Andrew Carnegie And The Rise Of Big Business

“Because Andrew’s lifetime spanned two worlds, before and after mechanization, his actions continuously manifested an ambivalence rooted in his double exposure to the old world among the cottages, glens, and firths of Scotland, and the new world of smokey factories in America.”

In Livesay’s biography, Carnegie is depicted as spanning not only two nations, but also as spanning two distinct time periods: the old agricultural world of his native Scotland and the new booming industrial world of the American city. Livesay will insist that Carnegie’s talents lie both in his ability to adapt to new circumstances, and in his ability to recognize the positive qualities of the old ways of life.

“It was not so much that Will was not a man of the world, but that his world had passed.” 

In the early chapters, Livesay presents Will as a foil to his son, Andrew Carnegie. Where Andrew Carnegie makes the best of changed circumstances and grabs opportunity whenever able, Will refuses to learn how to survive in his new home of industrial America, and instead resigns himself to living in failure while his wife and son support the family.

“The opportunity came, as he realized, from ‘Fortunatus’ (‘my Good Fairy found me in a cellar’); [Carnegie’s] own virtue lay in exploiting the chance.” 

This quote describes Carnegie’s initial jump from working in a textile factory to working in a telegraph office. Carnegie’s Uncle Hogan happens to know the manager of a telegraph office, and when the manager mentions needing a new messenger boy, Carnegie seizes the window of opportunity and pushes his Uncle to suggest him. Livesay argues that this episode forever teaches Carnegie the importance of using any opportunity provided to him, and throughout his life Carnegie frequently grasps at new opportunities to further his career.

“All his life Carnegie adhered to this theme of the interdependence between political equality and economic superiority. This equation served Carnegie as a two-edged sword: with one side he attacked other countries’ systems as inferior; with the other he defended American institutions against criticism.”

As an immigrant who was able to climb up the social ladder, Carnegie remains committed throughout his life to his belief in the perfection of America’s system of government. In Carnegie’s view, America’s societal freedoms meant that anyone who desired to could better their social position and grow their fortune. As such, Carnegie remains blind to America’s many inequalities, refusing to believe that America’s system could be biased in any way.

“Ultimately human behavior results from the way in which an individual accommodates himself to the contradictions and ambiguities within himself and his society. Most of these conflicts can never be resolved; they can only be rationalized. Andrew Carnegie had a personal set of paradoxes. The best his biographers can do is to designate the pressures and document the response. The precise motivation always remains something of a mystery, and that is both the fascination and frustration of history. In himself Carnegie knew kindness and cruelty, vanity and shame, generosity and greed, doubt and confidence.”

In this passage, Livesay reflects on the act of writing a biography. Livesay notes that biographers are always somewhat limited in their ability to understand their subjects. Though they can record the various facts and decisions that a person made throughout their life, biographers can never fully claim to understand the motivations that led to those decisions. This is especially true for Andrew Carnegie, who, Livesay notes, is full of paradoxes.

“This was the formula for profitable operation of a capital-intensive business: learn the costs and reduce them as much as possible; then lower prices to lure a greater volume of business.”

Livesay here is describing the business philosophy that allows the Pennsylvania Railroad to maintain a profitable business, despite its size and amount of expenditures. Tom Scott, the Pennsylvania Railroad’s superintendent, implements this policy through an extensive cost-accounting system. By working directly under Scott, Carnegie learns the ins-and-outs of this business philosophy and goes on to apply it to the manufacturing industry.

“One morning a derailment brought all traffic to a standstill. Carnegie arrived at the office to find that Scott had not yet appeared. Sizing up the situation, he recognized that fate had placed another opportunity in his path. He promptly sent messages that got the traffic moving, signing them T. A. S. because only the superintendent was authorized to give orders.”

Carnegie’s success in the Pennsylvania Railroad comes both through his opportunism and his dedication to the job. In this episode, Carnegie jumps at the chance to display his leadership skills, efficiently and daringly solving a crisis. Carnegie could also only solve the crisis due to his thorough knowledge of the railways, as his actions require a “mental blueprint” of the tracks in order to be successful (37).

“I shall remember that check for as long as I live…It gave me the first penny of revenue from capital—something that I had not worked for with the sweat of my brow. ‘Eureka,’ I cried, ‘Here’s the goose that lays the golden eggs.’”

Carnegie begins his career in investing after his mentor, Tom Scott, provides him with $600 to purchase stocks. In this passage quoted from Carnegie’s autobiography, Carnegie describes the feeling of euphoria when he receives his first dividend check from the investment. Whereas Carnegie had previously devoted hours and hours to labor, he recognizes that investing can create a life for himself where he can make money without working.

“[The Woodruff Sleeping Car Company investment] provided not only the cash—such as he needed—for subsequent investments, but also a valuable object lesson in the profitability in promoting America’s economic growth.”

One of Carnegie’s first large investments is in the Woodruff Sleeping Car Company, which had created a new “sleeper” train car with beds for overnight journeys. The investment earns Carnegie thousands of dollars for years to come. Livesay argues that this investment teaches Carnegie the importance of investing in America’s newest industries, something which Carnegie will continue to do throughout his career.

“Carnegie earned his $50,000 in stock. But he had bigger plans. He wrote to Frank Taussig, St. Louis Bridge Company’s finance chairman, and asked to borrow $200,000 of the proceeds of the bonds at 7 per cent claiming that he needed ‘to use the funds, just now, for the completion of the Keokuk Bridge.’ It was a lie.”

This passage describes one of Carnegie’s deals of speculation, in which he tells a lie to receive $200,000 of funds that he can then invest. During Carnegie’s years as an investor, he engages in many of these deals, in which he manipulates the situation so that he can make larger profits. Though Carnegie is successful and earns large sums of money in this way, he eventually grows ashamed of his back-room deals.

“Man must have an idol—The amassing of wealth is one of the worst species of idolitry. No idol more debasing than the worship of money. Whatever I engage in I must push inordinately therefore should I be careful to choose that life which will be most elevating in its character.”

In this note to himself from 1868, Carnegie describes his increasing discomfort with the act of amassing great sums of wealth. Prior to this moment, Carnegie had earned his fortunes through investments and speculation. Carnegie’s growing crisis of conscience propels him to turn to the iron and steel industry, using his money to create something material, and that could better society.

“Carnegie’s primary motive, first in founding Cyclops and then in merging it into Union Iron, was to create a reliable and cheap source of beams and plates for Keystone Bridge. In other words, he integrated two successive stages of manufacturing vertically under a single controlling head. For the first time he was an innovator in manufacturing, rather than an imitator.”

Carnegie’s corporation, Union Iron, is formed from merging his steel mill with a railroad axle manufacturer. Such an act is an example of vertical integration, a process that had not previously been performed in the manufacturing industry. Livesay describes this episode as a crucial moment in Carnegie’s development into an innovative business entrepreneur—a role he would continue to perform with his steel companies.

“Above all, the furnace crew achieved a high volume of production by ‘hard-driving,’ that is, by getting the maximum output of iron regardless of wear and tear on the furnace.”

One of Carnegie’s key innovations in iron manufacturing is to run furnaces at maximum capacity to the point that they break down—a process known as “hard-driving.” Though such a system requires the furnaces to be frequently replaced, Carnegie earns more profits from the increase in output, placing him at a competitive edge over other iron manufacturers.

“Put all your good eggs in one basket, and then watch that basket.”

Carnegie offers this business motto to younger businessmen, and the motto captures Carnegie’s business philosophy during his years in the steel industry. Rather than spread his money in several investments, Carnegie begins putting all his money and attention on his growing steel industry. The focus pays off, as Carnegie is able to grow his corporation into a streamlined industrial titan.

“[Carnegie] never missed a chance—at shipboard press conferences when he traveled abroad, at gatherings for distinguished visitors such as Matthew Arnold—to advertise his rails; American steel rails they were, as good as England’s finest. It got him publicity, it sold his rails, and he loved it.”

In order for Carnegie’s steel to have success, Carnegie has to play salesman and convince the world that his new product of steel rails are better than the traditional iron ones. Carnegie responds to his new role with boundless enthusiasm, never passing up an opportunity to make a sale. In the process, Carnegie’s steel earns a global reputation.

“Every bit of raw material, waste, and product was weighed and accounted for, as were all tools and building materials used in construction and repairs.”

When Carnegie opens his steel mill, he brings to it the system of accounting he learned from working in the railroads. Carnegie insists that each and every cost be minutely accounted for, allowing him to tabulate exact profits and determine precise areas for cost-cutting measures.

“[“The Gospel of Wealth”] elaborated on his earlier reflections that it was his personal responsibility to ‘spend the surplus…for benevolent purposes.’”

In 1889, Carnegie publishes one of his most famous pieces of writing, “The Gospel of Wealth,” in the North American Review. The article outlines the philosophy Carnegie would devote the later portion of his life to, arguing that the rich have a social responsibility to use their riches for the common good. Such a position sets Carnegie apart from many American industrialists at the time, who saw no problem with amassing vast sums of wealth for personal use.

“Carnegie’s continual need to reconcile his role as wealthy employer with his Radical conscience convinced him that good treatment of workers was good business.”

Though Carnegie seeks to earn maximum profits from his factories, he often sympathizes with the workers and unions. Livesay argues that such pro-worker views stem from Carnegie’s Scottish upbringing, in which Carnegie was introduced to the politically-progressive policies of Britain’s Radical movement through his father and uncle. In handling strikes, Carnegie would often try and resolve the conflict through respecting the rights of the unions, placing him at odds with many industrialists.

“[Frick] believed in the written laws that stated he could do with his property as he liked—bring anyone on it, keep anyone off it, and otherwise use and benefit from it in any legal way he chose.”

Frick’s attitude towards labor unions is far more antagonistic than Carnegie’s. Frick believes he is entitled to do whatever he wants with his property, and feels that if his workers go on strike, he should be able to bring in scab labor to perform the work. Such a differing of attitudes between Frick and Carnegie is part of what leads to the violent conflict of the Homestead Strike.

“Three months ago Andrew Carnegie was a man to be envied. Today he is an object of mingled pity and contempt.”

This quote comes from an article published by the St. Louis Post-Dispatch, while reporting on the Homestead Strike. Though Frick makes the decisions leading to the violence, the blame for the affair largely falls on Carnegie, who is sharply criticized in numerous press articles. Carnegie grows angry at Frick for mishandling the strike, and the outcry motivates Carnegie to redeem himself in the public eye through donating his wealth to charity.

“Carnegie acquired exclusive rights to the Rockefeller ore without spending a cent, simply because he could promise to use 1,200,000 tons of ore every year for fifty years. No small firm could have signed such an agreement.”

Livesay describes how Carnegie makes a deal with Rockefeller to give Carnegie exclusive access to the Mesabi ore deposits, allowing Carnegie’s steel company an incredible advantage over smaller competitors. According to Livesay, Carnegie is able to use his already-large fortune to tremendously expand his operation. Such practices, widespread in late-19th century America, make it nearly impossible for smaller corporations to enter into a given industry. As a result, America at this time becomes an oligopoly, in which industries are governed by a handful of large corporations.

“Describing the Pennsylvania’s behavior as ‘monstrous,’ [Carnegie] claimed that the railroad lost money everywhere except in Pennsylvania itself; the road in effect levied a tax on the state’s businesses in order to subsidize their competitors. He demanded legislation and threatened mob violence if it was not passed […].”

This passage displays the lengths Carnegie would go to get his way in business dealings. In this instance, Carnegie is angered that the Pennsylvania Railroad over-charges him for shipments, and he appeals to the state legislature to lower rates, threatening civil unrest in the process. Even though Carnegie’s partners, Phipps and Frick, feel such a threat goes too far, Carnegie is unstoppable in his drive to lower costs.

“There was so much to make up for: the failure of his father; the ignominious flight from poverty; the people ground up and fed to his insatiable ambition—Woodruff, Kloman, Tom Scott, his own brother Tom; the lies to get contracts, the brutality to make them pay; the greed and the trickery; and Homestead, always there was Homestead.”

Throughout his biography, Livesay largely limits himself to reporting the facts of Carnegie’s life, describing the ways Carnegie grew from a factory worker to an industrial innovator. But here, Livesay attempts to analyze Carnegie as a character, offering a possible explanation for Carnegie’s motivations. In Livesay’s view, Carnegie’s intense ambition is primarily driven by his desire to somehow makeup for the difficulties of his life, from his childhood poverty to the violence of the Homestead Strike. It is only by using his wealth to better society, Livesay argues, that Carnegie can properly prove his worth to himself.