Andrew boy in a cotton mill at a
Andrew Carnegie and the Rise of Big BusinessAndrew Carnegie was the pioneering tycoon of the 19th century.
From his companies emerged the steel to build the infrastructures such as railroads, bridges, automobiles, and ships that would build a nation in need of direction. He was a major player in the transformation into the Industrial Revolution producing the steel to make machinery and transportation possible. Carnegie built his empire from cost control, low prices, low profits, and high volume to make himself the richest man in the world. In his philanthropic stage of life, he became the world’s beneficiary to education, as he is responsible for the construction and donation of thousands of libraries in the U.S., Europe and around the world.
Andrew Carnegie is remembered for many accomplishments that include his rise from rags to riches and his influences on the railroad, stock market, and iron and steel industries. Early Years:Andrew Carnegie was born into a very poor family from Dunfermline, Scotland. He moved to the United States with his family in 1848. Carnegie received his first job when he was 13 as a bobbin boy in a cotton mill at a mere $1.
20 weekly wage. Carnegies big break came in 1849, when he was hired at the OReilly Telegraph Company. With this job, Carnegie was able to learn many of the important structures of business, which gave him important knowledge of commercial affairs and the new economy. Carnegies second big break arose when Thomas Scott hired him to be the personal telegrapher and secretary.
Carnegie gained hands on experience in the railroad when a derailment almost caused heavy stoppage. Carnegie was able to get the railroad moving again which gave him his first chance to be a leader. In 1859, Andrew Carnegie was appointed Superintendent of the Pittsburgh Division at the age of 24. Carnegie was so good at his job that he was able to perfect the system of statistical control even further and introduce new management innovations. From working with the railroad, great qualities were emerging that were to mark his later career. These qualities included, a hard work ethic, ability to master the details of a business very quickly, and act daring and forceful.
New Investment Ventures: In 1856, Andrew Carnegie was persuaded to buy some stock. He was loaned the money and bought the stock primarily because he admired his boss, Thomas Scott. This experience changed Carnegies attitude, as he became an enthusiastic investor. The next investment Carnegie joined was with William Coleman in the oil business. They made a substantial amount of money but Carnegie grew tired of the messy and chaotic state of the business and sold out in 1865.
In 1862 Carnegie joined a number of Pennsylvania Railroad managers to start the Keystone Bridge Company. Carnegie had been convinced that the trend in railroading was towards heavier locomotives and cars and longer trains in order to increase productivity. This is where many of the old wooden bridges were converted into sturdier, iron and steel bridges. Carnegie quit the Pennsylvania Railroad in 1865 both to concentrate on the bridge business and to pursue investments.Iron Business:Carnegie made his first investment in iron in 1861 when he invested in a local iron company. Carnegie and three partners later founded the Cyclops Iron Works in Pittsburgh in October of 1864. Right away Carnegie introduced a new method to the iron industry.
Carnegies aim was to ensure a reliable and cheap supply of iron beams and plates. He was able to control all aspects of the iron business and create an almost monopoly. This way of business was also called vertical integration.
His training on the Pennsylvania railroad proved crucial. With the high fixed costs of railroading, to make money it was essential to have a good cost accounting system. Once the costs were known, Carnegie would speed the flow of traffic through the system and increase its volume. Another of Carnegies great innovations was to impose a rigorous cost accounting system which included installing weighing scales at all points in the mills to see where material was saved or not saved. Also every man in a particular job was compared with all other men in that job. Cost accounting was the most important factor thereafter in personnel, marketing, and investment decisions. One of Carnegies great inventions was in 1870 when he built his own blast furnace to guarantee supplies of pig iron that he controlled.
. The furnace went into blast in 1872 and Carnegie was determined to increase its efficiency by learning how good his iron ore was and how to improve the charge in the furnace.Steel Business:In 1872, Andrew Carnegie was convinced that steel was the way of the future.
Carnegie was convinced beyond any shadow of doubt that the American railroad system had to switch to steel rails as soon as they were cheaply available. The difference in strength and longevity was on the order of a factor of 15 to 20 years. In 1865 and 1866, Carnegie had many failed tests of the hybrid iron-steel rails. In 1866, the Bessemer steel process was made available for licensing in the U.S. .
The Bessemer steel process would successfully burn out the silicon and the carbon from the pig iron, thereby making the cheap production of steel practical. Along with the better use of steel because of the Bessemer, Carnegie and his superintendent invented many important processes and devices to speed the flow of the metal through the various stages of the production process before it cooled. This resulted in huge savings and increased output because the metal did not have to be re-heated at the various stages of processing. One of Carnegies genius ideas was to always improve his factories and the equipment in them. Others in the industrial movement waited on many occasions until the machinery was infective and obsolete to buy new machinery. However, Carnegie insisted upon reinvesting almost all the profits back into improving the works time after time.
Carnegie was always upgrading his machinery and always in search of the littlest efficiencies. He was always concerned more with building and improving than spending dividends.Carnegie set the standard and forced the entire iron and steel industry to adopt his methods to the long run improvement of the entire American economy. Cheap steel greatly increased the productivity of railroads and many other industries. Finally, the breadth and the usefulness of his benefactions continue to honor his name almost 80 years after his death.Carnegies Merits/Demerits of CharacterThroughout the rise of Carnegie from stockholder to iron and steel pioneer to philanthropist, he made an effect on everyone he met.
He showed many different sides of himself as being violent and peace loving, ruthless and loyal, greedy and generous, boastful and diffident, vain and doubting, brash and shy. Despite a few problems, Carnegie built friendships with many intellectuals of the time. His wealth helped him to join this group, but once he was in, he gave respect for the intellectual rather than material. Some of his friends included Matthew Arnold, Joseph Gladstone, and John Morley. Carnegie was proud of these friendships, not because he had the money to be there, but for the satisfaction that he had accomplished a place in society. Another one of his great merits in life was his donations.
Carnegie set about disposing of his fortune through innumerable personal gifts and through the establishment of various trusts. In his thirties, Carnegie had already begun to give away some of his accumulating funds. His first large gifts were made to his native town of Dunfermline, Scotland. Later he created seven philanthropic and educational organizations in the United States, including Carnegie Corporation of New York, and several more in Europe.
One of Carnegie’s lifelong interests was the establishment of free public libraries to make available to everyone a means of self-education. Carnegie believed that it was not right to give money to the poor because they wouldnt know what to do with it, but give the money to institutions such as libraries and schools, where the funds could help in the education of the poor. There were only a few public libraries in the world when Carnegie began to promote his idea.
He built 3000 libraries, 4100 church organs, founded the Carnegie Trust for the Universities of Scotland, constructed Carnegie Hall in New York, and opened the Carnegie Institutes in Pittsburgh and Washington. He did this and more before he died in which he gave a sum of more than $325,000,000.Some of the demerits of Carnegies character might have been his handling of some of his partners.
Carnegie was ruthless when it came to partners he felt were no longer performing to his standards. Those men were forced out of the partnership and by the “iron-clad” partnership agreement, they had to cash in their shares at the “book” value. Since the partnership was grossly undervalued this meant that the man who was forced out, would walk away with a fraction of the true value of his share of the firm. Another demerit was his treatment towards his brother, Tom Carnegie. Tom was unhappy behind Andrews empire. He was made to watch the happenings of the business while Andrew received all the credit. Andrew left Tom to guide the firm through its initial struggles, which put a ton of pressure on him.
Andrew dealt his brother the same abuse he gave the other supervisors with outrageous demands, emotional sarcasm, and hot bursts of flattery. These problems brought Tom into a state of heavy drinking which killed him in 1886. The last of Carnegies demerits was his action he took during the Homestead Strike. Really he didnt take action. He let his partner Henry Frick take over the situation.
This turned into a bad call because of the deaths and injuries made by Fricks view to bring in strikebreakers. If Carnegie would have gone with his normal action of closing down the plants until a new agreement could be made, Homestead never would have taken place. Carnegie wouldnt have had to regret this decision the rest of his life and the press wouldnt have criticized him the rest of his life.In conclusion, Andrew Carnegie is one of the greatest entrepreneurs that have ever lived. He was a Schumpeteran entrepreneur that changed the stream of the allocation of resources over time by introducing new departures into the flow of economic life by creating the modern iron and steel industry. He set a standard that no other industrialists could match.
He made million after a million, learning and preparing to make even more money. He loved to make money but was unlike John D. Rockefeller or Cornelius Vanderbilt. Carnegie believed in making the most of his money, so he gave millions of dollars to different institutions and built many structures for people to learn.
Andrew Carnegie will always be remembered as long as time passes as a philanthropist, businessman, and a great man.