This is our 200th edition. So I figured that it made sense to do something historic. A few weeks back I told the story of my father and his life-long struggle to achieve his full potential in a society that was dedicated to dealing with him as a second class citizen. I got more mail from that story than any other thus far. A lot of people asked if I might share some point of wisdom with them that my father had shared with me. Here it is. "If you don't know where you come from, you won't know where to go." I didn't have to wait too long for an answer to that question. My wife teaches eleventh grade English at a Los Angeles High School. Over dinner she related a question that one of her students asked her that very day, that answered any questions I might have had. "Mrs. Webber, is it true that Hitler was black?" Next question. "Mrs. Webber. Why did France bomb Pearl Harbor?" Questions from young people one year away from the end of their formal education. I'd be willing to bet that any one of those teenagers would have no trouble recounting how many times Brittany Spears had been married, or the titles of Cold Play's last four albums. But that's them. God help us. Now what about you? Do you give a shit about what happened in the last century? Why should you care? What does that have to do with you right now? Which was my attitude when my father told me that a simple dinner table conversation on one of the last evenings of the Nineteenth Century (December 12, 1900 to be exact) was responsible for everything we know of today as the global corporation? "From one conversation, everything can change", my father pointed out. "You best be ready when it comes." For the new Lean Advertising Network White Paper |
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This conversation my father spoke of happened at a dinner that had been arranged by J. Edward Simmons and Charles Stewart Smith at the University Club on Fifth Ave. in New York City. The guest of honor was Charles M. Schwab the 39 year old President of Carnegie Steel in Pittsburgh. Mr. Schwab had been born just three blocks away from the house my father was born in Williamsport, Pa and as fate would have it, my grandfather worked for the Schwabs as a boy in the mid 1850's, which is how my father came to hear this story from his father. The occasion of this dinner at the University Club was to introduce the young steel maker to the 80 wealthiest men in America at the time. The Stilhnans, Harrimans, Vanderbuilts and Astors were all in attendance. And seated to his right was the imperious John Pierpont Morgan. All in all about five billion dollars was represented at the table. I researched the event and according to John Lowell of the New York World-Telegram, "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." No record was kept of the dinner conversations, but the result of those conversations was undeniable. Schwab 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 of the errors of their piracy and the folly of being "Robber Barons,". Their purposes, he inferred, had been to create monopolies, raise prices, and pay themselves fat dividends. Schwab condemned the shortsightedness of such a policy, because it restricted the market in an era when everything cried for expansion. By cheapening the cost of steel, Schwab 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 day mass production. Within two weeks the deal was done and Andrew Carnegie sold his interests to J.P. Morgan for $400,000.000. Charles M. Schwab was installed as the first president of U.S. Steel and the modern American corporation was born. Three years later, J.P. Morgan forced out Charles M. Schwab and Schwab went on to create Bethlehem Steel, which under his direction became the largest independent steel producer in America. Part of Bethlehem Steel's success was the development of the H-beam, a precursor of today's I-beam. Charlie Schwab was interested in producing such a wideflange steel beam, a risky venture that required capitalization and new plant construction to make an unproven product. "I've thought the whole thing over," Schwab told his secretary, "and if we are going bust, we will go bust big." It is his most famous remark. Which is why Thomas Edison once famously called him the "master hustler" In 1908, Bethlehem Steel began producing the beam, which revolutionized building construction and made possible the age of the skyscraper. Its success helped make Bethlehem Steel the second-largest steel company in the world. But as fate would have it Charles M. Schwab died penniless and bankrupt. And today, it is the discount brokerage founded by his grandson that carries his name forward in time. For the furnaces of U.S. Steel and Bethlehem Steel, like the meal that brought them to life are cold and long forgotten. But not the story. It lives on with me. And now it lives on with you. "Best be ready."
Stay Strong .
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