A Pretty After-Dinner Speech For A Billion Dollars

When, on the evening of Decemeber 12, 1900, some eighty of the nation’s financial nobility in the banquet hall of the University Club on Fifth Avenue to do honor to a young man from of the West, not half a dozen of the guests realize they were to witness the most significant episode in American industrial history.

J. Edward Simmons and Charles Strewart Smith, their hearts full of gratitude for the lavish hospitality bestowed on them by Charles M. Schwab during a recent visit to Pittsburgh, had arranged the dinner to introduce the thirty-eight-year-old steel stampede the convention. They warned him, in fact, that the bosoms within New York’s stuffed shirts would not be responsive to oratory, and that, if he didn’t want to bore the Stilimans and Harrimans and Vanderbilts, he had better limit himself to fifteen or twenty minutes of polite vaporings and let it go at that.

Even John Pierpoint Morgan, sitting on the right hand of Schwab as became his imperial dignity, intended to grace the banquet table with his presence only briefly. And so far as the press and public were concerned, the whole affair was of so little moment that no mention of it found its way into print the next day.

So the two hosts and their distinguished guests ate their way through the usual seven or eight courses. There was little conversation and what there was of it was restrained. Few of the bankers and brokers of the Monongahela, and none knew him well. But before the evening was over, they- and with them Money Master Morgan- were to be swept off their feet, and a billion dollar baby, the United States Steel Corporation, was to be conceived.

It is perhaps unfortunate, for the sake of history, that no record of Charlie Schwab’s speech at the dinner ever was made. He repeated some parts of it at a later date during a similar meeting of Chicago bankers. And still later, when the Government brought suit to dissolve the Steel Trust, he gave his own version, from the witness stand, of the remarks that stimulated Morgan into a frenzy of financial activity.

It is probable, however, that it was a ‘homely’ speech, somewhat ungrammatical (for the niceties of language never bothered Schwab), full of epigrams and threaded with wit. But aside from that it had a galvanic force and effect upon the five billions of estimated capital that was represented by the diners. After it was over and the gathering was still under its spell, although Schwab had talked for ninety minutes, Morgan led the orator to a recessed window where, dangling their legs from the high, uncomfortable seat, they talked for an hour more.

The magic of the Schwab personality had been turned on, full force, but what was more important and lasting was the full-fledged, clear-cut program he laid down for the aggrandizement of Steel. Many other men had tried to interest Morgan in slapping together a steel trust after the pattern of the biscuit, wire and hoop, sugar, rubber, whisky, oil or chewing gum combinations. John W. Gates, the gambler, had urged it, but Morgan distrusted him. The Moore boys, Bill and Jim, Chicago stockjobbers who had glued together a match trust and a cracker corporation, had urged it and failed. Elbert H. Gary, the sanctimonious country lawyer, wanted to foster it, but he wasn’t big enough to be impressive. Until Schwab’s eloquence took J.P. Morgan to the heights from which he could visualize the solid results of the most daring financial undertaking ever conceived, the project was regarded as a delirious dream of easy-money crackpots.

The financial magnetism that began, a generation ago, to attract thousands of small and sometimes inefficiently managed companies into large and competition-crushing combinations, had become operative in the steel world through the devices of that jovial business pirate, John W. Gates. Gates already had formed the American Steel and Wire Company out of a chain of small concerns, and together with Morgan has created the Federal Steel Company. The National Tube and American Bridge companies were two more Morgan concerns, and the Moore Brothers had forsaken the match and cookie business to form the ‘American’ group- Tin Plate, Steel Hoop, Sheet Steel- and the National Steel Company.

But by the side of Andrew Carnegie’s gigantic vertical trust, a trust owned and operated by fifty-three partners, those other combinations were picayune. They might combine to their heart’s content but the whole lot of them couldn’t make a dent in the Carnegie organization, and Morgan knew it.

The eccentric old Scot knew it, too. From the magnificent heights of Skibo Castle he had viewed, first with amusement and then with resentment, the attempts of Morgan’s smaller companies to cut into his business. When the attempts became too bold, Carnegie’s temper was translated into anger and retaliation. He decided to duplicate every mill owned by his rivals. Hitherto, he hadn’t been interested in wire, pipe, hoops, or sheet. Instead, he was content to sell such companies the raw steel and let them work it into chief and able lieutenant, he planned to drive his enemies to the wall.

So it was that in the speech of Charles M. Schwab, Morgan saw the answer to his problem of combination. A trust without Carnegie-giant of them all- would be no trust at all, a plum pudding, as one writer said, without the plums. Schwab’s speech on the night of December 12, 1900, undoubtedly carried the inference, though not the pledge that the vast Carnegie enterprise could be brought under the Morgan tent. He talked of the world future for steel, of reorganization for efficiency, of specialization, of the scrapping of unsuccessful mills and concentration of effort on the flourishing properties, of economics in the ore traffic, or economies in overhead and administrative departments, of capturing foreign markets.

More than that, he told the buccaneers among them wherein lay the errors of their customary piracy. Their purposes, he inferred, had been to create monopolies, raise prices, and pay themselves fat dividends out of privilege. Schwab condemned the system in his hearers, lay in the fact that it restricted the market in an era when everything cried for expansion. By cheapening the cost of steel, he argued, an ever-expanding market would be created; more uses for steel would be devised, and a goodly portion of the world trade could be captured. Actually, though he did not know it, Schwab was an apostle of modern mass production.

So the dinner at the University Club came to an end. Morgan went home to think about Schwab’s rosy predictions. Schwab went back to Pittsburgh to run the steel business for Andrew Carnegie, while Gary and the rest went back to their stock tickers, to fiddle around in anticipation of the next move.

It was not long coming. It took Morgan about one week to digest the feast of reason Schwab had placed before him. When he had assured himself that no financial indigestion was to result, he sent for Schwab- and found that young man rather coy. Mr. Carnegie, Schwab indicted, might not like it if he found his trusted company president had been flirting with the Emperor of Wall Street, the street upon which Carnegie was resolved never to tread. Then it was suggested by John W. Gates, the go between, that if Schwab ‘happened’ to be in the Bellevue Hotel in Philadelphia, J.P. Morgan was inconveniently ill at his New York home, and so, on the elder man’s pressing invitation, Schwab went to New York and presented himself at the door of the financier’s library.

Now certain economic historians have professed the belief that from the beginning to the end of the drama, the stage was set by Andrew Carnegie- that the dinner, the famous speech, the Sunday night conference between Schwab and the Money King, were events arranged by the canny Scot. The truth is exactly the opposite. When Schwab was called in to consummate the deal, he didn’t even know whether ‘the little boss’ as Andrew was called, would so much as listen to an offer to sell, particularly to a group of men whom Andre regarded as being endowed with something less than holiness. But Schwab did take into the conference with him, in his own handwriting, six sheets of copperplate figures, representing to his mind the physical worth and the potential earning capacity of every steel company he regarded as an essential star in the new metal firmament.

Four men pondered over these figures all night. The chief, of course, was Morgan, steadfast in his belief in the Divine Right of Money. With him was his aristocratic partner, Robert Bacon, a scholar and gentleman. The third was John W. Gates whom Morgan scorned as a gambler and used as a tool. The fourth was Schwab, who knew more about the processes of making and selling steel than any whole group the processes of making and selling steel than any whole group of men then living. Throughout that conference, the Pittsburgher’s figures were never questioned. If he said a company was worth so much, then it was worth that much and no more. He was insistent, too, upon including in the combination only those concerns he nominated. He had conceived a corporation in which there would be no duplication, not even to satisfy the greed of friends who wanted to unload their companies upon the broad Morgan shoulders. Thus he left out, by design, a number of the larger concerns upon which the Walruses and Carpenters of Wall Street had cast hungry eyes.

When dawn came, Morgan rose and straightened his back. Only one question remained.

“Do you think you can persuade Andrew Carnegie to sell?” He asked.

 “I can try”, said Schwab.

“If you can get him to sell, I will undertake the matter”, said Morgan.

So far so good. But would Carnegie sell? How much would he demand? (Schwab thought about $320,000,000.) What would he take payment in? Common or preferred stocks? Bonds? Cash? Nobody could raise a third of a billion dollars in cash.

There was a golf game in January on the frost-cracking heath of the St. Andrews links in Westchester, with Andrew bundled up in sweaters against the cold, and Charlie talking volubly, as usual, to keep his spirits up. But no word of business was mentioned until the pair sat down in the cozy warmth of the Carnegie cottage hard by. Then, with the same persuasiveness that had hypnotized eighty millionaires at the University Club, Schwab poured out the glittering promises of retirement in comfort, of untold millions to satisfy the old man’s social caprices. Carnegie capitulated, wrote a figure on a slip of paper, handed it to Schwab and said, “All right, that’s what we’ll sell for.”

The figure was approximately $400,000,000 and was reached by taking the $320,000,000 mentioned by Schwab as a basic figure, and adding to it $80,000,000 to represent the increased capital value over the previous two years.

Later, on the deck of a trans-Atlantic liner, the Scotsman said ruefully to Morgan, “ I wish I had asked you for $100,000,000 more.”

“If you had asked for it, you’d have gotten it,” Morgan told him cheerfully.

The thirty-eight-year-old Schwab has his reward. He was made president of the new corporation and remained in control until 1930.”

This dramatic story of big business was included in this book because it is a perfect illustration of the method by which desire can be transmuted into its physical equivalent. I imagine some readers will question the statement that a mere, intangible desire can be converted into its physical equivalent. Doubtless some will say, “You cannot convert nothing into something!” The answer is in the story of United States Steel. That giant organization was created in the mind of one man. The plan by which the organization was created in the mind of one man. The plan by which the organization was provided with the steel mills that gave it financial stability was created in the mind of the same man. His faith, his desire, his imagination, his persistence were the real ingredients that went into United States Steel. The steel mills and mechanical equipment acquired by the corporation after it had been brought into legal existence were incidental, but careful analysis will disclose the fact that the appraised value by an estimated six hundred million dollars by the mere transaction that consolidated them under one management.

In other words, Charles M. Schwab’s idea, plus the faith with which he conveyed it to the minds of J.P. Morgan and the others, was marketed for a profit of approximately $600,000,000. Not an insignificant sum for a single idea!

What happened to some of the people who took their share of the millions of dollars of profit made by this transaction is a matter with which are not now concerned. The important feature of the astounding achievement is that is serves as unquestionable evidence of the soundness of the philosophy described in this book. Moreover, the practicality of the philosophy has been established by the fact that the United States Steel Corporation prospered. It became one of the richest and most powerful corporations in American, employing thousands of people, developing new uses for steel and opening new markets; thus proving that the $600,000,00 in profit which the Schwab idea produced was earned.

Riches begin in the form of thought. The amount is limited only by the person in whose mind the thought is put into motion. Faith removes limitation. Remember this when you are ready to bargain with life for whatever it is that you ask as your price for having passed this way. Remember, also, that the man who created the United States Steel Corporation was practically unknown at the time. He was merely Andrew Carnegie’s “ Man Friday” until he gave birth to his famous idea. After that, he quickly rose to a position of power, fame and riches.

Now for another example of how faith in an idea made millions for one man and through it helped countless others increase their wealth. Sir John Templeton is a man with great faith in his talent to make sound and profitable investments.

Templeton was better than most people at investing money because people often made investments based on emotion an ignorance and not common sense. He felt that by using his skill in investing, he could not only provide a needed service to the small investor, but make a good deal of money for himself as well.

To accomplish this he started a group of mutual funds to manage other people’s money. This was a pioneering project as mutual funds were a relatively new concept at the time. Templeton honed that concept into what it is today.

He reminisced that at the Templeton Growth Fund’s first annual meeting the participants consisted of John Templeton, one part-time employee and one shareholder. “We held the meeting in the dining room of a retired General Foods executive, to save money.”

The Templeton funds now have more than 6,000 employees worldwide and $36 billion in assets. Driving that growth is the Templeton Group’s well-earned reputation as the premier fund group for investing. A $10,000 investment in the Templeton Growth Fund 40 years ago is worth $3 million today. By the time he retired and sold his Templeton Group fund interests in 1992 (estimated at $400 million), John Templeton estimated that he had helped a million people make money, in addition to his own success.

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