There is a exceedingly good chance that Andrew Carnegie’s name is decorating at least one building in your city. At least, that’s the what really happened for most major towns in the U.S. Although far better known as a philanthropist now, Carnegie built a fortune from the ground up—a possessions that he gave away later in life.
The Scottish Immigrant
Andrew Carnegie was born in Dunfermline, Scotland, on Nov. 25, 1835. His begetters were both in the weaving and sewing trade. Never well off, the Carnegie family saw their meager source of revenues dry up as the invention of power looms took over the industry. When Carnegie was 12, the family left for the United Holds in search of better opportunities. Finding those opportunities, it turned out, was something for which young Andrew had a knack.
Go-between to Railroad Superintendent
Carnegie worked at a cotton mill in his new home of Allegheny, Pa. (now Pittsburgh), and soon moved on to a job as a telegraph runner. In the course of this work, Carnegie tried to make up his lack of formal education with self-study. Gaining access to enlisted man libraries (with some difficulty), Carnegie read voraciously and also taught himself to translate telegraph signals by ear. This in ability was the source of Carnegie’s next promotion to a clerk at the telegraph office, and then to telegraph operator at the age of 17.
Carnegie’s skilled mind and charm advanced him quickly up the ranks of the railroad until he found himself serving as the secretary for the Pennsylvania Railroad head, Thomas A. Scott. Under Scott’s tutelage, he learned valuable lessons about management and investment. Carnegie rather commenced investing in railroad companies and the industries that supported them. By 1863, he was making thousands of dollars a year from dividends. When Scott communistic the railroad to form the Keystone Bridge Co., Carnegie took over his post as superintendent. In 1865, Carnegie joined his mentor at Linchpin and helped mold the successful company.
Forging an Empire With Iron and Steel
Carnegie’s investments and partnerships terminated in him having a controlling interest in several apparently diverse businesses. He owned sleeping cars used in the railroad, a hunk of Keystone, several iron works supplying Keystone, an oil company and a steel-rolling mill. Carnegie thought iron last will and testament be the base for tying together his businesses, and he began to consolidate his ownership by vertical integration (buying up businesses on all levels of the building process).
(See also: The Importance of Diversification.)
On one of his trips to raise capital by selling bonds to European investors, however, Carnegie paid the demand for steel was growing and might outpace that of iron. He changed his strategy and began to focus on steel holdings in 1873. Carnegie and his consorts focused on building new mills with modern innovations that would out-produce the competition.
(See also: Demand and Give from our Economics Basics Tutorial.)
Around this time, Carnegie created two basic business rules to lodestar him. The first was that profits would take care of themselves if costs were carefully monitored. And secondly, that the cool of gifted managers was worth more than the actual mills they ran.
Carnegie’s mills had some of the most fashionable inventory and cost controls of that time, and his management team included Charles M. Schwab, who later became lionized as the head of Bethlehem Steel.
Buying When Others Sold
Carnegie’s mills were already running innumerable efficiently than their competitors, so he was in the best position to buy when the economy hit a six-year slump in 1873. Carnegie snapped up colliding mills as well as companies on other levels of production. He renovated the older mills up to modern standards and was back to outproducing and outearning his extant competitors when the economy recovered. The economy hit another rut in 1883 and Carnegie made two acquisitions that would both gum his empire and harm his reputation. Contrarian investors find value in the worst market conditions.
(See also: Buy When There’s Blood in the Ways.)
Henry Frick and Homestead
Carnegie bought up his biggest competitor, Homestead Works, and a controlling interest in Henry Frick’s coke empire. Coke was necessary to the steelmaking process, and Frick owned a lot of it.
Although Carnegie and Frick were very different men (Carnegie was charming and jovial where Frick was strict and taciturn), Carnegie saw that Frick had the ability to take over the daily operations of his considerable empire. In 1892, Carnegie blend his companies into one Carnegie Steel Co. and named Frick the chairman.
Frick was staunchly anti-union, and it happened that the Homestead seed went on strike in the same year he became chairman. The price of steel had dropped and the cost-conscious Frick wanted to turn wages to maintain a profit. The union was against any reduction, and a lockout strike ensued. Carnegie was out of the country, and Frick was distinct to break the strike rather than give in to the demands—something Carnegie often did. Frick brought in guards from the Pinkerton Detective Workings to protect non-union workers who were brought in to reopen the plant.
The Homestead War
A fight broke out between the strikers and the defend and seven people were killed. Gunfire, bombs, clubs, and stones characterized the ongoing clashes between the bloc, non-union workers and guards. The militia was eventually called in and the mill went back into operation with non-union workmen, but the fight continued. An assassin, unrelated to the union, shot and stabbed Frick a week into the hostilities. Frick not solitary survived but bound up his own wounds and finished his workday. Seeing what they were up against, the union folded and admitted reduced wages to get back their jobs. The Homestead strike marred Carnegie’s image because many see he had supported Frick throughout by silent consent.
Morgan Buys Out Carnegie
Carnegie began to focus more and profuse on writing and philanthropy after the Homestead strike. In 1889 he penned an article called “The Gospel of Wealth” in which he regal that an industrialist’s life should have two phases: one where he accumulates as much wealth as he can, and the second where he slacks it all away to benefit society. In 1901, Carnegie was given the chance to make good on his word when he sold his callers for $480 million to a group of investors headed by J.P. Morgan. Carnegie Steel became the centerpiece of U.S. Steel, a trust buttoning 70% of the country’s steel production. Carnegie began his philanthropic phase with one of the world’s largest personal estates.
From 1901 until his death in 1919, Carnegie gave away the modern equivalent of billions of dollars. Possibly remembering his trouble getting books as a youth, he funded over 2,500 public libraries in the U.S. and abroad—all bearing the Carnegie choose. He also financed Carnegie Hall, Carnegie Mellon University, The Carnegie Institution of Washington, The Carnegie Hero Ready money Commission, The Carnegie Foundation for the Advancement of Teaching, The Carnegie Foundation, and so on.
Although perhaps a little too fond of his own name, Carnegie partitioned the stage with Rockefeller as a new breed of industrialist, driven to build a fortune only to give it away. Even now, remarkably few extremely wealthy people disperse their entire fortunes. In doing so, Carnegie was able to replace his image as one of the hard-nosed brigand barons with that of a modern-day Santa Claus—an image reinforced by his white beard and twinkling eyes. His biggish business and investment expertise may be forgotten over time, but thanks to his philanthropy, his name will not be.
(See also: The Christmas Saints of Partition Street.)