John Warne Gates (May 18, 1855 – August 9, 1911), also known as "Bet-a-Million" Gates, was an American Gilded Age industrialist and gambler. He was a pioneer promoter of barbed wire. He was born and raised in what is now West Chicago, Illinois. He did not enjoy farm life and began offering neighbors various business propositions at an early age, including the sale of firewood to homes and to the local railroad. When he started a local grain brokerage that failed, Gates began spending time at the local railroad station and became reacquainted with the men he previously sold firewood to. He was invited to join their poker games and through this, Gates' aptitude for cards and other games of chance was developed.
After studying penmanship, bookkeeping and business law in North Central College (by then Northwestern College), he failed as an owner of a local hardware store. Gates became interested in barbed wire and became a salesman for the Washburn-Moen Company. When he was assigned to the Texas sales territory, he learned that ranchers were adamant about not buying his product. Gates staged a demonstration of the wire in San Antonio's Military Plaza with charging cattle failing to break the barbed wire fences he had set up. He then proved very successful in selling the company's product, and went on to start his own barbed wire manufacturing business, which eventually led to the production of steel. In the process, his company was purchased by J. P. Morgan's U. S. Steel. Gates was not invited to become part of the company, and he fought back at Morgan for many years through a series of business acquisitions and sales; both men were key figures in the Panic of 1907.
Gates was the president of Republic Steel and of the Texas Company, later known as Texaco. He was instrumental in changing the steel industry's production methods from the Bessemer process to the open hearth process and in building the city of Port Arthur, Texas.
Biography
Early years
Gates was born in West Chicago, Illinois (then known as Turner Junction) on May 18, 1855. He was the son of Asel A. and Mary Warne Gates. Gates had two older brothers, George and Gilbert, but both had died by the time he was 15 years old. While Gates was raised in a religious household, his mother, Mary, became more religious after the deaths of her two older sons. Because he had been involved in some harmless childhood mischief in both grammar and Sunday School, he was accused of stealing a collection at the Sunday School. He was barred from attending church as a result.
Gates was raised on the family's farm, but did not care for farm life. At an early age, he entered into his first business proposition: to husk a neighbor's corn. His next business venture was to clear some land of timber for another neighbor. Gates earned US$1,000 for this job, selling the timber as firewood to homes and to the railroad. Gates then took the money from this labor and bought a half interest in a threshing machine. As this type of equipment was very new at the time, few farms owned one, so Gates and his partner hired themselves out to work with it at various local farms. After one season, Gates tired of this type of work and he sold his interest in the threshing machine to his partner and another friend. Gates then set himself up as a local grain broker, doing business from the family's home. This business venture was a failure; in an effort to escape farm work, he took to spending time at the railroad depot where he had previously sold firewood. The railroad men remembered him and now asked him to join their poker games. Gates found he had an aptitude for the game and for anticipating the cards men held and how they would play them. With the grain brokerage now forgotten, he was able to make up the losses at the card table.
While attending a house party near St. Charles, he met and fell in love with a farmer's daughter, Dellora Baker. Gates proposed to her at one of the house parties. Dellora was willing to accept Gates' proposal, but wondered how he would be able to provide for a wife, as his only income came from winning at the railroad poker games. When his father discovered Gates in a poker game with some railroad men in the family's barn, Asel told his son he was no good and would never be any good. Only Mary's mediation stopped her son from leaving home. With the realization that he needed more education than grammar school had provided, he announced to his parents that he would be enrolling in some local college classes. Gates attended some courses at nearby Wheaton College and graduated from North Central College in 1876. He had little opportunity to put his new business education to work, as the financial Panic of 1873 began just as he was completing his college work. In order to be able to marry Dellora, Gates accepted every type of job he could get for the next year; most of them were for farm work. Gates and Dellora were married on February 25, 1874.
Marriage and early business ventures Gates tried to revive his grain brokerage business but lost all his savings through it. When the couple's first child was stillborn, Gates returned to his old pattern of playing poker and thought seriously about leaving town with Dellora. With this knowledge, Mary Gates told her husband he needed to help his son financially so he could start a new business. Gates' father-in-law, Ed Baker, had already offered to help his daughter and son in law in this way. Asel purchased a two-story brick building and Ed Baker provided the capital for stock to open a hardware store in Turner Junction. At first the business went well; Gates and Dellora were able to move into their own home. Gates began taking time away from the hardware store and while his partner tried to handle all the business, he was not able to. A son, Charles Gilbert Gates, was born to Gates and Dellora on May 21, 1876. Gates began to complain of various ailments soon after the baby's birth; at times, he would take to his bed for some days with them. Business at the hardware store had become so bad, Gates was not able to afford the rent on the family's home. They had to move into two rooms above the hardware store, with Gates saying he was too ill to help with the moving and packing.
While at the hardware store, Gates met a salesman who was in the barbed wire business. As a result, Gates became interested in the relatively new product. When he announced his intentions to sell his interest in the hardware store and become a traveling salesman for the product, his wife and mother were both in favor of the plan. He made a trip to San Antonio, Texas, in 1876, where Isaac Ellwood hired him as a salesman for the Washburn-Moen barbed wire company. After being assigned to work in Texas, Gates quickly learned that while he found friends and poker playing companions, when it came to selling barbed wire, ranchers were not buying. After watching a medicine show proprietor stage an elaborate presentation for his wares and noting that people fought to buy the products sold, Gates decided to have a similar production to demonstrate the merits of barbed wire. In San Antonio's Military Plaza, Gates provoked cattle into charging into a barbed wire fence which did not break. Gates went from not being able to sell his product to not being able to fill orders quickly enough after the demonstration.
The barbed wire and steel business Upon Ellwood's refusal to grant him a partnership in the company. Gates traveled to St. Louis, Missouri, where in partnership with Alfred Clifford, he started the Southern Wire Company to compete with Washburn-Moen. Clifford's equipment to manufacture barbed wire had come from George C. Baker, who had invented a machine for producing barbed wire which was similar but not identical to the one made by Isaac Ellwood. Baker had resisted all attempts by Ellwood and Washburn-Moen to buy him out. Gates and Clifford sold their product at a cheaper price than Washburn-Moen. Before long, Washburn-Moen was losing substantial business to Gates and Clifford's Southern Wire Company.
In an effort to stop the success of the former company salesman, Ellwood and Washburn-Moen filed for an injunction to stop the business of Southern Wire Company. The suit, filed in U. S. District Court, claimed the machines Gates and Clifford used in the production of their product were a direct copy of those used by Washburn-Moen. The suit also called for Gates and Clifford to pay US$100,000 in damages to the company. As they avoided process servers, Gates and Clifford made a plan to save their company. They were able to rent a building in East St. Louis, Illinois, and moved their equipment out of the factory and onto a ferryboat after dark. After they crossed the Mississippi River, the machines were out of the jurisdiction of the St. Louis U. S. District Court and were back in business the next day. When Clifford and Gates hired an attorney to answer the charges made against them in court, the judge ruled that the manufacturing process used by Southern Wire Company was not an infringement on any patents or machinery owned by Ellwood and Washburn-Moen.
After a fire destroyed the Southern Wire Company, Gates gambled on the idea that William C. Edenborn had not heard the news and approached him for a merger with the idea that Southern Wire would manufacture in Edenborn's now idle barbed wire plant. The new company was known as St. Louis Wire Mill Company. They continued to buy other wire companies and had strong sales. Washburn-Moen went back into court, this time in Des Moines, Iowa, where a federal judge ruled that the machinery created by Baker was an infringement of Washburn-Moen's patents. By this time, Gates had created a syndicate of barbed wire manufacturers who did not produce their wires using Washburn-Moen's methods; the ruling in favor of Washburn-Moen only applied to areas in the jurisdiction of the U. S. Federal Court in Des Moines. Washburn-Moen continued to falter; Isaac Ellwood sent word asking for a meeting with Gates. Ellwood and another key figure with Washburn-Moen, John Lambert, now accepted offers from Gates. The barbed wire legal issues ended with Washburn-Moen selling their patent rights to Gates and his syndicate of wire manufacturers.
Through a series of mergers and acquisitions the company went through various name changes, finally settling on American Steel and Wire Company. Gates and his family moved to Chicago, where they lived for a period of ten years. Chicago attorney Elbert Henry Gary had helped Gates form the syndicate which led to the defeat of Washburn-Moen. Gary was called on again in 1901 to negotiate a merger with J. P. Morgan's U. S. Steel. Though he had provided Gates with some loans and advice in the past, Morgan did not want Gates to be a part of the merged company, saying that there was only a deal without Gates. Morgan made an offer to Gates for the American Steel and Wire Company, telling him that he was not welcome to take part in the business of U. S. Steel-either as part of management or on the company's board of directors. Morgan continued by saying that if Gates did not accept his offer, U. S. Steel intended to build its own wire production plant.
Railroads, oil and Port Arthur, Texas