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Captains of Industry or Robber Barons?
Transcript of Captains of Industry or Robber Barons?
He enjoyed sailing and participated in many America's Cup yacht races.
Junius Spencer Morgan, J.P.'s father was a
banker. J.P. Morgan learned about the field of business and how to manage his family's assets at a very young age.
J.P. graduated University of Gottingen in Germany at the age of 20 with a degree in Math.
Then he traveled back to New York to work for Duncan, Sherman and CO.
Early Years and
Path to Success
Born Nov. 25, 1835
Parents- Margaret and Will Carnegie
Will Carnegie becomes unemployed
"The King of Steel"
Family settles in Pittsburgh
Andrew Carnegie works various jobs
PA Railroad's Western Division
Telegraph office open 24 hrs
Burning railroad cars
Invests $217.50 in
Woodruff Car Company
Return of $5000 annually
Becomes superintendent of PA Railroad's Western Division
Supervising repairs of railroad lines in Maryland
Helps organize Railroad and telegraph lines to VA
Invests $11000 in an oil company - return of $17900
Income = $42000
1/2 from oil investment
$2400 from salary
$13000+ from other investments
Drafted into the Union Army
Pays a replacement of $850
Retires from Railroad
Reorganizes Piper and Schiffler Company into Keystone Bridge Company
Envisions building bridges with iron
Founds Keystone Telegraph Company
Strings telegraph wires across railroad pole across the the entire state
Pledges to resign from business at age 35
Live on $50000 per year
Donate the rest
Spend time being educated
Visits Henry Bessemer's steel plants
Plans to expand his steel business
Edgar Thomson Works in Braddock, PA
2000 steel rails for PA Railroad
Vertical and Horizontal
Fortune was better spent on beneficial projects
Wealth should be shared among the people
Rich only made their money because of other people, and should give back to the public rather than waste money
Wealth to spread to all classes and better society
Control over all
Each plant located near a river for transportation of goods
No one except Carnegie's
employees had touched
the product before it
Ally with competitors
J&L Steel biggest competitor
Weaker competitors eliminated
Cornelius Vanderbilt was born on May 27, 1794 in Staten
Island, New York
By the age of 16 the young Vanderbilt owned his own
(Staten Island to Manhattan)
Morgan went into banking in 1857 at Peabody,
Morgan & CO.
In 1893 a huge financial panic struck the U.S., the federal Treasury
ran out of gold so J.P. Morgan supplied 3.5 million ounces of gold.
In 1890 Morgan took control of the JP Morgan Company an renamed it
the Morgan, Grenfell Company.
In 1900 Morgan and Schwab bought out Carnegie's steel company
and created the United States Steel Corporation.
This was the
The Early Life of J.P. Morgan
Greater Economies of Scale
Reduction of Transportation Costs
Reduce Resource Cost
Expand Product Lines
Compete Globally against Germany and Britain
Early Goals for the Steel Corporation
What is the gospel of wealth?
Article written by Carnegie in 1889
Wealth of businessmen beneficial
Wealth hand in hand with responsibility
Accumulation of wealth beneficial
Rich should hold their money until they find the proper public use
Problems of the new age?
Proper administration of wealth.
Conditions of life revolutionized.
Old luxuries are now necessities.
Luxuries were manufactured at a slow rate making them higher in cost.
Financial Panic of 1907
Major New York banks were on the verge of bankruptcy
The Moore and Schley brokerage firm failed to pay the
Tennessee Coal and Iron Company $6 million dollars in stocks
Morgan's U.S. Steel Company bought out the stocks with 30 million
dollars and saved the economy from near collapse.
federal reserve system
and a central bank was created in 1913 to prevent future crisis
Federal Reserve System: maximum employment, stable prices, moderate long-term interest rates
Morgan and Edison
In 1878 Morgan invested, controlled Thomas Edison's General Electric Company
The steel empire
Carnegie's steel mills the most modern in the world
Drove down costs and undersold competitors
Produced affordable steel causing a boom in buildings and bridges
Steel - jobs, national prestige, higher quality of life
Carnegie's company due to cheap steel = lower wages, less job security, end of creative labor
efficiency top priority
1870 - Edgar Thomson steel works
Purchased other local mills from the profits of the Edgar Thomson Steel Works
1892 - Carnegie steel company
Open hearth furnace system
Continuous system of production
Improved material handling system
Sir Henry Bessemer of England
Cheap and efficient mass production of steel
The price of steel dropped
By 1900 - U.S. output of steel exceeded that of the UK
Preached rights of laborers to unionize and protect their jobs
Unusual among the industrial captains of his day
His actions did not always match what he said - steelworkers were often pushed to long hours with low wages
homestead strike of 1892
Carnegie Steel's main plant in
Increase in profits by 60%
Company refused to increase workers wages by more than 30%
Management locked the union out when workers demanded 60% increase
Carnegie left plant manager Henry Frick deal with the situation
Brought in thousands of strikebreakers to work
Pinkerton Security Agents
10 killed and hundreds injured
Later resumed operations with non-union immigrant employees
Reputation was permanently damaged
Nikola Tesla was Edison's main competitor in the electric industry (AC motors).
Edison electrocuted an elephant named
in 1903 to disprove Tesla's
This shows the extremes
Morgan (and Edison) went to
to compete against Tesla.
Financing reorganization of railroad's, insurance companies, banks
Carnegie was eager to sell his holdings
Morgan - manufacturer of steel pipe tubing
Carnegie threatened to invade the same business
Morgan agreed to buy out Carnegie for
Mr. Carnegie you are the richest man in the world"
Feared he would die disgraced with so much wealth
Dedicated remainder of life to giving away money
Did not approve of charity
Public libraries, pensions for professors, etc.
Totaled about $350 million
Died of Pneumonia in 1919
John D. Rockefeller
"Americas First Billionaire"
John D. Rockefeller was born July 8, 1839, in Richford, New York, about midway between Binghamton and Ithaca.
His father, William Avery Rockefeller, was a "pitch man" -- a "doctor" who claimed he could cure cancers and charged up to $25 a treatment. He was gone for months at a time traveling around the West from town to town and would return to wherever the family was living with substantial sums of cash.
His mother, Eliza Davison Rockefeller, was very religious and very disciplined. She taught John to work, to save, and to give to charities.
By the age of 12, he had saved over $50 from working for neighbors and raising some turkeys for his mother. At the urging of his mother, he loaned a local farmer $50 at 7% interest payable in one year. When the farmer paid him back with interest the next year Rockefeller was impressed and said of it in 1904: "The impression was gaining ground with me that it was a good thing to let the money be my servant and not make myself a slave to the money…"
In 1853, the Rockefellers moved to Cleveland, Ohio, and John attended high school from 1853 to 1855. He was very good at math and was on the debating team. The school encouraged public speaking and even though Rockefeller was only average, it was a skill that would prove useful to him.
THe Railroad industry
In 1885 Morgan reorganized the New York Central and Pennsylvania railroads
In the spring of 1855 Rockefeller spent 10 weeks at Folsom's Commercial College -- a "chain College" -- where he learned single- and double-entry bookkeeping, penmanship, commercial history, mercantile customs, banking, and exchange. From his father he had learned how to draw up notes and other business papers. His father was very meticulous in matters of business and believed in the sacredness of contracts.
What was railroad reorganization?
Morgan 'reorganized' the railroads; he
controlled the stocks of the companies, therefore owning the companies (stabilized
the financial base of the companies).
Finally, on September 26, 1855, he got a job as an assistant bookkeeper with
Hewitt & Tuttle
, commission merchants and produce shippers.
Rockefeller soon impressed his employers with his seriousness and diligence. He was very exacting and scrupulously honest. For example, he would not write out a false bill of lading under any circumstances. He went to great lengths to collect overdue accounts. He was pleasant, persistent, and patient, and he got the company's money from the delinquents. (For all this work, he was not well paid. But whatever he was paid, he always gave to his church and local charities.)
On March 1, 1859 -- several months before his 20th birthday -- Rockefeller went into business for himself, forming a partnership with a neighbor, Maurice Clark. Each man put up $2,000 and formed
Clark & Rockefeller
-- commission merchants in grain, hay, meats, and miscellaneous goods. At the end of the first year of business, they had grossed $450,000, making a profit of $4,400 in 1860 and a profit of $17,000 in 1861. The commission merchant business was very competitive and Clark & Rockefeller's success was due in large part to Rockefeller's natural business abilities.
Railroad rate stability and competition against eastern railroad companies. Morgan controlled 5,000 miles of American railroad by 1902.
He merged Thomas Houston Electric Company with Edison's Company
Formed the General Electric Company
The government and economy was temporarily in the hands of Morgan and his partners.
how it became THe general electric
Determined to disprove the AC generators, he endorsed a plan to electrocute NYC criminals who were sentenced to death.
Morgan then dropped Edison's name from the company name.
United States Steel Corporation
1898 Morgan financed Federal Steel Company in Chicago
1901 he merged Federal and Carnegie Steel Companies to form the U.S. Steel Corporation, it cost over 492 million dollars.
This was significant because Morgan prompted the idea of merging companies and how successful they could be.
20th century- US Steel Corp. extended to oil, gas, construction, chemicals, transportation and mining industries
In 1650, his grandfather emigrated from Utrecht, Netherlands as an indentured slave
The Pennsylvania oil was of high quality. One barrel yielded 60-65% illuminating oil, 10% gasoline, 5-10% benzoyl or naphtha (a volatile inflammable liquid used as a solvent in dry cleaning, varnish making, etc.), with the remainder tar and wastes.
Rockefeller abhorred waste and devoted considerable energy to increasing the efficiency of his refining business. He believed that the secret of success was attention to detail -- to wringing little efficiencies out of every aspect of his business. He hired his own plumber and bought his own plumbing supplies. He built his own cooperage shop and made his own barrels for the oil. He bought tracts of white-oak timber for making the barrels. Instead of transporting the freshly cut green timber directly to the cooperage shop, he had kilns built on the timber tracts to dry the wood on site, to reduce the shipping weight of the lumber. He bought his own wagons and horses to transport the wood to the cooperage shop in Cleveland. (We would call this "vertical integration" today.)
The Oil Industry
In February 1865, at the age of 24, Rockefeller bought out the Clark brothers for $72,500 and gained complete control of the business.
In 1866, John D. brought his brother William Rockefeller into the partnership and they built another refinery in Cleveland which they named the
. They also opened a New York City office with William Rockefeller in charge, to handle the export business, which eventually became larger than the domestic business
In 1867, Henry M. Flagler (1830-1913) became a partner, and Rockefeller, Andrews & Flagler was formed.
By 1868, Rockefeller, Andrews & Flagler was the largest refiner in the world.
On January 10, 1870, the Standard Oil Company of Ohio was created by John D. Rockefeller (30%), William Rockefeller (13.34%), Henry Flagler (16.67%), Samuel Andrews (16.67%), Stephen Harkness (13.34%), and O. B. Jennings (brother-in-law of William Rockefeller, 10%). It held about 10% of the oil business at the time of its formation.
In Rockefeller's eyes, the state of the oil business was
. Because entry costs were so low in both oil drilling and oil refining, the market was glutted with crude oil with an accompanying high level of waste. In his view, the theory of free competition did not work well when there was a mix of very large, efficient firms and many medium and small firms. His view was that the weak firms, in their attempts to survive, drove prices down below production costs, hurting even the well-managed firms such as his own.
Although his economics may be suspect in modern eyes, his solution -- a market with a few (maybe one!) large, vertically integrated firms -- in effect an oligopolistic market -- was what other industrial sectors eventually evolved into. What makes oil stand out is that it happened by design -- as the result of a plan formulated by a single person -- John D. Rockefeller.
During 1871, Rockefeller formulated his plan for consolidating all oil refining firms into one great organization with the aim of eliminating excess capacity and price-cutting.
In 1817 Thomas Gibbons (Gibbons vs. Ogden) asked Vanderbilt to captain steamboat between NJ and NY. Became his business manager. Kick started his future in business, learned to operate a large scale business
Gibbons Vs. Ogden
As Vanderbilt entered his position, Gibbons fought a monopoly granted to Ogden for a ferry service by the New York Legislature
In 1824 the Supreme Court ruled
in favor of Gibbons, states had
no power to interfere with
By the 1830s- 1840s Vanderbilt ventured into many industries
(real estate in Manhattan, Staten Island)
But his steamship business was most lucrative, famous
In 1830 Vanderbilt became commonly referred to as The Commodore- highest rank in U.S. navy because of his
success in the steamboat industry.
the California gold rush and the Accessory Transit Company
Many migrants and gold went by steamship to Panama during the California Gold Rush of 1849
Vanderbilt started a steamship line to Nicaragua
He founded the Accessory Transit Company, which transported passengers
across Nicaragua by lake and river.
His Involvement American Civil War
In 1861 when the Civil War began and Vanderbilt offered his largest steamboat,
to the Union. Gideon Welles refused thinking the cost is too high, Vanderbilt had to lease his ship to War Department
Abraham Lincoln had to receive help from Vanderbilt later in the war, so he donated his steamship, the Vanderbilt
Vanderbilt converted his ship into a cruiser especially for the war to hunt for Confederate commerce ships
The New York and Harlem Railroad
Vanderbilt owned and was the president of the
Harlem Railroad Company
monopoly in 1863
It was the only steam railroad in center of Manhattan, it ran down 4th Avenue, connected with a horse-drawn streetcar line
By 1864 The Commodore became more focused on railroads after selling his last steamship.
NY Central and Hudson River Railroad
1864 Vanderbilt bought
Hudson River Railroad
1867 Vanderbilt bought
New York Central Railroad
1869 Lake Shore and Michigan Southern Railway
1870 he combined the Hudson River and NY Central Railroads
Controversy over Morgan
Some say Morgan was involved with the unethical death of Topsy with Edison
Morgan swallowed up many companies in the process of becoming one of the world's richest men, like Vanderbilt
Despite Morgan's helping the government in 3 financial crises, he did it for his own companies benefit, his business wouldn't survive without a thriving economy
Morgan was a robber baron
Controversy over Vanderbilt
Vanderbilt destroyed small businesses in his pathway in an attempt to achieve self fame and wealth (both of which he attained)
Vanderbilt stole and moved many Indian tribes during his creation of a railroad empire
Few people know that the Vanderbilt steamship and vessels sold to the Union was sold at an inflated prices
Vanderbilt was a robber baron
Why is he a robber baron?
He would spy on other companies to find out what type of competition he had
He secretly bought out companies, and then used them to buy out other competitors
He went to companies and offered them to either sell out or go bankrupt
Rockefeller believed that constant competition wasted money and effort
To destroy opposing companies, he would
in certain areas with no competition
He could then lower the prices radically in areas with no competition
They called it the
. In 1871 John D. Rockefeller struck a secret deal with the railroads that transported his oil. By March of 1872, the 33-year-old businessman had used this and other tactics to take over 22 of the 26 refineries in Cleveland.
For further proof he is a robber baron, one needs to look no further than the fact that the government eventually had to step in and close down standard, the company Rockefeller worked so hard to create
why is he a robber baron?
"The way to make money is to buy when blood is running in the streets."
-John D. Rockefeller
Speculators had purchased the abandoned reservoir, made less than well-engineered repairs to the old dam, raised the lake level, built cottages and a clubhouse, and created the South Fork Fishing and Hunting Club.
There had been some speculation as to the dam's integrity, and concerns had been raised by the head of the Cambria Iron Works downstream in Johnstown.
The dam to give way on May 31, 1889 resulting in twenty million tons of water sweeping down the valley causing the Johnstown Flood
When word of the dam's failure was telegraphed to Pittsburgh, Carnegie and the members of the South Fork Fishing and Hunting Club gathered to form the Pittsburgh Relief Committee for assistance to the flood victims as well as determining never to speak publicly about the club or the flood.
Bad Working Conditions
Carnegie steel company
Robber Baron = an American capitalist who acquired a fortune in the late nineteenth century by ruthless means.
A Captain of industry was a business leader whose means of amassing a personal fortune contributes positively to the country in some way.