Chapter 9. Fourth He Goes.
1. Life in this financial limbo would have exactly suited the placid temperament of our organization but for the distracting activities of Galt.
With Valentine's permission, he took that old vice president's desk in Harbinger's office and began to keep hours.
Such hours! He was always there when Harbinger arrived.
At ten he went to the stock exchange, at three he returned.
He was still there when Harbinger went home.
The scrub women complained of him that he kept them waiting until late at night.
Sometimes for that reason they left the room unswept.
Insatiably he called for records, data, unheard of compilations of statistics.
He wrangled with John Harrier, the treasurer, for hours on end over the nature of assets
and Past Accounting.
Their voices might often be heard in adjacent rooms, pitched in the key of a fish-wife's
quarrel.
Harrier was an autocratic person whose ancient way of accounting had never before been challenged
nor very deeply analyzed.
With so much laxity at the top of the organization, he had been able to do as he pleased.
And being a pessimist, his tendency was to undervalue potential assets, such as lands,
and developed oil and mining rights and deferred claims.
Gradually he wrote them off, a little each year, until in his financial statements they appeared as nominal items.
His judgments were arbitrary and passed without question.
This had been going on for many years.
The result was that a great deal of tangible property, immediately unproductive, yet in fact very valuable, had been almost lost sight of.
The Great Midwestern, like the country, was richer than anybody would believe. And nobody cared.
Live working assets were in general so unprofitable, especially in the case of railroads, that dormant assets were treated with contempt.
Galt valued them. He knew how Harrier had sunk them in his figures and forced him step by step to disclose them.
They are at it again, Harbinger said, coming in one evening to sit for a while in my room,
bringing some papers with him.
Who?
Galt and Harrier.
I can't think for their incessant canter-walling.
How do you get along with him?
I asked.
With Galt?
He makes me very uncomfortable.
There's no concealing anything from him.
Do you still dislike him?
Oh no, that wears off.
I've been watching his mind work.
It's a marvellous piece of mechanism.
He went on with his work.
I know at last what he's doing, he said suddenly.
What?
He's developing a plan of reorganization.
That was true.
I had known it for some time.
He accumulated his data by day in the office and worked it up by night in his room at home.
He showed it to me as it progressed.
There was a good deal of writing in it.
The facts required interpretation.
He was awkward at writing, and I helped him with it, phrasing his ideas.
The financial exposition was one part only.
There was then the physical aspect of the property to be dealt with.
When it came to that, he spent six weeks out on the road.
Three days after he set out on this errand, we began to receive messages by telegraph
from our operating officials, traffic managers, agents and division superintendents to this
effect.
Who is Henry M. Gault?
At Valentine's direction, I answered all of them, saying, Treat Henry M. Gault with
every courtesy.
He went over every mile of the right-of-way, inspected every shop and yard, talked with
the agents and workmasters, and finally scandalized the Department of Traffic by going through
all the contracts in force with large shippers.
He studied traffic conditions throughout the territory, had a look at competing lines,
and conferred with bankers, merchants and Chamber of Commerce presidents about improving
the Great Midwestern service.
He returned with a mass of material, which we worked on every night feverishly, for he
was beginning to be very impatient.
The physical aspect of the property, having been treated from an original point of view,
There followed an illuminating discussion of business policy.
Goodwill had been leaving the Great Midwestern, owing to the unaccommodating nature of its
service.
This fact he emphasized brutally and then outlined the means whereby the road's former
prestige might be regained.
Never had a railroad been so intelligently surveyed before.
The work as it lay finished one midnight on Galt's table represented an incredible amount
of Labor. More than that, it represented creative imagination in three areas, finance, physical
development and business policy. The financial thesis was that the Great Midwestern should
be reorganized without assessing the stockholders in the usual way. All that was necessary was
to sell them new securities on the basis of dormant assets. This was a new idea.
Have you done all this in collaboration with the bankers?
I asked him.
No, he said.
They have a plan of their own.
My next job is to make them accept this in place of theirs.
That's why I've been in such a sweat to get it done.
What inducement can you offer them?
Mine is the better plan, he said.
It stands on its merits.
What will you get out of it, I asked.
He looked very wise.
That's the crow in the pie, Coxie.
He got up, stretched, walked about a bit, and stood in front of me, saying,
I'll get a place on the board of directors.
I'll be one of ten men in a boardroom.
Everything else follows from that.
Two
A railroad has its own bankers, just as you have your own dentist or doctor.
They sit on the board of directors as financial experts.
They carry out the company's fiscal policies.
They sell its securities to the public for a commission.
They lend it money while it is solvent, and when it is insolvent, they constitute themselves
a protective committee for the security holders, and get all the stocks and bonds deposited
in their hands under a trust agreement.
Then, in due time, they announce a plan of reorganization.
Mordecai and Company were the Great Midwestern's bankers.
The Theory of Money and Credit
The profession of dynamic man is arms. It has never been otherwise. Only the rules and
Blood Weapons Change, He Makes a Tilting Field of Business, The Blood Weapon is Put
Away, Killing is Taboo, But the Struggle is There, If You Look, Essentially Unchanged,
Men are the Same as Always.
Wall Street is a modern jousting place, the gates stand open, anyone may compete, there
is no cast, the prizes are unlimited, the tournament is continuous, capital is not essential,
One may borrow that, as the stranger knight of ancient time, bringing only his skill and
daring, might have borrowed lance, horse, and armor for a trial of prowess.
To this field of combat you must bring courage, subtlety, nerve, endurance of mind, and swift
imagination.
Given these qualities, then to gain more wealth and power than any feudal lord, you need only
Only one inch more than the next longest lance of thought.
You have only to outreach the vision of the champions to unhorse them.
There is no mercy for the fallen, no more than ever.
The new hero is acclaimed.
He may build him a castle on any hill, and with his wealth command the labor of tens
of thousands.
But he must still defend his own against all comers in the marketplace.
In time he will meet one greater than himself.
He may have the consolation of knowing, if it is a consolation, that defeat is never
fatal or seldom ever.
Now through these gates went Galt.
He had a vision of the future longer than the lance of any knight defending.
He needed horse and armor.
I did not see him again that day.
3.
In the evening I went to the house.
Natalie met me.
He is in bed, she said.
Is he ill?
He looked very tired and ate no dinner.
I was to tell you if you came that he had to get a big sleep on account of something
that will happen tomorrow.
I was holding my hat.
Natalie looked at it.
My beautiful sister is not at home, she said.
Tell her I was desolate.
And that you did not ask for her, she suggested slyly.
Now Natalie, you are teasing me.
Mama is out, grandma's gone to bed, there's nobody to entertain you, she said, shaking
her head.
What a dreary state of things, I said, laughing at her and putting down my hat.
She went ahead of me into the parlor, arranged a heap of pillows at one end of the sofa,
saying, there, and sat herself in a small straight chair some distance away.
Living on eighteen is an age between maidenhood and womanhood.
Innocence and wisdom have the same naive guise and change parts so fast that you cannot be
sure which one is acting.
The girl herself is not sure.
She doesn't stop to think.
It is a charming masquerade of two mysterious forces.
The part of innocence is to protect and conceal her.
The part of wisdom is to betray and reveal her.
I wish I were a man, she sighed.
Every girl says that once.
Why do you wish it?
I asked.
But it's so, she said.
They know so much.
They can do so many things.
What does a man know that a woman doesn't?
If I were a man, she said, I'd be able to help father.
I'd understand figures and charts and all those things he works with.
They make my silly headache.
I'd study finance.
What is it like?
What is finance like?
Yes.
Do you think I might understand it a little?
For an hour or more we talked finance, that is, I talked and she listened, saying, yes,
and oh, and bringing her chair closer.
She made a very pretty picture of attention.
I'm sure she didn't understand a word of it.
Then she began to ask me questions about her father, what his office was like, how he dealt
with Wall Street people, what he did on the stock exchange, and so on.
Asked you, she asked, when I rose to go, I'm afraid you haven't been entertained at all.
I love to listen.
I just now remember I haven't had any dinner, I said.
I stopped late at the office and came directly here.
It's past ten o'clock.
Dear me, why didn't you tell me?
I'll get you something.
You didn't know I could cook.
Come on.
Without waiting for yes or no, she scurried off in the direction of the kitchen.
I followed to call her back, but when I had reached the dining room she was out of sight,
the pantry door swinging behind her.
I returned to the parlor and waited, thinking she would report what there was to eat.
Then I could make my excuses and depart.
She did not return.
Presently I began to feel embarrassed, as much for her as for myself, also a little
nettled.
However, I couldn't disappoint her now.
The Theory of Money and Credit
What's that for?
I'm thinking, she said, what my sister would say if she saw us now.
As I walked home, I could not help contrasting her with Vera, who never, even at Natalie's
age, would have thought of doing a thing like that.
Why?
Yes, why?
Well, because she had not that way with a man.
Natalie was born to get what she wanted through men.
She fed them, she fed their stomachs with food and their egos with adoration.
She liked doing it, for she liked men.
She already knew more about their simplicities than Vera would ever learn.
She knew it all instinctively.
And how lovely she was in that apron.
4.
Late the next afternoon he appeared at my desk, sat down, fixed me with a stare, and
began to whistle Yankee Doodle out of tune.
Did they take your plan?
When I asked him, he went on whistling. I couldn't guess what had happened. His expression
was unreadable. Did they? I asked again. He stopped for breath. Spit on your hands, Coxie,
he said, as if I were at a distance and needed some encouragement. We've got her by the
tail, by the tail, tail, tail. We'll tie a knot in the end of it, and then we're off.
He never told me how he did it.
He had no vanity of reminiscence.
Long afterward I got it from a junior partner of the firm of Mordecai and Company.
They hardly knew him by sight.
He appeared in their office on that hot summer morning and said simply that he wished to
talk Great Midwestern.
He would see nobody but Mordecai himself.
At midday they were still talking, and lunch was brought to Mordecai's room.
One by one the junior members were called in until they were all present.
Galt amazed them with his knowledge of the property, its situation and possibilities,
even more with his acute understanding of its finances.
He gave them information on matters they had never heard of.
He gave them original ideas with such frankness and unreserve that at one point Mordecai interrupted.
We cannot forget what you say, Mr. Galt. It is so important we might use it. There is
no bargain yet. We are not here angels. I can't help that, said Galt. To sell a tune,
you have to play it. And he went on. When Mordecai spoke again, the case was lost.
For us it is not, he said. For us it is not. We are bankers. To these heights of imagination
In the doorway, Galt turned and faced them. No one else had moved.
I'm tired, he said. I need some sleep. I'll come tomorrow.
The scene was repeated the next day. Galt talking, the bankers listening, Mordecai lying
back in his chair, gazing at the ceiling, tapping the ends of his fingers together,
What is it you yourself you want, Mr. Galt, he asked, without moving.
It was Galt's way, when he was winning, to press his luck.
He wanted a place on the board of directors.
But he demanded more.
I want to be chairman of the board, he said.
It would be strange, said Mordecai pensively.
Nobody would understand it.
Who is that Mr. Galt? Why is he made chairman? So the people would talk. Of the old directors,
who would vote for that Mr. Galt? Gates and Valentine will vote for me, said Galt.
You have asked them? I have asked Gates, said Galt. I am sure of Valentine.
Another way of Galt's was to stop at the peak of his argument and wait. When the other man in his
If Mordecai's mind is coming over to your side, a word too much will often stop him.
Galt knew he was winning. There was a long silence. They began to wonder if Mordecai was asleep.
He was a man of few but surprising contradictions.
Conservative, cautious, axiomatic, he had on the other side great courage of mind and a latent capacity for daring.
He distrusted intuition as a faculty, yet on rare occasions he astonished his associates
by arriving most unexpectedly at an intuitive conclusion, knowing it to be such, and acting
upon it with fatalistic intensity.
On those occasions he was never wrong.
Now he sat up slowly and began to toy with a jeweled paper knife.
Nobody will understand it, Mr. Galt. Nobody will understand it. We accept your plan. We promise all our influence to use that you will be made Chairman of the Board on one condition. You will resign if we ask it immediately.
5. In September, the plan was brought out. Though it caused a good deal of dubious comment, the verdict of general opinion was ultimately favorable. The security-holders liked it because they were not assessed in the order of the General Assembly.
5. In September, the plan was brought out. Though it caused a good deal of dubious comment, the verdict of general opinion was ultimately favorable.
The security holders liked it because they were not assessed in the ordinary way.
They received, instead, the privilege, so-called, of buying new securities.
When all arrangements were completed, the assets of the old Great Midwestern Railroad Company,
meaning the railroad itself and all its possessions and appurtenances, were put up at auction.
Mordecai and company, acting as trustees, were the only bidders.
They delivered the assets to the new Great Midwestern Railway Company, which had been previously incorporated under the laws of New Jersey.
Afterward, there was a stockholders meeting in Jersey City, in one of those corporation tenements where rooms are hired in rotation by corporations that never live in them but come once a year for an hour or two to transact some formal business and thereby satisfy the fiction of legal residence.
A stockholders' meeting is itself a fiction.
The stockholders are present by proxy.
Clerks bring the proxies in suitcases.
They are counted and voted in the name of the stockholders under previous instructions.
Thus, directors are elected.
Mordecai and company held six-tenths of the proxies.
Horace Potter, representing himself and the oil crowd whose investment in the old Great
For the first time since their inglorious exit through Harbinger's office 11 months
before, Valentine was unanimously re-elected president.
There was a pause.
I propose Mr. Gauld for Chairman of Zeebord, Lisbeth Mordecai.
It had all been arranged beforehand.
There was no doubt of the outcome.
Yet there was an air of constraint about taking the formal step.
Evidently, in the background, there had been a struggle of forces.
Potter said, second the nomination.
The president called for the vote.
Four were silent, including Galt.
Five voted aye.
Valentine nodded his head, and the result was recorded.
Chairman of the board, Henry M. Galt.
Meanwhile, the traffic manager and his three assistants,
who had been summoned from Chicago for a conference,
were waiting in Harbinger's office.
Galt walked directly there from the boardroom,
sat on Harbinger's desk with his feet in the chair,
waved all introductions and said, now for business.
Hereafter, all contracts with shippers and all agreements
with the traffic managers of other roads
will be sent to this office for my approval and signature.
They will not be valid otherwise.
The traffic manager was a florid, contemptuous man, who wore costly Chicago clothes and carried
a watch in each waistcoat pocket, very far apart.
He was one of a ring of traffic managers who waxed fat and arrogant in the exercise of
a power that nobody dared or knew how to wrest from them.
They sold favors to shippers.
They sold railroad stocks for a fall in Wall Street, and then got up ruinous rate wars
At Galt's speech, the traffic
The traffic manager crossed his legs with amazement, dropped his arms, slid down in his chair, bowed his neck, and assumed the look of an incredulous bull showing the white under his eyes.
And who the hell are you? he asked.
Me? said Galt.
I'm the driver.
We'll see, said the traffic manager.
He rose, overturning his chair, and made for the door, meaning, of course, to see the president.
You'd better wait a minute, said Galt. I'm not through yet. He waited.
Then Galt, addressing the assistants, outlined a new policy. What they were to work for was
through freight, passing from one end of the system to the other. What they were to avoid was
anything they wouldn't like a railroad to do to them. What they were to believe in was a gang
Getting down on the floor he advanced slowly with a stealthy step at the traffic manager, who began to quail.
You choose whether to resign or be fired, said Galt. The first assistant will take your place.
He added something in a lower tone that no one else could hear, then stood looking at him fixedly.
The traffic manager started, mopped the back of his neck, wavered, and stood quite still.
Well, it's damned high time, he said at last, by way of mentioning a basic fact.
With that, he sat down and wrote his resignation.
This incident was an omen. Unconsciously, Galt worked on the principle
that once a thing has happened, it cannot unhappen.
The fact of its having happened is original and irrevocable.
Every other fact in the universe must adjust itself to that one.
Something else may happen the next instant.
That is a new happening again.
Mr. Valentine was violently agitated by the traffic manager's dismissal.
If he had been consulted, he would have made an issue of it.
But there it was.
It had happened.
The fact created a situation.
He might refuse to accept the situation, but he could not extinguish the fact.
He fumed and let it pass.
Nothing was ever the same again.
Galt consulted nobody.
He turned from the traffic man to Harbinger and ordered that the pay of the whole executive
staff from the secretary down be doubled.
Then he put Harbinger out, took the whole of the room for himself, painted the word
The Great Midwestern was managed from his desk.
There was never a moment's doubt about it.
There was no time to debate his authority.
It took all of everybody's time to keep up with what was happening.
He recast the operating department by telegraph in one hour, according to a plan already matured
in his mind.
He changed the accounting system radically and, much to everyone's surprise, John Harrier
accepted the change with enthusiasm.
Having made a flying trip over the road, he sent a telegram ahead of him calling a special
meeting of the board of directors.
It convened at 10 o'clock.
Galt came directly from the train, stained, unshaven and a little weary, until he began
to talk.
What he proposed was that $50 million be raised at once and spent for new engines, cars, rails
and road improvements.
Mordecai alone was prepared for this.
All the others were daft with astonishment.
A railroad only a few days out of bankruptcy to find and spend that sum for improvements?
It was preposterous.
Not only was the whole board against him, save Mordecai, it was hostile and struck with
foreboding.
As Galt rose to make his argument, I remembered what he had twice said.
I shall be one of ten men in a boardroom.
Everything else follows from that.
6.
This was the first true exhibition of his power to move men's minds, a power which
which nobody understood, which he did not himself understand.
Perhaps it was not their minds he moved.
Men of strong will often turned from their convictions and voted with him or for what
he wanted, who afterward, having recovered their own opinions, were unable to say why
they had acted that way.
He was not eloquent.
When he was excited, his voice became shrill and irritating.
He had no felicity of speech and often lost the grammar of tenses, cases and pronouns.
The reasoning was always clear.
He molded an argument in the form of a wedge and then hit it a sledgehammer blow.
But it was not the argument alone that did it.
As time went on, he more and more dispensed with argument and brought the result to pass
Man's directly, as a hypnotist with a well-trained subject, induces the trance without preparation,
seemingly by an act of mere intention.
It was a power that increased with use until it was like an elemental force, and acted
at a distance, so that he had only to send an agent with word that this or that should
be done, and men did it, helplessly.
You may say, of course, that all such later phenomena were owing to a habit of submission,
men having accepted the tyranny of his will.
Only that would not account for the rise of his power from nothing, would it?
In this first case he had back of him no prestige of success.
He was still unknown and distrusted by a majority of the ten directors who sat at the board
table.
And they were not men accustomed to be led.
They Were Themselves Leaders
In all Wall Street, it would have been impossible to find a more powerful, self-confident group.
Cold, calculating, unsentimental in business, their faces all cruelly scarred with the marks
of success terrifically achieved.
Yet as he talked, their chemistries changed.
The first visible reaction was one of bothered surprise.
This was followed by efforts of resistance.
The last phase was one of fascination.
His reasons were these.
A flood was about to rise.
He adduced evidence on that point.
Money, materials and labor were plenty and cheap.
Never again would it be possible to increase the railroad's capacity at a cost so low,
and a railroad that made itself ready to receive the flood would reap a rich harvest.
Finally, the spending of 50 million dollars in this way would give business the impulse
it was waiting for, the little push that sends a great vessel down the ways into the water.
The moment was rare and propitious.
Is it true, asked Mr. Valentine, that the chairman on his own responsibility, without
consulting the president or the board of directors, has already placed contracts for engines,
cars, rails and construction work, before the money has been voted for that purpose,
before anybody knows whether it can be raised or not, I have heard so.
Everyone was startled by the question.
Galt was not expecting it.
That is true, he said, and waited.
So we are committed to this expenditure whether we approve it or not?
That's the predicament, said Galt recklessly.
Valentine, wholly deceived by his manner, came heavily on.
Have you any idea what it will cost us to get out of these contracts, to cancel them?
The construction contracts, Galt said very slowly, are subject to cancellation without
penalty until this midnight.
The contracts for engines, cars and rails cannot be cancelled.
I've baked this pie for the Great Midwestern.
If it doesn't want it, I'll give the company's treasurer my check for $100,000 and eat it
myself.
What do you mean?
Horace Potter asked.
I mean that in consideration of placing the orders when and as I did on the equipment
maker's empty stomach, I got a special discount of 10 percent.
The idea was that the news of our buying as it got around would start a general buying
movement.
That has happened.
Other roads have placed orders behind ours at full prices.
We started a stampede.
Nobody has been buying equipment for two or three years.
Everybody needs some.
These contracts can be sold today for at least $100,000.
Can we sell 50 millions of bonds? asked Potter, looking at Mordecai.
Vi vil garantie to sell them, said Mordecai.
Mr. Galt is right.
If we reap, we must sow.
With no further discussion, they voted with Galt, and the feud between Valentine and Galt
was openly established.
We were torn by the dilemma of allegiance.
Everyone was fond of Valentine.
One could not help liking him, and his position was desperately uncomfortable.
Galt had reduced him to a mere figurehead, not intentionally, perhaps, not by any overt
Act of Hostility certainly, but as an inevitable consequence of his ruthless pursuit of ends.
Valentine became obstructive, Galt grew irritable.
They ceased to have any working contact, whatever.
And although the organization to a man was sorry for Valentine, still there was a turning
to Galt, purely as an instinctive reaction to strength.
As a railroad executive, Valentine, for all his experience, was inefficient.
This had been always tolerantly understood.
But now, with Galt's work beginning to produce results, in contrast, the fact was openly
admitted.
Galt's touch was sure, propulsive, and unhesitating.
And besides, in whatever he did, there was an element of fortuity that could not be reasoned
about.
He not only did the right things, he did them at precisely the right time.
You remember what I told you a long time ago, said Harbinger.
He sees things before they happen.
My heart breaks for the old man, but it's no use.
The site of inspired craftsmanship is irresistible to men.
The organization wavered between affection for the one and awe of the other and ended
by giving its undivided loyalty to Galt, not for love of his eyes, but for reasons that
were obvious.
One day Mr. Valentine complained that I was unable to serve him and Galt both, and asked
me gently if I did not wish to go entirely to Galt.
He had guessed my inclinations, so we shook hands and parted.
Thereafter, my place was in Galt's room, and I attended the board meetings as his private secretary.