Background
John Warne Gates was born on May 8, 1855, near Turner Junction, now West Chicago. He was the son of Asel Avery and Mary (Warne) Gates.
John Warne Gates was born on May 8, 1855, near Turner Junction, now West Chicago. He was the son of Asel Avery and Mary (Warne) Gates.
Gates received his schooling at the village academy and at North-Western College, Naperville, where he graduated from a six months’ commercial course in 1873.
The manufacture of barbed wire for fencing was an industry just then beginning to have some importance because of the opening of wide tracts of western land, on which rail-fencing could not meet the ravages of fire, wind, and cattle.
Gates saw here a field for business enterprise, and, with an audacity that deserved success, sought out Isaac L. Ellwood in 1878 and offered to take a partnership in his wire-manufacturing concern.
Ellwood was sufficiently impressed to hire him as a traveling salesman at twenty-five dollars a week. Finding that the Texas ranchers to whom he tried to sell the wire were skeptical of its usefulness, Gates rented a tract at San Antonio, built a corral of the wire, and issued a challenge to the ranchers to let their best Texas steers test its endurance.
The wire emerged the victor and orders came rushing in. It was a display of salesmanship that was symbolic in inaugurating his business career.
Feeling that where he had tapped so copious a source of profits he had a right to more than the drippings, he turned from salesman to entrepreneur and decided to fill the orders himself.
He found a partner with some capital and set up his manufacturing plant in St. Louis. This enterprise involved him in legal complications with Ellwood, but Gates exhausted his opponent by ingeniously moving his plant from one side of the river to the other to avoid the service of injunctions, and they finally reached an agreement.
He then turned his attention to the art of “putting together, ” as he phrased it, the various wire interests. A series of consolidations starting in 1880 led finally in 1898 to the formation of the American Steel & Wire Company of New Jersey, with a capitalization of $90, 000, 000. The series of steps by which this was accomplished was traced by himself in 1902 in his testimony on the witness stand in Parks vs. Gates.
Each successive consolidation bought up the stock of the previous one at more than its par value and issued its own stock at considerably more than the appraised value of the constituent properties.
In 1894, Gates had succeeded Jay C. Morse as president of the Illinois Steel Company as Morse’s personal choice. This company supplied the iron and steel rods out of which the wire of the Consolidated Steel & Wire Company was made, and Gates managed to pull it out of the non-dividend-paying class of enterprises and make it yield profits.
When Carnegie expressed an intention of retiring from his interests it was Gates who saw more clearly than anyone else the possibilities of a huge steel combination. While Frick, Gary, and Moore in 1899 discussed terms for such a merger, Gates “hovered around the negotiators” and broached the idea of a billion-dollar corporation.
In 1896, he managed a speculative operation of some importance in Chicago gas; in 1897 he was reputed to have cleared twelve million dollars in Wall Street in connection with his wire interests; he was charged by some with having precipitated something of a panic in 1900 through his operations.
It was chiefly as a marauder that he was known and feared on the Exchange. Once an unfortunate speculation in the Chicago Grain Exchange wiped out his fortune, but he kept quiet about it, maintained a brave front lest his credit fail, and managed in a short time to retrieve his losses.
One of his boldest exploits carried off with the greatest eclat, led eventually to disaster. At a time when J. P. Morgan needed the Louisville & Nashville Railroad in connection with a consolidation he was managing, Gates secretly gained control of it and resold it to Morgan for a fancy price.
Morgan, according to the version published by Gates’s private secretary, pretended to be amused, extended Gates a good deal of credit on collateral, manipulated a drop in the price of the securities, and then dictated his terms. The terms were that Gates was to forsake the New York Stock Exchange for good.
Whatever the authenticity of his account Gates did retire from New York in his prime. He chose Port Arthur, Texas, at that time a town of less than ten thousand, as his next field of operations.
There he invested in the Spindletop Oil Field and organized the Texas Company as an independent concern. He owned a large portion of the real estate of the town and controlled its industries. Though his operations were now on a small-town scale, he showed an undiminished zest for them.
He was like a Napoleon banished to St. Helena and reduced to organizing the warfare of the islanders. But he talked, gambled, invested, and promoted as though he were still in New York. He died in Paris, August 9, 1911.
The American Steel & Wire Company was Gates's greatest industrial achievement and with it, he became the head of the wire industry of the country. He participated in the formation of the Republic Iron & Steel Company, and in 1906, he was part of the syndicate which took over the Tennessee Coal & Iron Company in an effort to break the impact of the impending panic. To the general public Gates was best known as “Bet-you-a-million Gates” because of a reputed audacity of conviction that sought always concrete expression. In 1971, Gates was honored with a state historical marker at the site of his Military Plaza barbed wire demonstration in San Antonio.
Gates's work a testimony to his shrewd financing and to the upward swing of conditions in the wire industry, that, even after the “watering” process, the stock rose in value on the Exchange.
But he was of that new type of captain of industry whose principal activity consisted not so much in the working out of the technical and managerial arrangements of a particular enterprise as in the floating of a variety of new enterprises and the gathering of capital for them.
His chief talent lay in a promotion. His geniality, his contagious enterprise, his ready flow of talk, his masculine tastes for hunting, gambling, and traveling, and the tradition of financial success that attached to any one who joined the “Gates band-wagon” gave a persuasiveness to any project that he proposed.
He was overbrimming with energy: he was, in the words of his secretary, “a great boy with an extraordinary money sense annexed. ” In addition, he had an intuitive knowledge of how to adapt the methods of his approach to the particular individual. These talents found their best expression in the steel industry.
He was certainly somewhat open in his expressions of an aleatory philosophy. A fatal passion for speculation and a restlessness of imagination conditioned the greater part of his business activity.
He left no dynasty. Gates was one of the most vigorous and colorful figures in American finance. His significance may be said to lie chiefly in the application of the rough qualities of the frontier to the realm of Big Business. He was intuitive and resourceful rather than intellectual - David Hamm was the only book he ever mentioned as having read. Later, in life he added the veneer of the plutocrat: he maintained a hunting castle near Paris and in his New York apartment he hung Corots and Meissoniers. With as high an endowment of natural gifts as any businessman of his day, he fell short of genuine business leadership by the lack of a mature sense of public responsibility.
At twenty-one, Gates married Dellora Baker, of St. Charles, Illinois.
