Carnegie Survives the Panic of 1873

I am sure that any competent judge would be surprised to find how little I ever risked for myself or my partners.

Continuing The Age of Steel Begins,
our selection from Autobiography by Andrew Carnegie published in 1920. The selection is presented in five easy 5-minute installments. For works benefiting from the latest research see the “More information” section at the bottom of these pages.

Previously in The Age of Steel Begins.

Time: 1872
Place: Braddock, Pennsylvania

I said we would risk that. The railway company could not proceed to that extremity. And as a matter of fact we ran for some time without paying the freight bills. It was simply impossible for the manufacturers of Pittsburgh to pay their accruing liabilities when their customers stopped payment. The banks were forced to renew maturing paper. They behaved splendidly to us, as they always have done, and we steered safely through. But in a critical period like this there was one thought uppermost with me, to gather more capital and keep it in our business so that come what would we should never again be called upon to endure such nights and days of racking anxiety.

Speaking for myself in this great crisis, I was at first the most excited and anxious of the partners. I could scarcely control myself. But when I finally saw the strength of our financial position, I became philosophically cool and found myself quite prepared, if necessary, to enter the directors’ rooms of the various banks with which we dealt and lay our entire position before their boards. I felt that this could result in nothing discreditable to us. No one interested in our business had lived extravagantly. Our manner of life had been the very reverse of this. No money had been withdrawn from the business to build costly homes, and, above all, not one of us had made speculative ventures upon the stock exchange or invested in any other enterprises than those connected with the main business. Neither had we exchanged endorsements with others. Besides this we could show a prosperous business that was making money every year.

I was thus enabled to laugh away the fears of my partners, but none of them rejoiced more than I did that the necessity for opening our lips to anybody about our finances did not arise. Mr. Coleman, good friend and true, with plentiful means and splendid credit, did not fail to volunteer to give us his endorsements. In this we stood alone; William Coleman’s name, a tower of strength, was for us only. How the grand old man comes before me as I write. His patriotism knew no bounds. Once when visiting his mills, stopped for the Fourth of July, as they always were, he found a corps of men at work repairing the boilers. He called the manager to him and asked what this meant. He ordered all work suspended.

“Work on the Fourth of July!” he exclaimed, “when there’s plenty of Sundays for repairs!” He was furious.

When the cyclone of 1873 struck us we at once began to reef sail in every quarter. Very reluctantly did we decide that the construction of the new steel works must cease for a time. Several prominent persons, who had invested in them, became unable to meet their payments and I was compelled to take over their interests, repaying the full cost to all. In that way control of the company came into my hands.

The first outburst of the storm had affected the financial world connected with the Stock Exchange. It was some time before it reached the commercial and manufacturing world. But the situation grew worse and worse and finally led to the crash which involved my friends in the Texas Pacific enterprise, of which I have already spoken. This was to me the severest blow of all. People could, with difficulty, believe that occupying such intimate relations as I did with the Texas group, I could by any possibility have kept myself clear of their financial obligations.

Mr. Schoenberger, president of the Exchange Bank at Pittsburgh, with which we conducted a large business, was in New York when the news reached him of the embarrassment of Mr. Scott and Mr. Thomson. He hastened to Pittsburgh, and at a meeting of his board next morning said it was simply impossible that I was not involved with them. He suggested that the bank should refuse to discount more of our bills receivable. He was alarmed to find that the amount of these bearing our endorsement and under discount, was so large. Prompt action on my part was necessary to prevent serious trouble. I took the first train for Pittsburgh, and was able to announce there to all concerned that, although I was a shareholder in the Texas enterprise, my interest was paid for. My name was not upon one dollar of their paper or of any other outstanding paper. I stood clear and clean without a financial obligation or property which I did not own and which was not fully paid for. My only obligations were those connected with our business, and I was prepared to pledge for it every dollar I owned, and to endorse every obligation the firm had outstanding.

Up to this time I had the reputation in business of being a bold, fearless, and perhaps a somewhat reckless young man. Our operations had been extensive, our growth rapid and, although still young, I had been handling millions. My own career was thought by the elderly ones of Pittsburgh to have been rather more brilliant than substantial. I know of an experienced one who declared that if “Andrew Carnegie’s brains did not carry him through his luck would.” But I think nothing could be farther from the truth than the estimate thus suggested. I am sure that any competent judge would be surprised to find how little I ever risked for myself or my partners. When I did big things, some large corporation like the Pennsylvania Railroad Company was behind me and the responsible party. My supply of Scotch caution never has been small; but I was apparently something of a dare-devil now and then to the manufacturing fathers of Pittsburgh. They were old and I was young, which made all the difference.

The fright which Pittsburgh financial institutions had with regard to myself and our enterprises rapidly gave place to perhaps somewhat unreasoning confidence. Our credit became unassailable, and thereafter in times of financial pressure the offerings of money to us increased rather than diminished, just as the deposits of the old Bank of Pittsburgh were never so great as when the deposits in other banks ran low. It was the only bank in America which redeemed its circulation in gold, disdaining to take refuge under the law and pay its obligations in greenbacks. It had few notes, and I doubt not the decision paid as an advertisement.

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