have given our road to the lake that we owned for all you have talked about. The CHAIRMAN. And if you had constructed the other road, would you have been in a position to have protected yourself against any rate that the Baltimore & Ohio or the Pennsylvania might have made? Mr. CARNEGIE. That depends upon the arrangement we would have made. We did not begin. We figured about it. I think we should have taken good care of ourselves in the contract. Judge Reed would have looked out for that-and Mr. Knox. [Laughter.] The CHAIRMAN. The Moore companies were, a great many of them, finishing companies? What were the Moore companies? Mr. REED. The sheet steel, the steel hoop, and the tin plate. The CHAIRMAN. These companies had the means of obtaining their own semifinished products. If the Moore companies had gotten their raw materials from their own blast furnaces, and the Federal Steel Alliances had gotten theirs from their own blast furnaces, could you have withstood both the house of Morgan and the house of Moore, if they had gone into combination? Mr. CARNEGIE. We could have beaten all comers. It never bothered us a minute. We never lost a moment's sleep on anything like that. We had supreme confidence in the horse that we had entered for this race. The CHAIRMAN. Here is a statement that is almost that strong, but I was afraid that Mr. Smith was romancing-that he had overestimated. Mr. CARNEGIE. Is Mr. Smith the Government assessor? The CHAIRMAN. He is the commissioner. He says, on page 86: The Carnegie interests had, by the beginning of 1900, became very strongly intrenched with respect to the reserves of all the principal raw materials. The company had assured itself of a long-term supply of very desirable ores in the lake region. Most of its acquisitions bad been acquired by lease and had involved comparatively small initial outlay, the bulk of the cost being paid in yearly installments in the form of royalties as the ore was actually produced. With respect to coal and coke property, the Carnegie interests, through the H. C. Frick Coke Co., had made very extensive purchases long before the era of extension. On the reorganization of the Carnegie interests in 1900 the H. C. Frick Coke Co. held 40,000 acres of coking-coal lands in addition to a large amount of surface lands, about 11,000 coke ovens, aside from a large amount of mine equipment, dwellings, and miscellaneous property. The cokingcoal lands owned by the Frick Co. formed one of the most valuable assets of the Carnegie concern. The Carnegie Co. also had very valuable natural-gas properties in the vicinity of Pittsburgh. While the company did not control the transportation of its ore by rail from mines to the head of the Lakes, as did the Federal Steel Co., it acquired a fleet of six lake ore vessels in 1899 and rapidly added others, so that by the end of 1900 it was in a position to transport a very considerable part of its ore down the Lakes in its own boats. Moreover, as early as 1896 the Carnegie interests had acquired the Shenango & Lake Erie Railroad, running from Conneaut to Pittsburgh, and also the Butler & Pittsburgh Railroad, then under construction, both of which were consoli dated in the latter part of 1896 as the Pittsburgh, Bessemer & Lake Erie Railroad. Immediately upon the acquisition of these railroads the Carnegie interests virtually reconstructed them, with a view to effecting the transportation of ore at a minimum cost. The size of the equipment, both engines and cars, was enormously increased, bridges were strengthened, and the road in large measure rebuilt. The most modern methods of unloading ore from steamers to cars at the docks and from the cars to furnaces at Pittsburgh were introduced. The result was a very pronounced increase in the average trainload and a marked reduction in transportation and handling costs per ton. It is well worth repeating that the Carnegie interests long before this had owned the Union Railroad, a belt line in the Pittsburgh district, which added greatly to the efficiency of their plants. The chief business of the Carnegie concern was the manufacture of heavy steel products, such as steel rails, plate, axles, structural steel and bridge material, and various kinds of crude steel for the trade. Its annual capacity of Ingots was about 3,500,000 tons, and its capacity of finished products rather more than 3,000,000 tons, thus placing the company well in advance of its largest competitor, the Federal Steel Co., with respect to size. Its ingot production in 1900 was about 18 per cent of the company's total. It conducted every stage in the manufacture of its various products from the production of the raw materials up. Generally speaking, the Carnegie interests, up to the date of the organization of the New Jersey company, had confined themselves largely to the manufacture of heavier steel products of the character just described. Many of its best customers were manufacturers of finished steel, such as wire products, tubular goods, tin plate, and sheet steel. The company was, however, in a position to engage at short notice in the manufacture of more highly finished products, a fact which, as shown later, proved to be an exceedingly important consideration in bringing about the organization of the United States Steel Corporation. Is that statement correct, Mr. Carnegie? Mr. CARNEGIE. It is delightful reading. It serves to confirm you in all that I have said, does it not, Mr. Chairman? The CHAIRMAN. Yes. Mr. CARNEGIE. That should be a great satisfaction to you and to me. The CHAIRMAN. No. I was rather inclined to doubt it. I was inclined to suspect that you did not have that advantage over the Federal Steel Co. which Mr. Smith thinks you had. I desired to know what you thought about it. Mr. CARNEGIE. Do not let us waste time on that. Whether we had or had not, we had the great pleasure of thinking we had; and if the other parties thought they had, so much the better. It is a question that never can be solved, because we retired from business. The CHAIRMAN. I have here an extract from a letter from Mr. Carnegie to Mr. George Lauder, of January 14, 1899. Mr. CARNEGIE. That is my cousin; a very valuable man. He was at the head of the mechanical end. The CHAIRMAN. In that letter you say: I am certain that in two years hence we shall be on the basis of $25,000,000 net yearly, even at low prices. We have to supply the world-note last week's British advices; less ore this year than last from foreign points; great scarcity; prices wild; coke put to 15 shillings and 6 pence at works, best grade; bad to get at that; near $3.75 per ton, and scarce. Impossible to increase supply of either coke or ore. Since we reach Atlantic ports at $1 per ton, we have the trade of the world. Are you still of that opinion, Mr. Carnegie? That was your letter to Mr. George Lauder. Have you changed that opinion since? Mr. CARNEGIE. Wait a minute. I would like to look over that and recall some of the conditions. The copy of letter referred to was handed to Mr. Carnegie. |