The images of Andrew Carnegie and Henry Clay Frick are some of the most iconic representations of the Gilded Age, that period of industrial progress when everything seemed possible in America. For the average immigrant the streets were not paved with gold but for these two men they may as well been. As ruthless as they were wealthy, Andrew Carnegie in particular was the Bill Gates of his day; they represent what was possible in the time of limited regulation and, let’s not forget, no personal income tax. It is well know that these two men began as friends and ended up as bitter enemies. Perhaps it was destiny that two such strong willed men could no co exist peacefully in the same enterprise for ever. It you take a look at their early interaction, with of course the benefit of hind site, it is almost impossible to miss the warning signs of what was to come.
Andrew
Carnegie, the elder of the two, immigrated to Allegheny
City, what is today Pittsburgh’s
North Side, at the age of 12 yrs with his parents and siblings from Scotland
in 1848. He had some schooling but
formal education was impossible for the young boy whose priority now was to
help provide for his family. He got a
job as a bobbin boy working 12 hours a day 6 days a week for $1.20 a week. He moved on from there to become a clerk,
then a delivery boy for a telegraph company in Pittsburgh. By the time he was 18 years old he had become
the assistant to the Assistant Superintendent of the Western Division of the
Pennsylvania Railroad, Thomas Scott. It
was through this partnership that Carnegie would learn the value of investment
which he built into one of the largest personal fortunes of any one individual
in history. He persuaded his employer
Scott to loan him $500 so he could invest in Adams Express. The company Scott had just told Carnegie was
about to land a large contract with the railroad, the idea of insider trading
was not something Carnegie or his friends were familiar with. The $10 check Carnegie received shortly after
his purchase of the company shares was the first time he ever made money with
out personally working for it and it changed his life and the country.
Henry Clay
Frick grew up on a farm near Mount Pleasant Pennsylvania. The son of a farmer, his early years, like much
of his later life, were plagued by illness.
Because of his poor health his formal schooling was sporadic at
best. He was sent to collage by one of
his maternal uncles but was soon back home having decided that collage was
not for him. In 1868 he moved to Pittsburgh
and got a job as a clerk in a department store.
Impressed with his grandson, Abraham Overholt soon offered Frick a job
as the book keeper for the family’s distillery business. Unfortunately not long after taking the
position Abraham died leaving Frick with out a job. He again turned to family and got a position
with his cousin Abraham Tinstman, who was in the coke making business. Tinstman was looking for investors to provide
and infusion of cash into his struggling business. Frick, using the inheritance
his mother received from his father’s estate as collateral, borrowed enough to
buy at 20% stake in the new company.
This proved to be the first step in what would eventually make him the
King of Coke. By 1873 Frick and company
were running 200 coke ovens, the largest operation in the region, and then came
the economic collapse.
Both
Carnegie and Frick were affected by the economic down turn and both met it with
the same determination to succeed. Frick
used it as an opportunity to purchase the failing businesses of is rivals as each
collapsed. Carnegie had founded the
Edgar Thomson Works, his first entry into the steel making business, just as
the economic collapse began. Carnegie
had gotten out of the Railroad business and decided that the nation’s future
lay in Steel. His intense devotion to
cost management helped his steel mill weather the storm and continue to show a
profit even as other mills were shutting down.
Carnegie continued to expand and soon his own coke mills could not keep pace
with his steel mills. He needed Henry
Clay Frick’s coke and he knew it. Tom,
Andrew’s brother, first approached Frick with the idea of selling the Carnegie
Coke holdings near Latrobe, about 100 ovens in all, to Frick. Frick was interested but it wasn’t a good
time to be talking business, he was about to marry Adelaide Childs. After the wedding however the couple began a
6 week honeymoon starting in New York City. Carnegie, who was living in NYC at the time,
invited the newlyweds to lunch and together Carnegie and Frick agreed upon a
deal where Frick’s company would become the exclusive supplier of coke to
Carnegie’s steel mills, setting the price at the beginning of the year per ton
of coke. After setting through the
entire meeting Margaret Carnegie famously remarked to her son “ah, Andra,
that’s a verra good thing for Mr. Freek, but what to we get out of it?” What they got was a constant supply of coke
at a set price, which would help insulate Carnegie from variations in the coke
market, and in the long run the talents of one of the most gifted managers the
world has ever seen. The seeds were sown
for a rocky relationship between the two very strong willed men.
Next week I
will continue their story looking at the partnership years.
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