Rags to Riches

“It is not the rich man's son that the young struggler for advancement has to fear in the race of life, nor his nephew, nor his cousin. Let him look out for the "dark horse" in the boy who begins by sweeping out the office” was Andrew Carnegie’s dictum [1].

The industrial revolution of the late 1800s in which Andrew Carnegie lived allowed him to follow his dreams; it was an age of great change within the United States when the US emerged as a world power and center of wealth. This new age was created by the industrialists who were led by a few key individuals. With no government controls or restrictions, innovations and changes created by these titans were unchallenged.

The greatest leader of this time was Andrew Carnegie, a Scottish immigrant who through luck and work became one of the most powerful and richest Americans. When he died in 1918, he had given away almost 90% of his wealth, to the benefit of millions of Americans [2]. Andrew Carnegie’s legacy and accomplishments as a leader contributed to the United States of America in four ways: providing a real life example of the American success story, organizing industry in new ways, modernizing philanthropy, and advancing American education.

America in the 1800s

At the start of the late 1800s, American interests shifted from expansion of territory to industrialization. This was America’s industrial revolution, when the government’s laissez-faire policy greatly helped American businesses grow an enormous size. This revolution was marked by the growth of the materialist consumer culture that defines the American identity today.

The American economy boomed through introductions of new technology, cheap labor, and new laws regarding corporations. These new laws allowed for corporations to consolidate their assets in a holding company or trust, and sell stocks with limited liability that allowed for growth -- unachievable through limited partners or one single person.

New consolidation techniques also brought the wealth and power into the hands of key individuals such as John D. Rockefeller, JP Morgan, Thomas Edison, Henry Ford, and of course Andrew Carnegie. Through direct power and wealth, these individuals invested in new technologies in steel, petrol, and transportation previously unavailable in a society without large corporations.

Carnegie’s Life

Carnegie’s life was a true ‘rags to riches story’ that inspired millions of Americans to have hope and to search for success. Carnegie immigrated to the US in 1848. Carnegie’s family settled in Pittsburgh, Pennsylvania. With little formal education Carnegie worked in a telegraph office. Through his uncanny skill of being able to read telegraphs in his head, Carnegie became Thomas A. Scott of the Pennsylvania railroad’s secretary and right hand man. Carnegie became the superintendent of the Pennsylvania Railroad at the age of 24. Over his first 18 years of working, Carnegie’s salary increased from $16 to over $4000 a month.[3] Although Carnegie’s leadership and success was met with resentment[4], it mostly they inspired others to try and achieve similar success. This early success was even published in a Maryland newspaper called The Sun, under the title “An Example for Boys”[5]. Carnegie’s leadership and success as a young man were thought of as an inspiration to many poor members of American society.

After Carnegie became wealthy working with the railroads, he turned his interests to business investments in order to attain even greater wealth. Thomas A. Scott, Carnegie’s boss and mentor, convinced him to invest in profitable ventures connected to his railroad [6]. At the same time, Carnegie was making his way into social business circles in Pittsburgh as well as starting both the Keystone Bridge Company and the Cyclops Iron Works. Carnegie’s entrepreneurial visions soon encompassed his life and he left the railroad in 1865[7]. Carnegie's success with investments showed everyday workers how lucrative the stock market could be.

With the help of banker Junius Morgan, Carnegie traveled to Europe and sold the reputable bonds of his bridge company which quickly rose in value [8]. As a leader in investing, his bond sales made many rich and inspired others to start investing. Later in his career, Carnegie found ambitious men regardless of wealth, and mentored them as he had been mentored, eventually making them millionaires [9]. Through his own path to wealth, Carnegie heralded others to financial success and at the same time turned his attention to revolutionizing the world of business and manufacturing.

The success of Carnegie’s companies was due to his pioneering of new techniques in manufacturing, business, and management that changed his industry forever. Before he had created his empire, Carnegie said, “The Iron Age would pass away and the Steel Age take its place.”[10] His intuition about the future was one of his greatest assets that spurred the use of new techniques. Carnegie knew from his work in the railroads that railcars were getting heavier and thus needed stronger tracks, but he also needed a way to create this steel cheaply and in the United States. Carnegie pioneered several new steel manufacturing processes.

First he implemented the “Hard Drive” process [11] that created 10,000 tons more steel per year than other processes, but soon Carnegie’s travels in England led him to discover and use the more efficient Bessemer process [12]. Soon, the Carnegie industries of Pennsylvania produced more Bessemer steel than any other part of the country [13] and the world [14]. This steel allowed the Carnegie plants to sell steel cheaper and in larger quantities than all other competitors. Carnegie’s leadership in pioneering new steel techniques left a legacy in all steel manufacturing that allowed American infrastructure to expand horizontally through railroads and vertically into skyscrapers.

Manufacturing processes were not the only thing Carnegie advanced in his company, in fact Carnegie started a process called vertical integration, the integration of all industry related to one’s product on a large scale.

From 1862-1864 he created both his bridge and steel companies using vertical integration. In 1881 Carnegie bought the Frick Coke Company [15], another venture into vertical integration as he now controlled his fuel, his production, and his demand. Through the 1910s, Carnegie Steel became a giant that encompassed almost every related industry. All these companies were bought so Carnegie steel could save costs, something Carnegie valued immensely. To drop his prices, Carnegie would rebuild whole factories to save cents on every ton of iron he produced [16]. Through leadership, Carnegie crushed his opposition with vertical integration. Carnegie’s invention of vertical integration left a blueprint for a corporate structure that can be seen in companies like Ford, Apple, Google, and Verizon.

Carnegie’s cost saving techniques was not only in infrastructure, but also on paper. Coming into the industry, Carnegie was surprised that most companies only did their accounting once a year. Carnegie began recording everything to do with his production, including data on every worker, steel trade, and process that happened in his domain. He did this accurate accounting by installing weighing scales at different parts of his factories so that he could see what was wasted in the process and who wasted things [17]. Men in his company often remarked that “The eyes of the company were on them in the books” and thus worked harder because they were always observed [18].

Carnegie’s methods of organization and accounting were revolutionary [19] and proved their usefulness under Carnegie. Cost accounting was one of the most important factors in Carnegie’s investments, advertising, and personal management, and created an important precedent for all modern companies.

Today it is common that those who are organizers of industry also give to many charities but this was not always the case, Carnegie brought about many of the modern ideas in philanthropy over his generous lifetime.

Carnegie’s fortune was put into many different foundations. The largest of these organizations are the Carnegie Foundation for the advancement of teaching (CFAT), the Carnegie Foundation of New York (CFNY), and the Carnegie Endowment for International Peace -- all active today[20].

The CFAT is dedicated to furthering the field of education and has been one of the most active and influential organization in American schools. They have developed the widespread educational standards we have today [21] and created the Educational Testing Service, a sub- organization that introduced standardized tests [22].

Along with the CFAT, the CFNY is also dedicated to the pursuit of knowledge and was created to give the bulk of Carnegie’s money away to create permanent good in the world. The CFYN gives grants such as “ladders on which the aspiring can rise,”[23] so others can do the same the Carnegie did. The Carnegie’s Endowment for the International Peace was the first public policy institution in the United States and the first International Peace organization ever. This think-tank continues to provide unsoiled information about policy all over the world [24]. Carnegie’s leadership in giving and his useful insight into the future has contributed a legacy of changing American life to what it is now.

Although his foundations are well known, Carnegie’s greatest gifts were the 2,500 libraries he built without asking a cent in return[25]. All that was required to get a library was to send a letter about the current system of libraries and assurance that his library would be maintained. Without such an easy process, many towns might have not been able to get libraries so easily [26]. It is estimated that Carnegie gave over 1.3 billion to build libraries all over the world, mostly in small towns [27]. Not only did Carnegie’s libraries help educate many small town folks, but the standardized blockish building with a grand entrance also became a staple in the American small town. Carnegie’s gifts did not only create beautiful monuments in many rural towns, but Carnegie also started a trend that would empower the American people to become more educated, bringing knowledge, wisdom, and literacy to thousands of Americans. Carnegie’s leadership helped the American people build a culture of education and left a legacy of a strong skilled labor population in America.

Charity does not always come in the form of monetary donations, sometimes it can be a donation to culture. These charities embodied Carnegie’s literature, writing that changed the cultural makeup of America’s rich and poor. Carnegie’s writing was sought out and widely read due to his benevolent ideals and past success [28]. His writing on success and charity continues to inspire many today [29]. Through his books like The Empire of Business, Carnegie instructed young men on how to achieve the right path and responsibly create a business [30]. The ideal of financial responsibility also appears in his most famous essay, one that even inspired the Rockefeller Foundation to be created [31].

The Gospel of Wealth, an article written by Carnegie, outlines the message that it is the rich man's duty to give all his money away to the poor or else he dies disgraced [32]. Due to these ideals, Carnegie believed he was a returner, not a giver [33]. Many other great businessmen of his time eventually adopted his attitude [34], and now the richest men in America also give away large sums of money to broad charities using the same methodology that Carnegie started [35]. Carnegie was a leader of his time in giving, and his writings on charity and business left a legacy in the form of a new precedent for the rich.

Although he gave to many causes all around the world, it is clear that Carnegie’s focus was the education of the masses in both professional and nonprofessional tasks. Carnegie’s funds went to many sects of education but he donated most to medical schools and historically black colleges. Carnegie not only gave money to medical schools [36], he reformed them completely. Through his foundations, Carnegie revised medical schools by standardizing educational requirements and legitimizing the entire profession [37].

As someone not born into the upper classes, Carnegie had a great and openly known [38] appreciation for African-Americans, who at the time were associated with lower class. Carnegie especially liked Booker T. Washington, whom he met at the founding of the Tuskegee Institute, a college for African-Americans [39]. Carnegie’s love to Booker T. Washington, and the African-American race inspired him to give $600,000 to found this institute, and doing so left a legacy of one of the oldest and most famous African-American colleges. Carnegie’s gift to the education of African-Americans was larger than that of donations he gave to historically white schools like Cooper-Union. [40].

Carnegie’s leadership to give money to new causes changed these institutions fundamentally and left a legacy of better doctors, educated African-Americans, and society in general.

As with any great man, Carnegie took much criticism in his lifetime. He was criticized about his alleged mistreatment of workers, the lack of books in his libraries, and a supposed trend in only giving to the rich. Even today, some historians see Carnegie’s donations as a way for him to make up for the mistreatment of his workers [41]. They use examples of the Homestead Strike where Carnegie’s workers struck and he broke his workers apart using strikebreakers. In fact, the harsh actions of the strikebreakers were only in response to the violent actions and death threats from the workers [42].

Although it is common knowledge that Carnegie kept his wages low, he was good to his workers in other ways, establishing funds for them after his retirement. In a letter from his workers at the Homestead Plant he was told that he has always shown benevolent interest in his workmen [43]. Even the downsides of Carnegie’s hatred of unions were upsides because his continued denial of union demands helped spawn a movement that would coalesce in the great depression and gain the right to bargain under the Wagner act, legalizing their power. Other criticisms of Carnegie include criticism of the lack of books in his libraries[44], but Carnegie was careful to only give libraries to people already in a position to help themselves and therefore able to purchase books and maintain his libraries [45]. Carnegie’s greatest criticism was the belief that he only gave money to institutions that would help the upper class, but his contributions of libraries to rural areas and his foundation’s goal to help the lower classes reach riches prove this criticism wrong.

In the history of the world, Carnegie stands out as one of the most generous people to ever live. Without his contributions, the United States would not be the place it is today. His contributions have led to the modernization of industry, a story that inspired many. Through the development of cheaper and stronger steel, Carnegie changed the skylines of modern. Although the great leader is dead, his legacy will continue to survive and deliver his will through his foundations and teachings.

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Photo Credit: http://www.nydailynews.com/news/top-10-richest-people-time-gallery-1.1186737?pmSlide=1.1186732 (1st Photo)

http://gallagherbblockgroup1.wikispaces.com/file/view/carnegie_steel_float.jpg/140502495/carnegie_steel_float.jpg (2nd Photo)

http://njmonthly.com/articles/jersey-living/a-gift-that-keeps-on-giving/ (3rd Photo)

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[11] Joel Sabadasz, "The Development of Modern Blast Furnace Practice: The Monongahela Valley Furnaces of the Carnegie Steel Company, 1872-1913," IA. The Journal of the Society for Industrial Archeology18, no. 1/2, IRON AND STEEL (January 01, 1992): pg. #95, accessed November 13, 2014, http://www.jstor.org/stable/10.2307/40968252?ref=no-x-route:f737a453b25e4e7221c452b5b7351b24.

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[13] Andrew Carnegie, The Industries of Pennsylvania; an Address Delivered before the Franklin Institute of Philadelphia, on Monday Evening, March, 18, 1889 (Philadelphia, 1889), pg. #4.

[14] Archer Brown, "Review and Forecast of the Iron Trade," The New York Times (New York City), January 1, 1990.

[15] Andrew Carnegie and Van Dyke John Charles, Autobiography of Andrew Carnegie (Boston: Houghton Mifflin, 1920), pg. #222.

[16] James Howard Bridge, The inside History of the Carnegie Steel Company; a Romance of Millions (New York: Aldine Book Company, 1903), pg. #262.

[17] Andrew Carnegie and Van Dyke John Charles, Autobiography of Andrew Carnegie (Boston: Houghton Mifflin, 1920), pg. #136.

[18] James Howard Bridge, The inside History of the Carnegie Steel Company; a Romance of Millions (New York: Aldine Book Company, 1903), pg. #85.

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[21] Sarah I. Engelhardt, The Carnegie Trusts and Institutions (New York, NY: Carnegie Corporation of New York, 1981), pg. #26.

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[24] "About Us," Carnegie Endowment for International Peace, about us, accessed November 28, 2014, http://carnegieendowment.org/about/.

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[27] Kriston Kapps, "How Andrew Carnegie Built the Architecture of American Literacy," CityLab, October 28, 2014, accessed October 29, 2014, http://www.citylab.com/design/2014/10/how-andrew-carnegie-built-the-architecture-of-american-literacy/381953/.

[28] George Swetnam, "THE CARNEGIE NOBODY KNOWS,"Pennsylvania History 44, no. 2 (April 01, 1977): pg. #164, accessed October 21, 2014, http://www.jstor.org/stable/10.2307/27772454?ref=no-x-route:2e4ce4c8938a712baf9000bb585c9675.

[29] William Gates, "Bill Gates on Being Inspired by Philanthropists" (speech, Microsoft Research Faculty Summit Keynote Speech, Redmond).

[30] Andrew Carnegie, The Empire of Business (New York: Doubleday, Page &, 1902), entire book.

[31] "Our History - A Powerful Legacy," : The Rockefeller Foundation, History, accessed December 15, 2014, http://www.rockefellerfoundation.org/about-us/our-history.

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[33] L.H. Robbins, "Carnegie's Gifts Still "Let in Light"" The New York Times (New York City), November 24, 1935.

[34] Felix Klein, Annals of American History, , s.v. "The American Philanthropist."

[35] Daniel Gross, "Giving It Away, Then And Now," The New York Times, July 01, 2006, accessed October 31, 2014,http://www.nytimes.com/2006/07/02/business/yourmoney/02view.html?_r=0.

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[37] Abraham Flexner, Annals of American History, , s.v. "Medical Education in the United States."

[38] Andrew Carnegie, "The Negro in America" (speech, Philosophical Institute of Edinburgh, Edinburgh, October 16, 1907).

[39] Frances Benjamin Johnston, "Tuskegee Institute Faculty with Andrew Carnegie, Tuskegee, Alabama," digital image, Library of Congress, accessed December 16, 2014, http://www.loc.gov/pictures/item/98503059/.

[40] "Mr. Carnegie's Gift to Cooper Union," The New York Times (New York City), January 2, 1890.

[41] "The Steel Business," PBS, introduction, accessed November 08, 2014, http://www.pbs.org/wgbh/amex/carnegie/sfeature/mf_flames.html.

[42] "Homestead Strike," American History, 2000, Third Paragraph, accessed November 17, 2014, http://americanhistory.abc-clio.com/Search/Results?q=909246.

[43] Andrew Carnegie and Van Dyke John Charles, Autobiography of Andrew Carnegie (Boston: Houghton Mifflin, 1920), pg. #257.

[44] Finley Peter Dunne, Annals of American History (Dissertations by Mr. Dooley, 1906), s.v. "Lithrachoor and Andhrew Carnaygie."

[45] Brendan Grimes, "Carnegie Libraries in Ireland," History Ireland 6, no. 4 (December 01, 1998): pg. #28, accessed October 29, 2014,http://www.jstor.org/stable/10.2307/27724607?ref=no-x-route:f2700ed5834efde2c7b2ccc24bc9a1ab.