#73 Andrew Carnegie and Henry Clay Frick: The Bitter Partnership That Changed America

What I learned from reading Meet You in Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership That Changed America by Les Standiford. ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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• 0:00David Senra?

  One thing is clear: Carnegie and Frick represent the American ethos of limitless possibility. Both men were born to poverty and both became wealthy and powerful beyond imagining. The impact of their steelmaking enterprise on the economy at the end of the 19th century was as profound as the impact of the American Revolution had been on this country's politics and philosophy a century before. And the rupture of their once-perfect partnership illuminates the contradictions embodied in those two hallowed pillars of our thinking: capitalism and the Protestant ethic. Carnegie and Frick were not the first to wrestle with those contradictions, and they were most assertively not the last.

• 0:44David Senra?

  But the making and unraveling of their relationship became an often-trouble exploration of America's promise to us all: a reminder that monumental achievement comes at monumental cost. Their story offers a vivid illustration of a young nation's steadfast belief in progress and in man's ability to affect his own destiny. As the ancients observed, such thinking may be fine for the gods, but when mortals attempt to operate on the same plane, even mortals of heroic proportions, tragedy ensues. Okay, so that was an excerpt from the book that I read this week and the one I'm going to be talking to you about today, which is "Meet You in Hell: Andrew Carnegie, Henry

• 1:29David Senra?

  Clay Frick and the Bitter Partnership That Transformed America." So there's two things I want to do before I jump into the book. The first is, that excerpt had the words in there, "two hallowed pillars of our thinking: capitalism and the Protestant ethic." I had to look up what Protestant ethic meant. I'm used to seeing in the religious, like, in the religious context. So I'm just going to read from the dictionary what it says. It says, "The view that a person's duty is to achieve success through hard work and thrift, such success being a sign that one is saved." And then the second thing I want to bring to your attention before I jump into the book is, the very beginning of the book, the author makes a really interesting point. I think

• 2:13David Senra?

  that's part of the reason I enjoyed reading this book so much. But he says...

• 2:20David Senra?

  I am not sure that there is a single salient fact concerning any of these subjects that has escaped the attention of some previous writer somewhere, meaning the lives of Andrew Carnegie and Henry Clay Frick. He says, "And yet, my purpose is not to unearth and rebury the same old bones of history. Instead, I have turned my focus upon the thread of a relationship and have restricted my attention, for the most part, to matters pertaining thereto." So, what he's saying there is that there's plenty of biographies of Andrew Carnegie and Henry Clay Frick. He actually lists a bunch in the back of the book. And that, since he doesn't want to just come and copy what other people have done,

• 3:03David Senra?

  he's going to focus on the relationship between the two and then what series of events actually pulled them apart. And so, to that end, I would say about a third to half the book has to do with this event that happened in the late 1890s. And it's called like "The Battle for Homestead" in some cases, but it's the battle between striking steelworkers and Andrew Carnegie, Henry Clay Frick, and the rest of the management that winds up being like a, basically a miniature war. So, I'm gonna skip over a lot of that today. I am gonna touch on some of the highlights there.

• 3:45David Senra?

  But the author does a fantastic job of telling that story. And so, I bring that up now, I guess I should get to my point, right? I bring that up now because I think this idea of focusing in and going deeper on one part of a person's life is actually a really interesting idea, and it made for a very fascinating read. So, first I want to tell you, like, the reason, one of the reasons I brought my attention to the book is the title. It's like "Meet You in Hell," that's interesting. So, I want to tell you where the title comes from before going into... It's setting the stage for like what life was like at this time period. And then going into Andrew Carnegie's early life.

• 4:24David Senra?

  So at the, towards the end of his life, Carnegie, this is about 20 years after they have a huge falling out. Andrew Frick is probably in his late 60s. He's gonna die in a few years. Carnegie dies like a few months before Frick does. And he sends, Carnegie sends a note. They hadn't spoken in two decades. And he sends a note that he wants to bury like all the past troubles. And he wants to have a meeting so they can discuss that time. They're trying to discuss whether, they're having a large influence. They're two of the richest people in the world at the time. And they're having an influence on whether or not America's gonna join the League of Nations. They wind up on opposite sides.

• 5:07David Senra?

  Carnegie being more for it and Frick being against it. So Carnegie wants to meet with Frick. He wants to put everything in the past. And so he sends somebody over to Frick's house with a letter saying, hey, let's bury the hatchet. And let's actually talk and let's meet. And I just want to read to you Frick's response. And he says, "Yes, you can tell Carnegie I'll meet him," Frick said. "Tell him I'll see him in hell, where we are both going." So I'm gonna talk to a lot about Frick. He's a very interesting character. He's the one I knew less about, but that one sentence gives you a good idea of his personality. Okay, so first, well, let me just talk about something that happens at the very, what the author talks about at the very beginning of the book. The author, by the way, his name is Les Standiford.

• 5:50David Senra?

  And he says, "Henry Frick's now mythic reaction to Carnegie's overture for reconciliation can be traced back to the events of a fateful summer in Pittsburgh, Pennsylvania, some 30 years before, when a tragedy unfolded, whose reverberations can still be felt." And this is where the author's telling us where he's gonna start focusing in on. And he says, "Independence Day of 1892 will do as a starting point." So I'm gonna get there, but this next sentence is very interesting personally to me. And I'll tell you why after I read it. "Most citizens of the United States were aware that their world was changing at a rapid pace, technologically and otherwise, though they could not have understood just how pivotal

• 6:33David Senra?

  the era in which they lived would be judged by future historians."

• 6:39David Senra?

  And the reason I highlighted that and I want to share that with you is because I 100% sincerely believe that the era that we all living through will be viewed the same way by people living, by people in the future. And I think also where a lot of people may have been unlucky to live in a time of rapid change, let's say in the late 1800s, I think we're, it's the opposite for us. I think we're unbelievably lucky if we take advantage of that. Okay, so most of this, there, most of the story settles on, I don't know if you know this, but when Andrew Carnegie winds up selling his steel company, I think he's like 65 at the time by the time he sells, it's the first

• 7:20David Senra?

  ever company to cross being worth over, recapitalized at a billion dollars. And the sale of the company, which happened somewhere around, I think 480 million dollars was the number, made Carnegie the richest man in the world. And so I want, like, before we get into the story, like, you need to understand, like, why was steel so important at this time? And it says, "As the American Civil War began, there were fewer than 30,000 miles of railroad track in all of the United States, and much of that was in varying gauges and states of repair. The 1890s," so now we're talking about 25, 30 years in the future, where most of the story of this book takes place,

• 8:00David Senra?

  "saw the width of railroad tracks standardized and nearly 163,000 miles of roadway put into use." It says, "To build the vast network of tracks and bridges, no supporting industry was more important than iron and steel." Okay, so you have this huge explosion in the production and the creation of the railroad tracks, but then it lists on, like, once they've figured out that steel's much, is a much better material to use for construction than iron, everybody starts using it. It says, "Most of those early 30,000 miles of railway had been made of iron, an industry initially banned in the British colonies but accounting for 835,000 tons of product by 1860." The technological advancements that allowed for the mass production of steel

• 8:45David Senra?

  and the vast expansion of the rail system proceeded hand in hand to the end of the 19th century, when the United States was turning out 10 million tons of steel, more than Great Britain, France, and Germany combined. And then by this point Carnegie, I think, controlled like something like 25 to 30% of the market. It says, "In less than half a century, the United States had been transformed from a largely agrarian and undeveloped federation of competing interests to a relatively cohesive economic juggernaut promoting a jackpot mentality in anyone willing to work hard and take the occasional chance. The age of the founding fathers was over, the age of the titans had begun." So the book also talks in some detail, not only are they building railroad tracks, but buildings.

• 9:29David Senra?

  Basically, they just started using everything they were using iron before, they were using steel for now. So Carnegie's timing was perfect. Okay, so I had to read this one so you understand, because Henry Clay Frick is known, his nickname was "The King of Coke", and I was like, "That can't mean cocaine." So what is Coke exactly? So it says Coke, or baked bituminous coal, was a substance that could provide the fuel necessary for the economical production of steel in significant quantities. So it's one of the raw materials that Carnegie and other business people like him needed to produce steel, so it's extremely important.

• 10:14David Senra?

  Alright, so we're gonna get back to that later, because first I'm gonna talk about Andrew Carnegie's life, and then I'll tell you where his life starts to intersect with Frick, and then we'll go into a little bit of detail about Frick too. So this is just a description of, a really quick description of Andrew Carnegie's early life, and then the progress he made relatively fast, transitioning from...

• 10:32David Senra?

  An employee taking whatever opportunity you could have into an entrepreneur. So he says, "He arrived as a penniless Scottish immigrant of 12. Carnegie's father had been a master weaver." This is in some city in Scotland that I can't, there's no way I'm going to pronounce. I think it's like Dune from my line or something like that. "His prospects steadily diminished by the advance of mechanization." So it's really interesting to me. Well, let me finish reading this sentence. "In the wake of Ireland's great potato famine, the family sold everything and came to America." So, I think this is important, especially for the times we live in. Carnegie's father, his life was essentially ruined by technology. Carnegie's, the son, Andrew Carnegie's life was vastly improved by technology.

• 11:17David Senra?

  So, I think that's important to us because obviously we're going through this huge technological shift and the people that will benefit are the people that are able to use technology in their work as opposed to the ones that failed to adapt. Unfortunately, that was the case of Carnegie's father. So now he's describing why they came to America. "It offered unfettered opportunity for those willing to endure the harsh conditions of factory work. Further schooling, beyond the few years he had received in a rudimentary Scottish classroom, was out of the question for young Andrew, whose mission now was to help his family survive. His first employment was as a bobbin boy in a weaving mill. He worked six days a week, 12 hours per day, and he was paid $1.20 a week. However, Carnegie was diligent and hardworking.

• 12:02David Senra?

  He found a clerk's position in another mill and then happened into a position as a delivery boy for a telegraph company in downtown Pittsburgh for what must have seemed the princely sum of $2.50 a week." All right, he continues. "Before long Carnegie had picked up telegrapher skills, including the ability to translate the clicks and clacks of Morse code directly into text or speech. His skill and self-confidence attracted the notice of a number of influential customers, including Thomas Scott, who was then an assistant superintendent for the Western Division of the Pennsylvania Railroad." Scott proves to be very important to the life of Andrew Carnegie. Scott had recently made a decision to string his own telegraph lines for the railroad

• 12:46David Senra?

  and had it in the back of his mind to hire an assistant who could serve as his personal telegraph operator. This is in 1853, Andrew Carnegie, not yet 18, accepted Scott's offer of the job for $35 a month. And this was the first step along his path to greatness. So he goes, let's see, three to four years earlier, he's making a dollar, that would be five bucks a month, now he's making $35 a month. And I'm going to show you how fast he starts making more and more money. It says, "The real benefit to Carnegie was the practical business education that he received from his association with Scott, who also introduced him to the concept of investment.

• 13:27David Senra?

  When in 1856, Scott took him aside to deliver an insider's tip on this company, it's called Adams Express, a delivery company about to sign a favorable contract with railroad, with the railroad, Carnegie made a fateful decision. While he lacked the $500 he needed to invest," and Carnegie writes later in his autobiography that at this time $0.50 was nearer my capital, "the young telegrapher persuaded Scott to advance him the money. One day not long after he bought the stock, he arrived at work to find an envelope on his desk. Inside was a check for $10 from the cashier of the Adams Express Company. These dividends provided the first income," and then there's a quote from Carnegie, "that

• 14:12David Senra?

  I had not worked for with the sweat of my brow," as Carnegie later wrote in his autobiography. And then he realizes this is really important to how he sets up basically his entire life from here on. "Eureka, I cried, here's the goose that lays the golden egg." And I think this is important because it's happening only a few years removed where you'd have to, you know, work six days a week, 12 hours a day, and in the entire month, he's going to get paid $5 for that labor. Meanwhile, the investment that just one, and it doesn't say if it's quarter, yearly, dividend or whatever case, but one dividend check is actually double that, and he didn't have to do anything besides supply the money.

• 14:51David Senra?

  Alright, so he's going to continue his association with Scott here. It says, "By 1859, Scott had become vice president of the Pennsylvania Railroad, and promoted Carnegie to the post of superintendent. Carnegie, then just 24, had officially become an executive with an annual salary of $1,500." So he's making a little bit over $100 a month. Remember, he just went from making five... So now he's making almost 20x in less than 10 years. So now, we're going to continue and follow Carnegie's early life. This is where he learns more about investing, and then he finally becomes an entrepreneur. It says, "In the fall of 1861, Carnegie was approached by a group of businessmen." Remember, he's an executive now, so he's fraternizing or associating himself with different people. Not so much the working class anymore.

• 15:34David Senra?

  "These businessmen persuaded him to visit a region north of Pittsburgh, where a new substance known as oil had been discovered." How funny is that? I mean, the world we live in runs on oil, right? And they're like, "Oh, we have this new stuff named oil." If you listen to my podcast I did a long time ago on John D. Rockefeller, this area of Pittsburgh, Pennsylvania, rather, is where he got his start as well. "Carnegie took one look at the mad scene in Pennsylvania's new oil country and made his decision. He was able to raise the necessary cash and join a group of investors to found the Columbia Oil Company." So that was happening in 1861.

• 16:13David Senra?

  "Two years later, by 1863, he was receiving nearly $18,000 in yearly dividends from what they're calling 'black gold.' The new company also recapitalized, and shares for which Carnegie had originally paid $10 were suddenly worth $50." And here's the main point. "It was a lesson that Carnegie would not forget. When another such venture presented itself in 1862, he did not hesitate." The incidents... Oh, so this is really interesting. We always talk about how a lot of... It's interesting. A lot of the biographies that I've read so far, I would say, I don't know, maybe 10 or 15 of them, deal with companies that made their fortunes, as a result, indirectly or directly from war.

• 16:56David Senra?

  And Carnegie's history is not that different. So at this time, this is right, right around the beginning of the Civil War. So it says, "The incidence of sabotage on the North's rail lines had greatly increased with the advent of the Civil War, with wooden thresholds and bridges being particularly vulnerable to arson." So the South was coming up, and you're not going to be able to supply your troops if we burn your rail lines. That's pretty straightforward, right? So he's like, well, Scott gives him the idea. It's like, well, why aren't we build, like, we can build bridges that don't burn? Like, that would be hugely valuable to the North, right? So they start this thing called the Keystone Bridge Company. The Keystone Bridge Company was formed in early 1862, and to Carnegie, it was the investment that turned out to be the parent of all other works.

• 17:42David Senra?

  By 1863, Carnegie was earning more than $45,000 a year from this and all his other investments, compared with a mere $2,400 from his railroad salary. He's still working while he's doing all this. Remember, he's the superintendent of the railroad, whatever the, his official title was? So, he's like, all right, well, I'm making, I'm having to bust my ass, I'm making $2,400 for my own labor. Meanwhile, I've seen a stumble on some good luck, and I'm making $45,000, what is that, 20X, something like that, from investing. So he always had a design that he wanted to work for himself, but he's not there yet. So I'm just going to share an insight into his mind at the time.

• 18:25David Senra?

  He says, "Yet he understood that it was the contacts he made and the information he derived from his association with the railroad that made everything else possible." So, of course, insider trading laws, they didn't exist at this time, so he's benefiting greatly from that. However, he doesn't, he doesn't hold that thought in his mind for very long, and he realizes, hey, I'm spending way too much of my actual physical time, of my physical time, only making $2,400 a year. If I quit and dedicate myself full-time to business, then I can achieve my goal. And his goal was to build lasting wealth.

• 19:01David Senra?

  It says, "Determined to make a fortune and certain that he could never do so as a salaried man, he tendered his resignation to the Pennsylvania Railroad and turned his energies to iron." Alright, so now we're gonna see examples of some of the first kind of deals that a young Andrew Carnegie would do. And, this is not a new tactic. We saw this, especially from Cornelius Vanderbilt, who would start companies for the sole purpose of having them acquired by a competitor, as a way to kind of lever up the amount of money he has, then move that money into something else. So Carnegie's gonna do something very similar. It says, "The telegraph business was dominated in the 1860s by Western Union."

• 19:45David Senra?

  There's a guy, his name's William Orton, he's running Western Union, said, "Orton's determination to dominate the telegraph business led to the demise of many a lesser competitor, but also to creative responses from those in dangers of being gobbled up. Carnegie hoped to join the ranks of a number of lesser players, with no real intention of doing significant long-term business of their own. The idea was to organize sufficiently to present one's firm as an up-and-comer, a potential competitor, and then accept a handsome buyout." So Carnegie starts his own company, he gets actually a contract with the Pennsylvania Railroad to run lines along the company tracks from Pittsburgh to Philadelphia. That's the same railroad he just resigned from.

• 20:30David Senra?

  So another benefit of kind of having relationships inside the industry already. And, before he could even, it says, "Before he could even approach Western Union, the Pacific and Atlantic Telegraph Company came courting. In the resulting merger and stock swap, Carnegie tripled the value of his telegraph holdings without having strong a single mile of wire." And then he, from here, he uses his position as a major stockholder in the new company. And he actually winds up selling that company, in turn, to Western Union, so he benefits twice. And so now, this is gonna bring us, this is a description of Carnegie's financial situation at the age of 33 years old.

• 21:12David Senra?

  At the tender age of thirty-three, he listed personal assets of some $400,000, at a time when the average wage earner might bring home about $300. Carnegie enjoyed an annual income of more than $50,000. So, the author says that the equivalent, at thirty-three, he was making about, in today's dollars, or in 2005 dollars, when this book was written, it's about $10 million a year. The canny Scotsman was no longer a working man, but a bona fide capitalist who had borrowed less than $1,000 to end up with everything he had. Now, if you recall at the very beginning, the author was talking about the, sometimes

• 21:54David Senra?

  you have a hard time reconciling the two pillars of thinking, which is capitalism and the Protestant ethic. Carnegie definitely had this. He had a sense of internal conflict. I'm going to give you a short summary of that here, and I'll cover more of that when I read his autobiography. But it says Carnegie's upbringing had predisposed him towards honesty and a high regard for the opinion of others. But those attributes sometimes collided with his overwhelming ambition. And I would say, now, reading his story, the overwhelming ambition went out. He had penned himself a letter in which he stated, this, he's doing this, late twenties, he's writing himself this letter. And he says, "Man must have an idol. The amassing of wealth is one of the worst species of idolatry. No idol more debasing than the worship of money.

• 22:38David Senra?

  To continue," and he's talking to himself, remember that, "to continue much longer overwhelmed by business cares, and with most of my thought wholly upon the way to make more money in the shortest time, must degrade me beyond hope." That's what I mean about his internal conflict. "I will resign business at thirty-five." Uh, no, he will not. "It was a noble pledge, but one he was too ambitious to honor."

• 23:05David Senra?

  He's got, one of my favorite, he's got a bunch of good quotes, but one of my favorite quotes we're gonna get to right now. And, um, so I'm skipping over a bunch of, I'll cover more when I, when I have a, just a dedicated, uh, founders episode, just with Andrew Carnegie. But he did his hands in all kinds of different businesses, all kinds of different investment, and he realized it's not the best way to accumulate them, in his opinion, to accumulate the most amount of money in the shortest amount of time. So now he's gotta figure out what, well, let me just read this, "Which eggs in which basket?" "Bolstered by the notion that his rise in the business arena would pay dividends for society as a whole," that's another thing I should say, like, it's kinda like, almost, he wasn't a religious person, even though he was influenced by religious philosophy, and he felt that

• 23:47David Senra?

  the best way to serve humanity is to get really, really rich and then give your money away. Um, the only problem is that his, his critics will rightly point out that he made a lot of money at the, um, expense of his workers, that he should have, instead of accumulating hundreds of millions of dollars, uh, he should have spread that out and actually paid workers more. He very much, him and Frick, very much look at labor costs with, uh, something that, to be, to be grounded down to its lowest amount possible.

• 24:21David Senra?

  Which, again, controlling costs is not, uh, like a negative thing, but at the, the way they did it, I could, I completely understand the criticism that they both get. Um, and we'll get to more, more to that in a little bit. Alright, so he says, um, "He was bolstered by the notion that his rise in business arena would pay dividends for society as a whole, and, and, um, and conditioned by years of operating at full throttle, Carnegie began to rethink his early determination to quit the field of battle at such an early age."

• 24:52David Senra?

  So then that leads to this kinda thinking, he says, "If what was good for Andrew Carnegie led inevitably to the betterment of the world around him, then perhaps it made more sense to end the scattershot approach to accumulating wealth," and, direct quote from him, "Put all good eggs in one basket and then watch that basket." The question was, "Which eggs and which basket?"

• 25:15David Senra?

  And so now we're going to get into, I touched on a little earlier, it's like, why is, like, how is the richest person in the world, like, why was steel the vehicle at which to accumulate such a vast wealth at this time? And so we talked a little bit about the railroads and how they needed it, but he also understood, this is actually really like, smart for him to pick up on, he says Carnegie understood the industry's vast potential appetite for an improved form of iron. Remember, most of the railways and most of the construction was done in iron. Says, "Not only did everything in the business move on iron rails, but the cars and the engines were built on, of iron, as was the machinery that loaded and serviced them, as were the new bridges that spanned the rivers and chasms for the American West."

• 25:57David Senra?

  If there, and this is a huge, hugely important realization he had, "If there was a cheaper and more durable substance than iron, it would lead to a revolution in the business, not to mention a fortune for those who got in on the ground floor."

• 26:12David Senra?

  He says, "If one were to gain favorable position feeding the appetite for expansion of a good portion of this industry, while assuming none of the accompanying risks, well then, why would one not think of placing steel eggs in steel baskets?" So this whole idea of servicing the people that are going out and doing all this, this building, as opposed to doing it themselves, is very similar to that old axiom where it's like, listen, in gold rush, you should be selling pickaxes and not hunting for gold yourself. Or, another way to put it is, since I have Jeff Bezos in the brains that just read every single one of his shareholder letters, is, instead of building a massive internet business

• 26:54David Senra?

  by yourself, why don't you just create the, the infrastructure that those businesses actually need, and that they're going to build upon? And that's basically the thinking of, of AWS. Alright, so, when his, when his talks with him, this guy's really important, I've actually started looking for books for him. Henry Bessemer is the person that basically made it possible for Carnegie to exist. And so, trying to make steel was not a new process, but Bessemer, I think it's called like, the Bessemer Oven, or Bessemer, I don't remember the exact...

• 27:31David Senra?

  The exact name of it, but Henry Bessemer was, um, he, he lived in England, he was inventor, and he figured out a way to improve upon somebody else's work. So there's a guy named William Kelly, who, uh, did a lot of early, uh, earlier experiments in steel. Um, he actually received his first patent, uh, in steel in like the eighteen, like eighteen fifties. And the problem with the way Kelly's method and the one that Bessemer creates and winds up making him a fortune and creates, uh, the, the opportunity for people like Carnegie, um, is, I'm trying to look for the... Um, so the quality goes up after Bessemer. Okay, here it is. Um, okay, so the, the, this is a result of Bessemer's, um, invention. So the result of the process for transforming

• 28:14David Senra?

  iron to steel that bore his name, um, a quantity of steel that might formerly have taken long as two weeks to produce could now be made in fifteen minutes. So it could be made way, way faster and it's of higher quality. Um, so before he gets, he's engaged, uh, full, uh, full-fledged into the steel business, Carnegie hears about what Bessemer's doing, so he goes to see him. And he says, "If one began, uh, favorable position," uh, let me skip, I just read that part, "When his talks with Henry Bessemer convinced him that sources of impurity-free iron ore had recently been discovered that would allow the British to begin production of high-grade steel for export to the United States, Carnegie made up his mind.

• 28:55David Senra?

  He returned to Pittsburgh intent upon building his own steel mill and beating the British to the punch." So that's the foundation of Carnegie's great work, uh, great wealth and what he works on for the rest of his life, until he sells the company when he's around sixty-five. Um, okay, so this is, this is really actually important. Um, now we reach the part where Carnegie's hell-bent, right? He has no plan B. He just said, "I'm putting all my eggs in this basket and I'm damn sure gonna watch that basket." But right when he decides this, there's one of the most famous financial catastrophes in history, it's called the Panic of 1873, you should read about, it's really interesting, because it just happens over and over again.

• 29:37David Senra?

  And it happens while he's trying to build this massive steel plant. So let me just give you some lessons he learned from the Panic of 1873 and how he responded, which actually worked to his advantage later on. So the New York Stock Exchange would close its doors for the first time in history, remaining shuttered for 10 days. Of the more than 360 railroad companies, remember, these are the companies that he wants to sell to, in the United States, fully one-quarter declared bankruptcy. Twenty thousand businesses of all types failed, and one-sixth of the nation's workforce found itself out of work. However, the Depression actually played into his hands. The decreased demand for materials and labor caused by the economic downturn resulted in

• 30:22David Senra?

  nearly 25% savings over the cost Carnegie had projected, meaning the cost it would cost him to build the steel mill. For Carnegie, it was another invaluable business lesson. The best time to expand was when no one else dared to take the risks. And he was able to do this because he had legendary levels of frugality. And it's a good example, too, where, at the time, the book talks about, you know, everybody thought these 360 railroad companies, they're like, "Oh, we struck gold, we're the smartest people on earth, like, we're gonna print money." This is right before the Panic of 1973. When I was reading this, I always think about that quote, I've mentioned many times on the

• 31:05David Senra?

  podcast, it comes from Steve Eiseman, who was featured in Michael Lewis's great book, The Big Short, and when he was describing, years after, like, what caused, like, what's a good one-sentence synopsis for what happened to the financial crisis of 2007, 2008, and so on? And he says, "They mistook leverage for genius." And I think that's just one of my favorite quotes of all time. And in this case, the railroad companies, they had high levels of debt, the demand ceased to exist, and they went bankrupt. And then, from there, since there's a lot less people needing the very same materials Carnegie needed, he could then build his plant 25% less. And then, we're gonna get into one of, I think this is one, so...

• 31:48David Senra?

  I think I've said this on the podcast, if you've listened to a bunch of these, I think you know this by now, but the goal of this podcast is not to hoist these people up as idols. It's to take all their experiences, in the case of Carnegie and Frick, 60 to 70 years, that's how long he lived, so like 30 or 40 or 50 years of a career. Take the best lessons from their experiences and then, as quote Steve Jobs, being shameless about stealing good ideas. And then, on the other end of the spectrum, avoid the bad mistakes. And we're going to get into more of the bad mistakes that both Frick and Carnegie did as well. But one of the best ideas that I took from Carnegie is his level of frugality. And he's got a great quote, which I'll get to eventually, but I'm going to get into that.

• 32:30David Senra?

  Because it says Carnegie's success can be attributed to another lesson that he had learned on the way up. The value of meticulous cost accounting. So it says, "His was the only firm in the field with a near fanatical devotion to cost accounting."

• 32:50David Senra?

  As Charles Schwab, this is not the Charles Schwab, not the stockbroker Charles Schwab, but actually a manager in Carnegie's company later on. He says, "As Charles Schwab would later put it, Carnegie never wanted to know the profits. He always wanted to know the costs." He says, "Carnegie's approach may seem ruthless, but the idea of treating the complex process of manufacturing..." This is another idea that's highly linked to controlling your costs. And he says, "Carnegie's approach may seem ruthless, but the idea of treating the complex process of manufacturing like a giant machine with component parts that must be constantly retooled seemed to him completely natural." So he pulls a lot from the theory of evolution. And it's not the Darwinian theory, although it is related.

• 33:35David Senra?

  It's this other guy, whose name escapes me at the moment. But this idea that life, like, both him and Frick believe that the survival of the fittest, basically. And that the only people who survive was this continuous feedback loop of improvement, applied not only to yourself, but to any endeavor that you engage in, which is what he's talking about here. It's like, yeah, of course, it's a natural idea. Manufacturing is just a giant machine with component parts that must be constantly retooled seemed to him completely natural. Many of that retooling comes with like reinvesting in technology and lowering your costs. And then, this is a great quote of Carnegie, one of my favorite, and it kind of ties into what, how he thinks about costs.

• 34:20David Senra?

  He says, "Cut the prices, scoop the market, watch the costs, and the profits will take care of themselves." So later on, he talks about, he's like, you know, this is not normal. Most people in his industry are focused on profits and prices and revenue. He's like, "I don't give, I don't give a shit about that." He's like, "Because those things are cyclical." And when he says, I'm like, "Oh, I never heard of that before." But that's actually because I've, you know, I've highlighted many times that many of these successful entrepreneurs that you and I have talked about on the podcast have, you know, have been obsessed with this idea of frugality, with this obsession with watching their costs. And, but, and I, that, that just makes personal sense to me.

• 35:03David Senra?

  But to hear it described that way, it's like, "Oh, that is a good point." That revenue and profits are cyclical, but the savings you get from costs are forever, which we'll go into more of that later. I think he elaborates on that at length. And so I just want to bring this to, to your point. This is all happening in like the late 1870s. By 1880 Carnegie, he's got two steel companies, but they're making 1.5 million dollars in profit. And that's 1.5 million dollars in 1880 dollars. So the author says, "If you want a good shorthand of comparing the numbers in the book, is you multiply by 200."

• 35:47David Senra?

  So the author's saying it's, you know, equivalent to close to 300 million in a year. And at the end, I think right before, the last two years before he sells the company, this is in the early 1900s, like 19, maybe 1900 exactly, it makes 40 million dollars a year.

• 36:09David Senra?

  And again, that's $40 million in 1900, the year 1900 dollars. So it's just an insane, insane amount of money. Okay, so at this time, he's already really successful. He controls costs by controlling labor. Very much like Bezos, he will constantly reinvest in things. He'll come up with the money for capital expenditures now if he knows that in the future, it'll yield him a larger benefit. If you have not listened to my podcast on the Dow of Capital, I'd recommend listening to that immediately because that entire book is about this, about the way to think about things over a long time spectrum. He's got a really, his name's Mark Spitsnagle. He's got a really unique way of thinking. But anyways, so he's controlling costs, he's keeping on labor,

• 36:53David Senra?

  he's reinvesting technology, and he's like, okay, like, this is never gonna stop. I need to continue to find a way to lower costs. And he realizes he starts to turn to the actual raw ingredients and the materials he needs to produce the steel. And this is what's gonna cause Carnegie and Frick's lives to start to intersect. So it says Carnegie continued his quest to cut costs, focusing now on the raw materials demanded by the steelmaking process. After iron ore, the next indispensable substance for the production of steel was coke. That's what I read to you earlier. So he's like, okay, well, I'm just, he, vertical integration wasn't a term at the time, but he's kind of trying to do that here. So he starts buying, they're called, they're like coke ovens, where you're actually baking what they call coal cake,

• 37:36David Senra?

  which is then turned into that substance of coke. But he starts doing it, and the ovens he uses, there's so low capacity and his steel business is growing so rapidly, that he realizes, hey, this is stupid. I can actually buy, like, I'm wasting my time here. I was trying to lower costs and it's actually going up because I could buy coke from a more efficient manufacturer on the open market and be paying less. So he says they're limited capacity, meaning the ovens he bought. Meant that Carnegie could actually buy cheaper Coke from competing operators. As a result Carnegie decided to sell his own ovens and buy all of his Coke on the open market. So at this time, you have now Henry Frick has, that's his business. He runs this giant Coke business.

• 38:20David Senra?

  It goes under different names, but mostly it's called Henry Clay Frick Coke. And Carnegie tells his brother, who's his partner at the time, says, hey, go see this guy. This guy Frick's crazy. He's selling, buying up all the Coke ovens in this entire area. He's trying to die. He's basically doing the same exact thing in Coke that Carnegie's doing in steel. He's like, why don't you see if he'll, he'll buy, he'll buy the ovens off of us because surely he will. And so now I'm going to backtrack and we're going to go into the quick summary of like Frick's business activities. The business, the book doesn't really talk too much about his early life, other than that he came from rather humble beginnings, just like Carnegie. And that kind of bonded them before, because they were, you know, they worked together very, very closely before they became enemies.

• 39:05David Senra?

  So I just want to bring up this one thing where at the time Frick is, he's already started his Coke business. And he is going crazy. He's, he's just keeps buying up. He wants to basically limit competition. So he's buying up all the different Coke ovens and Coke businesses that he can. And as a result, he needs to have a lot of funding from, from banks. And he goes and gets a, a loan from Mellon, which becomes successful in his own right. And you might know Mellon Bank and et cetera, et cetera. But this is how Mellon describes Frick and why he lent him the money, which I think is really important to understanding

• 39:48David Senra?

  who Henry Frick was, because he's very different from Carnegie. But he says, he knows his business down to the ground. He was obsessed with details and very much like Sam Sammurray, who said, if, you know, as long as you know your business from A to Z, you'll be fine. You can solve any problem that, that comes up, but you have to understand every single aspect of your business. Frick definitely embodies that philosophy. So it says, by the end of 1873, Frick and company owned 200 Coke ovens, selling everything it could produce to the rapidly expanding Bessemer steelmakers in the region. Bessemer Steelmaker, that's exactly what Carnegie was at the time. Then came the economic collapse, this is the same collapse that almost destroyed Carnegie. As iron and steel declined, so did Coke.

• 40:31David Senra?

  But Frick, who would later recall this time period as one of the most grueling times in his life, proved as undaunted in the face of adversity as Carnegie had been. Instead of turning tail, he used the depression and the confidence he had cultivated with Tom Mellon to his advantage. Judiciously purchasing the coal lands and Coke ovens of his failed and failing competitors. So this is a perfect example of like why you should study the broad themes in how people approach like their strategy for business is because, remember, a couple minutes ago we talked about, hey, Carnegie's learning one of his most important business lessons

• 41:15David Senra?

  that he ever learned. And he says like the best time to expand was when no one else dared to take the risks. So he did that in steel, right? And he benefits from that. Frick is doing the exact same thing in Coke, and he benefits from that. In fact, it's because of his relentless pursuit of all these acquisitions that he becomes eventually Carnegie's right-hand man. And he winds up making in his lifetime like $70 million from that. Okay, so he's just going, he's picking up all the assets from failed and failing competitors. His relentless acquisitions continued until by 1882, the company owned some 3,000 acres of coal lands and operated more than 1,000 Coke ovens.

• 42:00David Senra?

  He controlled about a quarter of all the Coke in the area. By the end of 1879, at age 30, he was a millionaire. He would produce and sell almost a million tons of Coke in a year, netting nearly $400,000 annually in the process. Remember, they're saying at this time, a laborer could be expected to make $300 a year. This guy's making 400 grand.

• 42:24David Senra?

  And he does some interesting things that I don't even know if I understand now. I'm gonna have to read his biography to understand his thought process. It winds up being proven correct, but wasn't it... The book doesn't rev... I guess I'll get to that in a minute. I wasn't understanding why he would give up his coke business, which he eventually does, to go into steel. It says Frick's company not only owned the best coal lands in the area and produced the best coke from it, but also had in Mr. Frick himself a man with a positive genius for its management. He's very much like Carnegie did not have... He was not well-educated. He learned on his own. Frick's rise from humble beginnings was obviously intriguing to him, meaning this is when Carnegie wanted to meet him. It would have signaled to Carnegie that Frick was another of the fellow fittest. That's what I was referencing earlier. They have this idea of fittest, meaning that like,

• 43:09David Senra?

  these are the individuals with whom Carnegie sought to align himself. Fittest meaning, hey, if you can come from nothing and you wind up dominating an industry, there's something about you that like the whole, like you've clearly evolved in a way that is advantageous to your survival. And I'm not saying they thought... They probably did think of themselves as better than everybody else. But, I mean, you don't become the richest person in the world without a huge ego, right?

• 43:34David Senra?

  But they both shared this whole idea, and this is why Frick was opposed later on in life to the League of Nations. He thought, no, like, why are we... In his opinion, he's like, this is stupid. Why are we aligning ourselves with lesser nations? Like, you wanted to take advantage of them. It's very much like, think about how the natural world... I'm not talking about human society, but like how the natural world operates. Like, you know, only the strong survive, the strong eat the weak. Well, in their case, like, the strong may rule the weak, but the wise rule the strong. So Frick didn't see, like, he just, he's... He thought, you know, like, you should only survive if you are worthy of surviving.

• 44:16David Senra?

  I'm not going to like, be charitable with you, just out of, just because we both happen to be human beings. So they're very, very hard man, men. Frick more so than Carnegie. Carnegie was, like I said earlier, was, he, it bothered him. He wanted to be liked. Frick didn't care.

• 44:34David Senra?

  Okay, so this is, we got to the part, this is a note I left to myself. I was like, why would Frick do this deal? So it says Frick continued to pursue, I'm skipping way ahead, by the way. Frick continued to pursue acquisitions vigorously, bankrolling some of his purchases with the sale of his stock to Carnegie.

• 44:50David Senra?

  So the one thing I couldn't understand is like you had banks willing to lend to you. Why are you giving up their most valuable asset, which is your equity? But I guess it was more strategic in his part. So he says, "In addition, the Carnegie's also set about," Carnegie's meaning Andrew and his brother. "The Carnegie's also set about buying up the stock of H.C. Frick that were owned by partners with whom Frick had been involved with early on. Carnegie now owned 50% of H.C. Frick Coke Company, and then some other people at home, 33%, and Frick held the remaining 16%. The benefits to Carnegie's iron and steelworks were considerable.

• 45:28David Senra?

  On the average, his plants paid about 18 cents less per ton for their Coke than did competitors." So they save about $50,000 a year just on Coke that their other competitors weren't. And it was about 4% of net profit, so it wasn't a negligible amount. And it says, "By 1888, dividends from H.C. Frick's operation were total almost $2 million." Which was, remember, it was printing money. "Which were slightly higher than the total of those from Carnegie Iron and Steelworks themselves." So it's like, that's why I was like, "Why are you doing this? Like, you're giving up your equity. You allowed him to work himself in a position, Carnegie that is, where he owns way more than you do, almost over three times the amount.

• 46:13David Senra?

  And then your business is actually making more in profit at this time." Now Carnegie eventually, like, way surpasses Frick's operation? But I just did not understand that. It was revealed later on in the book that, and remember, I was just like, "Why are you giving up equity? Why don't you get more debt?" Well, they had a lot of profit, but Frick and company had a lot of debt. So he had lots of debt. He had to sell to pay down that debt. And then, it's revealed later on, that he viewed Coke as a way to get to what he really wanted, which was steel. He thought the market, the profit on steel for a well-run steel company was going to be much higher than the best-run Coke company.

• 46:58David Senra?

  It winds up being correct. I just didn't understand that at this time. I didn't understand that until I got to the very end, actually.

• 47:05David Senra?

  So yeah, so he's like, alright, well, I'm gonna align myself with this guy because he's dominating the steel industry and I'll find a way to work in there. He brings this to Carnegie's attention. He's like, listen, why don't you just buy out? Because eventually he gets his holdings in his own company goes down to about 4%, so he owns about 4% of H.C. Frick. And he's trying to convince Carnegie to let him buy equity in Carnegie Steel Company. And Carnegie has this thing where he like, he's like 15 years older than Frick, so he starts to kind of talk to him like a father, like take a paternal role, which I don't know how much Frick appreciated, but he's like, listen, I believe you'll make millions, more millions by concentrating than by scattering.

• 47:49David Senra?

  So he's giving Frick the same advice that he gave himself. It's like, well, let me just put all my eggs in one basket and watch that basket. Instead of saying, hey, I'm gonna run the co-company, I'm gonna run Carnegie Steel, do all this other stuff. So he wasn't willing to sell to Frick. A few years later, though, something happens that where Frick gets his wish, and that's the death of Carnegie's partner and his brother. So it says, while the death of his brother, who was the principal firm manager, had been a severe blow, Carnegie saw advantages in promoting Frick to fill the void at Carnegie Brothers. To hard-charging Andrew Carnegie, his brother had sometimes proven to be a bit reluctant and risk averse as a competitor and entrepreneur.

• 48:33David Senra?

  And you're not reluctant and risk averse, there's two words you'd never use to describe Henry Frick. There would be no such timidity with Frick, of that much Carnegie was certain. And if it meant allowing Frick his wish to buy into the company, it was a small price to pay. It had taken the death of Tom Carnegie to accomplish it, but Henry Frick was now a partner in steel.

• 48:59David Senra?

  So Frick is running the co-company still and now he's becomes Carnegie's like right-hand man. Now, this is gonna give you an idea of Frick's personality, though. And this is why I always wonder aloud on the podcast, like, why do we see so few companies led by... Like, why is it usually one founder? It's like one person that winds up being in charge. Even if they start out with a bunch of co-founders, the longer the company survives, you see this trend where it kinda just comes down to one person. And why, I think, because of Frick's personality, this partnership with Carnegie was doomed from the very start. They both wanted to run their own thing. So it says, "Carnegie was accustomed to obedience from his subordinates, but if he expected unquestioned subservience from Henry Frick, he had gravely miscalculated."

• 49:43David Senra?

  So at this time, there's all these kind of labor strikes, which is like a central tenet around this book. And they spend great detail. The author does a wonderful job, like, telling these high suspense stories about this. But in one of them, Carnegie's response to strikes is, "Hey, I'm gonna shut down the plant. I'm gonna wait 'em out," right? And Frick, his was violence, not giving an inch. He was a very, very hard dude. And so, in one case, like, there's this guy that won't... Like, one of the strikers builds a shack on the property that Frick owned.

• 50:28David Senra?

  He goes over there with a sheriff. And they're like, "Hey, you gotta get outta here." The striker refuses. Frick and the sheriff pick the guy up, throw him in the river, and throw all of his mattress and all his belongings in there. He was just a crazy, crazy dude. And there's a strike. This is not the big strike that's the main part of the book, but one earlier. And Frick is handling it how he wants to do. He's like, "We're not giving an inch." Like, they don't get to dictate terms. And Carnegie's kinda questioning his... He's like, "No, no, no." You know, let's, let's, let's go my way. And this is how Frick responds. He says, "Whatever the reasons, Frick responded in a rather startling fashion to Carnegie's demand that he settle with the strikers."

• 51:13David Senra?

  And Frick, Frick writes Carnegie a letter. He says, "As you hold a majority of the stock and are entitled to control in the Frick Co. company, and in viewing what has passed between us on the subject, I feel compelled to vacate my position as its president, and I therefore enclose my resignation." So, he winds up coming back. He, he, um, he, uh, he resigns twice.

• 51:38David Senra?

  And comes back twice till they have their, their final falling out, but that gives you an idea of Frick. He's, he wants to be left alone. He's like, "I'm gonna, if you, if you hire me to run the business and I own a part of it, don't tell me what to do." Um, so you could see that, you know, knowing this now, it's not surprising that about 10 or 13 years later, they have a falling out that they never recover from.

• 52:02David Senra?

  Okay, so here's a note I left for myself. So, after this, Carnegie coaxed him back in because Frick, he does consider Frick a genius. He thinks he's a genius in managing. And so I read, "The end result of their disagreement is a closer partnership. Why?" Um, it says, "The incident that had, that, the incident had taught both partners important lessons about each other. Carnegie saw that Frick was no puppet, but rather a man willing to take considerable risks in defense of his principles. If Frick's actions made clear that he was less pliable than others in Carnegie's circle, they also indicated a strength of will that might be useful if applied to others." That was a really interesting, um, like, observation from Carnegie. "On the other hand, Frick's admiration and awe of Carnegie were tempered by the realization that Carnegie's self-interest reigned supreme.

• 52:47David Senra?

  It was more important than ever to carve out an enhanced, an enhanced position in the steel, in the steel business. It was a matter of self-preservation. Carnegie was wise enough to grasp Frick's point of view, and because he had also seen in Frick a managerial capacity second to none, he was willing to overlook Frick's resignation as the understandable act of a proud man. Carnegie determined to put Frick's managerial talents directly to work within the steel companies and to assure Frick's loyalty, Carnegie offered him an increased share of the company." So he has, now he has more equity, which was his, Frick's goal all along.

• 53:23David Senra?

  Frick was also named chairman of Carnegie Brothers and Company, and his interest in the company was increased from 2% to 11%. "Had such unalloyed sentiments been expressed in a novel, experienced readers would have known to expect the worse. This being real life, however, the players in this drama forged blithely ahead." It says Carnegie, "To Carnegie, Frick represented something special. Not only had Frick risen up from nothing, as Carnegie had, and not only had he proven himself the master of an allied industry, Frick had an ambition, a singleness of purpose, and a lack of self-doubt that Carnegie envied." And I would say that's another one, going back to what I was saying earlier,

• 54:06David Senra?

  one of the best things I learned from Frick. And he goes crazy later on, so I definitely, that's something I want to avoid. But this idea of he had outside ambition, a singleness of purpose, and a lack of self-doubt, which I think are great traits for anybody that wants to do their own thing. Oh, okay, now I'm skipping ahead. This is Carnegie's mantra, mantra, that I mentioned earlier, which I'd never even, like, again, I understand the need to cut costs, the value of frugality, or else you wouldn't see this trait over and over again in successful businesses. But Carnegie is the first person to make me understand why you should focus on that above all else. He says Carnegie was always more interested in what it costs to produce goods than in revenues or profits.

• 54:52David Senra?

  Carnegie would repeat the mantra time and time again. "Profits and prices were cyclical, subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled, and in Carnegie's view, any savings achieved in the cost of goods were permanent." And I think this also, this obsession over controlling costs, something that bonded Frick and Carnegie, and allowed them to have, you know, a perfect partnership, up until the time they didn't. And this is an example, so they realize, hey, the Bessemer converter was a technological advancement over what existed previously.

• 55:32David Senra?

  Then they have another new technological advancement called the open hearth furnace, which is even better than the Bessemer's. So even though they just bought all the Bessemer, they had recently purchased, I guess a few years prior, all these other Bessemer converters, they're willing to just throw that out because they understood the leverage that technology would give them in the future. So it says, although it meant scrapping hundreds of thousands of dollars worth of Bessemer converters, Carnegie was undeterred. And he says, even if we save half a dollar per ton by the changes, it would justify a large additional expenditure now.

• 56:05David Senra?

  And if, if you didn't know that was a Carnegie quote, it could easily have been a Jeff Bezos quote. So it says, on this issue, the two men were of one mind. Frick had made his way in coke by the same reckoning that Carnegie had in rail and then in steel. If you knew your costs down to the penny, you were always on firm ground. Furthermore, Frick had always understood how essential new technologies were in driving costs down. Cost controls became nearly an obsession. Again, I think that is, that was just as true in the 1890s as it is today. The fact that technologies are going to continue to drive costs down, so therefore you should invest in them, and then you should keep an eye on where every penny is going. In fact, after Frick leaves the company, the guy that takes over after would send memos, that's how they would communicate, that's how we have so much of like the Carnegie

• 56:50David Senra?

  Steel history is from these memos. And in one of them, Carnegie chastises him. He's like, Frick would send me costs on every single thing. You don't even talk about it. And he's like, it's very valuable. And I thought that was very interesting how they run the company. It's just like they're communicating through reports and keeping an eye, you know, weekly, monthly, quarterly, yearly, on what they were, what they were spending. It was continuous, I guess is a better way to put it.

• 57:18David Senra?

  This is where Frick makes his move. And his move clearly is he wants to, he wants to run everything. Remember, Carnegie's like 15 years older. So he makes a lot of money, starts to spend more time in like Scotland and other places, and he needs somebody on the ground, and Frick's that person. So this is Frick approached Carnegie with an ambitious proposal. Now was the time to reorganize his eggs into one basket, once and for all. He went on to argue that the main object of this proposal, his own appointment as chairman of the combined operations, there's two, this is what I meant, there's, so you have the Frick Co. company, which Carnegie owns a lot of, and then Carnegie has two steel companies. He's like, no, this needs to be in one spot, run by one person. And he wants

• 58:01David Senra?

  to be that person. Chairman of combined operations, as Frick reminded Carnegie, in a single year as the head of Carnegie Brothers, that's the company he's running, he had increased profits from a little less than $2 million to more than $3.5 million. Clearly Carnegie had chosen a management genius. Why not let the genius manage everything? So Carnegie's like, well, that's actually a good, that's a very persuasive argument. So he winds up doing this. And he says Frick had managed to beat the odds and the grim scenario Carnegie had painted upon his entry into the company, what they're talking about is like, oh, you know, don't scatter your attention, like focus. Rising from the apex of one industry to become the chief operating officer of the largest and most powerful steel making company on earth, all in the space of a decade.

• 58:47David Senra?

  Okay, so like I said before, about a third, maybe half of the book is this war, literally war, people die, they shoot at each other, they have hired soldiers about the strike. I'm not, I'm gonna skip over a lot of that, but I want you to understand, here's a brief summary of why there was tension between ownership and labor. And it says Carnegie Steel had become the nation's leading producer of steel. Its output soaring to more than 1 million tons in 1890, 10 years from this point is when they start making about 40 million a year. As profits for that year totaled nearly $5 million and a 2 cents per ton write-off, so they're talking about lowering, they want to lower the average rate of a laborer, just knocking off 2 cents per ton, because they were paying some laborers per

• 59:32David Senra?

  ton at the time. So a 2 cents per ton write-off would have dented the bottom line by all of $20,000. Okay, so you're making 5 million a year and they're lowering, they're continuing to lower the laborer's pay. Even though it only saves $20,000. It seemed inexplicable that Frick and Carnegie would not have surrendered the point. I agree with that. I think this is, I mean, now in hindsight, it's clearly a big mistake. It's something, but again, they, they're approaching it from how they had their own worldview. And once you have a worldview and you've built this huge successful company, I kind of understand like why they wouldn't bend, even though it's in hindsight, not a smart idea. And we're going to get an insight into Carnegie's worldview here. It says, "In Carnegie's mind,

• 1:00:16David Senra?

  nothing had changed in the intervening years. If costs could be cut, then cut they must be. And never mind if the category read minerals, or vegetables, or men. But there is a difference. That's the problem." That's the problem. What I mean is like, that's what he didn't understand. Men are not minerals and they're not vegetables. They fight back. And if he was tough on matters pertaining to the production line, he was even more demanding when it came to support staff. So he's just cutting wages and eliminating jobs all the way across.

• 1:00:49David Senra?

  So I'm going to skip over and then I'm just going to read like a very, so they're on strike. They're closed, they've closed down. I'm going to skip over after this. This will be the last to talk about the strike. If you want to learn more, read the book. The book is a fascinating read, but especially the middle of the book. I mean, it reads like a, it's full of suspense and the author does a great job. So Carnegie's in Scotland at this time. He leaves Frick in charge. Lets Frick do whatever he wants. Frick is at home sleeping. He's deciding, hey, you know, you don't get to dictate. The strikers are setting up. They're not letting any new workers in. There's been all kinds of violence. Police officers come in. There's 2,000, a mob of 2,000 people versus nine police officers. Police officers leave.

• 1:01:29David Senra?

  So Frick hires what's called Pinkerton detectives. It's like a private police force. There's 300 of them. And they have them ferried in by boat. And when the strikers, basically the entire town, they're in, discover that they're there, they break onto the property of the Carnegie Steel Plant and arrive at the docks where these detectives are. And both sides are extremely, they're heavily armed. And they have shootouts and they kill each other. And so this is how the battle begins. So the head of the union, this guy named O'Donnell says on behalf, he's now, he walks up, he's got like 5,000 people behind him. The detectives are still on the boats, they haven't disembarked yet.

• 1:02:14David Senra?

  There's 300 and he's trying, he's like, "Listen, just get out of here, don't do this." He says, "On behalf of 5,000 men, I beg, I beg of you to leave here at once. I don't know who you are, nor from whence you came, but I do know that you have no business here. We, the workers in these mills, are peaceably inclined." That's not necessarily true, it's actually not true. They've trespassed, actually, and they've already engaged in violence, throwing rocks and stuff, and having fights. "We have not damaged any property and we do not intend to," that's also not true. "If you will send a committee with us, we will take you, we will take them through the works and promise them a safe return on their boats. But in the name of God and humanity, don't attempt to land. Do not attempt to enter these works by force." So this guy named Captain Hendy, he's the leader of the Pinkerton forces.

• 1:02:59David Senra?

  He steps finally onto the decks. Pinkerton had, there were some people that had no experience, but a lot of them were like former soldiers and police detectives. And he steps up to deliver his response unequivocally and imperatively, I don't know how to pronounce that word. "We were sent here to take possession of this property and to guard it for this company. We do not wish to shed blood, but if your men don't withdraw, we will mow every one of you down and enter in spite of you. You had better disperse for land we will." Oh boy. O'Donnell surveyed the scene around him. In addition to the armed thousands who had occupied the steep banks of the river, hundreds more looked down upon the scene from the railroad bridge just upstream. O'Donnell had spent weeks and months in an attempt to engineer a peaceful resolution

• 1:03:43David Senra?

  to a dispute that in his mind, cried out for a meeting of the reasonable minds. How had it come to this? So, nobody backs down, they start shooting at each other, the battle lasts like a, I think like a day, day and a half. Eventually, the National Guard has to come in and Frick, there's an entire chapter called "Not an Inch." That's a good way to describe Frick, because he refused, basically he said, "Hey, your union doesn't exist anymore, we're not gonna, the plant's gonna stay shut down, we're gonna bring in new workers. They'll be guided, guarded by the National Guard. And like, we're not even, like the deal we offered you that you rejected last year is no longer, no longer on the table because you don't exist to us." Frick was a very driven, hard person.

• 1:04:32David Senra?

  He, well, okay, so, let me, let me give you an example of this, this kind of relentless personality. So I'm skipping way ahead, the battle, it takes like six months for them to, uh, to finally get the plant back up and running. All this stuff happens, most of the people lose their jobs, some people are tried for murder, there's all kinds of details in the book. But what I couldn't understand is like, while this was happening, right, because these, this is another like, uh, example of human nature, which we've seen multiple times throughout history that, you know, they're, we, we don't, we let, uh, emotion get the best of us. And I understand the worker's point of view because they're living paycheck to paycheck, they're not making any money.

• 1:05:13David Senra?

  Meanwhile, Carnegie's in Scotland buying like, you know, five million dollar castles, like that's literally true. Uh, the equivalent of five million dollars today, um, and they're, you know, they're, they're, they felt that if I, if you're taking away my ability to work, you're making my family starve and I'm willing to die for that. Now, what I would say, um, what I would say about that is,

• 1:05:41David Senra?

  there's no, you don't have, like, I don't, I've always thought since I was a young age, like, I don't like relying, putting myself in the position where I have to rely on the good graces of other people. Um, I just think that's a, that's, I mean, that's why people want to work for themselves because they don't want to just be at the whims of other people. I'd rather be at the whims of customers than, than, you know, manager or owner of the company. And I, if, if you don't like, if I would, I was trying to think of like what I would do in a situation. One, like, hopefully, like, I have this quote I always think about, like, emotion blurs judgment. And when we're emotional, we are very irrational as a species. And this idea that I'm gonna go and, and have a war for a job, like, what, what is the outcome?

• 1:06:25David Senra?

  Like, if I get shot and I die, my fam, is my family any better off? No, like, they're worse off. And if I don't like the pay I get or the conditions of work that I'm under, like, go elsewhere. I don't understand this, this, this, I mean, I do understand it because it's an emotional response, it's not a logical response. It's just not. It's not, it was not successful. They wind up, the union, like, they won. Carnegie and Frick win. They have the advantages. And it's an unfair world, this idea. I always tell my daughter that all the time. She's like, "Oh, that's not fair." I was like, "Do you think the world is fair?" Like, the large, outside of the human society, like, the world doesn't, fairness is not even a word to describe anything.

• 1:07:11David Senra?

  So I just,

• 1:07:14David Senra?

  what's gonna happen next, what I'm about to explain to you is, it's kind of, to me, was inevitable. Because I'm like, "Wait a minute. If these guys are willing to shoot at Pinker detectives, right? They're doing that on, at the plant. Like, they could easily go to Carnegie's headquarters where Frick is working. And they do. There's a guy who's a Russian anarchist, goes in, and he tries to assassinate Frick. And he shoots Frick twice in the neck. Then, there's like a, Frick and this other guy tackle him. The assassin pulls out a knife, stabs Frick three times. And eventually, they get the knife out of his hand, like, a bunch of people jump on him. The guy winds up going to prison. The assassin goes to prison for a bunch of years.

• 1:07:58David Senra?

  But, it's just like, to me, it's like, losing your life is, it's silly, in these circumstances. Like, and both people are at fault. It's just, you had both sides not willing to give an inch. The difference was, one side had all the leverage and all the power, and the other side didn't. And of course, we know, like, if those two go up against each other, who's gonna win? So I'm just saying, if you ever find yourself in that position, like, you gotta find a better route than that. Because you're not going to win. So instead of going through the object, go around it. And this is an example of Frick's relentless personality after the failed assassination attempt.

• 1:08:38David Senra?

  They want to take him to the hospital. He said, "No." The doctor came into his office, stitched him up, and he says, "Only after he was finished with his day's work, did Frick permit himself to be carried from the office to an ambulance that would take him to his home. And even then, he had his litter bearer stop so that he might issue a statement to the reporters." And this is a direct quote from him. "This incident will not change the attitude of Carnegie Steel Company towards the amalgamated association, that's the union they're fighting with. 'I do not think I shall die, but whether I do or not, the company will pursue the same policy, and it will win.'"

• 1:09:16David Senra?

  So I just couldn't help when I'm reading the book, I'm like, they're just, they're, both sides are making disastrous decisions. And it wind up, you know, thirty or something, so people died, Frick could have died. It just didn't have to go down this way. So, this was the beginning of the end of the partnership though, between Carnegie and Frick. So it says, "If the Homestead Tobacco set back efforts to organize American industrial labor for some forty years, as most agree, it also opened up a rift between Andrew Carnegie and Henry Frick. In some ways, what happened between them is as fascinating and consequential as the events of those fateful days in 1892." So the, you know, some press gets, the press gets wind of this, some press are on the side of capital, some are on the side of labor. Carnegie does not like being, like, he was important, the opinions of others were important to him, so he didn't like what was happening.

• 1:10:02David Senra?

  And, you know, he starts to say, like, this is basically Frick's fault. They wind up recovering from this fallout, but it was the beginning and end of a relationship. I'll get there in a minute, but, and, in the interim, I found this, this one paragraph that I thought was good life advice from Frick. And he says, he was talking to his, his second in command, he says, "You must not allow anything to discourage you in the least. Even if things do not go well for some time to come, or even if they should get much worse, just keep at it, doing the best you can.

• 1:10:32David Senra?

  Do not allow the fact that you are not getting along as well as you would like to lead you to put yourself in a compromising position." So I, I think that's good advice, it could be applied to a lot of different domains.

• 1:10:44David Senra?

  So it says, "The incident that would alter Frick's relationship with Carnegie."

• 1:10:48David Senra?

  It says Carnegie had been, so this is just another stupid thing Carnegie does. And Frick's response is just not good. "Carnegie had been interested in acquiring the coke holdings of W.J. Rainey, who was a former competitor of Frick's. Frick, however, considered Rainey a thief and saw the acquisition as a threat to his own role as the company's primary supplier of coke." Because Frick coke company's still supplying Carnegie Steel Company. "When he learned that Carnegie had actually met with Rainey without informing him, Frick tendered his resignation from the chairmanship." We've seen this before, he does it again. "He advised Carnegie to purchase his shares in the company and begin an immediate search for successor. Carnegie wrote back to Frick, dismissing his chairman's abrupt threat of resignation as unrealistic." And he's, he also, again, he's more like paternal, he's like, "Oh, just go on vacation."

• 1:11:33David Senra?

  That's not... Frick didn't want you to say that to him. So it said Frick had learned, in the interim between these replies, they're sending cables back and forth because Carnegie's in Scotland. Frick had learned that a broker was attempting to sell a block of 32,000 Frick Coke Company bonds, bonds that Carnegie had received as part of their original partnership agreement. To Frick, it was treachery beyond bounds, selling Frick Coke and marrying a thief from the same industry. And then this is when Frick's personality comes out again. Frick penned a five-page memo that can only be described as a jaw dropper, so I'm going to quote from that. "Mr. Carnegie, it is high time you should stop this nonsensical talk about me being unwell,

• 1:12:14David Senra?

  overstrained, etc., and treat this matter between us in a rational, businesslike way. Why do you write such stuff? I warn you to carry this no farther with me, but come forward like a man and purchase my interests and let us part before it becomes impossible to continue to be friends. I desire to quietly withdraw, doing as little harm as possible to the interest of others, because I have become tired of your business methods, your absurd newspaper interviews..." Oh, this is gonna, this is painful. "...and your personal remarks and unwarranted inferences in matters you know nothing about." So remember, this is, he's saying this to somebody who's used to subordinates, just like listening to his every command. Frick was not that kind of person. Okay, so they reconcile even after this.

• 1:12:58David Senra?

  A year or two later, this is the deal that causes them, even though they reconcile, they were never like kind of the same and this has just broke it. And this is just a weird thing all the way around. They got real petty, considering both of them at the time were unbelievably wealthy. So Frick wanted to sell all his holdings and basically cash out. But something stopping him, he says Frick might have sold their holdings even earlier. It's using their, so he's naming Fricks, these other two guys are doing the same thing, they're also shareholders. I'm removing their names because it's confusing. So it says Fricks might have sold their holding even earlier, but for the existence of one major stumbling block, the ironclad agreement of 1887, which all had signed. So this is an agreement they signed about 13 years prior. And it says, "According to its provisions, which were meant to protect the other partners

• 1:13:41David Senra?

  in the event of Carnegie's untimely death, a partner who wished to retire could do so, but his shares would be redeemed at book value in the payment made in installments." Here's the problem with that. Since Carnegie had always opposed periodic re-evaluation of the company, the book value of Carnegie Steel in 1899 remained at 50 million, even though the most conservative estimates place its true value between 200 and 250 million. It actually sells for 200 more million above that. So I think so is for 480, 480 million, like a year or two later. It's also a private company, remember that at the time, that becomes important.

• 1:14:15David Senra?

  So Carnegie's adamant, like, "I'm not revaluing the company. If you want to do it, you have to do it at that book value." Well, that's, you know, that's not, that's ridiculous. You're gonna lose 90% of the value. Why would you do that? So they go and try to find buyers. Frick tries to find a buyer for the whole company because he knew Carnegie would sell out for the right price. But this is also weird too, what he does here. So it says, "The impasse was finally broken in April 1899, when Frick informed Carnegie that he had been approached by a buyer willing to meet the $250 million price. Under their proposed terms, Carnegie would receive $157 million. After agreeing to the terms, Carnegie asked Frick who the prospective buyers were. This is the weirdest thing. Frick told Carnegie that he had been sworn to secrecy by the prospective suitor,

• 1:14:58David Senra?

  and that they were acting solely as intermediaries." What? That's ridiculous. Like, tell them who the buyer is. There was one thing as well. The buyer was asking for a 90-day option to prepare for this sizable transaction. Carnegie must have worked hard to conceal his incredulity. Just how naive did his partners think he was? Yes, they were all friends and longtime associates, but this was business, and very big business at that. For all he knew, there was no buyer, and Frick could be asking him to sign an irrevocable agreement to sell at a fixed price. So he's like, "Listen, I'll give you, I'll still go ahead even if I don't know who these people are, and I'll give you this option, but you have to pay me a non, uh, on, uh, $2 million for that 90-day option.

• 1:15:41David Senra?

  I'm gonna charge 2 million and it's, uh, it's non-refundable even if the deal falls, falls through." Of that 2 million, uh, 170,000 of it is Frick's, which is weird too. So winds up, leaks who, who's gonna, who's the sellers are. Carnegie doesn't like these people. He's like, "I'm not selling. This is not gonna happen." And it winds up, they couldn't come up with the money in 90 days anyways. And he keeps Frick's $170,000. So... Frick winds up with 70 million later on. Carnegie winds up with like 300 million and their relationship falls out largely over $170,000. I mean, it's just, this is what I mean about like, you can learn a lot of good from these guys and you also learn like this is ridiculous.

• 1:16:27David Senra?

  So now Carnegie starts moving against him. He's like, I'm kicking this guy out of all my companies. So he wants, he wants to get, he wants Frick out of Carnegie Steel and he wants Frick out of his own company. So he tries to buy, to like, to, um, he wants to merge the companies together. So it says, Frick replied through clenched teeth that he might be willing to permit a merger, provided the newly formed company would be capitalized at no less than 150. What he means by that is Carnegie Steel merging with the Frick Co. company. Though the figure was low in comparison to what he believes the new entity would be worth, it would have netted Frick just a little more than half of an outright sale of Carnegie for 250 million. So he's just trying to increase, remember, he wants that book value reassessed.

• 1:17:10David Senra?

  Carnegie would have nothing of it. There would be no reevaluation of their holdings, he insisted. This is what, they're both acting emotional. Like, they're not caving here. If Carnegie had entertained the slightest hopes of patching things up, Frick's latest invective dashed them completely. It was Carnegie's intention to abolish the office of chairman once and for all. So Carnegie owns the board seats on both companies. So he basically pushes Frick out, even though Frick still has his, his, um, his stock, his equity. So it says, and he wants getting Frick kicked out of the company he started himself and off Carnegie's board, uh, steel, the steel board. Never had a coup d'etat gone more smoothly, or so it must have seemed. With the troublesome Frick out of the way at last, Carnegie could only envision smooth sailing.

• 1:17:54David Senra?

  But then, so did the passengers on the Titanic.

• 1:18:01David Senra?

  Actually, no. I got a little bit ahead of myself. They, he kicked, um, Carnegie kicked Frick out of Carnegie Steel. He's still on the, the board of, um, HCF Coke, Henry Frick Coke. So this is actually where he kicks him out of his own company. So it says, um, "There are matters to be attended to in the wake of Frick's ouster, of course. The question of Coke prices to Carnegie Steel had not been settled, and despite his resignation from the chairmanship at Carnegie, Frick remained the chairman of the board of Henry Frick Coke." Carnegie and Schwab had put a contingency plan into effect, however. At the board meeting of HCF Koch in early January of 1900, Carnegie saw to it that a new membership was elected,

• 1:18:43David Senra?

  one that reflected his and his loyalists' controlling interests in the company. The five new Carnegie men on the seven-member board of HCF Koch got quickly down to business, abolishing the office of chairman and leaving the company in the control of its president, some guy named Thomas. Frick, though still a member of the board, could do nothing. Deposed for a second time through the machinations of Carnegie, and now dropped from the very company he had founded, he simply walked out of the meeting in silent protest. And now, so, as I said before, both of their behaviors are kind of childish. If you look at it now in hindsight,

• 1:19:25David Senra?

  that they were clearly just emotionally angry at one another and tried to lash out at each other any way they could. This next thing is just ridiculous. And this is a mistake Carnegie makes. And then the way Frick responds, there's actually some good strategic moves he makes here. So I want to talk to you first about what Carnegie does and then how Frick responds. So Carnegie goes and meets Frick about a week later. Let's see. At his office. She says, as he handed over the document, Carnegie explained that on January 8th, the day before the meeting at which Frick had been deposed from his own company, there had been a special session of the Carnegie Board of Managers, meaning the steel company.

• 1:20:07David Senra?

  "They had just one piece of business, and here," said Carnegie, "was its result."

• 1:20:13David Senra?

  "What Frick read was as unmistakable as it was infuriating. As Frick had proven to be both an obstruction to the continued and efficient operation of the mighty Leviathan of Steel," the document stated, "the board had no choice but to invoke the provisions of the Ironclad Agreement. Frick's interests in the company must forthwhile be surrendered, his compensation fixed at book value and not a penny more. Frick would receive about $1.5 million for the stock that was worth at least 10 times that much." And that's actually where it winds up getting, it's arguably worth about 40 times that much.

• 1:20:58David Senra?

  And so this is Frick's response, kind of predictable response now that we've gone over his personality at length. And he says, "Frick was on his feet by now, his chair tipping backward with a crash." And this is a quote from Frick. "For years, I've been convinced that there's not an honest bone in your body. Now I know that you are a goddamn thief. He crumpled up the document and tossed it aside. We'll have a judge and jury decide what you are to pay me. He spun around his desk, advancing on Carnegie with his fists raised." So they go on to talk about the people that witnessed this, basically Frick chased after Carnegie, trying to basically beat him up. And Carnegie was barely managed to escape.

• 1:21:42David Senra?

  Now, they moved very, very fast. So this, what I'm about to describe you happens rather quickly, although the first part happens rather quickly. And this is just a good strategic move on Frick's part. So he goes, "Okay, well, he told his adversary what he's gonna do. He's like, "I'm gonna, you know, I'm not gonna accept 1.5 million dollars for something that's worth so much more. So I'm gonna contest you in court." To do that, though, he, um, Frick hires, so this ironclad agreement, Frick hires as his attorney to represent him, the attorney that made the ironclad agreement. And he moved so fast, he called them right away.

• 1:22:23David Senra?

  The next day Carnegie goes to the same person, trying to get him, try to hire him to represent him. He's like, "I can't, I'm already representing Frick." So it says Frick had, and this guy's name's Phipps. "Frick had Phipps poring over the fine print of that storied ironclad agreement. Since it was Phipps' brainchild in the first place, he was the logical person to discover his faults." That's a really good idea, or its faults. "And soon enough, he had found them." So he realizes, hey, there's like a bunch of revisions to the document and some of which seem to exclude certain partners and then some of them didn't even sign the agreement. So, but, so Frick immediately seizes the advantage, but what's so fascinating, remember I told you to remember that Carnegie's company was private?

• 1:23:07David Senra?

  Frick does something really smart. So he files suits again, files suit against him. It says, "Frick filed suit, charging, among other things, that Carnegie had unjustly attempted to force him out of the company and acquire his holdings at a sum far below their value." And so by pushing this lawsuit, he's opening up Carnegie to discovery, which means that everybody's gonna get to see Carnegie's books and Carnegie does not want that. He says, "Most distressing to Carnegie was the fact that the details of the company's business affairs were laid out in the accompanying brief. If the suit actually went forward, the public would, for the first time, learn details of the immense profits being generated by Carnegie's enterprise."

• 1:23:49David Senra?

  Now, keep in mind the overall, the overall like picture here. Carnegie's and Frick were both rightly criticized for their handling of the strike. And the strike was only happening about seven years earlier from the time point we're in now. It was widely recovered, people knew about it, and you know, they're trying to basically nickel and dime their, they're nickel and diming their employees. And if this came out that the company was making forty million dollars in a year, like that would be very, very bad for Carnegie. So it's actually smart for Frick to push this and you will see that it benefits him greatly. "To Carnegie, that such, that such information concerning the inner workings of the company

• 1:24:34David Senra?

  should be made public was an affront, an embarrassment, and most important, a disadvantage to doing business."

• 1:24:43David Senra?

  If he were to prove in court, for instance, that the value of Carnegie Steel was just a fraction of what Frick claimed, how, and this is another point. So it's like, one of Carnegie's contentions, like, I'm not increasing the book value because, you know, I don't need to change it. It's still stuck at, I think, fifty million dollars. But then the problem was, then, if you have to prove that point, it's different if you, maybe your few partners know that. But when you're proving and making it public, then everybody thinks that the value of fifty million dollars was. So Carnegie's like, oh crap, he's got me here. He says, "If he were to prove in court, for instance, that the value of Carnegie Steel was just a fraction of what Frick claimed, how on earth would he attract a buyer willing to pay what he privately knew the company was worth?" And he wanted to find a buyer. He wanted to be done with it.

• 1:25:24David Senra?

  "In the end, and for once, reason prevailed between the two men, and a compromise was laid out." So that's what, basically, that was my takeaway here. It's like, they wind up doing this agreement, I'm gonna tell you the details, and I'll close on that, but there's no reason, there's no logic, there's no smart business sense towards the end. This is really a tale for us to realize that, you know, even people that achieved monumental monetary success, they're still humans. And, you know, we're all prone to get this kind of behavior, and hopefully, we keep our emotions in check, and we just make better decisions. Because, you know, they could've sat down as friends, I understand they were both hurt by each other, and that's caused a lot, you know, I completely understand that.

• 1:26:07David Senra?

  But let some time pass, cool down, sit down and talk it out, and, you know, come to an agreement. Frick didn't have to do what he did. Carnegie certainly didn't, you know, Carnegie's saying, "The company, you're only getting one point five million," when this guy's, you know, he made you tens and tens of millions at that point. It just was unnecessary. So I like what the author says here, he's like, "For once, reason prevailed between these two men." Because for a very long time, they were very logical about how they ran their business. It's interesting, they almost went from, they went too far on either end of the spectrum. It's logical to control costs, but it's not logical to control costs to the point where you're like, people are getting paid a dollar twenty a day to work twelve hours, you know,

• 1:26:49David Senra?

  people die, it's molten, like, it's just, people, plenty of people die in this line of work. It's very risky. They talk about, like, people would come to work at Carnegie, and one guy in particular, after three weeks, he sweated so much because of the heat and the physical labor, he lost forty pounds. Like, this is very backbreaking work. So... If you're gonna run a business and you're making a lot of money, I do think it's right to share that with your employees. And I think history has proven that point right, because when you tilt too much in the favor, and this is speaking, I'm very much a capitalist. But you should want to, if people are helping you make money, you should reward them. I think that's the right thing to do.

• 1:27:29David Senra?

  I understand keeping control of costs and leveraging technology, please, you know, I think that's a good idea. But there is some fun, we are human beings, and humans and numbers are very different. And there has to be some kind of fundamental level of dignity.

• 1:27:44David Senra?

  And so they were too far on that end, right? They took their logical, the logical conclusion to controlling costs too far to the extreme. And then now, a few years later, they're all the way on the other end of the spectrum, which is no logic and all emotion. And what I learned from the book is like, you gotta be in the middle there. Like, okay, so Carnegie, you don't end up with 300 million, maybe you end up with 250 million, and that 50 million dollars was spread to employees that help you, you know. Do you see what I'm saying here? Like, you didn't need, at a time where you could buy, he buys like a castle, I think, for like 80,000 dollars, and equivalent there was something, I don't know, like 5 million or whatever, whatever the number was. I don't recall at the moment. You could have shared more of the money.

• 1:28:28David Senra?

  And if you shared more of the money, you wouldn't have had all the bad publicity, and you didn't want the bad publicity, because you've even said, like, it's important to you what other people think of you. So I guess that's just, regardless of success, and regardless of competency in business, we're all prone to make these mistakes, and I think we should all keep that in mind and realize that, you know, things can get out of hand really quickly. In this case, it destroyed a friendship and a partnership that was very successful for 20 years. In some cases, it wound up Frick getting almost assassinated, other people dying. Like, none of this stuff had to happen. So that's definitely what I took away from it. Like, there was no logic or reason for this. And, you know, we're all prone to make these same mistakes. Think about the last time you were extremely furious, the way you reacted, you know?

• 1:29:09David Senra?

  I guarantee your best decisions that you ever make in your life are not usually when you're either angry or depressed or over, like, more emotional than you normally are. And we're seeing, you know, these two men definitely gave way to logic and gave into their emotion. Alright, so the compromise was laid out. Carnegie Steel is to be valued at 250 million, and Henry Frick Coke to be valued at 7 million. And then the two companies would be merged. So again, the book value was not 50 million. It's 320 million here, right?

• 1:29:47David Senra?

  Well, let me get, I'll tell you that in a minute. So it's 320 million here, okay? Remember that he accepted an offer a year before for 250, 250 million. Now they're saying the value of the company is at 320 million. And it says, "As a result of the agreement, Henry Clay Frick would remove himself from any role in the management of the new company. Perhaps it had cost him a job and the friendship of Andrew Carnegie. Then again, he had 31 million from which to console himself." Okay, so that 31 million actually goes to about 70 million. Because about a year or two later,

• 1:30:21David Senra?

  the company is not valued at 320 million. He actually sells to JP Morgan and another collection of investors for, I think, 480 million dollars. So that increases Frick's equity in the company from 31 up to, right around 70 million is what, is what he walks away with.

• 1:30:42David Senra?

  And that's where I'm going to leave this story. I will go into more detail. I'm going to do a podcast on both the biography of, the autobiography of Andrew Carnegie and the biography of Henry Frick. I think they're both really interesting people we can learn a lot from. If you like this story and you want to pick up the book and support the podcast at the same time, if you like the podcast, you'd probably like reading the book because I've barely scratched the surface. There's a lot of interesting storytelling, just like I do in every book. So you can go to amazon.com forward slash shop, forward slash founders podcast. There you'll see every single book. I think I'll, close to 70 books by now that I've done for the podcast. And if you purchase a book using that link, Amazon will send to me a small percentage of the sale and no additional cost to you.

• 1:31:24David Senra?

  And again, the URL is amazon.com forward slash shop, forward slash founders podcast. If not, just look in your podcast player and I include the link in this and every other podcast. And one last thing before I go. As you just saw, I just presented this entire podcast. I have no ads. So if you get value from my work, if you're learning from my work, and if you want more exclusive podcasts, sign up for the Misfit feed. Misfit feed link is in the show notes. Available on your podcast player within 10 to 15 seconds, maybe 10 to 20 seconds. You can sign up. It costs as little as $5 a month. You'll get access to all the exclusive Misfit podcasts I've done so far, plus two exclusive podcasts every month that only people that sign up for the Misfit feed get. So sign up for the Misfit feed, and in 10 to 20 seconds,

• 1:32:07David Senra?

  you'll be listening to exclusive Misfit podcasts. Thank you very much for listening. Please tell a friend, and I will talk to you next week.