Charles Schwab is a name that has evolved over time, from a 19th Century Steel magnate who built Bethlehem Steel into the largest steel producer globally to the famous investor and founder of the Charles Schwab Corporation. Though Charles Schwab, the steel magnate, is not as well known, his life and financial downfall are incredible stories worth telling. Despite growing an immense fortune, he still went broke and died in debt. This article delves into his life and financial misfortunes.
Charles Michael Schwab was born on February 18, 1862, in Williamsburg, Pennsylvania, to John and Pauline Schwab. His grandparents were Catholic immigrants from Germany. Schwab later grew up in Loretto, Pennsylvania, and attended Saint Francis College for two years before dropping out to find work in Pittsburgh.
At the age of 21, Schwab got a job at Andrew Carnegie’s steelworks, where he showed a potential for business, working his way up the ranks. In 1883, he married Emma “Rana” Dinkey despite his mother’s fierce disapproval.
Rise to Success
Schwab become President of Carnegie Steel Company in 1897 at 35 years old. In 1901, he played a crucial role in negotiating the sale of Carnegie Steel to a group of New York-based investors headed by J.P. Morgan. He then became the first President of U.S. Steel Corporation. However, Schwab’s time with U.S. Steel was plagued by clashes with Morgan and other senior executives. He left to head Bethlehem Steel Company in Bethlehem, Pennsylvania, which he helped grow into the largest independent steel producer globally.
One of Charles’ most significant achievements during his time at Bethlehem Steel was developing the H-beam; it revolutionized building construction and made the age of the skyscraper possible. Bethlehem Steel also had monopolized World War I contracts to supply the Allies with munitions.
Schwab’s financial life was characterized by lavish spending that spanned several years. He built a $7 million, 75-room mansion, called Riverside, located in New York alongside the Hudson River. He also built a summer retreat in his hometown of Loretto, Pennsylvania, costing $3 million. These places had exquisite facilities such as bowling alleys, swimming pools, and lush gardens.
Schwab regularly engaged in high stakes gambling and threw opulent parties. He had extramarital affairs, including an affair that resulted in an illegitimate child. He traveled in a private railcar worth $100,000 named “Loretto” and was an international superstar when he “broke the bank” at Monte Carlo.
It is estimated that Schwab spent between $25 million and $40 million on his lavish lifestyle and travels. Adjusting for inflation, that is between $500 million and $800 million today.
Unfortunately, all of Charles Schwab’s wealth would disappear, plunging him into debt in the decades following his lavish spending. By 1933, he could no longer afford to pay the property taxes on his New York Mansion. He originally spent $7 million building Riverside, but less than 30 years later, he unsuccessfully tried selling it for $4 million. Due to the Great Depression, there were no buyers, and after his wife died, he lost the mansion, retreating to a small Park Avenue apartment until he died in debt.
Charles Schwab became bankrupt: his stake in Bethlehem Steel became worthless, and he was over $300,000 in debt. Ironically, had he lived longer, his fortune would’ve been restored and then some when Bethlehem Steel received an onslaught of orders for materials during World War II.
Charles Schwab’s incredible life, characterized by a rise to success followed by a plunge into debt, is an essential lesson on financial responsibility. Though he accrued immense wealth and enjoyed a lavish lifestyle, his unchecked spending led to his eventual downfall. His story serves as a warning to individuals who indulge in a lifestyle they cannot sustain.