What the U.S. Steel Corporation Really Is, And How It Works

Ray Stannard Baker

McClure’s/November, 1901

THE capitol of the United States Steel Corporation is in New York, just below Trinity Church and convenient to the head of Wall Street. It is a precipitous building, twenty-one stories high, called “The Empire.” Around a corner and one short block away is the office of J. Pierpont Morgan, to whom of a bright morning comes President Charles M. Schwab, of the Steel Corporation, walking down from his capitol—a plain, sturdy man in a worn sack coat and black derby hat. A stone’s throw below The Empire, toward the Battery, rises that other capitol of industry where the inscrutable Mr. Rockefeller directs the colossal business of the Standard Oil Company. The two capitols, as I shall point out later, are connected by an invisible but by no means tenuous web, spun in the new pattern variously known as “community of interest,” “combination,” “community of control.”

President Schwab occupies an office on the eighteenth floor of The Empire, where he can look out over the smoky top of west New York, across the Hudson, and far into New Jersey. On the floor below him are the offices of ex-Judge E. H. Gary, chairman of the executive committee, and around about them are the vice-president, the general council, the secretary, the treasurer, the members of the executive committee, which may be called the president’s cabinet, and the rooms of the board of directors, which is the corporation’s Congress. Here also are grouped the headquarters of several of the subsidiary corporations—the Carnegie Steel Company, the Federal Steel Company, the American Steel and Wire Company, and others, once regarded as giants of industry, but now overshadowed by the new power. Several of the greatest rivals of the corporation, as if to fight at close quarters, occupy offices on other floors of the same building.

From this brain-center is directed a business so extensive that few people possess anything but the vaguest conception of its magnitude, organization, and methods of operation. It is indiscriminately denominated a “trust,” a “combination,” a “monopoly,” and abused or extolled offhand according to the political or financial predisposition of the individual. One who attempts to grasp it abstractly in its entirety finds the process like trying to realize the extent and purchasing power of a billion dollars in gold eagles. We have been thinking in terms of hundreds or thousands of dollars, and find ourselves suddenly called upon to think in billions, and because we do not immediately succeed, we feel somehow that the organization and operation of the great corporation are intentionally shrouded in secrecy. But this is hardly the case. In their recent testimony before the Industrial Commission of the United States Congress, Mr. Schwab, Judge Gary, and other prominent officers and attorneys of the Steel Corporation spoke with the utmost freedom of the organization and purposes of the so-called “trust,” and of its component corporations, even to the extent of furnishing statistics relative to certain branches of their business. They have also spoken and written freely for publication elsewhere. A British publication (“The Contemporary Review”) expresses astonishment at the “extraordinary frankness” of President Schwab and his colleagues as to the intentions of their organization, so “that we are really more fully informed thereon than we are about the ambitions and methods of our family grocer.”

It is not an uncommon impression that J. Pierpont Morgan, having more money at his disposal than he knew what to do with, conceived the idea of buying up and combining under one management a number of steel properties, seeking thereby to make large promoter’s profits and to establish a sort of “monopoly” in the steel business. But the Steel Corporation was not a sporadic promoter’s enterprise, being the product of conditions rather than of men; and while the corporation seemed to burst suddenly upon the public view, its seeds had long been germinating. Many of the men who were prominent in the organization were unquestionably forced into it against their will. If the truth were known, it is probable that Mr.’- Morgan himself undertook the task out of necessity, and that the responsibilities of piloting the stupendous enterprise to success, knowing as he did that his reputation was at stake, must have weighed heavily upon him. Like the German Empire, the Steel Corporation was “squeezed into existence”; a number of mighty concerns, on the brink of war, were brought together because they dared not remain independent. And Andrew Carnegie, the man of all men who was most responsible for the Steel Corporation, had no desire to see it organized.

When Mr. Carnegie embarked extensively in steel-making, the various industries which combine in producing steel—the iron mines, coal mines, lime quarries, coke ovens, blast and Bessemer furnaces, and so on—were owned for the most part by separate companies; so that when he, as a steel-maker, needed raw materials he was compelled to bargain with Jones & Co. for coal, with Smith & Co. for iron-ore, with Jackson for coke, and so on down the list, and then he was compelled to pay freight on various railroad and steamship lines. He was never sure of securing the supplies he wanted when he wanted them, and at reasonable prices. Mr. Carnegie, feeling the inconvenience and the money losses incident to this system, had already tried the experiment of owning their own coal and in some cases iron mines. Mr. Carnegie greatly extended this system, acquiring not only iron and coal mines, but coke-ovens, building or leasing his own railroad and steamship lines, until finally his company controlled every step in the process of steel-making, from ore mine to steel billet or ingot. In other words, by becoming independent or “self-contained,” he was enabled to put the profits of the various branches of the industry in his own pocket, and, by extending his plants and introducing the most approved machinery soon became the greatest steelmaker in the world. An Englishman who visited the Carnegie works a year or so ago was apparently unmoved until at the close of his inspection, he asked his guide how much steel was there produced. The answer was “The output of the Carnegie Company, alone, equals about three-quarters of the entire product of Great Britain.”

But other great steelmakers were quick to perceive the secrets of Mr. Carnegie’s success, and they, too, began to combine, buy up coal and ore mines, and make themselves independent; and some of them who had formerly purchased the crude steel billets and ingots from Mr. Carnegie to make into steel tubes, wire, tin-plate, and other finished products, found that they could make their own billets more cheaply than they could buy of Mr. Carnegie. And they were in themselves gigantic combinations or “trusts,” all completely or nearly self-contained. A single one of them, the Federal Steel Company, having $99,000,000 issued capital, was until the organization of the United States Steel Corporation the greatest corporation in the world, controlling the steel business of Chicago, Milwaukee, Joliet, Ill., Lorain, O., and Johnstown, Pa.; a large number of iron-ore mines in the Northwest, and of coking coal in Pennsylvania; besides extensive railroad and steamship transportation facilities. Indeed, six large corporations, with several subsidiary railroad, coal, and iron companies, were combined in forming the Federal Steel Company.

Mr. Carnegie, perceiving that his competitors were pushing his system a step further than he himself had planned, and that his market for crude steel was threatened, immediately planned to build enormous works for manufacturing his crude steel into tubes and kindred completed products. With his reputation for Scotch determination, backed by the best organized and most compact industrial institution of its kind in the world, it was not unnatural that his rivals, big as they were, should look upon the new move with alarm. There were two courses open to them: fight or buy. Now, Mr. Morgan had assisted in bringing the Federal Steel Company and two of the other great steel corporations into the world and he and his associates were still largely interested in them. Mr. Morgan is as much a fighter as Mr. Carnegie, but he knows when to fight and when to buy. Fighting in this case meant losses to everyone concerned. Mr. Carnegie’s price for his plants was enormous, and he plainly hinted that unless the purchase was made immediately the price would go higher still. But Mr. Morgan did not hesitate; the price was promptly paid, and the Carnegie Steel Company and nine other great corporations were combined to form the colossal United States Steel Corporation.

Never before had there been such a huge business deal, and yet it was consummated with astonishing celerity. Mr. Morgan began the work of organization in December, 1900, and the earliest announcements of the enterprise appeared in February and March, 1901. In April the corporation began work. The total cost of all the steel plants, mines, steamship and railroad lines purchased, as it appears on the corporation books, was about $1,300,000,000. Partial payment was made with the capital stock of the new corporation, which amounted to $1,100,000,000 ($550,000,000 preferred and $550,000,000 common stock), and for the remainder the corporation went into debt; that is, issued bonds for about $304,000,000. The actual cost of organizing the corporation—Mr. Morgan’s work—as it appears on the books is about $750,000, much less than is popularly supposed. Of this sum $220,000, $200 on every million dollars of capital stock, was paid to the State of New Jersey for the fees of incorporation.

It is difficult to convey any adequate idea of the magnitude of the Steel Corporation. A mere list of the properties owned or controlled would fill an entire number of this magazine. It receives and expends more money every year than any but the very greatest of the world’s national governments; its debt is larger than that of many of the lesser nations of Europe; it absolutely controls the destinies of a population nearly as large as that of Maryland or Nebraska, and indirectly influences twice that number. Its possession are scattered over half a dozen states, from Minnesota to New York and Massachusetts, with its chief interests centering at Pittsburgh, Chicago, and Duluth, and the whole controlled from New York City. It owns or controls 115 fine steamships on the Great Lakes, and six important railroad lines and several smaller ones. In Pennsylvania, its coal possessions cover over 75,000 acres of land worth $1,200 an acre, besides 30,000 acres of other land and quarries, and 98,000 acres of leased natural-gas lands. It owns no fewer than 18,309 coke ovens, being the largest coke producer in the world. Of blast furnaces it owns eighty, producing 9,000,000 tons of pig iron yearly, and of steel plants it owns about 150.

And yet the Steel Corporation cannot be called a monopoly; it does not control production or prices, although its influence on both must be profound. In a general way the corporation may be said to own something more than two-thirds of the steel industry in this country (in the tin-plate industry a considerably larger proportion), the remainder being controlled by a number of lively rivals. Here are the comparative figures of steel production for 1899, being practically the same for 1900:

 

Produced by the U. S. Steel Corporation: 7,000,000 tons.

Produced by independent companies: 3,200,000

Total United States: about 10,200,000

 

Total for Great Britain (1899): 4,988,010

Total for Germany (1899):  6,290,434

Total for the world, including the U. S. (1899)    26,848,755

 

These figures show that the Steel Corporation produces more steel than either of our two greatest rivals, Great Britain and Germany, and more than a quarter of the entire production of the world. The production of the independent companies, given at 3,200,000 tons, is divided among some twenty or thirty rivals of the Steel Corporation, a few of which are powerful concerns, owning their own coal and iron mines, and therefore independent in the matter of competition. The growing industry of the South, centered at Birmingham, Alabama, as well as the Colorado branch of the industry are independent of the Steel Corporation. Jones & Laughlin’s Limited in Pittsburgh is the most threatening of all the rivals of the corporation. Other competitors are the Cambria Steel Company; the Republic Iron & Steel Company; and the Pennsylvania Steel Company, which has recently passed into the control of the Pennsylvania Railroad Company, and acquired extensive iron mines in Cuba, thus making it, in case of a steel war, a most formidable competitor. Since the organization of the corporation a number of new independent concerns have sprung up in various parts of the country, so that there promises to be enough fighting to keep the Broadway capitol from dozing. The above figures showing proportion of production are “good times” figures. Prosperity is favorable to the growth of rivals, and in times of financial stress some of the smaller concerns will no doubt go to the wall; and the great corporation, fitted to weather storms, will, as Mr. Schwab says, control probably as high as seventy-five per cent of the steel industry of the whole country instead of some sixty-five per cent, as now.

The Steel Corporation is a republican form of government, not unlike that of the United States, with a president; a cabinet, or executive committee, which is likewise a supreme court, having practically all the power of the board of directors; a treasury department, or finance committee; a legal department (the general counsel); and a congress (board of directors), elected to office by the individual voters or stockholders. In this case, owing to the large amount of stock which he owns or influences, Mr. Morgan had much to say in electing the board of directors, and its composition shows how his idea of “community of interest” has been worked out. There are two main elements about equally represented among its twenty-four members, one of which may be called the financial side of the board—men who, like Mr. Morgan, Mr. Rockefeller, and Mr. Marshall Field, know little or nothing about steel-making, but who do know business and finance. The other element, represented by Mr. Schwab, Mr. Reid, Mr. Roberts, Mr. Edenborn, and others, are practical steel-makers. There are other lines of division. Each of the subsidiary companies forming the Steel Corporation has its representation in the board. It is probable that Mr. Andrew Carnegie is the largest single owner of bonds in the Steel Corporation, having acquired this interest in partial payment for his share in the Carnegie Steel Company ; he has a first mortgage, so to speak, on the property, and while not a member of the board, he is represented through the Carnegie Steel Company by Mr. Schwab and James H. Reed. Mr. Morgan is probably the next most powerful interest, and he and two of his partners are on the board. The Standard Oil Company, which owned part of the Lake Superior mines and a steamship company absorbed by the Steel Corporation, also has three members—Mr. Rockefeller himself, John D. Rockefeller, Jr., and H. H. Rogers. In the same way the Federal Steel Company, the American Bridge Company, the “Moore group” of companies, and others are each represented by heavy stockholders.

Each man on the board was chosen, like a political committeeman, for the influence he could wield; and there is no better way to reach an understanding of the scope of this colossal enterprise than to follow out some of the many devious and far-reaching courses of influence represented by the various directors, which constitute a web covering the entire country and reaching hundreds of unexpected industries. Take the case of Mr. Morgan, who is a director in twenty-one railroad companies and a vital influence in several others, besides being the dictator of a transatlantic steamship line. These railroads require enormous quantities of steel material for rails, locomotives, and cars, the steamship line requires ships, and so on, and Mr. Morgan would naturally use his influence to persuade them to purchase their supplies of the Steel Corporation. Furthermore, he would buttress his influence throughout the railroad world by this forceful argument, in plain language thus expressed: “See here, the Steel Corporation is the greatest shipper of freight in the world. You buy your iron and steel of us and we will ship a proportionate amount of our freight by your line.”

Similarly Mr. Rockefeller, dictator of the Standard Oil Company, is naturally prepared to favor the Steel Corporation as a source of all the vast supplies of steel tubing, piping, and materials for tanks used in the combined oil industries of America. Then there is William E. Dodge, a member of the firm of Phelps, Dodge & Co., one of the controlling influences in the copper industry of America, with all its avenues of financial authority, and Clement A. Griscom, president of the International Navigation Company, a large user of steel ships, and a likely factor in the invasion of foreign markets which the Steel Company is planning. Mr. Griscom is also closely identified with the management of the Pennsylvania Railway Company, perhaps the ost important single railroad system in the world, thereby reaching other long lines of influence. P.A..B. Widener, of Philadelphia, another member, controls many of the important streetcar lines in America, all of which are heavy purchasers of iron and steel for rails, cars, power-houses, and so on. Marshall Field, of Chicago, probably the foremost of American merchants, brings to the corporation a wide authority in financial circles. Thus, one might continue the analysis, showing in what manner each member of the board adds strength to the corporation. It would seem that Mr. Morgan’s “community of interest” had been so completely and successfully worked out that most of the great aggregations of wealth in the country are gathered within the net of the Steel Corporation. Indeed, so diverse have become the interests of the great money masters that they must, perforce, bury their differences and step to the same music, for if they disagree, there is an even chance that their left hand will be found engaged in fisticuffs with their right. Never was there such evidence of the growing solidarity of capital as that furnished by the new Steel Corporation.

There are other facts of interest in regard to this board of directors. It is indicative of the part the law plays in greater enterprises that the board contains no fewer than four men who were trained in that profession, three of whom have been judges. Six are bankers, and many of the others are heavily interested in banks. One of the twenty-four members is foreign-born (Prussia); nearly all of the remainder sprung from old American families, of British origin, though three are plainly of German descent. That early training and environment count much in fixing a man’s career is evident from the fact that seven directors were born in the coal and iron state of Pennsylvania, five are from the Middle West in close proximity to centers of steel industry, and only one is from the South. More than half of the members are “self-made men,” having been farmer boys, clerks, or workmen, beginning with nothing, educating themselves, and pushing upward by sheer ability. Less than half the number received a college education, and only four or five are graduates of the great universities, a fact which explains Mr. Schwab’s light regard for an extended college course as a training for a business career. Mr. Schwab himself was educated in a Catholic school, from which he was graduated at the age of eighteen.

The board of directors holds a meeting once every month in the Broadway office, though it is not often that all of the members are in, attendance. At these sessions the broader policies of management are settled, and such knotty questions as the executive or the finance committees cannot decide are here discussed, together with all problems having to do with the purchase of new properties, the expenditure of extraordinary sums of money for improvements the issue of new bonds, the declaration of dividends, and so on. In short, the board is the law-making power, having very much the same duties and responsibilities as a parliament. But there is this difference: the president of the Steel Corporation presides at the head of the table at board meetings, and his cabinet (the executive committee), as well as the finance committee, is composed of members of the board. The directors, being busy men, nothing but affairs of superior importance are placed before them, and those in the most condensed form. Indeed, the bulk of their work consists of approving what their president, the executive committee, and the finance committee, of which Robert Bacon, of J. P. Morgan & Co., is chairman, have done. All matters of executive routine, the whole vast internal workings and policies of the corporation, are left in the hands of President Schwab and the members of his cabinet, most of whom have offices near the president, in the Empire Building, where they may consult constantly. Indeed, they usually hold a meeting every day, gathering around a mahogany table in the private office of Judge Gary, chairman of the executive committee.

This executive committee has been constituted with scrupulous care. Every man on it has had experience in the conduct of large affairs, most of them having been presidents of the huge concerns which were absorbed by the United States Steel Corporation. Judge Gary, the chairman, a prominent lawyer of Illinois, was formerly president of the Federal Steel Company. The other members are Daniel G. Reid, a Western banker; William Edenborn, German by birth, and an expert in every department of the wire industry; E.C. Converse of Boston, formerly president of the National Tube Company; Percival Roberts, Jr., of Philadelphia, a trained engineer, and former president of the American Bridge Company; and Charles Steele, a lawyer and a member of the firm of J.P. Morgan & Co.

It is significant of the vitality of the new corporation that its managers are all men in the prime of life. The average age of the president and his cabinet is only forty-eight; the oldest member is fifty-five, and the youngest, President Schwab, but thirty-nine.

It is a general though erroneous impression that when the Steel Corporation was organized all of the ten absorbed companies lost their identity, being merged in a single huge concern managed from New York City. But the United States Steel Corporation is rather a federation of independent companies, a combination of combinations, each with its own distinct government, officers, sphere of influence, and particular products. The Carnegie Steel Company, for instance, is still independent of the Federal Steel Company, and yet both are a part of the United States Steel Corporation, in the same way that Pennsylvania and Illinois, while separate states, each with its own governor, are part of the United States. The title, for instance, of A. J. Major is “President of the American Bridge Company of the United States Steel Corporation.” The organizers here pursued the historic policy of the old Carnegie Steel Company. Mr. Carnegie encouraged friendly rivalries between his plants, spurring them on with rewards, and by firing the pride of accomplishment he succeeded surprisingly in adding to the efficiency of his force. For years a huge broom, the mark of honor, was shifted from stack to stack in the Carnegie mills as the record of the world was broken; and every man, from the manager down, gloried in the presence of that broom. So the various great companies of the Steel Corporation will be encouraged in rivalries. The United States Steel Corporation, owning practically all the stock in each subsidiary company, can assure harmony by electing such directors and officers as it chooses. But one company buys of or sells to another, as formerly, and the bargains are driven just as shrewdly as ever, each president being keenly ambitious to make a good showing for his company. The disputes which naturally arise, are settled by the executive committee, sitting as a sort of supreme court.

Formerly the main offices of many of the subsidiary companies were in New York City, but when the new corporation was organized President Schwab transplanted some of these offices to the center, each of its own properties. For instance, the headquarters of the National Steel Company was removed to Pittsburg under the wing of the Carnegie Company. “Put the management within smell of the smoke of the furnaces,” says Mr. Schwab; “that is the way to get results.” These changes in several instances were productive of picturesque incidents, typical of the energy of the new management. Instead of permitting officers and employees to straggle along to their new headquarters, the company chartered special trains, as when the headquarters of the Oliver Mining Company were moved from Pittsburg to Duluth, and all the office employees with the books and documents of the company were sent flying to their destination.

While each subsidiary company retains the entire management of its own manufacturing plants, it has been the policy of the new corporation to combine in great general departments those factors of production common to all the companies. For instance, most of the subsidiary companies owned their own iron-mines, their own coke-ovens, and controlled their own ships on the lakes, and each had a department to care for these interests. Now, the ore and transportation interests are gathered in one great department, the chief of which is James Gayley, first vice-president of the Steel Corporation, with offices in New York and Duluth; and the coke interests, the export department, the foreign offices in London, and certain branches of the sales departments are each grouped under a single head. By this method a single agency distributes iron ore, coal, and coke between the various plants as needed, avoiding cross-shipments and supplying plants always from the nearest sources, thereby saving freight charges.

Much of the economy of production depends on the efficiency of distribution. Formerly, serious delays resulted from the inability to obtain vessel tonnage at the right time, or to load the ships with the right kind of ore when wanted, for many companies, while owning plenty of one kind of ore, were compelled to purchase other kinds to make the proper mixtures. Under the new system, however, the splendid fleet of 115 vessels on the Great Lakes is all under the control of one man, Captain A. B. Wolvin (fleet manager for Mr. Gayley), and the ore-distribution system is all under another chief. The ships can thus be directed by telegraph to the ore dock in Minnesota, Michigan, or Wisconsin, where each immediately secures a full load and carries it to the dock or mill where that particular kind of ore is most needed.

Every plant of the corporation is connected by special telegraph wires, and many by telephone, with the central office in New York, as well as with Captain Wolvin’s office in Duluth, so that the needs of each in the matter of ores, vessels, and so on, can be instantly communicated. Suppose the works at Lorain, Ohio, need a load of some special kind of ore. Mr. Gayley’s department knows the exact location of every boat in the fleet, and by reference to its charts it is found that a vessel full of the required ore is passing through the river at Detroit. A telegram is sent to the captain, and the vessel appears soon after at Lorain. Under the old system there might have been all manner of delays before the Lorain works could have secured this particular ore. Coke and coal are distributed much in the same manner by a central department.

In the matter of sales there is still wide latitude of independence because the products of the various companies are different, one company manufacturing bridges, another tubes, another sheet steel, another wire, another tin-plate, so that each can best sell its own products. But in cases where several companies produce the same thing—steel rails, for instance—they agree on a price and appoint the same agents throughout the country. The foreign business of all the companies has been combined in one great office in London, under the direction of Millard Hunsicker. It may be said in passing that the corporation is planning the first really systematic effort ever made by Americans to capture foreign steel trade, our exportation of steel in the past having been somewhat spasmodic and rather for the purpose of disposing of a surplus product than with a view to secure a permanent foreign foothold. It is said that Mr. Morgan had this development in view when he bought the Leyland steamship line.

It is interesting, also, to note that the United States Steel Corporation has established a fire insurance department of its own, and that in future it will insure most of its own buildings, the business done exceeding that of many regular fire insurance companies.

President Schwab has called the United States Steel Corporation a “clearing house for information”; and this is truly one of its main purposes. The experience and wisdom of the best brains in the best plants are to be brought to the service of all the plants. In the old Carnegie Company the heads of departments were accustomed to get together at lunch and talk over their work. The same course is being pursued in the Steel Corporation. For instance, the presidents of the various companies assemble at certain times in New York and discuss the affairs of their concerns, often deciding important questions without referring them to President Schwab. Similarly the general managers, the managers of sales departments, the freight agents, and the auditors of the various subsidiary companies have formed committees, elected chairmen, and each meets regularly to plan methods for securing greater efficiency and uniformity. Stenographers are present at these conferences, and such valuable points as may be brought out are set down and subsequently distributed widely among those in the corporation who will be benefited by the information. These meetings also serve as a sort of testing ground. Here talent shows its light, the chiefs come to know the qualities of their subordinates, and to select those who are to be advanced to positions of greater responsibility. It is said that the “trusts” crush the opportunities for young men, yet President Schwab has said:

“I think there never was a greater opportunity for any man, workingman or manager, who has to use his brains as today. Never has there been such a scarcity of special men that great manufacturing concerns and capitalists desire.”

For it is the expressed intention of the corporation to pursue the same course that Mr. Carnegie followed, that of admitting subordinates to an active share in the company’s business. President Schwab has a scheme of his own for extending the share system to the skilled mechanics of the works, it being his belief, pointed by Mr. Carnegie’s success and by the experiences of his own career, that the more harmoniously employer and men work together, and the more pride of employment that can be inspired, the better for all concerned. Indeed, there was rarely, if ever, a business enterprise in which every man was chosen so absolutely upon merit. To make such a vast enterprise a success, there can be no inefficiency in the management. It was one of Mr. Carnegie’s methods to discard, inexorably, all men who had passed the age of usefulness or whose energy was failing. He did it on principle, as he discarded worn-out machinery. Every man in his company, he said, must be a worker; and in the Steel Corporation there are no ornamental officers, no “front office presidents.” I presume it would be impossible to find harder workers in any walk of life than Mr. Morgan, Mr. Rockefeller, Mr. Field, and Mr. Schwab, and other prime movers in the corporation. One of the first acts of the corporation was to cut down the number of directors in the subsidiary companies and make every officer the responsible chief of some department. For instance, the number of directors in the National Tube Company was reduced from 23 to 11, and in the American Steel and Wire Company from 15 to 9. A single example will show how one of these subsidiary corporations is managed. The president of the National Tube Company, Mr. Hearne, has general charge of its affairs. Mr. Schiller, first vice-president, is chief of the manufacturing department. Mr. Latshaw, second vice-president, is chief of the mercantile department. Mr. Culbertson, third vice-president and treasurer, has charge of the financial department. Mr. Matheson, fourth vice-president, has charge of the foreign department. The management of the Steel Corporation thus relies for its success on the human factor; it is character and energy that have made the American leader in the world’s industries, and it is character and energy that the Steel Corporation is eager to purchase at any salary.

In the same way that the various companies profit by the brains of their former rivals, they are also able to perfect their processes by the use of special inventions not before available. Each company had its own valuable patents and secret processes which now become common property. And the corporation keeps a sharp lookout for new processes and inventions, with which profits are increased and competition more successfully met. An important part of every plant is that of the scientific and mechanical experts, who are seeking new methods for performing by machinery work before dependent upon human muscle. The writer of the papers on American Engineering Competition in the London “Times” was strongly impressed with the loneliness of the great steel works at Pittsburg, the noisy machinery running at full speed with few men in sight. And yet, wonderful and perfect as the present processes of steel-making now seem, the Carnegies and the Schwabs see in the future amazing changes and development in the direction of making steel cheaper. Only recently Mr. Schwab predicted that the Bessemer process, which wholly revolutionized the steel industry scarcely thirty years ago, is doomed to disappear, being superseded by what is known as the open-hearth process.

Another point of progress which will find its fullest expression in the new corporation is that of making new markets for steel. Only a few years ago the steel-maker was fulfilling his mission if he sat still and let the orders come in, but today he manufactures not only his steel, but also his markets to absorb it. An English writer exclaims: “The American steel-makers manufacture business out of nothing!” And one has only to look upon the recent development in the United States of steel buildings, steel bridges, steel railroad cars, steel railroad ties, steel ships, and so on, to realize the truth of this assertion. Mr. Carnegie kept more than a hundred draftsmen employed in the business of proving that steel was better for certain purposes than wood or stone. Did a New York builder propose putting up a large office structure, Mr. Carnegie agreed to draw the plans without charge, provided only that in case steel was used his company should have the contract. It is by such methods that the new corporation proposes to spread itself.

Every department of the United States Steel Corporation runs smoothly, simply, noiselessly. Knowing the magnitude of the business transacted at the capitol in Broadway, a vision of hurrying messengers, and of crowds of business men thronging the offices, rises before one’s mind; but there is here no appearance of haste or of crowds. Here are roomy, comfortable, carpeted offices, high above the roar and smoke of the city, where a low-voiced boy asks your business and a secretary comes out quietly from his office to show you in to his chief. Here there seems to be something akin to leisure, for by the time business reaches this height it has assumed a highly condensed form. Mr. Schwab himself, though some humorist who loved the exaggerated and inconsequential has computed his time to be worth ten dollars a minute, is a calm, steady worker. He is surrounded by a personal staff of helpers, mostly young men, one a brother, who were associated with him in the Carnegie Company. During office hours he is occupied largely in examining reports, in deciding questions, in answering the few important letters which have sifted through all his assistants, and in holding conferences with the members of his cabinet. Organization is, indeed, the mainspring of success in such a colossal enterprise, and yet it is absolutely necessary to have a man in the executive chair who possesses force and independence, who is ready, if necessity demands, to rise superior to organization, to cut red tape, to do the unexpected thing of genius.

(Source: UNZ.org, http://unz.org/Pub/McClures-1901nov-00003)