It was the boast of a Roman Emperor that he had found the Eternal City brick and left it marble. Similarly the present generation of Americans inherited a country which was wood and have transformed it into steel. That which chiefly distinguishes the physical America of today from that of forty years ago is the extensive use of this metal. Our fathers used steel very little in railway transportation; rails and locomotives were usually made of iron, and wood was the prevailing material for railroad bridges. Steel cars, both for passengers and for freight, are now everywhere taking the place of the more flimsy substance. We travel today in steel subways, transact our business in steel buildings, and live in apartments and private houses which are made largely of steel. The steel automobile has long since supplanted the wooden carriage; the steel ship has displaced the iron and wooden vessel. The American farmer now encloses his lands with steel wire, the Southern planter binds his cotton with steel ties, and modern America could never gather her abundant harvests without her mighty agricultural implements, all of which are made of steel. Thus it is steel that shelters us, that transports us, that feeds us, and that even clothes us.
This substance is such a commonplace element in our lives that we take it for granted, like air and water and the soil itself; yet the generation that fought the Civil War knew practically nothing of steel. They were familiar with this metal only as a curiosity or as a material used for the finer kinds of cutlery. How many Americans realize that steel was used even less in 1865 than aluminum is used today? Nearly all the men who have made the American Steel Age—such as Carnegie, Phipps, Frick, and Schwab—are still living and some of them are even now extremely active. Thirty-five years ago steel manufacture was regarded, even in this country, as an almost exclusively British industry. In 1870 the American steel maker was the parvenu of the trade. American railroads purchased their first steel rails in England, and the early American steel makers went to Sheffield for their expert workmen. Yet, in little more than ten years, American mills were selling agricultural machinery in that same English town, American rails were displacing the English product in all parts of the world, American locomotives were drawing English trains on English railways, and American steel bridges were spanning the Ganges and the Nile. Indeed, the United States soon surpassed England. In the year before the World War the United Kingdom produced 7,500,000 tons of steel a year, while the United States produced 32,000,000 tons. Since the outbreak of the Great War, the United States has probably made more steel than all the rest of the world put together. "The nation that makes the cheapest steel," says Mr. Carnegie, "has the other nations at its feet." When some future Buckle analyzes the fundamental facts in the World War, he may possibly find that steel precipitated it and that steel determined its outcome.
Three circumstances contributed to the rise of this greatest of American industries: a new process for cheaply converting molten pig iron into steel, the discovery of enormous deposits of ore in several sections of the United States, and the entrance into the business of a hardy and adventurous group of manufacturers and business men. Our steel industry is thus another triumph of American inventive skill, made possible by the richness of our mineral resources and the racial energy of our people. An elementary scientific discovery introduced the great steel age. Steel, of course, is merely iron which has been refined—freed from certain impurities, such as carbon, sulphur, and phosphorus. We refine our iron and turn it into steel precisely as we refine our sugar and petroleum. From the days of Tubal Cain the iron worker had known that heat would accomplish this purification; but heat, up to almost 1865, was an exceedingly expensive commodity. For ages iron workers had obtained the finer metal by applying this heat in the form of charcoal, never once realizing that unlimited quantities of another fuel existed on every hand. The man who first suggested that so commonplace a substance as air, blown upon molten pig iron, would produce the intensest heat and destroy its impurities, made possible our steel railroads, our steel ships, and our steel cities. When William Kelly, an owner of iron works near Eddyville, Kentucky, first proposed this method in 1847, he met with the ridicule which usually greets the pioneer inventor. When Henry Bessemer, several years afterward, read a paper before the British Association for the Advancement of Science, in which he advocated the same principle, he was roared down as "a crazy Frenchman," and the savants were so humiliated by the suggestion that they voted to make no record of his "silly paper" in their official minutes. Yet these two men, the American Kelly and the Englishman Bessemer, were the creators of modern steel. The records of the American Patent Office clearly show that Kelly made "Bessemer" steel many years before Bessemer. In 1870 the American Government refused to extend Bessemer's patent in this country on the ground that William Kelly had a prior claim; in spite of this, Bessemer was undoubtedly the man who developed the mechanical details and gave the process a universal standing.
Though the Bessemer process made possible the production of steel by tons instead of by pounds, it would never in itself have given the nation its present preeminence in the steel industry. Iron had been mined in the United States for two centuries on a small scale, the main deposits being located in the Lake Champlain region of New York and in western Pennsylvania. But these, and a hundred other places located along the Atlantic coast, could not have produced ore in quantities sufficient to satisfy the yawning jaws of the Bessemer converters. As this new method poured out the liquid in thousands of tons, and as the commercial demand extended in a dozen different directions, the cry went up from the furnace's for more ore. And again Nature, which has favored America in so many directions, came to her assistance. Manufacturers in the steel regions began to recall strange stories which had been floating down for many years from the wilderness surrounding Lake Superior. The recollection of a famous voyage made in this region by Philo M. Everett, as far back as 1845, now laid siege to the imagination of the new generation of ironmasters. For years the Indians had told Everett of the "mountains of iron" that lay on the Minnesota shore of Lake Superior and had described their wonders in words that finally impelled this hardy adventurer to make a voyage of exploration. For six weeks, in company with two Indian guides, Everett had navigated a small boat along the shores of the Lake, covering a distance that now takes only a few hours. The Indians had long regarded this silent, red iron region with a superstitious reverence, and now, as the little party approached, they refused to complete the journey. "Iron Mountain!" they said, pointing northward along the trail—"Indian not go near; white man go!" The sight which presently met Everett's eyes repaid him well for his solitary tramp in the forest. He found himself face to face with a "mountain a hundred and fifty feet high, of solid ore, which looked as bright as a bar of iron just broken." Other explorations subsequently laid open the whole of the Minnesota fields, including the Mesaba, which developed into the world's greatest iron range. America has other regions rich in ore, particularly in Alabama, located alongside the coal and limestone so necessary in steel production; yet it has drawn two-thirds of its whole supply from these Lake Superior fields. Not only the quantity, which is apparently limitless, but the quality explains America's leadership in steel making.
Mining in Minnesota has a character which is not duplicated elsewhere. When we think of an iron mine, we naturally picture subterranean caverns and galleries, and strange, gnome-like creatures prowling about with pick and shovel and drill. But mining in this section is a much simpler proceeding. The precious mineral does not lie concealed deep within the earth; it lies practically upon the surface. Removing it is not a question of blasting with dynamite; it is merely a matter of lifting it from the surface of the earth with a huge steam shovel. "Miners" in Minnesota have none of the conventional aspects of their trade. They operate precisely as did those who dug the Panama Canal. The railroad cars run closely to the gigantic red pit. A huge steam shovel opens its jaws, descends into an open amphitheater, licks up five tons at each mouthful, and, swinging sideways over the open cars, neatly deposits its booty. It is not surprising that ore can be produced at lower cost in the United States than even in those countries where the most wretched wages are paid. Evidently this one iron field, to say nothing of others already worked, gives a permanence to our steel industry.
Not only did America have the material resources; what is even more important, she had also the men. American industrial history presents few groups more brilliant, more resourceful, and more picturesque than that which, in the early seventies, started to turn these Minnesota ore fields into steel—and into gold. These men had all the dash, all the venturesomeness, all the speculative and even the gambling instinct, needed for one of the greatest industrial adventures in our annals. All had sprung from the simplest and humblest origins. They had served their business apprenticeships as grocery clerks, errand boys, telegraph messengers, and newspaper gamins. For the most part they had spent their boyhood together, had played with each other as children, had attended the same Sunday schools, had sung in the same church choirs, and, as young men, had quarreled with each other over their sweethearts. The Pittsburgh group comprised about forty men, most of whom retired as millionaires, though their names for the most part signify little to the present-day American. Kloman, Coleman, McCandless, Shinn, Stewart, Jones, Vandervoort—are all important men in the history of American steel. Thomas A. Scott and J. Edgar Thompson, men associated chiefly with the creation of the Pennsylvania Railroad, also made their contributions. But three or four men towered so preeminently above their associates that today when we think of the human agencies that constructed this mighty edifice, the names that insistently come to mind are those of Carnegie, Phipps, Frick, and Schwab.
Books have been written to discredit Carnegie's work and to picture him as the man who has stolen success from the labor of greater men. Yet Carnegie is the one member of a brilliant company who had the indispensable quality of genius. He had none of the plodding, painstaking qualities of a Rockefeller; he had the fire, the restlessness, the keen relish for adventure, and the imagination that leaped far in advance of his competitors which we find so conspicuous in the older Vanderbilt. Carnegie showed these qualities from his earliest days. Driven as a child from his Scottish home by hunger, never having gone to school after twelve, he found himself, at the age of thirteen, living in a miserable hut in Allegheny, earning a dollar and twenty cents a week as bobbin-boy in a cotton mill, while his mother augmented the family income by taking in washing. Half a dozen years later Thomas Scott, President of the Pennsylvania Railroad, made Carnegie his private secretary. How well the young man used his opportunities in this occupation appeared afterward when he turned his wide acquaintanceship among railroad men to practical use in the steel business. It was this personal adaptability, indeed, that explains Carnegie's success. In the narrow, methodical sense he was not a business man at all; he knew and cared nothing for its dull routine and its labyrinthine details. As a practical steel man his position is a negligible one. Though he was profoundly impressed by his first sight of a Bessemer converter, he had little interest in the every-day process of making steel. He had also many personal weaknesses: his egotism was marked, he loved applause, he was always seeking opportunities for self-exploitation, and he even aspired to fame as an author and philosopher. The staid business men of Pittsburgh early regarded Carnegie with disfavor; his daring impressed them as rashness and his bold adventures as the plunging of the speculator. Yet in all its aspects Carnegie's triumph was a personal one. He was perhaps the greatest commercial traveler this country has ever known. While his more methodical associates plodded along making steel, Carnegie went out upon the highway, bringing in orders by the millions. He showed this same personal quality in the organization of his force. As a young man, entirely new to the steel industry, he selected as the first manager of his works Captain Bill Jones; his amazing judgment was justified when Jones developed into America's greatest practical genius in making steel. "Here lies the man"—Carnegie once suggested this line for his epitaph—"who knew how to get around him men who were cleverer than himself." Carnegie inspired these men with his own energy and restlessness; the spirit of the whole establishment automatically became that of the pushing spirit of its head. This little giant became the most remorseless pace-maker in the steel regions. However astounding might be the results obtained by the Carnegie works the captain at the head was never satisfied. As each month's output surpassed that which had gone before, Carnegie always came back with the same cry of "More." "We broke all records for making steel last week!" a delighted superintendent once wired him and immediately he received his answer, "Congratulations. Why not do it every week?" This spirit explains the success of the Carnegie Company in outdistancing all its competitors and gaining a worldwide preeminence for the Pittsburgh district. But Carnegie did not make the mistake of capitalizing all this prosperity for himself; his real greatness as an American business man consists in the fact that he liberally shared the profits with his associates. Ruthless he might be in appropriating their last ounce of energy, yet he rewarded the successful men with golden partnerships. Nothing delighted Carnegie more than to see the man whom he had lifted from a puddler's furnace develop into a millionaire.
Henry Phipps, still living at the age of seventy-eight, was the only one of Carnegie's early associates who remained with him to the end. Like many of the others, Phipps had been Carnegie's playmate as a boy, so far as any of them, in those early days, had opportunity to play; like all his contemporaries also, Phipps had been wretchedly poor, his earliest business opening having been as messenger boy for a jeweler. Phipps had none of the dash and sparkle of Carnegie. He was the plodder, the bookkeeper, the economizer, the man who had an eye for microscopic details. "What we most admired in young Phipps," a Pittsburgh banker once remarked, "is the way in which he could keep a check in the air for three or four days." His abilities consisted mainly in keeping the bankers complaisant, in smoothing the ruffled feelings of creditors, in cutting out unnecessary expenditures, and in shaving prices.
Carnegie's other two more celebrated associates, Henry C. Frick and Charles M. Schwab, were younger men. Frick was cold and masterful, as hard, unyielding, and effective as the steel that formed the staple of his existence. Schwab was enthusiastic, warm-hearted, and happy-go-lucky; a man who ruled his employees and obtained his results by appealing to their sympathies. The men of the steel yards feared Frick as much as they loved "Charlie" Schwab. The earliest glimpses which we get of these remarkable men suggest certain permanent characteristics: Frick is pictured as the sober, industrious bookkeeper in his grandfather's distillery; Schwab as the rollicking, whistling driver of a stage between Loretto and Cresson. Frick came into the steel business as a matter of deliberate choice, whereas Schwab became associated with the Pittsburgh group more or less by accident.
The region of Connellsville contains almost 150 square miles underlaid with coal that has a particular heat value when submitted to the process known as coking. As early as the late eighties certain operators had discovered this fact and were coking this coal on a small scale. It is the highest tribute to Frick's intelligence that he alone foresaw the part which this Connellsville coal was to play in building up the Pittsburgh steel district. The panic of 1873, which laid low most of the Connellsville operators, proved Frick's opportunity. Though he was only twenty-four years old he succeeded, by his intelligence and earnestness, in borrowing money to purchase certain Connellsville mines, then much depreciated in price. From that moment, coke became Frick's obsession, as steel had been Carnegie's. With his early profits he purchased more coal lands until, by 1889, he owned ten thousand coke ovens and was the undisputed "coke king" of Connellsville. Several years before this, Carnegie had made Frick one of his marshals, coke having become indispensable to the manufacture of steel, and in 1889 the former distiller's accountant became Carnegie's commander-in-chief. Probably the popular mind associates Frick chiefly with the importation of Slavs as workmen, with the terrible strikes that followed in consequence at Homestead, with the murderous attack made upon him by Berkman, the anarchist, and with his bitter, long drawn-out quarrel with Andrew Carnegie. Frick's stormy career was naturally the product of his character.
On the other hand, temperamental pliability and lovableness were the directing traits of the man who, in his way, made contributions quite as solid to the extension of the Pittsburgh steel industry. Schwab worked with the human material quite as successfully as other men worked with iron ore, Bessemer furnaces, and coal. He handled successfully what was perhaps the greatest task in management ever presented to a manufacturer when to him fell the job of reorganizing the Homestead Works after the strike of 1892 and of transforming thousands of riotous workmen into orderly and interested producers of steel. In three or four years practically every man on the premises had become "Charlie" Schwab's personal friend, and the Homestead property which, until the day he took charge, had been a colossal failure, had developed into one of the most profitable holdings of the Carnegie Company. As his reward Schwab, at the age of thirty-four, was made President of the Carnegie corporation. Only sixteen years before he had entered the steel works as a stake driver at a dollar a day.
When the Carnegie group began operations in the early seventies, American steel, as a British writer remarked, was a "hot-house product"; yet in 1900 the Carnegie partners divided $40,000,000 as the profits of a single year. They had demonstrated that the United States, despite the high prices that prevailed everywhere, could make steel more cheaply than any other country. Foreign observers have offered several explanations for this achievement. American makers had an endless supply of cheap and high-grade ore, cheaper coke, cheaper transportation, and workmen of a superior skill. We must give due consideration to the fact that their organization was more flexible than those of older countries, and that it regulated promotion exclusively by merit and gave exceptional opportunities to young men. American steel makers also had scrap heaps whose size astounded the foreign observers; they never hesitated to discard the most expensive plants if by so doing they could reduce the cost of steel rails by a dollar a ton. Machinery for steel making had a more extensive development in this country than in England or Germany. Mr. Carnegie also enjoyed the advantages of a high protective tariff, though about 1900 he discovered that his extremely healthy infant no longer demanded this form of coddling. But probably the Carnegie Company's greatest achievement was the abolition of the middleman. In a few years it assembled all the essential elements of steel making in its own hands. Frick's entrance into the combination gave the concern an unlimited supply of the highest grade of coking coal. In a few years, the Carnegie interests had acquired great holdings in the Minnesota ore regions.
At first glance, the Pittsburgh region seems hardly the ideal place for the making of steel. Fortune first placed the industry there because all the raw materials, especially iron ore and coal, seemed to exist in abundance. But the discovery of the Minnesota ore field, which alone could supply this essential product in the amounts which the furnaces demanded, immediately deprived the Pittsburgh region of its chief advantage. As a result of this sudden development, the manufacturers of Pittsburgh awoke one morning and discovered that their ore was located a thousand miles away. To bring it to their converters necessitated a long voyage by water and rail, with several reloadings. They overcame these obstacles by developing machinery for handling ore and by acquiring the raw materials and the connecting links of transportation. Ore which had been lying in the wilds of Minnesota on Monday morning was thus brought to Pittsburgh and made into steel rails or bridges or structural shapes by Saturday night. The Carnegie Company first acquired sufficient mineral lands to furnish ore for several generations and organized an ore fleet which transported the products of the mines through the lakes to ports on Lake Erie, particularly Ashtabula and Conneaut. The purchase of the Bessemer and Lake Erie Railroad, which extended from Conneaut to Pittsburgh, made this great transportation route complete. Besides freeing their business from uncertainty, this elimination of middlemen naturally produced great economies.
Probably Andrew Carnegie's shrewdness in naming his first plant the J. Edgar Thompson Steel Works, after the powerful President of the Pennsylvania Railroad, and in making Thompson and his associate Scott partners, had much to do with his early success. These two gentlemen conferred two priceless favors upon the struggling enterprise. They became large purchasers of steel rails and their influence in this direction extended far beyond the Pennsylvania Railroad. What was perhaps even more important, they gave the Carnegie concerns railroad rebates. The use of rebates, as a method of stifling competition and building up a great industrial prosperity, is an offense which the popular mind associates almost exclusively with the Standard Oil Company, yet the Carnegie fortune, as well as that of John D. Rockefeller, received an artificial stimulation of this kind.
Though incomparably the greatest of the American steel companies, the Carnegie Steel Company by no means monopolized the field. In forty years, indeed, an enormous steel area had grown up, including western Pennsylvania, Ohio, Indiana, and Illinois, practically all of it drawing its raw materials from those same teeming ore lands in the Lake Superior region. Johnstown, Youngstown, Cleveland, Lorain, Chicago, and Joliet, became headquarters of steel production almost as important as Pittsburgh itself. Two entirely new steel kingdoms, each with its own natural reservoirs of ore, grew up in Colorado and Alabama. The Colorado Fuel and Iron Company, which possessed apparently inexhaustible mineral lands in Colorado, Wyoming, Utah, New Mexico, and California, itself produces not far from three million tons a year, almost half the present production of Great Britain. The Alabama steel country has developed in even more spectacular fashion. Birmingham, a hive of southern industry placed almost as if by magic in the leisurely cotton lands of the South, had no existence in 1870, when the Pittsburgh prosperity began. In the Civil War, the present site of a city with a population of 140,000 was merely a blacksmith shop in the fork of the roads. Yet this district has advantages for the manufacture of steel that have no parallel elsewhere. The steel companies which are located here do not have to bring their materials laboriously from a distance but possess, immediately at hand, apparently endless store of the three things needful for making steel—iron ore, coal, and limestone. All these territories have their personal romances and their heroes, many of them quite as picturesque as those of the Pittsburgh group.
It is doubtful indeed if American industry presents any figure quite as astonishing and variegated as that of John W. Gates, the man who educated farmers all over the world to the use of wire fencing. Half charlatan, half enthusiast, speculator, gambler, a man who created great enterprises and who also destroyed them, at times an upbuilding force and at other times a sinister influence, Gates completely typified a period in American history that, along with much that was heroic and splendid, had much also that was grotesque and sordid. The opera-bouffe performance that laid the foundations of Gates's great industry was in every way characteristic of this period. In 1871 Gates, then a clerk in a hardware store at twenty-five dollars a week, made his first attempt to sell barbed wire in the great cattle countries of the southwestern States. When the cattle men in Texas first saw this barbed wire, they ridiculed the idea that it could ever hold their steers. Gates selected a plaza in San Antonio, fenced it in with his new product, and invited the enemies to bring along their wildest specimens About thirty of Texas' most ferocious cattle, placed within the enclosure, spent a whole afternoon plunging at the barbs in a useless and tormenting attempt to escape. This spectacular demonstration of efficiency launched Gates fairly upon his career. He immediately began to sell his new fencing on an enormous scale; in a few years the whole world was demanding it, and it has become, as recent events have disclosed, a particularly formidable munition of war. The American Steel and Wire Company, one of the greatest of American corporations, was the ultimate outgrowth of that lively afternoon in San Antonio.
In 1900 the Carnegie Steel Company was making one-quarter of all the Bessemer steel produced in the United States. It owned in abundance all the properties which were essential to its completed output—coal, limestone, steel ships, railroads, and steel mills. In twenty-five years, from 1875 to 1900, this manufacturing enterprise had paid the Carnegie group profits aggregating $133,000,000, profits which, in the closing years of the century, had increased at a stupendous rate. In 1898 Carnegie and his associates had divided $11,500,000, in 1899 their earnings had grown to $25,000,000, and in 1900 the aggregate had suddenly jumped to $40,000,000. Of this latter sum Carnegie received $25,000,000, Phipps $5,500,000, Frick $2,600,000, and Schwab $1,300,000. And Carnegie's little group could see no limit to the growth of their business and the expansion of their personal fortunes. Yet at that very moment Carnegie was planning to play the part of a Charles V with the large empire which he had pieced together—to abdicate his throne, retire from business life, and spend his remaining days in quiet.
Many influences were impelling him to this decision. His triumph, stupendous as it had been, also had had its alloy of sorrow. Indeed this little Scotsman, now at the crowning of his glory, was one of the loneliest figures in the world. Practically all the forty men with whom he had been closely associated had vanished from the scene. He had quarreled with his playmate and lifelong partner, Henry Phipps, and was in the worst possible business and personal relations with Frick. He had no son to carry on his work. He had become greatly interested in his philanthropies, and he had declared that the man who died rich died disgraced. Moreover, new influences were rising in the steel trade with which Carnegie had little sympathy. Its national capital seemed to be shifting from Pittsburgh to Wall Street. New men who knew nothing about steel but who possessed an intimate acquaintance with stocks and bonds—J. Pierpont Morgan, George W. Perkins, and their associates—were branching out as controllers of large steel interests. Carnegie had no interest in Wall Street; he has declared that he never speculated in his life and that he would immediately dissociate himself from any partner who would do so. This Wall Street coterie, in the years from 1898 to 1900, had made several large combinations in the steel trade. That was the era when the trust mania had gained possession of the American mind and when its worst features displayed themselves. The Federal Steel Company, the American Bridge Company, the American Steel and Wire, the National Tube Company, all representing the assembling of large works which had been engaged as rivals in similar enterprises, were launched, with the usual accompaniments of "underwriting syndicates," watered stock, and Wall Street speculation. This sort of thing made no appeal to Andrew Carnegie. His huge enterprise had always remained essentially a copartnership, and he had frequently expressed his abhorrence of trusts. Yet, in spite of his wish to retire from business and in spite of his avowed intention to die poor, Carnegie now adopted the policy of the Sibylline leaves to all prospective purchasers. Moore and Reid would have purchased his interest for $157,000,000; when Rockefeller came along the price had risen to $250,000,000; when the oil man shook his head and retired, Carnegie immediately raised his price to $500,000,000. It is doubtful whether he would have sold at all had not his Wall Street competitors begun to encroach on a field which the little Scotsman understood quite as well as they—the production and merchandising of steel. The newly organized combinations were completing elaborate plans to go after Carnegie's business. Then Carnegie, who had practically retired from active life, again arrayed himself in his shirt-sleeves, abandoned his career of authorship, and resumed his early trade. His first attacks produced an immense reverberation in the House of Morgan. He purchased a huge tract at Conneaut and began building a gigantic plant for the manufacture of steel tubes, a business in which he had not hitherto engaged. This was a blow aimed at one of Morgan's pet new creations, the National Tube Company. Should Carnegie finish his works, there was no doubt the Morgan enterprise would be ruined, for the new plant would be far more modern and so could manufacture the product at a much lower price; and, with Charles M. Schwab as active manager, what possible chance would the older corporation have? But Carnegie struck his enemy at an even more vulnerable point. The Pennsylvania Railroad had a practical monopoly of traffic in and out of Pittsburgh, and Pittsburgh "created" more freight business than any other city in the world. Carnegie lent his powerful support to George J. Gould, who was then extending his railroad system into the preempted field and was also making surveys and had financed a company to build an entirely new railroad from Pittsburgh to the Atlantic Coast. As Carnegie himself controlled the larger part of the freight that made Pittsburgh such an essential feeder to railroads, his new enterprise caused the greatest alarm. At the same time Carnegie equipped a new and splendid fleet of ore ships, his purpose being to enter a field of transportation which John D. Rockefeller had found extremely profitable.
Such were the circumstances and such were the motives that gave birth to the world's largest corporation. All one night, so the story goes, Charles M. Schwab and John W. Gates discussed the steel situation with J. Pierpont Morgan. There was only one possible solution, they said—Andrew Carnegie must be bought out. By the time the morning sun came through the windows Morgan had been convinced. "Go and ask him what he will sell for," he said to Schwab. In a brief period Schwab came back to Morgan with a letter which contained the following figures—five per cent gold bonds $303,450,000; preferred stock $98,277,100; common stock $90,279,000—a total of over $492,000,000. Carnegie demanded no cash; he preferred to hold a huge first mortgage on a business whose golden opportunities he knew so well. Morgan, who had been accustomed all his life to dictate to other men, had now met a man who was able to dictate to him. And he capitulated. The man who fifty-three years before had started life in a new country as a bobbin-boy at a dollar and twenty cents a week, now at the age of sixty-six retired from business the second richest man in the world. With him retired a miscellaneous assortment of millionaires whose fortunes he had made and whose subsequent careers in the United States and in Europe have given a peculiar significance to the name "Pittsburgh Millionaires." The United States Steel Corporation, the combination that included not only the Carnegie Company but seventy per cent of all the steel concerns in the country, was really a trust made up of trusts. It had a capitalization of a billion and a half, of which about $700,000,000 was composed of the commodity usually known as "water"; but so greatly has its business grown and so capably has it been managed that all this liquid material has since been converted into more solid substance. The disappearance of Andrew Carnegie and his coworkers and the emergence of this gigantic enterprise completed the great business cycle in the steel trade. The age of individual enterprise and competition had passed—that of corporate control had arrived.
A distinguished English journalist, who was visiting the United States, in 1917, on an important governmental mission, had an almost sublime illustration of the extent to which the telephone had developed on the North American Continent. Sitting at a desk in a large office building in New York, Lord Northcliffe took up two telephone receivers and placed one at each ear. In the first he heard the surf beating at Coney Island, New York, and in the other he heard, with equal distinctness, the breakers pounding the beach at the Golden Gate, San Francisco. Certainly this demonstration justified the statement made a few years before by another English traveler. "What startles and frightens the backward European in the United States," said Mr. Arnold Bennett, "is the efficiency and fearful universality of the telephone. To me it was the proudest achievement and the most poetical achievement of the American people."
Lord Northcliffe's experience had a certain dramatic justice which probably even he did not appreciate. He is the proprietor of the London Times, a newspaper which, when the telephone was first introduced, denounced it as the "latest American humbug" and declared that it "was far inferior to the well-established system of speaking tubes." The London Times delivered this solemn judgment in 1877. A year before, at the Philadelphia Centennial Exposition, Don Pedro, Emperor of Brazil, picked up, almost accidentally, a queer cone-shaped instrument and put it to his ear, "My God! It talks!" was his exclamation; an incident which, when widely published in the press, first informed the American people that another of the greatest inventions of all times had had its birth on their own soil. Yet the initial judgment of the American people did not differ essentially from the opinion which had been more coarsely expressed by the leading English newspaper. Our fathers did not denounce the telephone as an "American humbug," but they did describe it as a curious electric "toy" and ridiculed the notion that it could ever have any practical value. Even after Alexander Graham Bell and his associates had completely demonstrated its usefulness, the Western Union Telegraph Company refused to purchase all their patent rights for $100,000! Only forty years have passed since the telephone made such an inauspicious beginning. It remains now, as it was then, essentially an American achievement. Other nations have their telephone systems, but it is only in the United States that its possibilities have been even faintly realized. It is not until Americans visit foreign countries that they understand that, imperfect as in certain directions their industrial and social organization may be, in this respect at least their nation is preeminent.
The United States contains nearly all the telephones in existence, to be exact, about seventy-five per cent. We have about ten million telephones, while Canada, Central America, South America, Great Britain, Europe, Asia, and Africa all combined have only about four million. In order to make an impressive showing, however, we need not include the backward peoples, for a comparison with the most enlightened nations emphasizes the same point. Thus New York City has more telephones than six European countries taken together—Austria-Hungary, Belgium, Norway, Denmark, Italy, and the Netherlands. Chicago, with a population of 2,000,000, has more telephones than the whole of France, with a population of 40,000,000. Philadelphia, with 1,500,000, has more than the Russian Empire, with 166,000,000. Boston has more telephones than Austria-Hungary, Los Angeles more than the Netherlands, and Kansas City more than Belgium. Several office buildings and hotels in New York City have more instruments than the kingdoms of Greece or Bulgaria. The whole of Great Britain and Ireland has about 650,000 telephones, which is only about 200,000 more, than the city of New York.
Mere numbers, however, tell only half the story. It is when we compare service that American superiority stands most manifest. The London newspapers are constantly filled with letters abusing the English telephone system. If these communications describe things accurately, there is apparently no telephone vexation that the Englishman does not have to endure. Delays in getting connections are apparently chronic. At times it seems impossible to get connections at all, especially from four to five in the afternoon—when the operators are taking tea. Suburban connections, which in New York take about ninety seconds, average half an hour in London, and many of the smaller cities have no night service. An American thinks nothing of putting in a telephone; he notifies his company and in a few days the instrument is installed. We take a thing like this for granted. But there are places where a mere telephone subscription, the privilege of having an instrument installed, is a property right of considerable value and where the telephone service has a "waiting list," like an exclusive club. In Japan one can sell a telephone privilege at a good price, its value being daily quoted on the Stock Exchange. Americans, by constantly using the telephone, have developed what may be called a sixth sense, which enables them to project their personalities over an almost unlimited area. In the United States the telephone has become the one all-prevailing method of communication. The European writes or telegraphs while the American more frequently telephones. In this country the telephone penetrates to places which even the mails never reach. The rural free delivery and other forms of the mail service extend to 58,000 communities, while our 10,000,000 telephones encompass 70,000. We use this instrument for all the varied experiences of life, domestic, social, and commercial. There are residences in New York City that have private branch exchanges, like a bank or a newspaper office. Hostesses are more and more falling into the habit of telephoning invitations for dinner and other diversions. Many people find telephone conversations more convenient than personal interviews, and it is every day displacing the stenographer and the traveling salesman.
Perhaps the most noteworthy achievement of the telephone is its transformation of country life. In Europe, rural telephones are almost unknown, while in the United States one-third of all our telephone stations are in country districts. The farmer no longer depends upon the mails; like the city man, he telephones. This instrument is thus the greatest civilizing force we have, for civilization is very largely a matter of intercommunication. Indeed, the telephone and other similar agencies, such as the parcel post, the rural free delivery, better roads, and the automobile, are rapidly transforming rural life in this country. In several regions, especially in the Mississippi Valley, a farmer who has no telephone is in a class by himself, like one who has no mowing-machine. Thus the latest returns from Iowa, taken by the census as far back as 1907, showed that seventy-three per cent of all the farms—160,000 out of 220,000—had telephones and the proportion is unquestionably greater now. Every other farmhouse from the Atlantic to the Pacific contains at least one instrument. These statistics clearly show that the telephone has removed half the terrors and isolation of rural life. Many a lonely farmer's wife or daughter, on the approach of a suspicious-looking character, has rushed to the telephone and called up the neighbors, so that now tramps notoriously avoid houses that shelter the protecting wires. In remote sections, insanity, especially among women, is frequently the result of loneliness, a calamity which the telephone is doing much to mitigate.
In the United States today there is one telephone to every nine persons. This achievement represents American invention, genius, industrial organization, and business enterprise at their best. The story of American business contains many chapters and episodes which Americans would willingly forget. But the American Telephone and Telegraph Company represents an industry which has made not a single "swollen fortune," whose largest stockholder is the wife of Alexander Graham Bell, the inventor (a woman who, being totally deaf, has never talked over the telephone); which has not corrupted legislatures or courts; which has steadily decreased the prices of its products as business and profits have increased; which has never issued watered stock or declared fictitious dividends; and which has always manifested a high sense of responsibility in its dealings with the public.
Two forces, American science and American business capacity, have accomplished this result. As a mechanism, this American telephone system is the product not of one but of many minds. What most strikes the imagination is the story of Alexander Graham Bell, yet other names—Carty, Scribner, Pupin—play a large part in the story.
The man who discovered that an electric current had the power of transmitting sound over a copper wire knew very little about electricity. Had he known more about this agency and less about acoustics, Bell once said himself, he would never have invented the telephone. His father and grandfather had been teachers of the deaf and dumb and had made important researches in acoustics. Alexander Graham Bell, born in Edinburgh in March, 1847, and educated there and in London, followed the ancestral example. This experience gave Bell an expert knowledge of phonetics that laid the foundation for his life work. His invention, indeed, is clearly associated with his attempts to make the deaf and dumb talk. He was driven to America by ill-health, coming first to Canada, and in 1871 he settled in Boston, where he accepted a position in Boston University to introduce his system of teaching deaf-mutes. He opened a school of "Vocal Physiology," and his success in his chosen field brought him into association with the people who afterward played an important part in the development of the telephone. Not a single element of romance was lacking in Bell's experience; his great invention even involved the love story of his life. Two influential citizens of Boston, Thomas Sanders and Gardiner G. Hubbard, had daughters who were deaf and dumb, and both engaged Bell's services as teacher. Bell lived in Sanders's home for a considerable period, dividing his time between teaching his little pupil how to talk and puttering away at a proposed invention which he called a "harmonic telegraph." Both Sanders and Hubbard had become greatly interested in this contrivance and backed Bell financially while he worked. It was Bell's idea that, by a system of tuning different telegraphic receivers to different pitches, several telegraphic messages could be sent simultaneously over the same wire. The idea was not original with Bell, although he supposed that it was and was entirely unaware that, at the particular moment when he started work, about twenty other inventors were struggling with the same problem. It was one of these other twenty experimenters, Elisha Gray, who ultimately perfected this instrument. Bell's researches have an interest only in that they taught him much about sound transmission and other kindred subjects and so paved the way for his great conception. One day Hubbard and Sanders learned that Bell had abandoned his "harmonic telegraph" and was experimenting with an entirely new idea. This was the possibility of transmitting the human voice over an electric wire. While working in Sanders's basement, Bell had obtained from a doctor a dead man's ear, and it is said that while he was minutely studying and analyzing this gruesome object, the idea of the telephone first burst upon his mind. For years Bell had been engaged in a task that seemed hopeless to most men—that of making deaf-mutes talk. "If I can make a deaf-mute talk, I can make iron talk," he declared. "If I could make a current of electricity vary in intensity as the air varies in density," he said at another time, "I could transmit sound telegraphically." Many others, of course, had dreamed of inventing such an instrument. The story of the telephone concerns many men who preceded Bell, one of whom, Philip Reis, produced, in 1861, a mechanism that could send a few discordant sounds, though not the human voice, over an electric wire. Reis seemed to have based his work upon an article published in "The American Journal of Science" by Dr. C.G. Page, of Salem, Mass., in 1837, in which he called attention to the sound given out by an electric magnet when the circuit is opened or closed. The work of these experimenters involves too many technicalities for discussion in this place. The important facts are that they all involved different principles from those worked out by Bell and that none of them ever attained any practical importance. Reis, in particular, never grasped the essential principles that ultimately made the telephone a reality. His work occupies a place in telephone history only because certain financial interests, many years after his death, brought it to light in an attempt to discredit Bell's claim to priority as the inventor. An investigator who seems to have grasped more clearly the basic idea was the distinguished American inventor Elisha Gray, already mentioned as the man who had succeeded in perfecting the "harmonic telegraph." On February 14, 1876, Gray filed a caveat in the United States Patent Office, setting forth pretty accurately the conception of the electric telephone. The tragedy in Gray's work consists in the fact that, two hours before his caveat had been put in, Bell had filed his application for a patent on the completed instrument.
The champions of Bell and Gray may dispute the question of priority to their heart's content; the historic fact is that the telephone dates from a dramatic moment in the year 1876. Sanders and Hubbard, much annoyed that Bell had abandoned his harmonic telegraph for so visionary an idea as a long distance talking machine, refused to finance him further unless he returned to his original quest. Disappointed and disconsolate, Bell and his assistant, Thomas A. Watson, had started work on the top floor of the Williams Manufacturing Company's shop in Boston. And now another chance happening turned Bell back once more to the telephone. His magnetized telegraph wire stretched from one room to another located in a remote part of the building. One day Watson accidentally plucked a piece of clock wire that lay near this telegraph wire, and Bell, working in another room, heard the twang. A few seconds later Watson was startled when an excited and somewhat disheveled figure burst into his room. "What was that?" shouted Bell. What had happened was clearly manifest; a sound had been sent distinctly over an electric wire. Bell's harmonic telegraph immediately went into the discard, and the young inventor—Bell was then only twenty-nine—became a man of one passionate idea. Yet final success did not come easily; the inventor worked day and night for forty weeks before he had obtained satisfactory results. It was on March 10, 1876, that Watson, in a distant room, picked up the first telephone receiver and heard these words, the first that had ever passed over a magnetized wire, "Come here, Watson; I want you." The speaking instrument had become a reality, and the foundation of the telephone, in all its present development, had been laid. When the New York and San Francisco line was opened in January, 1915, Alexander Graham Bell spoke these same words to his old associate, Thomas Watson, located in San Francisco, both men using the same instruments that had served so well on that historic occasion forty years before.
Though Bell's first invention comprehended the great basic idea that made it a success, the instrument itself bore few external resemblances to that which has become so commonplace today. If one could transport himself back to this early period and undergo the torture of using this primitive telephone, he would appreciate somewhat the labor, the patience, the inventive skill, and the business organization that have produced the modern telephone. In the first place you would have no separate transmitter and receiver. You would talk into a funnel-shaped contrivance and then place it against your ear to get the returning message. In order to make yourself heard, you would have to shout like a Gloucester sea captain at the height of a storm. More than the speakers' voices would come over the wire. It seemed to have become the playground of a million devils; moanings, shriekings, mutterings, and noises of all kinds would constantly interrupt the flow of speech. To call up your "party" you would not merely lift the receiver as today; you would tap with a lead pencil, or some other appliance, upon the diaphragm of your transmitter. There were no separate telephone wires. The talking at first was done over the telegraph lines. The earliest "centrals" reminded most persons of madhouses, for the day of the polite, soft-spoken telephone girl had not arrived. Instead, boys were rushing around with the ends of wires which they were frantically attempting to peg into the holes of the primitive switchboard and so establish "connections." When not knocking down and fighting each other, these boys were swearing into transmitters at the customers; and it is said that the incurable profanity of these early "telephone boys" had much to do with their supersession by girls. In the early days of the telephone, each instrument had to carry its own battery, usually installed in a little box under the transmitter. The early telephone wires, even in the largest cities, were strung on poles, as they are in country and suburban districts today. In places like New York and Chicago, these thousands of overhanging wires not only destroyed the attractiveness of the thoroughfare, but constantly interfered with the fire department and proved to be public nuisances in other ways. A telephone wire, however, loses much of its transmitting power when placed under ground, and it took many years of experimenting before the engineers perfected these subways. In these early days, of course, the telephone was purely a local matter. Certain visionary enthusiasts had foreseen the possibility of a national, long distance system, but a large amount of labor, both in the laboratory and out, was to be expended before these aspirations could become realities.
The transformation of this rudimentary means of communication into the beautiful mechanism which we have today forms a splendid chapter in the history of American invention. Of all the details in Bell's apparatus the receiver is almost the only one that remains now what it was forty years ago. The story of the transmitter in itself would fill a volume. Edison's success in devising a transmitter which permitted talk in ordinary conversational tones—an invention that became the property of the Western Union Telegraph Company, which early embarked in the telephone business—at one time seemed likely to force the Bell Company out of business. But Emile Berliner and Francis Blake finally came to the rescue with an excellent instrument, and the suggestion of an English clergyman, the Reverend Henry Hummings, that carbon granules be used on the diaphragm, made possible the present perfect instrument. The magneto call bell—still used in certain backward districts—for many years gave fair results for calling purposes, but the automatic switch, which enables us to get central by merely picking up the receiver, has made possible our great urban service. It was several years before the telephone makers developed so essential a thing as a satisfactory wire. Silver, which gave excellent results, was obviously too costly, and copper, the other metal which had many desirable qualities, was too soft. Thomas B. Doolittle solved this problem by inventing a hard-drawn copper wire. A young man of twenty-two, John J. Carty, suggested a simple device for exorcising the hundreds of "mysterious noises" that had made the use of the telephone so agonizing. It was caused, Carty pointed out, by the circumstance that the telephone, like the telegraph, used a ground circuit for the return wire; the resultant scrapings and moanings and howlings were merely the multitudinous voices of mother earth herself. Mr. Carty began installing the metallic circuit in his lines that is, he used wire, instead of the ground, to complete the circuit. As a result of this improvement the telephone was immediately cleared of these annoying interruptions. Mr. Carty, who is now Chief Engineer of the American Telephone and Telegraph Company, and the man who has superintended all its extensions in recent years, is one of the three or four men who have done most to create the present system. Another is Charles E. Scribner, who, by his invention of that intricate device, the multiple switchboard, has converted the telephone exchange into a smoothly working, orderly place. Scribner's multiple switchboard dates from about 1890. It was Mr. Scribner also who replaced the individual system of dry cells with one common battery located at the central exchange, an improvement which saved the Company 4,000,000 dry cells a year. Then Barrett discovered a method of twisting fifty pairs of wires—since grown to 2400 pairs-into a cable, wrapping them in paper and molding them in lead, and the wires were now taken from poles and placed in conduits underground.
But perhaps the most romantic figure in telephone history, next to Bell, is that of a humble Servian immigrant who came to this country as a boy and obtained his first employment as a rubber in a Turkish bath. Michael I. Pupin was graduated from Columbia, studied afterward in Germany, and became absorbed in the new subject of electromechanics. In particular he became interested in a telephone problem that had bothered the greatest experts for years. One thing that had prevented the great extension of the telephone, especially for long distance work, was the size of the wire. Long distance lines up to 1900 demanded wire about one-eighth of an inch thick—as thick as a fairsized lead pencil; and, for this reason, the New York-Chicago line, built in 1893, consumed 870,000 pounds of copper wire of this size. Naturally the enormous expense stood in the way of any extended development. The same thickness also interfered with cable extension. Only about a hundred wires could be squeezed into one cable, against the eighteen hundred now compressed in the same area. Because of these shortcomings, telephone progress, about 1900, was marking time, awaiting the arrival of a thin wire that would do the work of a thick one. The importance of the problem is shown by the fact that one-fourth of all the capital invested in the telephone has been spent in copper. Professor Pupin, who had been a member of the faculty of Columbia University since 1888, solved this problem in his quiet laboratory and, by doing so, won the greatest prize in modern telephone art. His researches resulted in the famous "Pupin coil" by the expedient now known as "loading." When the scientists attempt to explain this invention, they have to use all kinds of mathematical formulas and curves and, in fact, they usually get to quarreling among themselves over the points involved. What Professor Pupin has apparently done is to free the wire from those miscellaneous disturbances known as "induction." This Pupin invention involved another improvement unsuspected by the inventor, which shows us the telephone in all its mystery and beauty and even its sublimity. Soon after the Pupin coil was introduced, it was discovered that, by crossing the wires of two circuits at regular intervals, another unexplainable circuit was induced. Because this third circuit travels apparently without wires, in some manner which the scientists have not yet discovered, it is appropriately known as the phantom circuit. The practical result is that it is now possible to send three telephone messages and eight telegraph messages over two pairs of wires—all at the same time. Professor Pupin's invention has resulted in economies that amount to millions of dollars, and has made possible long distance lines to practically every part of the United States.
Thus many great inventive minds have produced the physical telephone. We can point to several men—Bell, Blake, Carty, Scribner, Barrett, Pupin—and say of each one, "Without his work the present telephone system could not exist." But business genius, as well as mechanical genius, explains this achievement. For the first four or five years of its existence, the new invention had hard sailing. Bell and Thomas Watson, in order to fortify their finances, were forced to travel around the country, giving a kind of vaudeville entertainment. Bell made a speech explaining the new invention, while a cornet player, located in another part of the town, played solos, the music reaching the audience through several telephone instruments placed against the walls. Watson, also located at a distance, varied the program by singing songs via telephone. These lecture tours not only gave Bell the money which he sorely needed but advertised the innovation. There followed a few scattering attempts to introduce the telephone into every-day use and telephone exchanges were established in New York, Boston, Bridgeport, and New Haven. But these pioneers had the hostility of the most powerful corporation of the day—the Western Union Telegraph Company—and they lacked aggressive leaders.
In 1878, Mr. Gardiner Hubbard, Bell's earliest backer, and now his father-in-law, became acquainted with a young man who was then serving in Washington as General Superintendent of the Railway Mail Service. This young man was Theodore N. Vail. His energy and enterprise so impressed Hubbard that he immediately asked Vail to become General Manager of the company which he was then forming to exploit the telephone. Viewed from the retrospection of forty years this offer certainly looks like one of the greatest prizes in American business. What it signified at that time, however, is apparent from the fact that the office paid a salary of $3500 a year and that for the first ten years Vail did not succeed in collecting a dollar of this princely remuneration. Yet it was a happy fortune, not only for the Bell Company but for the nation, that placed Vail at the head of this struggling enterprise. There was a certain appropriateness in his selection, even then. His granduncle, Stephen Vail, had built the engines for the first steamship to cross the Atlantic. A cousin had worked with Morse while he was inventing the telegraph. Vail, who was born in Carroll County, Ohio, in 1845, after spending two years as a medical student, suddenly shifted his plans and became a telegraph operator. Then he entered the Railway Mail service; in this service he completely revolutionized the system and introduced reforms that exist at the present time. A natural bent had apparently directed Vail's mind towards methods of communication, a fact that may perhaps explain the youthful enthusiasm with which he took up the new venture and the vision with which he foresaw and planned its future. For the chief fact about Vail is that he was a business man with an imagination. The crazy little machine which he now undertook to exploit did not interest him as a means of collecting tolls, floating stock, and paying dividends. He saw in it a new method of spreading American civilization and of contributing to the happiness and comfort of millions of people. Indeed Vail had hardly seen the telephone when a picture portraying the development which we are familiar with today unfolded before his eyes. That the telephone has had a greater development in America than elsewhere and that the United States has avoided all those mistakes of organization that have so greatly hampered its growth in other lands, is owing to the fact that Vail, when he first took charge, mapped out the comprehensive policies which have guided his corporation since.
Vail early adopted the "slogan" which has directed the Bell activities for forty years—"One System! One Policy! Universal Service." In his mind a telephone company was not a city affair, or even a state affair; it was a national affair. His aim has been from the first a universal, national service, all under one head, and reaching every hamlet, every business house, factory, and home in the nation. The idea that any man, anywhere, should be able to take down a receiver and talk to anyone, anywhere else in the United States, was the conception which guided Vail's labors from the first. He did not believe that a mass of unrelated companies could give a satisfactory service; if circumstances had ever made a national monopoly, that monopoly was certainly the telephone. Having in view this national, universal, articulating monopoly, Vail insisted on his second great principle, the standardization of equipment. Every man's telephone must be precisely like every other man's, and that must be the best which mechanical skill and inventive genius could produce. To make this a reality and to secure perfect supervision and upkeep, it was necessary that telephones should not be sold but leased. By enforcing these ideas Vail saved the United States from the chaos which exists in certain other countries, such as France, where each subscriber purchases his own instrument, making his selection from about forty different varieties. That certain dangers were inherent in this universal system Vail understood. Monopoly all too likely brings in excessive charges, poor service, and inside speculation; but it was Vail's plan to justify his system by its works. To this end he established a great engineering department which should study all imaginable mechanical improvements, with the results which have been described. He gave the greatest attention to every detail of the service and particularly insisted on the fairest and most courteous treatment of the public. The "please" which invariably accompanies the telephone girl's request for a number—the familiar "number, please"—is a trifle, but it epitomizes the whole spirit which Vail inspired throughout his entire organization. Though there are plenty of people who think that the existing telephone charges are too high, the fact remains that the rate has steadily declined with the extension of the business. Vail has also kept his company clear from the financial scandals that have disgraced so many other great corporations. He has never received any reward himself except his salary, such fortune as he possesses being the result of personal business ventures in South America during the twenty years from 1887 to 1907 that he was not associated with the Bell interests.
Vail's first achievement was to rescue this invention from the greatest calamity which would have befallen it. The Western Union Telegraph Company, which in the early days had looked upon the telephone as negligible, suddenly awoke one morning to a realization of its importance. This Corporation had recently introduced its "printing telegraph," a device that made it possible to communicate without the intermediary operator. When news reached headquarters that subscribers were dropping this new contrivance and subscribing to telephones, the Western Union first understood that a competitor had entered their field. Promptly organizing the American Speaking Telephone Company, the Western Union, with all its wealth and prestige, proceeded to destroy this insolent pigmy. Its methods of attack were unscrupulous and underhanded, the least discreditable one being the use of its political influence to prevent communities from giving franchises to the Bell Company. But this corporation mainly relied for success upon the wholesale manner in which it infringed the Bell patents. It raked together all possible claimants to priority, from Philip Reis to Elisha Gray, in its attempts to discredit Bell as the inventor. The Western Union had only one legitimate advantage—the Edison transmitter—which was unquestionably much superior to anything which the Bell Company then possessed. Many Bell stockholders were discouraged in face of this fierce opposition and wished to abandon the fight. Not so Vail. The mere circumstance that the great capitalists of the Western Union had taken up the telephone gave the public a confidence in its value which otherwise it would not have had, a fact which Vail skillfully used in attracting influential financial support. He boldly sued the Western Union in 1878 for infringement of the Bell patents. The case was a famous one; the whole history of the telephone was reviewed from the earliest days, and the evidence as to rival claimants was placed on record for all time. After about a year, Mr. George Clifford, perhaps the best patent attorney of the day, who was conducting the case for the Western Union, quietly informed his clients that they could never win, for the records showed that Bell was the inventor. He advised the Western Union to settle the case out of court and his advice was taken. This great corporation war was concluded by a treaty (November 10, 1879) in which the Western Union acknowledged that Bell was the inventor, that his patents were valid, and agreed to retire from the telephone business. The Bell Company, on its part, agreed to buy the Western Union Telephone System, to pay the Western Union a royalty of twenty per cent on all telephone rentals, and not to engage in the telegraph business. Had this case been decided against the Bell Company it is almost certain that the telephone would have been smothered in the interest of the telegraph and its development delayed for many years.
Soon after the settlement of the Western Union suit, the original group which had created the telephone withdrew from the scene. Bell went back to teaching deaf-mutes. He has since busied himself with the study of airplanes and wireless, and has invented an instrument for transmitting sound by light. The new telephone company offered him $10,000 a year as chief inventor, but he replied that he could not invent to order. Thomas Sanders received somewhat less than $1,000,000 and lost most of it exploiting a Colorado gold mine. Gardiner Hubbard withdrew from business and devoted the last years of his life to the National Geographic Society. Thomas Watson, after retiring from the telephone business, bought a ship-building yard near Boston, which has been successful.
In making this settlement with the Western Union, the Bell interests not only eliminated a competitor but gained great material advantages. They took over about 56,000 telephone stations located in 55 cities and towns. They also soon acquired the Western Electric Manufacturing Company, which under the control of the Western Union had developed into an important concern for the manufacture of telephone supplies. Under the management of the Bell Company this corporation, which now has extensive factories in Hawthorne, Ill., produces two-thirds of the world's telephone apparatus. With the Western Electric Vail has realized the fundamental conception underlying his ideal telephone system—the standardization of equipment. For the accomplishment of his idea of a national telephone system, instead of a parochial one, Mr. Vail organized, in 1881, the American Bell Telephone Company, a corporation that really represented the federalization of all the telephone activities of the subsidiary companies. The United States was divided into several sections, in each of which a separate company was organized to develop the telephone possibilities of that particular area. In 1899 the American Telephone and Telegraph Company took over the business and properties of the American Bell Company. The larger corporation built toll lines, connected these smaller systems with one another, and thus made it possible for Washington to talk to New York, New York to Chicago, and ultimately—Boston to San Francisco. An enlightened policy led the Bell Company frequently to establish exchanges in places where there was little chance of immediate profit. Under this stimulation the use of this instrument extended rapidly, yet it is in the last twenty years that the telephone has grown with accelerated momentum. In 1887 there were 170,000 subscribers in the United States, and in 1900 there were 610,000; but in 1906 the American Telephone and Telegraph Company was furnishing its service to 2,550,000 stations, and in 1916 to 10,000,000. Clearly it is only since 1900 that the telephone has become a commonplace of American existence. Up to 1900 it had grown at the rate of about 13,000 a year; whereas since 1900 it has grown at the rate of 700,000 a year. The explanation is that charges have been so reduced that the telephone has been brought within the reach of practically every business house and every family. Until the year 1900 every telephone subscriber had to pay $240 a year, and manifestly only families in affluent circumstances could afford such a luxury. About that time a new system of charges known as the "message rate" plan was introduced, according to which the subscriber paid a moderate price for a stipulated number of calls, and a pro rata charge for all calls in excess of that number. Probably no single change in any business has had such an instantaneous effect. The telephone, which had hitherto been an external symbol of prosperity, suddenly became the possession of almost every citizen.
Other companies than the Bell interests have participated in this development. The only time the Bell Company has had no competitor, Mr. Vail has said, was at the Philadelphia Centennial in 1876. Some of this competition has benefited the public but much of it has accomplished little except to enrich many not over-scrupulous promoters. Groups of farmers who frequently started companies to furnish service at cost did much to extend the use of the telephone. Many of the companies which, when the Bell patents expired in 1895, sprang up in the Middle West, also manifested great enterprise and gave excellent service. These companies have made valuable contributions, of which perhaps the automatic telephone, an instrument which enables a subscriber to call up his "party" directly, without the mediation of "central," is the most ingenious. Although due acknowledgment must be made of the honesty and enterprise with which hundreds of the independents are managed, the fact remains that they are a great economic waste. Most of them give only a local service, no company having yet arisen which aims to duplicate the comprehensive national plans of the greater corporation. As soon as an independent obtains a foothold, the natural consequence is that every business house and private household must either be contented with half service, or double the cost of the telephone by subscribing to two companies. It is not unlikely that the "independents" have exercised a wholesome influence upon the Bell Corporation, but, as the principle of government regulation rather than individual competition has now become the established method of controlling monopoly, this influence will possess less virtue in the future. In addition to these independent enterprises, the telephone has unfortunately furnished an opportunity for stockjobbing schemes on a considerable scale. The years from 1895 to 1905 witnessed the growth of many bubbles of this kind; one group of men organized not far from two hundred telephone companies. They would go into selected communities, promise a superior service at half the current rates, enlist the cooperation of "leading" business men, sell the stock largely in the city or town to be benefited, make large profits in the construction of the lines and the sale of equipment—and then decamp for pastures new. The multitudinous bankruptcies that followed in the wake of such exploiters at length brought their activities to an end.