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i | MARINE REVIEW. i? age THE CAREER OF JOHN W. GATES. In a five-column interview, published in the New York Commercial- Advertiser, Mr. John W. Gates makes the claim that he is the real or- ganizer of the United States Steel Corporation. The-touch of verisimili- tude in the revelation is sufficient not alone to give plausibility but probability to the story. This is his account of how the great steel trust originated: "In talking with James J. Hill one evening in January of 1901 he informed me that J. P. Morgan was very much disturbed over the iron and steel situation. The Carnegie Steel Co. was threatening to build a large steel tube plant and become a competitor of the National Tube Co., in which Mr. Morgan was largely interested and instrumental as a banker in bringing out. After several hours' talk with Mr. Hill I told him that, in my opinion, there was but one way to manage the iron and steel busi- ness of the United States, and that was by an actual consolidation, and that if Mr. Morgan would. go to work at it right all the iron and steel companies of the United States could be brought into one company. Next day Mr. Morgan telephoned me, and asked me to come down to the bank and explain what I had said to Mr. Hill. I did so, and outlined to Mr. Morgan a plan for the formation of what was afterward named the United States Steel Corporation, "T told him about the lines and general terms I thought would have to be adopted to obtain the Carnegie Steel Co., which, being the largest and most aggressive steel works in the world, was the bone of contention among all the iron and steel manufacturers. I assured him that there was but one way to accomplish the'consolidation, and that was by getting Mr. Schwab, with whom I was very well acquainted, and with whom | had talked about the matter many times, to agree to a plan in advance and submit that plan to Mr. Carnegie and get his approval, and then go ahead and consummate the consolidation. "Mr. Morgan requested me to see Mr. Schwab and arrange a meeting at his residence. This I did, having first posted Mr. Schwab regarding my former talk with Mr. Morgan on the subject. We finally mapped out a plan after several hours' talk that Mr. Schwab through Mr. Carnegie would agree to, and that I strongly recommended. After many confer- ences with the various concerns that now form the United States Steel Corporation--namely, the National Steel Co., the American Steel Hoop Co., the American Steel & Wire Co., the Federal Steel Co., the Carnegie Steel Co., the American Tin Plate Co., the American Sheet Steel Co. and the American Bridge Co., together with the H. C. Frick Coke Co., which, in reality, was a Carnegie concern--the basis was made and all these properties put together. "T am familiar with all the plants of the United States Steel Corpora- tion, with all their ore properties, blast. furnaces, steel works, transporta- tion lines, both railroad and lake steamship, and the value of each, and I have never sold a share of my United States Steel stocks. I believe they are the cheapest stocks listed on the New York Stock Exchange today. The business of the United States Steel Corporation is world wide. I regard the formation of the United States Steel Corporation as the great- est factor for the laboring man that has ever been brought about in America, as they employ practically two hundred thousand men, who. are paid at least from 40 to 75 per cent. higher wages than foreign competitors pay for the same class of work. It insures the manufacture of a first-class quality of steel at a reasonable price, the price of steel rails today being only $28 a ton, as compared with the foreign price of fifteen or twenty years ago, before rails were made in the United States, of from $75 to $125 a ton delivered. Just think of it--rails at $28 a ton today, as against $125 less than a score of years ago!" Mr. Gates' autobiography, published in the same issue, is intensely interesting. He tells how he rose from a traveling salesman to be a millionaire and one of the financial powers of the country. He says: "First I started traveling for Isaac L. Elwood. I erected the first corral in the state of Texas, hiring men to help me put it up to show the rangers what use could be made of barbed wire. I had not traveled very long when I came to the conclusion that there was more money in the manufacture of barbed wire than there was in selling it at a salary of $100 per month. I had a friend in St. Louis--I was living in Chicago at the time--by the name of 'Alfred Clifford. Mr. Clifford and I started in to manufacture barbed wire in a very small way. I think we had three barbed wire machines. Our total investment was less than $8,000 to start with. The business proved very profitable, and we shortly increased it, not in the same factory, but in an independent factory. We started an unincorporated concern under the name of J. W. Gates & Co., into which eight of us put each $2,500, making a total of $20,000. All of these gentle- men are still alive. We declared dividends of about 50 per cent. per week. I would travel and sell the wire, come back, invoice it, bill it, paint it, market it and collect the money. I traveled for about two years. Our profits for the first year were $150,000. As I was doing most of the work I suggested to six of my partners that they make a give or take offer. They refused, but asked me to make the offer. They accepted my offer, and sold, leaving no one with me but Clifford. Then, in 1880, we incor- porated the Southern Wire Co., with a capital stock of $50,000, of which I was the owner of 48 per cent., Mr. Clifford 48 per cent. and a Mr. Rowe 4 per cent. Profits for the next year were $188,000. One of the parties of the Big Eight, Mr. Edenborn, went into opposition to us. At the end of three years our plant was destroyed by fire. The morning after the loss I called up Mr. Edenborn and suggested that he meet me and Mr. Cliff- ord and see if we could not agree upon a consolidation. Within fifteen minutes we had reached an agreement, so that we erected the new works out where the Edenborn plant was located. Then we concluded to build a mill near Pittsburgh, and selected Rankin as a site. In 1884 we began the erection of what is now known as the Braddock mill. We started in to build a mill that would cost us $110,000. We concluded that we would incorporate for $100,000 and borrow the $10,000. Before we had com- pleted the mill $250,000 had been expended, and we were obliged to bor- row $150,000. Mr. Clifford, Mr, Edenborn and myself always went on the notes of the company jointly to make them good. We began opera- tions in the mill early in 1886, and I went abroad for the purpose of buy- ing steel, it being unobtainable in the United States--I mean steel billets. I purchased about 50,000 tons of steel in Great Britain for shipment via Baltimore to the Rankin mill. I-had great difficulty in obtaining a bank- ers' credit to satisfy the European makers. Finally I called upon Mr. Morgan, and he very cheerfully gave us credit for £60,000 sterling, which was more money than we were worth. Owing to our exceedingly large purchase in Europe the price of steel advanced $5 to $10 a ton, which meant a profit to us of from $250,000 to $500,000. I sold 10,000 tons of the steel to the Carnegie company without touching it, simply delivering the shipping documents to them, and thereby made $100,000 net profit. The balance of the steel we worked up into rods and wire. "Our profits in the manufacture of wire in 1885 were very small, caused largely by the Grant-Ward panic, The year 1886 was fairly good. In 1887 we realized the profits of the steel purchased in Europe in 1886, together with the steel sold to the Carnegie-Phipps Co. We settled with them by taking their notes at four and six months. In 1887 we increased the capital stock of the Braddock Wire Co. from $100,000 to $500,000, we paid a cash dividend of $100,000--making a 500 per cent. dividend as the result of work during 1884, 1885, 1886 and 1887. "During all these years we were in bitter litigation with the Wash- burn & Moen Mfg. Co. and I. L. Elwood on account of barbed wire patenis. Our customers all over the United States and in foreign coun- tries where we were trying to work up a trade were harassed to such an extent that between the years 1880 and 1890 we paid out on account of patent litigation more than $1,000,000. In 1890 I persuaded Mr. Elwood . and the Washburn & Moen Co. that they had better sell their patents to a new company, which I would organize, that would own all the patents on barb wire and barb wire machinery. The patents all went into what was known as the Columbia Patent Co., of which I was president, and we had practically a monopoly of the wire fence business. This company oper- ated until the expiration of the patents, and for many months paid divi- dends of 100 per cent. per month. Its capital was $100,000. "In 1892 we took in the Lambert & Bishop Wire Fence Co. of Joliet, Ill., and we purchased the Baker Wire Co. of Lockport, IIl., giving our unsecured notes at one and two years. We paid off all of the notes within a year. In 1888 I bought control of the Iowa. Barbed Wire Co. of Allen- town, Pa. Its capital stock was $400,000 and the bonded debt $150,000. It had a floating indebtedness of $700,000, and was of course absolutely bankrupt. But we did not know it. I divided my interests with my part- ners, Mr. Clifford and Mr. Edenborn, giving them all they cared to take. Confronted with an enormous floating debt, we put it all into the shape of notes. In twelve months they were all paid off. In 1892 we consolidated the Iowa Barbed Wire Co. of Allentown, the Braddock Wire Co. of Pitts- burgh, the Southern Wire Co. of St. Louis, the Baker Wire Co. of Lock- port and the Lambert & Bishop Wire Co. of Joliet into the Consolidated Steel & Wire Co., with an actual paid in capital of $4,000,000. I managed that company's affairs from 1892 till some time in 1895, during which period the average net earnings were between 27 per cent. and 28 per cent., or about $1,100,000 per annum. In 1895 I was elected president of the Ilinois Steel Co. I had acquired an interest of about 27,000 shares, which I bought at around $30 per share." _ At this point in his narration Mr. Gates ceased divulging his profits which are figured by the millions since 1898. He told briefly of the organization of the Federal Steel Co. in 1898 with a capital stock of $98,- 000,000 to take in several steel companies. He explained the consolidation of many wire companies into the American Steel & Wire Co. with a capi- talization of $90,000,000. Then followed his account of the steel trust. Coming down to the recent Louisville & Nashville deal, Mr. Gates said: "On Louisville & Nashville we had the opinions of the best experts and auditors in the country that it was worth more per share than Illinois Central before we started into it. We knew it had $25,000,000 of quick cash assets in its treasury. The public did not know that. When we started in to buy the stock, we started in knowing the actual intrinsic value of the company and its exact physical condition, and we had reports of auditors on its financial condition. When we obtained 306,000 shares of stock--the amount we started out to get--there was a. short interest in the market of 150,000 shares. Of it 100,000 shares was foreign short interest; 50,000 was stock Mr. Belmont had sold under a resolution of the board authorizing its sale. These 50,000 shares were not good deliveries for thirty days, and if we had called the stock and insisted upon the specific performance of contracts, as we had every right to-do, we could have caused a panic greater than the May 9 panic. The proposition was made to me by a thoroughly responsible man financially that if I would call and insist upon delivery of Louisville he would sell 500,000 shares of stock and give me half the profits for doing it. Mr. Morgan's people sent to my hotel and awakened me at 1.30 in the morning and stated that at a meeting of bankers it had been determined that we were owners of Louis- ville & Nashville, and they wanted to know what we proposed to do about it, stating that it meant a panic probably greater than the May 9 panic. I told them the proposition that had been made to me, but that under no circumstances would we insist upon specific performance of the deliveries of Louisville & Nashville stock, as we had no wish whatever to cause any panic or to make any one lose money in stocks they held. We loaned va Sore people all the stock they wanted, without any premium charged. "The people interested with me in the purchase of Louisville & Nash- ville were able to have paid for the stock they bought four times over in cash. The newspapers often allude to me as doing this and that, though I may not have more than a 1 or 2 per cent. interest. There are a lot of fellows who are always willing to go along with me, however, and take my judgment, believing that I will treat them fairly. Many men have been with me for ten or twenty years, and have always made money. do not say that they have not made losses, but the net result has been that they have made millions of dollars. This is true of a great many men here in New York. If there was a loss I went to the end with them, and if there was a profit I went to the end." What is stated to be the oldest ship in the world has recently been sold at Teneriffe to be broken up. This is the Italian ship Anita, regis- tered at the port of Genoa. The Anita, which resembled Christopher Columbus' ship, the Santa Maria, was built in Genoa in 1548 -and effected her last voyage at the end of March, 1902, from Naples to Teneriffe, six or seven weeks ago. The Anita was of tremendously stout build and had weathered countless storms and tornadoes in all parts of the world; but, says the Shipping World of London, it was also the slowest ship afloat, taking 205 days on one voyage from Baltimore to Rio de Janeiro.