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There are but a few men in the history
of humanity who have accumulated fortunes
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like that of Andrew Carnegie, a man
who was as complex as he was rich.
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After selling his company, his net worth
would equal a staggering 2% of America’s GDP.
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In today’s video, we’ll explore how one
Scottish immigrant armed with just 5 years
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of schooling would rise from poverty to
the status of the world’s richest man.
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Carnegie was at one point the richest American
in history, but he wasn’t born in America.
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Andrew’s story begins across the
Atlantic Ocean in Dunfermline,
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Scotland, where he grew up in what could
only be described as abject poverty.
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His mother would work around
the clock, sewing shoes.
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His father would make cloth and
other material, hand-weaving looms.
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That was, of course, until the
steam-powered loom came into the picture.
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With weaving technology rapidly improving,
his father’s loom business would crumble,
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finding himself crushed by
the Industrial Revolution.
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Watching his father suffer as he begged for
work would impact the young Carnegie profoundly.
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In 1848, the Carnegies set out in search
of a better life outside Scotland.
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After selling all of their possessions and
borrowing 20 pounds, the family embarked on
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their journey to the land of opportunity—America.
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They would restart their lives from scratch
in Pittsburgh, the hub of manufacturing,
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but still found themselves unable to
escape hardship in their new country.
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His father and mother both struggled to find work,
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leaving Andrew no choice but to drop
out of school to support his family.
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He would finally catch a break
from the scorching heat of the
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boiler rooms when he landed a
job at a local telegraph office.
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As a messenger boy, he would deliver
telegrams by bike all over Pittsburgh.
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He would memorize the faces of
everyone he delivered to so that
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he could greet them by name if
he saw them outside of work.
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It would provide Carnegie with a
unique opportunity to familiarize
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himself with the city’s business community.
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At 17, he would perfect his telegraph skills.
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He would grow increasingly
skilled at hearing Morse code.
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Impressively, he could recite messages
without needing to write them down.
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This caught the eye of Thomas Scott, a regional
manager for the Pennsylvania Railroad Company,
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who hired Carnegie to be his personal telegrapher
and private secretary for the sum of $35 a month.
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At the time, the Pennsylvania Railroad Company
was the largest corporation in the world.
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For the business-savvy Carnegie,
it was an opportunity like none
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other—a front-row seat on how
to run a successful business.
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Tom Scott, his boss, realized Carnegie’s potential
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and decided to take the boy under his
wing, mentoring him like a second father.
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It would later be Tom’s advice to invest in stocks
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that provided Carnegie with
his first taste of capitalism.
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Fast forward to the American Civil War.
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Carnegie is drafted into the Union,
but instead of fighting in the war,
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Carnegie would profit from it.
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He was able to escape harm’s way after paying
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$850 for a substitute to take
his place on the battlefield.
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It was during this time that Carnegie noticed
that the wooden bridges were easily burnt by
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the troops and that there was a desperate
need for iron bridges to replace them.
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He capitalized on the opportunity,
launching the Keystone Bridge Company,
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but it would be his next move that would
define him as an astute businessman.
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Keystone didn’t just build bridges.
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They also had their very own iron mills,
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which provided the iron that was
needed for constructing the bridges.
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Owning the iron source meant that Carnegie’s
bridge-building company would not be dependent
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on mining or extracting companies
for iron, like their competitors.
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This not only gave Carnegie more control over the
entire process, it also improved their margins.
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After the bridge was built, he
would leverage his connections
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in the railroad industry to make money there, too.
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Essentially, he was operating a triad of three
companies, each strengthening one another.
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First, a mining extraction company.
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Second, a bridge-building company, which used
the iron provided from his mining company.
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And then, once the bridge was built, his
third business would monetize by selling rail.
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The concept worked to a T.
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Always looking for the next big opportunity,
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Andrew set his sights on New York City, the
undisputed business capital of the world.
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In the city, he expected to find a
hustling culture and mingle with other
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distinguished businessmen, but what
he found instead was disappointment.
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He would describe the wealthy
individuals around him as “scoundrels.”
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Carnegie wrote a note to himself
promising that in two years,
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when he turned 35, he would retire and
focus on making the world a better place.
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But this note would go unfulfilled.
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In 1856, a new invention by Henry Bessemer called
the Bessemer Converter, a pear-shaped furnace,
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would allow for the mass production of steel,
something previously thought to be impossible.
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For the first time ever, it would finally become
feasible to create large structures from steel,
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eventually giving birth to the first skyscrapers,
forever transforming a city’s skyline.
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Carnegie moved with lightning speed, successfully
building America’s first steel plants.
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In doing so, he hired the best engineers
and architects that money could buy.
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He focused maniacally on increasing
efficiency, always using the latest
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technology and pushing his employees to their
maximum physical and mental capabilities.
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He was also notorious for requiring
employees to work 364 days a year,
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only allowing for rest on the 4th of July.
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As technology continued to advance,
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he would seek ways to replace his workers
with machines at every possible opportunity.
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Unlike men, machines didn’t need sleep,
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they also didn’t ask for raises, and
they certainly did not try to unionize.
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Carnegie, a master salesman, decided to name
the venture not “Carnegie Steel,” but rather
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“J. Edgar Thompson Steelworks,” the name of
one of his customers in the railroad industry.
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Carnegie hoped a steel mill named after a
customer would show his appreciation for
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their business and maybe even secure
more orders from their railroad.
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And it did.
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The first order from Thompson
consisted of 2,000 steel rails.
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Naming a mill after a customer
was more than a sales gimmick,
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it was part of a larger strategy, showing
appreciation in public for others.
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Acts like this would continue to pay massive
dividends throughout the Titan’s career.
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To help run Carnegie’s steel mills, he would
bring on board a cutthroat executive known
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for his ruthlessness and attention to
the bottom line, Henry “Clay” Frick.
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As a team, Carnegie and Frick were a
powerful force to be reckoned with.
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And to show how ruthless the two could be, look
no farther than the story about Duquesne Works.
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With the help of Frick, Carnegie
spread a rumor which alleged that
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Duquesne’s mill was producing defective steel.
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It wasn’t true, but it didn’t matter.
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Carnegie claimed to Duquesne’s
railroad customers that their
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rails lacked what he called “homogeneity.”
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Few, if anyone, actually knew what the
word meant, but that wasn’t important.
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Carnegie used the word because it
sounded scary enough to frighten
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off railroads who were concerned that
they weren’t getting good products.
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If Duquesne’s sales slowed, they would eventually
become unprofitable and run out of money.
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To expedite their demise, Carnegie
and Frick would proceed to undercut
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Duquesne on price, further squeezing the company.
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Within two years, Duquesne’s
finances were in ruins,
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leaving it no other choice than to sell to
none other than Carnegie at a bargain price.
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For Frick and Carnegie, the
rules of engagement were clear.
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Do whatever it takes to win.
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But this ruthlessness came with a hefty price,
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as they would soon discover at one of their
largest steel plants in Homestead, Pennsylvania.
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Carnegie had just invested millions of dollars
optimizing the efficiency of Homestead,
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enabling it to produce more steel than
any other mill comparable to its size.
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But there was another part of the profit
machine that was yet to be optimized.
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Labor costs.
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This posed a problem for Carnegie,
who had been working on rebranding
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his image from an oppressive steel factory
billionaire to a champion of workers’ rights.
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So instead of risking his reputation,
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he would have his right-hand lieutenant,
Henry Frick, execute the dirty work.
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Meanwhile, Carnegie would distance himself,
traveling abroad to his home country of Scotland.
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Carnegie knew that he wouldn’t want to
be around the plant after cutting wages
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for 10,000 already frustrated low-paid workers.
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In 1892, tensions between workers and
mill owners were particularly heightened,
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after an ever-widening
wealth gap continued to grow.
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The richest people in America
were accumulating fortunes
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faster than at any time in American history.
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Meanwhile, workers felt that
they were property of the rich,
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and that their shrinking voice
could only be heard through a union.
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To make things even worse, Frick,
who took his orders from Carnegie,
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demanded increased factory production, which
would mean even more hours slaving away.
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But to top it all off, Frick would
not be increasing their income.
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He’d be reducing it.
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Longer hours and less pay put
Homestead at a boiling point.
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The strikers also demanded safer working
conditions, and for a good reason.
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In 1898, 9% of all steelworkers,
industry-wide, would die on the job.
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When the workers refused Frick’s aggressive
demands for longer hours and less pay,
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he decided to lock out all employees
and bring in a substitute group of
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immigrant workers who would be willing
to do their dangerous jobs for less.
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To escort the immigrant workers as
they made their way to the factory,
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Frick called on a 300-person
army-for-hire called the Pinkertons.
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Armed with rifles, they made
their way to the factory,
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where they were met by 10,000 angry strikers
refusing to give up what they called home.
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Historians don’t know who fired the first
gunshot, but what we do know is that the
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day would no longer be called the Homestead
Strike, but rather the Homestead Massacre.
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By the end of the battle, 9 factory
workers and 7 Pinkertons would be dead.
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Hundreds would be injured.
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The fighting was so extreme that the governor
ordered 8,000 militia troops to provide backup.
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Under the protection of the state’s
troops, the factory would be reopened.
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And unfortunately for Carnegie’s workers,
they would be returning with lower pay,
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longer working hours, and
the same safety conditions.
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Another collateral damage from Homestead
came in the form of Carnegie’s reputation.
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Prior to the tragedies at Homestead,
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he would often advocate in public for better
conditions in steel mills and increased wages.
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But these words were far from
aligned with his actions.
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Hypocrisy was incredibly prevalent.
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While he preached increased wages
and improved safety conditions,
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he was simultaneously reducing labor
costs by slashing paychecks and doing
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little, if anything, to make his
factories a safer place to work.
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Carnegie was widely called a coward for using
Frick as his scapegoat, not only for the tragedy,
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but for all the other dirty work that he
didn’t want his name to be associated with.
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But in spite of the tensions and animosity,
the steel mills continued to thrive.
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In fact, by 1900, the company would produce more
steel than the entire nation of Great Britain.
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But in 1901, Carnegie grew tired of the game and
wanted to spend time with his wife and daughter.
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Financier J.P. Morgan was a rising competitor in
the steel industry, and Carnegie, now nearing 70,
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became open to the idea of selling the
company he’d spent his entire life building.
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Carnegie wrote on a scrap of paper
what he would be willing to accept.
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Charles Schwab, the president of Carnegie
Steel, delivered the offer to Morgan.
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As the story goes, J.P. Morgan glanced at
the offer and without hesitation accepted it.
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Morgan would buy Carnegie Steel for $480 million,
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making Carnegie the single richest
man in the world at the time.
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Carnegie would completely cut ties with
his business life and dedicate 100% of
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himself to serving the world through philanthropy.
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Not a single dollar would be left to his family.
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Because Andrew had only 5 years of
schooling, he had a soft spot for
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libraries, which he credits for helping him
achieve the financial success he acquired.
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Over the course of his life, he would donate over
2,500 libraries to cities all around the world.
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But it wasn’t all self-promotion.
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He was generous for generosity’s sake.
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His name was only displayed on
less than 500 of those libraries.
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One example of his generosity is Carnegie Hall,
one of New York’s most recognizable landmarks.
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Built in 1891, Carnegie built and
donated the building as the Music Hall.
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But its original name of “The Music Hall” was only
changed to the current version after his death,
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and not by his request but through
the Music Hall’s board members.
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And from 1901 until his death
in 1919 in Lenox, Massachusetts,
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Carnegie’s full-time job was giving away
the vast wealth he had built up for himself.
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As we mentioned at the beginning of this story,
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Carnegie was a man who was
as complex as he was rich.
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Did he employ abusive labor techniques to
keep his factories producing maximum profit?
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Yes.
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Was he hypocritical?
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Of course.
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Did he make up slander to put
his competitors out of business?
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Absolutely.
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While these things are all true, Carnegie’s
philanthropic impact is also equally great.
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Perplexing to say the least, how can a man
commit such sins and then become a saint?
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Perhaps he viewed donating his money as
a way to atone for his business sins.
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Making money is a great feeling, but an
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