On Feb. 4, 1901, Andrew Carnegie sold his steel-making business for an unprecedented $400 million (worth about $120 billion now). With that sale, he became “The Richest Man in the World,” according to J.P. Morgan, who bought Carnegie’s company and used it as the basis of U.S. Steel. But if you want to learn how to become the richest person in your part of the world, that’s not the purpose of this biography. Instead David Nasaw minutely depicts an authentic tragic comedy in more than 800 pages, the life of an impoverished, painfully short immigrant lad who succeeded during the Gilded Age of capitalism, becoming a robber baron, philanthropist and “peacenik.” The author uncovers many of the secret operations Carnegie used to exploit his early employers and, later, his gullible investors. This account corrects biographies that omit Carnegie’s shady railroad bonds and union busting. The author also explains how Carnegie used his wealth to become one of the world’s greatest philanthropists, a significant legacy that endures through the institutions and libraries he endowed.
In this summary, you will learn
- How Andrew Carnegie rose from poverty to become the richest man of his time;
- Where he succeeded, and where he failed; and
- How he had a lasting impact on U.S. history.
- Andrew Carnegie (1835-1919) was a proud altruist and industrial giant, although he was so short that he wore elevator shoes.
- He embodied the “American Dream,” rising from rags to riches, power and fame.
- He took a semi-ethical, but legal road to become “The Richest Man in the World.” He often crossed the line between confidence and illusions of grandeur.
- He believed that “the laws of evolution” required ruthless suppression of workers.
- His formula for wealth included manufacturing a big-demand product – steel – plus insider deals, high tariffs and $1.35 daily wages for his laborers.
- He became so big that even the ultimate titan, J.P. Morgan, came to him.
- After Carnegie retired from the steel business, he went into the charity business.
- His charitable legacy remains in the libraries he endowed nationwide, the Carnegie Endowment, Carnegie-Mellon University and other institutions.
- He fought in vain for world peace.
- A master of self-promotion, he told his fellow industrialists, “Follow me, millionaires, and give away all your money before you die!”
Rising from Tough Roots
The “survival of the fittest” doctrine of evolution blazed the way for the emergence of “Primitive Capitalism,” a theory that supposedly justified the cruel British business practices of the Industrial Age. These tactics suited the 19th century robber barons, especially Andrew Carnegie.
“A messenger boy of the name Andrew Carnegie…yesterday found a draft of the amount of $500. Like an honest little fellow, he…deposited the paper in good hands.” [– Pittsburgh Daily Gazette, 1849]
He came from the impoverished masses, one of the troubled children of an unsuccessful weaver and a heroic mother, who worked hard so her family could just “get by.” She borrowed money to enable the family to flee a Scottish depression and migrate to the U.S. in the early 1800s. They arrived almost penniless but anxious to work. “Andras” Carnegie might have been just one more teenager among the hordes of immigrants seeking the American dream but for his exceptional memory and math skills. He began as a fellow Scot’s bookkeeper and became his business partner.
“At 40, as the tight-fisted employer, he reduces wages that he may play philanthropist and give away libraries.”
By age 24, he was helping his boss administer sectors of the Pennsylvania Railroad (“the Pennsy”), getting his first shares as an insider and “bagman” in a legal but “immoral” financing deal. On his own, he judged incompetent workers and summarily fired the worst ones. He declared he felt so confident he “could do anything.” Working as a railroader near the raging Civil War battle of Bull Run, Carnegie made a valuable contribution to the Union and, just off the battlefield, suffered a slight wound that he later referred to as having, “bled for the country…that had done so much for me.”
“Andrew Carnegie was not a cruel or uncaring man. In paying his common laborers $1.35 or $1.50 (daily), he was obeying the laws of the marketplace.”
While still working for the Pennsy, he learned the secret of becoming wealthy: Live cheaply at the start, save money and invest it (preferably with insider information). He saved capital to invest in stock market start-ups, and in deals he researched or was led to by inside information, which was legal at the time. He made killing after killing, and hobnobbed with his social superiors. He was acutely sensitive about his deficiencies, being very short and slight, and still speaking with a Scotch burr. In Darwinian fashion, he became a chameleon. Photos show that he camouflaged himself as an “older businessman” with a thin beard, formal coat and tall hat – all in an effort to overcome his baby looks.
“The longer the men stayed out of work, the hungrier and more desperate they and their families would become, and the easier it would be to break their strike.”
Oil drilling was his first big effort as an entrepreneur. He and his Pennsy boss, now also a friend, formed an oil drilling company that controlled hundreds of acres where oil naturally oozed out of the ground. The two men and two engineers also formed a corporation to build metal bridges to replace worn-out wooden ones. Another innovative scheme was to build a manmade lake for long-term storage of drilled oil. They believed it would become more valuable when the oil region dried up and prices rose. Much of the stored oil leaked away, but they sold out at a profit.
“The result of breaking the union was, as Carnegie had expected, an unprecedented boom in productivity and profits.”
Carnegie made money from l860 to l865 as part of an informal pool of investors that set up a firm to supply railroad-repair companies. They secretly hid their stock in the names of relatives. More underhanded was the unethical way Carnegie and his boss, both Pennsy employees, got profitable, sweetheart contracts with other railroad firms. With these and other post-Civil War investment adventures, Carnegie rose like a rocket. When he was 35 and still unmarried, gossip bruited that “he was worth $1,000,000,” despite his meager $2,500 annual salary from Pennsy.
“Carnegie would spend the rest of his life trying to remove the stain of Homestead from his reputation.”
Becoming a Tycoon in 19th Century America
Carnegie’s prototype of a wealthy, nearly “royal” man was the British nobleman: land-rich, cultured and patriotic. Carnegie made himself a “laird” (land-owning gentry) of Scotland by first becoming an outrageously wealthy, famous American tycoon. In a triumphal march, he returned to Scotland in June 1862. He was anxious for his relatives and the townspeople to know the Carnegies had made it. His father died impoverished, but Andra and his mother were back. She burst into tears of happiness upon arrival. She had fled disgraced and afraid, but returned as the proud, joyful mother of a very rich son.
“It is difficult to imagine a 30-year-old man, in good health and of medium frame weighing 109 pounds and standing no more than five feet tall.”
The stripling entrepreneur learned to like frequent vacations and he let subordinates run his business while he traveled. He lectured to younger men that success did not depend on endless work or divine selection. He believed success came more from being the correct person at the right place and time, by being clean-cut and free of vices, and concentrating one’s abilities on the jobs and objectives at hand. By 1862, his Pennsy salary was only one-twentieth of his income. His external affairs generated a steady flow of dividend checks, though he didn’t adhere to the virtue he urged upon younger businessmen. In one situation that he mediated, he structured the final deal totally to his own advantage. He cleverly separated the combatants into two competing companies, and kept direct or indirect control of both. He knew the split would fail. Within months, he merged them into the very profitable Union Iron. He emerged as president with his brother, Tom, as vice president.
“Carnegie was committed to funding schools for working people, black and white.”
Not all of his immoral actions profited. He lied to Tom about buying two English patents for methods to produce exceptionally strong railway rails. Tom insisted that Andrew should not risk the family’s funds. Andrew smiled and agreed, but did as he wanted anyway. After costly implementation, he found the new techniques to be worthless. His arrogance proved costly and he damaged the family’s capital. Carnegie bragged in his autobiography that he did not engage in speculation. But he did. Through a series of stock offerings based on a single contract to string telegraph wires, he manipulated shares and deals until he could sell the flimsy contract to Western Union for its solid shares. He made quick insider profits flipping real estate. And, he printed unauthorized, fraudulent Western Union stock certificates that paid him dividends for life.
“He had expended every bit of energy and made himself a slightly ridiculous figure…in his futile attempt to forestall the horrors of war. He realized now that he had failed.”
Carnegie’s special Wall Street talent was making money the sleazy way. He regularly floated stocks and bonds on “paper entities,” companies that were almost sure to go broke. His oily tongue and ability to “hang paper” on gullible investors propelled him to Manhattan. He opened an office two blocks away from the Big Board and the House of Morgan. For years, he specialized in selling U.S. railroad bonds to credulous Europeans. Securities trading was unregulated, so though he was often sued for fraud, he beat the rap. He also gambled in stocks. He held shares in a speculative St. Louis bridge company. He learned in advance it was going under and dumped his shares before the Morgan interests declared the bonds viable, but the stock worthless. Carnegie’s autobiography glosses over this Wall Street era. He made more money, but he had yet to find his calling – the steel business he was destined to rule.
“His…Spencerian beliefs that the nations and people of the world were becoming more civilized and less barbarous had been spectacularly misplaced.”
Reaching Olympus and then the Metamorphosis
Carnegie entered the steel business in 1870, drawn by a new tariff Congress levied on imported steel to protect U.S. industry. When wooed to invest in a steel plant, he went on foot to examine the revolutionary Bessemer-converter plant and other furnaces nearby. He asked penetrating questions until he became convinced this was the wave of the future. With an old friend as his partner, Carnegie set up a steel plant near Pittsburgh. He turned virtuous and recruited a high-quality board. Now near 50, he wanted to marry. He was often seen in snobbish drawing rooms or horseback riding in Central Park. He began spending more time with his frequent riding companion, a young, tall and attractive woman of quality named Louise Whitfield. He asked her to marry him. She accepted. Then, she fainted. They had one child during their long, happy marriage, a daughter named Margaret.
“I tried hard to like Carnegie but it is pretty hard. There is no type of man for whom I feel a more contemptuous abhorrence than for the one who makes a God of mere money-making and at the same time is always yelling…hopelessly twisted ideals.” [– President Theodore Roosevelt]
Carnegie’s new plant was well-sited on 106 acres with good rail connections. He named it “ET” for the architect Edmund Thomson. He hustled for orders, so ET made a profit from its first day. But, not long after it opened, labor problems struck. The demands were classic: more pay, less work time, better conditions. Carnegie believed that when labor and capital have a face-to-face showdown, capital wins. To prove it, he handled the strike firmly, rejecting unionization. This encounter was a precursor to his union busting at the Homestead mill, where he thought the fight would be just as clear. But it wasn’t, because the union built a war chest and put up a fight. Carnegie’s handling of Homestead was tough and vicious. He directed the battle from Europe, calling in Pinkerton guards. The union workers fought back. Blood was shed. The battles at the plant ruined his worker-friendly image forever.
“The tragedy of Carnegie’s last years was that no one took him as seriously as he took himself.”
When he publicly gave his version of the event, Carnegie denied responsibility, even denying using Pinkertons, because he had been overseas. He crowned his excuses with sophistry by claiming that he had retired from business years before. In fact, he was active throughout the Homestead affair, though his exhausted partner, Henry Clay Frick, handled the strike. Carnegie continued in business his entire life, even during his last months when he transferred his assets to his personal trusts. The union-busting strike at Homestead ended cruelly. Carnegie virtually starved the workers into submission. By ejecting the union at ET and Homestead, and imposing a 12-hour, $1.30-$1.50 daily sliding pay schedule, he made his company productive and profitable. Carnegie hid the enormous profits from the public so he and his cohorts could not be accused of bilking the U.S. government through monopolistic tactics.
Charity and Change
Carnegie sold his company to J.P. Morgan for $400 million, making him, in Morgan’s phrase, “the richest man in the world.” Afterward, this ruthless capitalist reinvented himself as an exemplary philanthropist. His gifts and charities are well known and numerous. He paid for hundreds of public libraries in cities and towns across the U.S. By one estimate, his gifts exceeded $200 million during his lifetime. Nevertheless, in his last years, his fortune was so big and growing so much automatically, that he had to find a clever way to get rid of it. He came up with a method that allowed him, simultaneously, to be rich and die poor: He used the legal device of making a huge endowment to a personal philanthropic trust.
Carnegie’s true charitable calling, however, was not establishing libraries, schools and research organizations. He embarked on a persistent, personal philosophical effort to establish a world order based upon peaceful arbitration of international disputes. He became obsessed by the superhuman challenge of world peace. He was ridiculed as messianic as he energetically urged world leaders to subscribe to his war-prevention plans. Carnegie never gave up, even when President Theodore Roosevelt rejected his bold peace idea.
When William Howard Taft became president, Carnegie launched the Carnegie Endowment, a major trust devoted to world peace. He knew the Endowment would outlast his lifetime. He wrote a toadying letter to Taft, extolling the president’s supposed dedication to peace and offering to finance the establishment of a peace organization to relieve the U.S. of that cost. The rich gadfly did not know that Taft, his wife and some of his Cabinet members really despised him. However, the Scot knew how to focus on achieving any objective.
Taft invited Carnegie to stay over at the White House. They put Carnegie’s plan in play. Carnegie wrote the legal instrument for the “peace trust” himself, using his preferred “simplified” spelling, like “dauter” for “daughter.” He gave $10 million worth of 5% gold bonds issued by U.S. Steel to what would become the Carnegie Endowment. The gift represented some $3.5 billion in long-term value.
Carnegie liked to deal with those he saw as his peers – kings, the Kaiser, four presidents. He was in very close contact with President Woodrow Wilson, who seemed to take Carnegie’s ideas seriously. Ultimately, Wilson formed the idealistic but toothless League of Nations. However, The Great War preceded that triumph. As men killed each other in “barbarous fashion,” the years of battle and bloodshed crushed Carnegie’s dream of peace. Almost from the war’s beginning, it turned the big talker into a silent, defeated, weak and blanked-out old man. As a final act combining egoism and altruism, he transferred almost all his great wealth to his foundation. On paper, he died broke. However, he won a sort of immortality through his still flourishing Carnegie-named charities. He could not achieve peace, but he fostered lasting philanthropy.