Throughout the 1800’s in the United States, the steel business was revolutionized by an American business icon, Andrew Carnegie. After growing up in a poor family, he used his self- taught knowledge to build wealth using investments to build a foundation of wealth. After coming from a humble background, Carnegie established himself as one of the wealthiest businessmen of his time period, and one of the most generous philanthropists of history. Carnegie was born on November 25, 1835, in Scotland. He came from a very modest background, his family was not wealthy and they worked very hard for what they ad.
When he was just 13, his father’s business crashed and that set his family off for the new opportunities of the United States. His family resided in Pennsylvania, where he found a job in a cotton factory. While he was working, Carnegie taught himself how to read telegraphs, and he spent many hours in the public library teaching himself new skills and information because he did not receive a formal education in Scotland. Later, he got a job as a messenger boy for the Atlantic & Ohio Telegraph Company. That job lead Carnegie to create relationships with local businessmen.
One of the businessmen he bonded with was Thomas. A Scott, who was the superintendent of the Pennsylvania Railroad. Carnegie used that relationship to his advantage and was hired as a personal assistant and a telegraph operator (Andrew Carnegie, Biography. com). In 1859, Carnegie replaced Scott as the superintendent as the railroad. During this job he made use of many investments, including: Woodruff Sleeping Car Company, the Keystone Bridge Company, Union Iron Mills, Pittsburgh Locomotive Works and Pennsylvania Oilfield (Andrew Carnegie,Encyclopedia Britannica).
One of his first investments was in the Woodruff Sleeping Car Company, which he invested only $217 in. After just two years he began receiving almost $5,000 annual payoff from his investment (Andrew Carnegie Timeline). Investments were a big part of building Carnegie’s wealth before he entered the steel industry. He was a very smart investor, and knew what he could do to make the most profit. Carnegie invested in products that used the railroad, and then those same companies would pay dividends, so he could make the most money.
When investing he made a profit on everything because f how well he diversified his money (Minton). By the time Carnegie was just 30 years old, he had an income of $30,000 which allowed him to take trips overseas, to Europe. After visiting Britain, he saw the high demand for steel and brought the idea to the United States. In 1972, the J. Edgar Thomson Steel Works was created by Carnegie, but the name later changed to Carnegie Steel Company. He transformed the steel industry in the United States by introducing the Bessemer process (DILallo). The Bessemer process was created in 1856 by Henry Bessemer of Britain.
The process consisted of iron being eated while oxygen was blown through molten metal. After oxygen went through the metal, it would react with carbon, which releases carbon dioxide and then made pure iron (Spoerl). Although the process did have early problems being perfected, Bessemer was able to correct the issues. The Bessemer process was fast and inexpensive, and made it possible for Carnegie to profit off of his steel. Carnegie introduced to the Bessemer process in the United States and steel began to be made efficiently and cheap (Terrell).
This process was revolutionary in steel production. One of the most important business strategies of today was also adopted by Carnegie in his steel mills. Vertical integration is defined as a strategy where a company expands its business operations into different steps on the same production path (Investopedia). Carnegie did this by buying coke fields and iron-ore deposits, which were the source of materials that he needed to make steel. He also took control of the ships and railroads that transported the raw materials to his mills (Andrew Carnegie, Encyclopedia Britannica).
Vertical integration is used to reduce ost and boost efficiency while making a large profit (Investopedia). Carnegie using the vertical integration method was a large milestone in American business and manufacturing, and changed the way business was done for the rest of history. Even though everything was going financially well for Carnegie, it is hard to say the same for his employees. In 1892, one of the most violent labor strikes in United States history took place in one of his factories (McNamara). Carnegie and his partner Henry Frick wanted to lower the wages at a steel plant in Homestead, Pennsylvania.
The workers at these plants dealt with 12 hour shifts, a seven day work week with seldom days off. A majority of the workers at this plant were represented by the Amalgamated Association of Iron and Steel Workers Union; which had a contract with Carnegie until July 1 of 1892. While Carnegie was away in Scotland, Frick cut the workers wages and the union rejected the pay cuts. Frick then fired and locked out 3,800 workers from the plant that had about 4,000 people. A group of 300 Pinkerton agents were sent to fill the plant. This caused the workers to be furious and the employees to open ire on the Pinkerton guards.
The situation became so violent that the governor became involved, as well as 8,500 national guard soldiers to help control the workers (Adamczyk). Although Carnegie was in Scotland, there is still some question to if he knew about the wage cuts (McNamara). The Homestead Strike is another crucial part of the United States, and Carnegie history that should not be overlooked. Working conditions inside of these plants were also not ideal. Accidents in the plants accounted 20 percent of all male deaths in Pittsburgh 1880’s. To Carnegie, loss of production was worse than a loss of life (Pittsburgh Pirate).
In this time there were no government regulations so the mill could be operated however, Carnegie wanted them to be (Andrew Carnegie, Encyclopedia of World Biography). The conditions of the plants contradict his philanthropic acts. Carnegie Steel Company continued to flourish throughout the late 1800’s. By 1890 the profits of the company reached $40,000,000, and Carnegie’s share reached $25,000,000 (EBSCO paper). In 1901, Carnegie sold his company to J. P Morgan’s United States Steel Corporation for a price of 250,000,000 (Andrew Carnegie, Encyclopedia Britannica).
At this time Carnegie’s net worth totaled $480 million, which is estimated to be $310 billion in today, making him the richest of his time (Sorvino). After selling his company, Carnegie started a philanthropic journey. Carnegie did not want to keep all of his assets he made off of the company. He did philanthropic behavior for many years before his retirement, but after he retired from steel he spent all of his time donating and giving back. Between the years 1847 to 1919 he donated $6 million to support churches to help buy organs. Carnegie also funded numerous libraries and other educational institutions.
Some of them include the Carnegie Museums of Pittsburgh, the Carnegie Institution for Science and the Carnegie Trust for Universities of Scotland. In total, he funded 2,509 libraries, 1,679 of them being in the United States. Before he died, Carnegie used his remaining $135 million to help promote education, and another $30 million was used to start the Carnegie Corporation (Andrew Carnegie’s Story). One of his greater donations was over one million dollars to create the Carnegie Hall in New York City, and t is still in use today (History. om Staff).
Carnegie’s philanthropic acts are still recognized today. Carnegie’s life came to an end on August 11, 1919, at age 84 (Andrew Carnegie, Biography. com). Carnegie will go down in history as one of the United States’s most influential businessmen and philanthropists. He went from rags to riches, and set up one of the most successful steel plants in history as well as being one of the richest of his time. Carnegie left an imprint on American business that will live forever and never be forgotten.
