Daniel Guggenheim

Industrialist

• Born: July 9, 1856
• Birthplace: Philadelphia, Pennsylvania
• Died: September 28, 1930
• Place of death: Port Washington, New York

American businessman

Through daring business risks and tight family control over his ventures, Guggenheim created one of the first multinational corporations and went a long way toward his goal of controlling the world’s mineral wealth.

Areas of achievement Business and industry, philanthropy

Early Life

Daniel Guggenheim (GEWG-ehn-him) was born in Philadelphia, Pennsylvania. His father was the greatest single influence in his life. Meyer Guggenheim had emigrated from Switzerland in 1848 to escape the restrictions placed on Jews in that country at that time. Daniel was the second of seven sons. When Daniel was born the family was still struggling. Meyer was a peddler who had gone into the manufacture and sale of stove polish and coffee essence. He made a large sum of money as a wholesaler during the Civil War. By the 1870’s, Meyer had branched into the making of lye for domestic soap, had speculated in railroad stock, and had formed the firm of Guggenheim and Pulaski to import lace and embroideries from Switzerland and Saxony. Meyer was determined to earn enough money to provide for his family even after his death. His children were given a lax religious upbringing. His goal was that they should receive as good an education as could be had, so Daniel and his brothers were sent to a Catholic school.

Academically, Daniel did not shine; like his father, he was more concerned with things practical. At seventeen, he was sent to Switzerland to perfect his German and to study the embroidery business; he stayed there ten years. In 1877, M. Guggenheim and Sons was founded. Two years later, Meyer’s worth was estimated at around $800,000. In 1881, he bought an interest in two lead and silver mines in Colorado. It was a gamble that was to set the course of Daniel’s subsequent career (and those of his brothers) because the mines proved to be enormously rich. Daniel was recalled to man the New York office, and all seven sons went into the mining business. By 1889, the entire Guggenheim family had moved to New York, the financial capital of the nation. From 1890 to 1923, it was Daniel, the most energetic and ambitious of the brothers, who directed the affairs of the Guggenheim interests.

In 1890, at the age of thirty-four, Daniel Guggenheim stood barely more than five feet tall. He was quick and very agile, bold and adventurous, possessed of truly demoniac energy, and a born general. His manner was European; he was polished and self-assured. He believed in the essential virtue and inevitability of material progress. In his eyes there was an expression of such intensity that it appeared he was forever about to explode. His mania was for profits. Even at the end of his life, Guggenheim worked a sixteen-hour day. He was independent, autocratic, dynamic, and forward-looking. Morally, he was the typical Victorian a devoted family man (he married in 1884), puritanical, and not in the least interested in society. His view of industrial management was unabashedly feudal.

Life’s Work

The two Guggenheim mines in Colorado were followed by the construction of a smelter at Pueblo. As a result of favorable federal legislation that served to boost silver prices, a harsh labor policy, selective stockpiling, and the attainment of cheap railroad freight rates, profits from the smelter alone ran at five million dollars. Guggenheim’s control over the Guggenheim interests, now all in mining, occurred as a result of a further piece of legislation, the McKinley Tariff Act of 1890. This placed a heavy duty on imported ores and motivated the Guggenheims to lease or buy mines in Mexico and to build smelters there. Guggenheim was sent to obtain the necessary concession from the Mexican government. It was the first, and by no means the last, occasion when the Guggenheims were able to use their industrial power to control poor countries. The result of Guggenheim’s negotiations with President Porfirio Diaz was not only the right to operate in the country but also exemptions from import duty on machinery and from all municipal and state taxes. On his return to New York, Guggenheim was chosen to oversee the entire mining and smelting business and to plan future expansion.

The rise of the Guggenheims had excited the interests of others in the mining business. In 1889, Henry Huttleston Rogers, with the principal backing of William Rockefeller, began to form a huge trust to monopolize the smelting business in America. In 1898, the new trust became known as the American Smelting and Refining Company (ASARCO). The Guggenheims were invited to join but they refused. Guggenheim was convinced that his family’s business was now too big to be squeezed out. By 1900, through a series of well-planned, astute moves, and aided by a two-month strike of ASARCO workers, the Guggenheims were able to flood the world market with cheap lead and silver, drive down prices and thus the value of ASARCO shares, and buy up those shares at low prices. Following merger negotiations and a series of court battles, Guggenheim emerged as chairman of the board and president of ASARCO, his brother Solomon became treasurer, three other brothers were board members, and the Guggenheims and their allies controlled 51 percent of the stock. Daniel Guggenheim was now firmly in control of mining and smelting in America.

In 1906, Guggenheim formed what came to be called the Alaska Syndicate with John Pierpont Morgan and Jacob Schiff. The discovery of Kennecott Creek, the richest copper deposit in the world at that time, excited the Guggenheims and their partners to the extent that they were willing to build the necessary two-hundred-mile railroad and the new harbor and acquire a steamship line to get the ore to the Guggenheim smelter at Tacoma, Washington. The necessity of buying coal mines to supply power to machinery and forests for construction purposes led the syndicate to attempt control over all the natural resources of Alaska. This led to the first great public controversy over Guggenheim business practices. Despite the efforts of Gifford Pinchot, chief of the U.S. Forest Service, and others who argued that natural resources should belong to the nation as a whole, the conservationists got nowhere. Guggenheim had too many friends in the administration, and his brother Simon, United States senator from Colorado, also worked effectively for M. Guggenheim and Sons. Between the completion of the railroad in 1911 and the end of 1912, Kennecott paid three million dollars in dividends. By 1918, it had yielded more than seventy-two million dollars.

During this same period, the Guggenheim interests, with the aid of their consulting engineer, John Hays Hammond, bought up more mines in Mexico, constructed more smelters there, acquired Esperanza, the richest gold mine in Mexico, formed the Yukon Gold Company to dredge the gold-bearing sands of the Klondike and, after 1916, transferred the equipment to Malaya to dredge for tin; and got over the disaster of investment in Nipissing silver. The same period too, saw Daniel Guggenheim in partnership with Thomas Fortune Ryan and King Leopold of Belgium with exclusive rights to prospect for and develop all minerals in the Congo, where gold and especially diamonds were found. Back in the United States, the Guggenheims bought Bingham Canyon, in Utah, which became the first open cast copper mine and the biggest copper operation in the world. Fully under way in 1910, the mine was run as a virtual slave-labor camp with specially imported cheap labor, and backed by the Utah state militia. Guerrilla warfare broke into open warfare between workers on the one side and company security men and state militia on the other. Some reforms followed, and, by 1935, profits from Bingham Canyon alone were estimated at $200 million. The year 1910 also saw the purchase of the Chuquicamata copper mine in Chile, nine thousand feet up in the Andes. It proved to be greater and richer than either Kennecott or Bingham Canyon. To exploit it, Guggenheim had to build a modern port, a road from the sea to his new mining town, an electric power plant, and fifty-five miles of aqueduct to bring in the nearest water.

By 1915, the Guggenheims controlled 75 percent to 80 percent of the world’s silver, copper, and lead, and could dictate prices. Their mines were in full production to fill war orders. From 1915 to 1918, their copper interests alone paid $210 million in dividends. Public criticism of the Guggenheims as war profiteers grew until President Woodrow Wilson forced them to peg copper prices. Their reputation was not enhanced when, in a short strike at Kennecott, the company evicted striking workers from their bunkhouses into bitter thirty-below-zero weather.

Guggenheim’s power in the industrial world was recognized by Wilson in May, 1917, when he was chosen as one of two representatives of capital, the other being John D. Rockefeller, Jr., to meet the representative of labor to discuss industrial peace for the duration of the war. Guggenheim’s public embrace of Samuel Gompers, the head of the American Federation of Labor, and his public endorsement of unionism, however, did not alter the policies of Guggenheim companies around the world.

The huge success of the Guggenheims was based on a business strategy devised by Daniel Guggenheim. First, they always went in for big development when the business barometer was low. Second, they used the cheap labor and raw materials of underdeveloped countries to depress their own country’s wages and prices until they were so cheap that they could afford to buy them up and place them within their own monopoly. Third, in the metals industry, Guggenheim felt that there was no use competing unless one owned everything from mine mouth to finished product.

In 1922, Guggenheim was sixty-six years old. In that year, the board of ASARCO accused the Guggenheims of milking the company to further their own separate family interests. It voted the family out of control at a stockholders meeting. Not long after, Guggenheim retired and Simon, the former United States senator, became president of ASARCO, assisted by Guggenheim’s son-in-law Roger Straus. The following year, Chuquicamata was sold by the family to Anaconda Copper.

During the next few years, Guggenheim and his brothers devoted their energies to redeeming the family image through philanthropy. In 1924, the Daniel and Florence Guggenheim Foundation was created for “the promotion, through charitable and benevolent activities, of the well-being of men throughout the world.” Guggenheim’s son, Harry, a World War I naval pilot, persuaded him to promote the neglected science of aeronautics; in 1925, the foundation granted $500,000 to New York University to establish the first school of aeronautics in the United States. The following year, the Daniel Guggenheim Fund for the Promotion of Aeronautics was established with $2.5 million. By 1930, the fund, almost single-handedly, had placed American aviation on a firm footing and had converted the public from apathy to enthusiastic support. Finally, convinced by aviator Charles Lindbergh, Guggenheim supported the experiments of an obscure physics professor in New England, Robert H. Goddard. Following an initial grant from the foundation, the Daniel Guggenheim Fund for the Measurement and Investigation of High Altitudes enabled Goddard to establish the first United States rocket testing ground at Roswell, New Mexico.

When Guggenheim died, September 28, 1930, he had achieved not only a great reputation as a powerful industrialist but also the admiration and affection of many.

Significance

Guggenheim was the head of an extraordinary industrial dynasty. Guided in the first instance by his father, he and his brothers developed a modest one-million-dollar fortune into one worth perhaps three hundred times that sum. The Guggenheims were a team, but, even though the contribution of his brothers is often much underrated, it was the driving ambition, ruthlessness, and boldness of vision provided by Daniel that, together with his undoubted ability and autocratic methods, made the Guggenheims into the controllers of most of the world’s exploited mineral resources by 1915. It was said that, with one telegram, Daniel had the power to topple governments.

Bibliography

Baruch, Bernard. My Own Story. New York: Holt, Rinehart and Winston, 1957. The “boy wonder of Wall Street” was closely associated with Daniel Guggenheim for many years, and in this book he leaves portraits of Daniel and all of his brothers.

Bernstein, Marvin D. The Mexican Mining Industry, 1890-1950. Albany: State University of New York Press, 1965. A comprehensive account of the development of the industry. Concentrates heavily on the Guggenheim interests and operations.

Cleveland, Reginald M. America Fledges Wings: The History of the Daniel Guggenheim Fund for the Promotion of Aeronautics. New York: Pittman, 1942. A good account of the “foster father” of United States aviation stage of Guggenheim’s life. However, there is more material on Guggenheim’s son, Harry, who actually ran the fund.

Davis, John H. The Guggenheims: An American Epic. New York: William Morrow, 1978. A well-balanced and informative account of the family to 1978. Daniel is dealt with in parts 1 and 2 and chapter 3 of part 3.

Lomask, Milton. Seed Money: The Guggenheim Story. New York: Farrar, Straus and Giroux, 1964. A work for a popular audience devoted largely to the philanthropic ventures of the family. Daniel is dealt with in chapters 2, 3, 6, and 8. Published by his grandson.

Marcosson, Isaac F. Metal Magic: The Story of the American Smelting and Refining Company. New York: Farrar, Straus and Giroux, 1949. A detailed account of the smelting and refining trust set up by Rockefeller to break the Guggenheims on the path to domination of metals in America but taken over by Daniel and his brothers in 1900. Published by Daniel’s grandson.

O’Connor, Harvey. The Guggenheims: The Making of an American Dynasty. New York: Covici, Friede, 1937. Written by a socialist, labor journalist, and writer who also wrote about the Rockefellers, Astors, Mellons, and Carnegies. It takes a caustic view of Guggenheim business practices, favoring unions, independent miners, and smelter owners. It is the product of careful research and is in no way personally vicious. A good balance to Davis or Lomask.

Unger, Irwin, and Debi Unger. The Guggenheims: A Family History. New York: HarperCollins, 2005. Extensively researched history of the Guggenheims based on letters, interviews, memos, and other documents.

Williams, Gatenby, and Charles Monroe Heath. William Guggenheim. New York: Lone Voice, 1934. Gatenby Williams was the pseudonym of William Guggenheim, youngest brother of Daniel, who left the company in 1901. His scholarly, contemplative temperament was overshadowed by the aggressiveness of his elder brothers, but his autobiography contains useful insights into the workings of the Guggenheim partnership and the building of its mining empire in the United States and Mexico.