U.S. Steel Born: World's First Billion-Dollar Firm

J.P. Morgan did not merely form a company; he assembled a colossus. When United States Steel was incorporated on February 25, 1901, it became the world's first billion-dollar corporation, capitalized at $1.4 billion at a time when the entire federal budget was roughly $500 million. Morgan had consolidated Andrew Carnegie's steel empire with Federal Steel, National Steel, and several smaller producers into a single entity that controlled two-thirds of American steel output. The deal's origin was a dinner conversation. Carnegie had been making threatening noises about expanding into finished products like wire and tubes, territory dominated by Morgan's clients. Morgan, who viewed industrial competition as wasteful chaos, decided it was cheaper to buy Carnegie out than to fight him. The negotiation was handled by Carnegie's lieutenant, Charles Schwab, who made the pitch at a famous dinner at the University Club in New York. When Morgan asked Carnegie to name his price, Carnegie scribbled $480 million on a slip of paper. Morgan glanced at it and said, "I accept." Carnegie later told friends he should have asked for $100 million more. The corporation Morgan created employed 168,000 workers and produced more steel than any country except the United States itself. Its mills stretched from Gary, Indiana — a city built from scratch and named after U.S. Steel's chairman, Elbert Gary — to Birmingham, Alabama, where the company absorbed the Tennessee Coal, Iron and Railroad Company in 1907. The federal government filed an antitrust suit in 1911 to break up the trust, but the Supreme Court ruled in 1920 that mere size was not a violation of the Sherman Act. Morgan's creation defined the scale of twentieth-century industrial capitalism. At its peak, U.S. Steel produced sixty-seven percent of all American steel. But the company's enormous debt load and cautious management made it slow to innovate. Competitors, especially Bethlehem Steel under Charles Schwab (who had left U.S. Steel), adopted new technologies faster. By the century's end, U.S. Steel's market share had fallen to eight percent, a monument to the paradox that size can be both a corporation's greatest asset and its heaviest burden.