Review Essay: Industrial Genius: The Working Life of Charles Michael Schwab
Book Review by: Mark R. Wilson
For Citation: Business Hisotry Review 83 (Autumn 2009)
A century ago, Charles M. Schwab (not to be confused with Charles R. Schwab, founder of a major discount brokerage firm in our day) was recognized as one of the great business leaders of his generation. In the late 1880s, while still in his twenties, Schwab oversaw the Carnegie Steel Company’s Homestead and Edgar Thomson works, two of the largest steel plants in the world. At age thirty-four, Schwab became president of Carnegie Steel, whose founder, Andrew Carnegie, was one of several contemporaries to call Schwab a “genius.” Before his fortieth birthday, Schwab became the first president of the U.S. Steel Corporation, the first billion-dollar industrial enterprise. Dissatisfied by constraints on his authority there (and troubled by a gambling scandal and illness), Schwab soon departed to take charge of the Bethlehem Steel Corporation, which he built into U.S. Steel’s leading rival. During World War I, when Bethlehem Steel served as a leading military supplier to Britain and the United States, Schwab became director-general of the Emergency Fleet Corporation, the government agency overseeing a massive wartime expansion of American shipbuilding. By the time he began to ease himself into retirement in the 1920s, Schwab was a wealthy man whose accomplishments in the steel business were legendary. In 1947, eight years after Schwab’s death, Bethlehem Steel chairman Eugene G. Grace remembered Schwab “as one of the most lovable and inspiring business leaders of all time” (E. G. Grace, Charles M. Schwab [1947], p. 53).
This new study of Schwab comes from Kenneth Warren, the leading historian of the American steel industry. Drawing on his expert knowledge of U.S. Steel and Bethlehem Steel, Warren offers a detailed account of Schwab’s work and its relation to developments in the industry. Warren makes it clear, however, that this “is not an attempt to write a complete life” (p. xiii). In many areas, Warren defers to Robert Hessen’s Steel Titan: The Life of Charles M. Schwab (1975). On its own modest terms, Warren’s study succeeds. He uses original archival research to supplement the earlier work, often adopting a more critical tone than that of Hessen, who was explicit about his desire to overturn the robber-baron interpretation of American business history. But in setting such limited goals for his study of Schwab’s “working life,” Warren likely forfeits the chance to reach an audience beyond the small circles of academics or buffs with a special interest in the details of the golden age of American steel. Most general readers will continue to turn to Hessen’s biography, which offers a better-written, more comprehensive portrait of this important business leader.
The most original part of Warren’s study is the account of Schwab’s years at Carnegie Steel, which he joined in 1879 as a teenage junior member in the engineering corps at the Edgar Thomson works. In charting Schwab’s quick ascent to the top of the company, Warren draws largely on the papers of Andrew Carnegie and Henry C. Frick, a contemporary and rival of Schwab’s. Indeed, this book may be seen as a companion volume to Warren’s biography of Carnegie’s other top lieutenant: Triumphant Capitalism: Henry Clay Frick and the Industrial Transformation of America (1996). Thirteen years younger than Frick, Schwab was at least as ambitious and more personable. An aggressive proponent of buying new equipment that could cut production costs, Schwab often pleased Carnegie but alienated Frick, who described his younger competitor as “reckless and extravagant” (p. 39). As Schwab’s career would demonstrate, Frick knew his man. But at Carnegie Steel in the 1890s, Schwab outdid Frick. Just after the bloody Homestead lockout and strike in 1892, over which Frick presided, Schwab was brought in to reorganize the Homestead works. Five years later, Schwab became the company’s president. Warren’s original chronicling of these years documents Schwab’s impressive achievements in making Carnegie Steel a highly profitable enterprise. This section also represents the book’s most substantial departure from the account offered by Hessen, who implied that Schwab enjoyed good relations with his workers. In reaching a different conclusion, Warren pulls no punches. Schwab succeeded in making the Homestead works and the whole company more efficient, to be sure, but “he also made it a soulless industrial monster. Men, like machinery, became items to use, write off, and replace” (p. 47).
After the first two chapters on the Carnegie Steel years, Warren’s book adds less value. This is not to say that the book is merely derivative of Hessen’s study. Despite some unavoidable overlap, Warren provides an original narrative throughout. His account of the birth of U.S. Steel in the winter of 1900–01, if less lucid than treatments of the same story by Hessen and other writers, is unusually detailed and honest about what remains unknown. Occasionally, as in his valuable discussion of Bethlehem Steel’s relation to the global marketplace during the first decade of the twentieth century, Warren outshines Hessen. More often, however, the older account remains superior. One reason for this is that Warren does so little to follow Hessen’s lead. Drawing largely on sources he used in previous works on the steel industry, Warren chose not to do his own research in many of the valuable manuscript collections, newspapers, and government documents identified by his predecessor. The result is that even when Warren is writing about Schwab’s “working life,” the area to which he deliberately limits himself in this book, his account is too spare.
In his 1947 memorial speech, Grace called Schwab “the most human man I ever knew” (Grace, p. 53). Regrettably, Warren’s book does little to suggest what Grace might have meant, even when it seems clear that Schwab’s activities off the job influenced his working life. This was certainly the case in January 1902, just months after Schwab—still not yet forty years old—was named the first president of U.S. Steel. After reporters noticed him on vacation in Monte Carlo, the newspapers were quickly filled with accounts of Schwab’s winning and losing thousands of dollars at the roulette tables. This episode—and Schwab’s private life more generally—is documented in richer detail by Hessen, who claims that Schwab had been playing roulette at Monte Carlo every year since 1886. Schwab was not forced to resign, but, shaken by a rebuke from Carnegie and by abundant condemnations in the press, he quickly fell into a period of poor health. This episode, and not only his clashes with Elbert H. Gary and other board members, prevented him from establishing himself as a leader at U.S. Steel.
One need not be a committed Freudian to think that there might be some value in probing the relation between a man’s behavior inside the workplace and his actions outside. Such an analysis would seem to be especially important in the case of Schwab, whose hard work was matched by hard play—at poker and bridge tables, in Monte Carlo and other European destinations, in the construction and upkeep of extravagant mansions and estates, at the opera, and in the arms of mistresses. Schwab met his wife Rana when she was twenty and he was not yet eighteen. Married a little over three years later, they referred to each other thereafter as “old lady” and “lad.” They had no children together, but—we know from Hessen—Schwab had a daughter with another woman. As Warren points out, Schwab referred to his lack of (legitimate) children when he spoke about his dedication to building Bethlehem Steel into a great company. “I have no heirs to leave my money to,” Schwab said in 1912, “and my greatest pleasure, and just now my only pleasure in life, is to build a big business in Pennsylvania.” Other than briefly noting the sadness behind Schwab’s statement and the “insight into his motivations” it suggests, Warren avoids further analysis (p. 138). Schwab’s weaknesses for gambling, women, and beautiful music are duly noted, but Warren restrains himself from speculating about what made the man tick.
While the decision to focus on Schwab’s working life may justify Warren’s limited treatment of Schwab’s extracurricular activities, it is less easy to excuse his inadequate discussion of the steel titan’s involvement in politics and government. Here, again, readers are better served by Hessen. As a leader of some of the nation’s leading corporations during the Progressive Era, Schwab was bound to have some involvement with Washington and the courts. In the event, he had more than his fair share. His career was nearly nipped in the bud in 1894, when Schwab came close to admitting to a congressional committee that he had looked the other way while his subordinates at Carnegie Steel hid minor flaws in armor plate from navy inspectors. In 1903, he settled a lawsuit that accused him of taking improper advantage of the bankruptcy of the U.S. Shipbuilding Company, the short-lived collection of shipyards that would soon become part of Bethlehem Steel. In 1908, Schwab, a good Pennsylvania Republican, returned to Congress to testify in favor of a high tariff. In 1916, when Bethlehem was making enormous sums as a military contractor, Schwab mounted a vigorous public-relations campaign against congressional proposals to create a government-run armor plant. In 1918, Schwab took charge of the Emergency Fleet Corporation, which coordinated the work of 151 shipyards across the country. Three years later, he was compelled (unfairly, Warren and Hessen agree) to appear before Congress to defend the propriety of his wartime work. Meanwhile, Bethlehem Steel became embroiled in a political and legal dispute over alleged excessive profits that would stretch into the next world war. Warren mentions these subjects, but his interests lie elsewhere. The effect is an understatement of the importance of government and politics in Schwab’s working life and in the development of the steel industry during this period.
Despite its limits, this book offers a well-informed account of Schwab’s working life in the turn-of-the-century steel industry that supplements Hessen’s standard study without superseding it. This leaves the door open for a third major biography. Would it be worth the effort? In comparison to his mentor Carnegie, Schwab was evidently less intellectually curious, and much less generous. A multimillionaire for much of his life, Schwab made no major philanthropic efforts. Having continued through the Depression years to spend large sums on his own properties, he died broke in 1939. Like Hessen, Warren concludes by pointing to Schwab’s considerable accomplishments in the business world. The implication is that this was a one-dimensional man, seldom admirable and something of a disappointment to biographer and reader alike. There is something to this view, and yet, it is hard to shake the feeling that a skilled novelist would have little trouble spinning an exquisite story out of a life like this one, full as it was of outsized appetites and accomplishments, scandal and sin. Whether a comparable tale could be woven by a biographer, who would be more constrained by the available sources, is less certain. But even if its reach exceeded its grasp, such an effort would bring us closer to appreciating the full measure of the triumphs of this “industrial genius,” and of the considerable debris he left in his wake.