This astounding description of the power of an IDEA
was dramatically told by John Lowell, in the New York World- Telegram,
with whose courtesy it is here reprinted.
"A PRETTY AFTER-DINNER SPEECH FOR A BILLION DOLLARS
"When, on the evening of December 12, 1900, some eighty of
the nation's financial nobility gathered in the banquet hail of
the University Club on Fifth Avenue to do honor to a young man from
out of the West, not half a dozen of the guests realized they were
to witness the most significant episode in American industrial history.
"J. Edward Simmons and Charles Stewart 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 man to eastern
banking society. But they didn't expect him to 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 Stilhnans 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 Pierpont 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 had met Schwab, whose career had flowered along the banks
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 epigram 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 stock jobbers 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
had 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
"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 whatever
shape they wanted. Now, with Schwab as his 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 economies in the ore
traffic, of 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,
bad been to create monopolies, raise prices, and pay themselves
fat dividends out of privilege. Schwab condemned the system in his
heartiest manner. The shortsightedness of such a policy, he told
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 'Wee Andra 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
indicated, 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 might also 'happen'
to be there. When Schwab arrived, however, 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
"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 to Schwab, 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 Andrew regarded as being endowed with something less than holiness.