The Farthest Fall (July/August 1991 | Volume: 42, Issue: 4)

The Farthest Fall

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Authors: John Steele Gordon

Historic Era: Era 7: The Emergence of Modern America (1890-1930)

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July/August 1991 | Volume 42, Issue 4

There is an old saying about the transitory nature of American fortunes: shirt sleeves to shirt sleeves in three generations. As Donald Trump has discovered, they can vanish a lot faster than that. But Trump is not the record holder for financial plummeting (at least not yet). That dubious honor almost certainly belongs to Charles M. Schwab.

Schwab had all the attributes needed for success and then some. Unfortunately he also had a fondness for the good life that drained even his formidable resources, a love of gambling in both casinos and stock markets, and an unshakable belief that the best was yet to come. It was the glory and the tragedy of Charlie Schwab that he was equally a Horatio Alger hero and WiIkins Micawber.

Schwab took the rising tide of steel, the miracle material of the late 19th century, and rode it on to fortune. Known for millennia, steel had always been very expensive to produce and thus limited in its uses. Then, in the 1850s and 1860s, new, much cheaper steelmaking processes were developed. As prices fell, the uses of steel expanded rapidly, and so did the American capacity to produce it. In 1880, the country’s steel mills—non-existent before the Civil War—turned out 1.25 million tons. Twenty years later American production was more than 10 million tons, the greatest of any country in the world.

When Schwab left school in 1879, at age 17, he clerked in a store in Braddock, Pennsylvania. The manager of the nearby steelworks, which were owned by Andrew Carnegie, often came to the store to buy cigars, and he quickly noticed the bright, energetic Schwab. Soon, Schwab had talked his way into a job at the steel mill, where he set about learning the business as quickly as he could.

Although he had not finished high school, Schwab proved so capable that he was named acting chief engineer of the mill within six months of his arrival. The manager came to rely more and more on him and began sending him to Pittsburgh to report to Carnegie.

 

At first, Carnegie regarded Schwab as just a messenger boy. Then one evening Carnegie was late, and Schwab, who numbered music among his many talents, noticed a piano in the room. He sat down and played while he waited. Carnegie soon appeared and, loving music himself, asked Schwab to continue.

One of the keys to Carnegie’s success in business had been his ability to spot and promote men of talent. Having noticed the young engineer with a gift for piano playing, he soon marked him for great things, and it was the start of a nearly forty-year friendship. Indeed, the very last thing Carnegie asked for before his death in 1919 was that a picture of Schwab be brought to him.

In 1886, Carnegie made Schwab, only 24, the head of the Homestead works at an annual salary of $10,000, a very substantial income. Ten years later, Schwab