A Collection of Wisdom

Charles M. Schwab

Charles Michael Schwab (1862-1939) is one of the greatest entrepreneurs in US history. Thomas Edison once referred to him as the “master hustler.”

Early in his life, Charles was a laborer in a Pennsylvania company known as Edgar Thompson Steel Works, which was owned by steel tycoon Andrew Carnegie. Charles ascended the ranks there, becoming assistant manager in the early 1880s, and manager in 1887.

Five years later, Andrew Carnegie asked him to restore relationships between labor and management after a severe strike at the Homestead steel plant. Charles not only succeeding in doing so, but he also dramatically and impressively improved the plant’s efficiency. This made way for his rise in Carnegie’s steel empire, and by 1897, Charles became president of the Carnegie Steel Company.

Then in 1901, he teamed with financier J.P. Morgan, and combined and consolidated several competing steel companies (including Carnegie’s) in order to form a new powerhouse called United States Steel Corporation.

Charles also became the new company’s president, but he resigned two years later due to conflicts with Morgan and the company’s directors.

Charles then devoted his efforts to a smaller steel company of his called Bethlehem Steel, which he had a controlling interest in since 1901.

A masterful innovator and motivator, Charles was able to make his company one of the most powerful steel-manufacturers in the world, mainly through efficiency improvements and a merger with the U.S. Shipbuilding Corporation.

The company reaped huge profits during World War I, supplying steel for military uses.

By then, Charles was very well known as a steel tycoon with a lavish lifestyle, risk-taking style, and rumored unethical business tactics.

By the 1920s his fortune was worth around $200 million, but that fortune slowly drained due to factors such as his spending habits, a string of bad investments, and the Great Depression. He died broke in 1939.

Selections from The Romance of Steel by Herbert Newton Casson

The Rise of C.M. Schwab

The most brilliant of all the young partners was Charles M. Schwab. His was the most meteoric career ever known in the steel business. He had risen step by step—but such steps!

Step number one—driving stakes for a dollar a day at the Edgar Thomson works.

Step number two, six months later—superintendent of the Edgar Thomson works, the foremost steel-making plant in the world.

Step number three—at thirty years of age superintendent of both the Edgar Thomson and Homestead plants, managing eight thousand workmen. This was the only instance in which Carnegie permitted one man to operate two plants.

Step number four—president of the Carnegie Steel Company, with a White House salary and three per cent. of the stock.

Step number five—president of the United States Steel Corporation, with twenty-eight million dollars' worth (par value) of its stock, and a salary of a hundred thousand dollars a year. In 1901 he sat on the apex of the towering steel pyramid—the victor among two hundred thousand competitors—at thirty-nine years of age.

“The first time I saw Schwab,” said Mr. Long, a former president of the Pittsburgh Stock Exchange, “ he was a barefooted boy at Loretto, a mountain hamlet near Altoona. The next time I saw him he was in his hundred-thousand-dollar private car.”

Schwab's father kept one of the village stores, and Charlie drove the rickety stage between the village and Cresson station. It was a poor plank road at that time, but he has had it paved at his own expense since then. Those who remember him say that he was the happiest boy in the village—laugh ing, whistling, singing, cracking his whip. His nicknames were “ Dolly Varden ” and “ Smiling Charlie.” The drummers told him stories and made fun of his flaming red neckties. No one looked less like an embryonic steel king than Charlie Schwab.

By the time he was nineteen, Schwab had drifted away from Loretto, and anchored in a Braddock grocery store. For wages he got a five-dollar bill every two weeks. One evening he caught the eye of Captain Jones.

“ Do you want to change your job, young fellow,” asked Jones.

“Yes, sir!” responded Schwab.

“What are you willing to do?”

“Anything,” replied the smiling young clerk.

“Well,” said Jones, “come around tomorrow morning and I'll give you a dollar a day to hammer stakes.”

This was the beginning of a friendship that lasted until the tragic death of Captain Jones. Schwab at once showed a natural talent for mechanics, and from Jones, who was without a peer as a leader of workmen, he learned to manage men.

Schwab's Work At Homestead

After the death of his teacher, the heaviest burden of the Carnegie company fell on the shoulders of Schwab. It was he who reconstructed the Homestead works from the debris of the great strike; who created the profitable armour-plate department; who originated the Saturday meetings of superintendents. With cheerful self-assurance, he accepted any responsibility that was offered. Enthusiasm, he found, was better than experience. Nothing daunted him. He swept into the Golden Sea with all sails set and the band playing. Had he been asked to reconstruct the empire of Russia or to federate the South American republics, he would have replied without hesitation:

“Yes. Good idea! I'll attend to that next week.” Schwab's greatest achievement—the one lasting honour which nothing can take away—was his successful handling of the Homestead steel-works after the great strike. No steelmaker, before or since, has ever had to tackle so hard a job. When Schwab took Homestead, it was a failure. It was a four-million-dollar mistake. The machinery was not working properly and the men were not working at all. There was a stupid rabble of strike-breakers, and a sullen, defeated army of five thousand workmen to deal with. And the whole place had been for five months a battlefield, passion-swept and blood-stained—the Waterloo of organised labour.

Winning the Early Workmen

Into this inferno of hate and bitterness came Schwab, caring no more for discouragements than a duck does for a drizzle. Little by little his “ Hurrah, boys!” swung the great steel-mill into action. He was approachable and sympathetic, yet always as quick as lightning to turn everything to his own advantage. Always fluent and plausible, he was never at a loss for a reason or an inducement. In half a year the surly workmen were entirely won over by his invincible optimism and perseverance; and “Charlie is my darling” was heard in Homestead, instead of the curses and rifle-shots of a few months before.

“ Schwab is a genius in the management of men and machinery,” said Carnegie, when I asked him for an estimate of his young partner's work. “ I never saw a man who could grasp a new idea so quickly.”

As soon as Carnegie saw that Schwab had “ made good ” at Homestead, he made him president of the whole company, so that not even the masterful Frick was equal to him in authority. This was perhaps the first instance in which so young a man, absolutely without any business experience, was placed in command over so great a corporation. He had previously had an offer of the vice-presidency and had refused it.

“ I'm a bigger man at the works,” he said.

There was another young workman in the Carnegie company who followed Schwab like a shadow. He was four years younger, and his name was William Ellis Corey. He was as thoroughly an American as any one can be, being a descendant of Benijah Corey, who flourished a hundred years ago and owned a farm of three hundred acres whose site is now covered by the streets of New York.

Organisation Versus the Individual

Schwab and Corey had been boyhood friends in smoky Braddock, when one was in a grocery-store and the other was working on a coal-tipple. Both got dollar-a-day jobs from the Carnegie company and worked up to be superintendents at twenty-one. Both married Braddock girls. Both became armour-plate specialists. Both made reputations as “ drivers ” and record-breakers. Both moved up from one presidency to another, Schwab being always one move ahead.

But here the resemblances cease. Schwab, the last of the individualists of steel, put personality first and organisation second. “ Every business grows around a great individual,” he said. Corey put the organisation first and the individual second.

To Schwab a workman was “ Bill,” or “ Joe,” or “ Tom.” To Corey he was “No. 137.”

Schwab swayed his men by sentiment, by his contagious enthusiasm, by his personal knowledge of each man. Corey ruled by his tireless supervision and his thorough knowledge of every department .

Schwab was brilliant, dramatic, impulsive. Corey was painstaking, methodical, trustworthy. On one of the very few occasions when he was persuaded to talk for publication, he said:

“ The man who succeeds is the one with bulldog tenacity— who never gives up. He is the man who not only does what he is told, but more.”

Schwab loves men and the applause of men. Publicity stimulates him like wine. Corey is reserved, stern-faced, nonmagnetic.

Schwab is a man of many interests. Even his charities are unique. He has built at Loretto, his birthplace, a cathedral and a monument to Prince Gallitzin, the founder of the town. To Braddock he has given a church and to Homestead an industrial school. At Richmond Beach, New York, he has established schools in which crippled and deformed boys and girls are learning trades. To the tenement children of New York he gives a thousand dollars' worth of toys as a Christmas present.

In his own pleasures, he loves display like a child. His New York palace is rated on the tax-list as the second highest in cost, Senator Clark's unfinished mansion being first. With land and furnishings, its value is probably more than five millions. Carnegie's austere residence is a model of simplicity when compared with Schwab's ornate pile of creamcoloured granite, with its gobelin tapestries, its music-room and chapel, its Flemish smoking-room, Louis Seize drawingroom, Henri Quatre library, Louis Quatorze dining-room, and Louis Treize breakfast-room.


Once when I was with Mr. Carnegie I had a mill manager who was finely educated, thoroughly capable and master of every detail of the business. But he seemed unable to inspire his men to do their best.

“How is it that a man as able as you,” I asked him one day, “cannot make this mill turn out what it should?”

“I don’t know,” he replied; “I have coaxed the men; I have pushed them; I have sworn at them. I have done everything in my power. Yet they will not produce.”

It was near the end of the day; in a few minutes the night force would come on duty. I turned to a workman who was standing beside one of the red-mouthed furnaces and asked him for a piece of chalk.

“How many heats has your shift made today?” I queried.

“Six,” he replied.

I chalked a big “6” on the floor, and then passed along without another word. When the night shift came in they saw the “6,” and asked about it.

“The big boss was in here today,” said the day men. “He asked us how many heats we had made, and we told him six. He chalked it down.”

The next morning I passed through the same mill. I saw that the “6” had been rubbed out and a big “7” written instead. The night shift had announced itself. That night I went back. The “7” had been erased, and a “10” swaggered in its place. The day force recognized no superiors. Thus a fine competition was started, and it went on until this mill, formerly the poorest producer, was turning out more than any other mill in the plant.

I am not a believer in large salaries. I hold that every man should be paid for personal production. Our big men at Bethlehem seldom get salaries of over one hundred dollars a week; but all of them receive bonuses—computed entirely on the efficiencies and the economies registered in their departments.

Approximately eighty percent of the twenty-two thousand men in our plants at Bethlehem come under the operation of the system. The only ones not included are certain kinds of day laborers, whose work is of such a nature that it does not fall readily into the scheme, and the men in a few special or too-complex departments.

Take the case of a mechanic: he is given a certain piece of work, and he knows that the allotted time for doing this work is, say, twenty hours. Perhaps he has a regular wage of forty cents an hour, irrespective of his production. If he finishes the job in the allotted twenty hours, he gets a bonus of twenty percent, bringing his total pay for the work up to nine dollars and sixty cents. But if he does the work in twelve hours, he still receives the nine dollars and sixty cents, and is ready forthwith to tackle another piece of work. In other words, the man gets bonus pay for the job on the basis of the entire schedule time, regardless of the actual time it takes him to do it.

Any short cuts a man may devise or any unusual energy he may show are thus capitalized into profit for him. With this stimulus, our men are always giving their best efforts to their work, and the result has been that the production per man in some departments has more than doubled since the plan was put into effect.

We have complete schedules of time and bonus rates for many kinds of common labor, and our statistics show that such labor has been averaging nearly forty percent above the regular rate per hour. Such jobs as wheeling a wheelbarrow or handling a shovel have been put under the profit-sharing system.

There are some departments in which the work is of such a nature that time enters very slightly into calculation—in open hearth work or treating of armor plate, for example. Here we are more concerned with the quality of the work than with the quantity turned out in a given time. In these cases we give a bonus for quality, basing our computations on tests of the steel. If we had the regular system in operation here, workmen might be tempted to hurry their work, and a lot of steel would have to be thrown out.

In still other departments we give bonuses for efficiencies. If a man handles his machines so that the item or repair is very low, or if he gets equal results with less than the regular amount of fuel, he is paid accordingly. We try to take into calculation every element that depends on the initiative, or originality, or energy, or manual dexterity of a worker.

In many departments we use $1 as a unit cost standard. The manager or superintendent gets 1 percent of the reduction down to $0.95, 2 percent of the total from $0.95 to $0.90, 3 percent of the total from $0.90 to $0.85, and so on. This holds out every inducement for economy and efficiency.

We say to the superintendent of blast furnaces, for example: “This is your normal operation cost, the amount we charge up. Everything you save from this standard cost you will share, and the more money you make the more money we will make, and the better satisfied everybody will be.”

If Mr. Grace, the president of Bethlehem, who made a million dollars last year, were working on a salary, he would have been very well paid if he had got thirty or forty thousand dollars. But I am delighted to see him make a million. If he had made two million the corporation would have made that much more.

We have to have a very elaborate and very costly statistical department to carry out the System, but it pays for itself a hundred times over.

There is at Bethlehem a minimum wage below which no man’s salary shall fall. But most of what each worker earns is made up of bonuses. We find that if a man has not ambition enough to earn bonuses he is not likely to remain with us long.

I am very happy to know that my Bethlehem employees are the best paid body of men in the steel industry in America. Last year, from superintendents to boys, they averaged $990 apiece.

Systems of general profit sharing have certain disadvantages from which ours is free. One disadvantage is that the lazy man shares the reward of the smart man’s work. General systems give employees uniformly bigger wages in times of general prosperity and furnish a good excuse to reduce wages at other times.

My system, I believe, can be fitted to any branch of industry. A banker once told me that there was no way in which it could be worked out for banks. I told him I thought there was a way. And to prove it I devised a system which has been put into successful operation in a dozen banks.

Profit sharing works well almost anywhere. I use it in my own home. Not long ago the expenses of running my New York house got exorbitant. I called in the steward and said to him: “George, I want to strike a bargain with you. I will give you ten percent of the first thousand dollars you save in house expenses, twenty-five per cent of the second thousand, and one-half of the third thousand.”

The expense of operating the house was cut in two.

Men are pretty keen judges of their employers. You cannot make workmen think you are interested in them unless you really are. They realize at once whether your interest is real or assumed.

The man who gets the loyalty of his employees is the man who has, first of all, a reputation for fair dealing. Men gage fair dealing quickly and respond to it.

There has never been so much sentiment in business, so close a spirit of cooperation between employers and men, as there is today. It is time for Americans to realize the falseness of the cry that we are a nation of money-grabbers. The difference between us and other nations is that we know how to earn money, while they, in the main, know how to save it. The sordid, hoarding miser, who makes every sacrifice to accumulate, is so scarce with us as to cut no figure, while abroad he is everywhere.

Mr. Carnegie’s personality would enthuse anybody who worked for him. He had the broad views of a really big man. He was not bothered with the finicky little things that trouble so many people. When he made me manager, Mr. Carnegie said: “Now, boy, you will see a good many things which you mustn’t notice. Don’t blame your men for trivial faults. If you do you will dishearten them.”

When I want to find fault with my men I say nothing when I go through their departments. If I were satisfied I would praise them. My silence hurts them more than anything else in the world, and it doesn’t give offense. It makes them think and work harder.

Many men fail because they do not see the importance of being kind and courteous to the men under them. Kindness to everybody always pays for itself. And, besides, it is a pleasure to be kind. I have seen men lose important positions, or their reputations—which are more important than any position—by little careless discourtesies to men whom they did not think it was worth while to be kind to.

There are many reasons why men are always working and not always succeeding. Sometimes they belong to the class who cultivate the appearance of working, doing anything. Sometimes they spend their lives working, bemoaning the fact that it’s all effort and no reward, and lay down the scythe just before the harvest ripens.

Hope and faith and courage are just as essential to success as the necessary effort. Many a man has lain down just this side of his laurels and neither he nor the world ever knew how near he came to accomplishment.

Then there are men who work conscientiously, perseveringly, hopefully; but they’re working on the wrong course of action. I believe that such men realize they’re out of place and out of tune, and will never strike the harmonious chord which accomplishment is. But they resolve they’ve got a little start and don’t want to lose it. These men form part of the army that fails.

I do not believe there is a normal man living who has not a capacity for some one line, who could not excel in that line if he pursued it. The first essential in a boy’s career is to find out what he’s fitted for, what he’s most capable of doing and doing with a relish.

The second essential is to go to work and do it… And if he’s going to stand out among men he’s got to resolve to do the particular thing he’s fastened on better than anyone else.

Every one’s got it in him, if he’ll only make up his mind and stick at it. None of us is born with a stop-valve on his powers or with a set limit to his capacities. There’s no limit possible to the expansion of each one of us.

It all depends upon our will and the power of our resolution. Our capacities expand and enlarge with exercise, just as the muscles of our bodies enlarge and grow strong.

That’s the way character is formed—doing callisthenic feats with obstacles and adversities. I tell you the hard knocks are the nest eggs of our fortunes. The men that are not made of the right stuff go under with them and are never heard of again.

And there are the others who are soured and embittered by them, and they’re heard from eternally. They haven’t a good word to say for the world’s plan, because when it got a trifle complicated it baffled them.

Those are the men who do more harm to the youth of civilization than its vices. Then there are those who start out, sometimes with bare feet and holes in their trousers, bravely resolving never to let circumstances crush them, never to harbor bitterness over defeat, but to save their energies for the next encounter.

These are the men hard knocks don’t hurt. They toughen them; they help them get ready for the next encounter. To these men, it’s only a question of sufficient hardship, and sacrifice, and battle, to make them proof against any onslaught. These are the soldiers, the victors.

Did you ever find a successful soldier who hadn’t seen a fight?

For my own part I am more interested in my work than its mere money value.

The best place to succeed is where you are with what you have.

In my wide association in life, meeting with many and great men in various parts of the world, I have yet to find the man, however great or exalted his station, who did not do better work and put forth greater effort under a spirit of approval than he would ever do under a spirit of criticism.

The first essential in a boy’s career is to find out what he’s fitted for, what he’s most capable of doing and doing with a relish.


Wikipedia Page
Steel Titam: The Life of Charles M. Schwab (Google Books Preview)
Charles Schwab and the Steel Industry