its book value. The young men were not permitted to assume any financial obligation, and not until their share was fully paid by the profits, and there was no further liability upon it, was it transferred to them. Thus thoughts of possible loss never prevented concentration upon their daily duties. They were not absorbed in the daily quotations, for the shares were not upon the stock exchage or transferable. This policy resulted in making some forty odd young partners, a number which was increased at the beginning of each year.

We did not fail to see, as the works enlarged, how much success depended upon the mechanical men, the superintendents and foremen, yet not one of these had up to that time been admitted as partner. The business and the mechanical men-office and mill-were still widely separated. Well do I remember the first attempt to bring these two departments into closer relations. It was made with our Captain Jones, well known and appreciated as being in the foremost rank of managers, perhaps the foremost of his day in America. He came to us as a working mechanic at 8 shillings per day. I explained to the captain how several of the younger men in the business department had been made partners and were actually receiving much greater rewards than he, while his services were at least equally valuable, and informed him that we wished to make him a partner. I shall never forget his reply. "Mr. Carnegie, I am much obliged, but I know nothing about business and never wish to be troubled with it-I have plenty to trouble me here in these works. Leave me as I am and just give me a thundering salary." "Hereafter," I said, "the salary of the president of the United States is yours, Captain," and so it remained till the sad day of his death. My seniors, the presidents of the other manufacturing concerns, did not fail to take me to task for ruining the steel business by paying a mechanic more salary than any of them received. Being much the youngest of these great dignitaries, I humbly confessed my wrongdoing, not, however, failing to inquire if they knew where we could find two or three more Captain Joneses at double the price. We did not overpay the captain; he was worth several ordinary salaried presidents. The cap

tain's declination of partnership was the only one which ever came within my experience. None of the other mechanics ever preferred salary to partnership, and they were wise. Nothing can compare with that form. From that time forward the union of the mechanical and business partners went steadily forward until no manager of a mill was without his interest in the business, as pertaining to the position, and no board of management, or important committee, was without a mechanical representative. Thereafter mill and office conferred upon all important sales or contracts. The mechanic and the man of affairs were in constant consultation and fellow partners-one of the most profitable changes that ever we made.

There was another step taken in the same direction. Men having others under their charge were given an interest in the proceeds, or savings in cost, in their department. Where it was impossible to decide the limits of a department, the managers were rewarded by handsome bonuses beyond their salary, based upon the general profits of the year. Thus, as a rule, every man in authority became more than a mere wage earner. He felt himself on the first step of the ladder which led to partnership sooner or later, and was worth any two mere employees paid only a daily or monthly wage and denied special recognition.

This plan of reward according to results for heads of departments has already become so general and is spreading so fast we may be sure it has proved its efficiency. There are few large department stores or important houses in retail trade which have not been forced to adopt it.

This plan is probably bound to prevail to greater or less degree in manufacturing concerns, and the sooner the better, for the greater number of the workers capital can compensate, and in one sense reward, by sharing its gains, the more harmonious and therefore more profitable for both must the relationship become.

The great secret of success in business of all kinds, and especially in manufacturing, where a small saving in each process means fortune, is a liberal division of profits among the men who help to make them, and the wider distribution

the better. There lie latent unsuspected powers in willing men around us which only need appreciation and development to produce surprising results. Money rewards alone will not, however, insure these, for to the most sensitive and ambitious natures there must be the note of sympathy, appreciation, friendship. Genius is sensitive in all its forms, and it is unusual, not ordinary, ability that tells even in practical affairs. You must capture and keep the heart of the original and supremely able man before his brain can do its best. Indeed this law has no limits. Even the mere laborer becomes more efficient as regard for his employer grows. Hand service or head service, it is heart service that counts.

One of the chief sources of whatever success may have attended the Carnegie Steel company was undoubtedly their policy of making numerous partners from among the ablest of their men, and interesting so many others of ability in results. I strongly recommend this plan, believing that in these days of threatened exhausting competition it will be the concerns which adopt this plan, other things being equal, which will survive and flourish.

In no field is the wise saying more amply verified than in manufacturing: "There be those who gather, yet scatter abroad, and there be those who scatter abroad, yet put into barns."

If the managing owners and officials of great corporations could only be known to their men and, equally important, their men known to their employers, and the hearts of each exposed to the other, as well as their difficulties, we should have in that troublesome field such harmony as delights us in the field of domestic employment. It is mainly the ignorance of contending parties of each other's virtues that breeds quarrels everywhere throughout the world, between individ*uals, between corporations and their men—and between nations. "We only hate those we do not know" is a sound maxim which we do well ever to bear in mind.

In the progress toward more harmonious conditions between employer and employed we see that the system of payment by fixed wage has been largely supplanted by payment according to value of service rendered by workmen in posi

tions of authority over others, and by recognition not only in money, but in position, which often counts quite as much as coin, and not seldom much more with the ablest. There remains still receiving the fixed wage the great mass of ordinary workmen; but we see in the history of the relation of employer and employed that these have not failed to rise greatly also. The movement tending to improve the position of the worker has not passed over even the humblest, but has reached and benefited all.

To-day we have reached the stage of perfect equality between the two contracting parties. Each is free to demand terms or to terminate agreements. Labor is worthy of its hire and is now paid this in coin, the law in many lands going so far as to make its claim a first charge upon the employer's property-a great advance. But the irresistible pressure which has forced change after change in the relations of capital and labor still operates unchecked-a sure indication that the final stage has not yet been reached. We have evidence of this in another important advance, the sliding scale, which provides not a fixed wage but in some degree settles by results. Increased demands bring higher prices and profits to the employer, which in turn bring workmen higher returns, so that as the employer's profits rise and fall, so do the workman's rewards. If I were asked what was the best service the Carnegie company were ever able to render the wage earner, next to giving steady employment of wages equal to any, I should answer, by persuading them to adopt the sliding scale, with a minimum insuring living wages, at their works at Braddock fourteen years ago, which has given perfect satisfaction from that day to this and is still in force, and has produced undisturbed harmony between capital and labor. The sliding scale is a great advance over the fixed wage, not only by securing the workman a prompter and more certain share of the profits, but also because it raises his status. He is something akin to a proprietor when he shares varying profits instead of having merely a fixed wage. He has risen in the scale and is more of a man, and the more of a man the better and more valuable the workman.

While the Carnegie Steel company interested their young men as partners and were always anxious to reward exceptional service, and carried the bonus system to an extent, perhaps unknown, in any similar organization, the masses of the ordinary workmen could not be embraced under the limited partnership form, even if it had been thought desirable that their savings should be so invested. The objection to this from the point of view of the workman, which always arose in our minds and which we were never able to surmount, was the sad and instructive history of the largest manufacturing concerns, especially those of iron and steel.

More than once in the history of the Carnegie Steel company leading partners have been so doubtful of their future as to beg their more optimistic senior partner to buy large amounts of their interests at actual cost.

It is an instructive fact that the majority of the principal of these in the United States have, at some period in their career, either been in the hands of receivers, been mortgaged, reorganized, or sold by the sheriff to the great loss of their original owners. Indeed, those who have escaped financial trouble are the exceptions. The great Cambria Iron company were twice in trouble and once sold by the sheriff; Joliet works were also sold; the Bethlehem company have twice been mortgaged; the 6 per cent first mortgage bonds of the immense Chicago works have sold for as low as 70 per cent, and their shares at less than one half of their par value. The Troy Iron and Steel company have lost heavily and undergone several reorganizations. It may be said that these disasters are of the distant past, but history has a way of repeating the past which we do well to remember. The Pennsylvania Steel company have in recent years been in the receiver's hands. Their shares in demand at $300 in 1881, sold in 1893 as low as $20. There was no over capitalization in any of these companies. Only actual cash counted. In 1903 the Consolidated Lake Superior company was embarrassed-after investing of cash capital $34,000,000. Their preferred shares, which recently sold for $80 per share, are quoted on the exchange at $15.50. The common stock, last year at $36 per share, sold for $4. Our oldest and largest shipbuilding company