Andrew Carnegie: The man who shaped America’s steel industry - Part 1
By Aniket Gupta | 26 Oct 2023
A man who dies rich, dies disgraced
- Andrew Carnegie
Imagine the ultimate story of rags to riches. A story that showcases how truly astonishing the American dream used to be. The story of a man’s rise from a working class background to become one of the richest people in the world.
The story of Andrew Carnegie. Andrew Carnegie has been described as one of the greatest philanthropists to have lived. Others accuse him of being a hypocrite whose actions caused the deaths of many people.
Andrew Carnegie was born to William and Margaret Carnegie on 25 November 1835, in Dunfermline, Scotland. Andrew’s father was a handloom weaver, a trade that was expected to be passed down to Andrew.
This was a time when the industrial revolution was in full swing and steam-powered looms had come into play, putting handloom weavers like Andrew’s father out of business. In order for the family to have enough money to survive, Andrew’s mother stepped up and began working long hours repairing shoes for people in the neighborhood.
One day Andrew witnessed his father beg for work. That deeply affected Andrew, leading him to make a solemn commitment never to witness poverty in his lifetime. An ‘impossible dream’ for someone of his social status.
The Carnegie family moved to America in 1848 after selling all their possessions back in Scotland.
The family had hoped for a better life in America; but little did they know how much better this life would be for them.
Working towards the impossible dream
The Carnegie family settled in Pittsburgh, Pennsylvania, which was a manufacturing hotspot. By then, Andrew had decided to drop out of school to help earn some money for his family. He had only completed five years of school.
A 12-year-old Andrew then started working in a cotton textile mill, where he would work for 12 hours a day and make $1.20 a week.
After two years, he found a higher-paying job delivering telegrams across the city. The job helped Andrew identify important and influential people in the vicinity. He made sure to memorize their names and faces so that if he ever saw them in the street, he could tip his cap and wish them a good morning, good day, or good evening.
It was just such a ploy that helped Andrew catch the attention of Thomas Scott, who worked as a regional manager for the Pennsylvania Railroad Company. This was the largest railroad company in America.
Scott hired Andrew as his personal secretary and gave him a huge hike from his previous income. Andrew benefited considerably from this job, for he experienced firsthand how a major corporation was run.
Tom Scott would later become president of the entire company, which helped his protégé Andrew to rise through the company’s ranks quickly. He worked closely with Scott as he oversaw the expansion of the railroad.
Andrew Carnegie helped Tom Scott build longer trains to cut costs and increase the volume of goods that were transported. The Pennsylvania Railroad Company was also the first company to keep trains moving 24 hours a day.
During the American Civil War in 1861, Andrew Carnegie was drafted into the army, but he paid someone $850 to replace him as a substitute. This was a very common practice back then.
By the time Carnegie was thirty years old, he was making upwards of $50,000 a year. That was a super-high salary for those times.
He then decided to leave the Pennsylvania Railroad Company and move to New York to explore other business opportunities. In New York, he began managing a business called the Keystone Bridge Company. During his time working for the Pennsylvania Railroad Company, Carnegie had realized the potential of iron in building bridges, replacing wooden bridges. He made sure to capture this opportunity.
Andrew had also learned about the process of vertical integration, which basically meant that a company owned operations up and down its supply chain.
The Keystone Bridge Company also owned the mills that provided them with iron. This helped the firm to cut production costs as it did not have to rely on other iron mills.
Carnegie also used his contacts in the railroad industry to undertake massive projects for the Keystone Bridge Company. He then undertook one of the most ambitious projects of that time.
This was a project to build the largest rail and road bridge in America at the time—over a mile long—that would span the Mississippi River and connect east to west like never before. Carnegie wanted to use steel to build this structure.
Back in the mid-19th century, steel was very expensive and difficult to produce. To deal with this problem, Carnegie contacted Henry Bessemer, an English inventor who had developed a new way of refining steel from molten pig iron, which was much more efficient and cost-effective than existing processes.
The equipment, named the Bessemer converter, revolutionized steel production. It could manufacture a single steel rail in 15 minutes, a process that previously took a fortnight. Carnegie invested heavily in this technology and soon set up a big steel mill using Bessemer converters.
The construction of the bridge started in 1867 and was completed by 1874. This was a remarkable accomplishment for the time as the bridge was the first ever steel structure of this size.
On its opening day, Carnegie arranged for a circus elephant to walk across the bridge to prove its safety and stability. The Eads Bridge, as it began to be known, remains standing to this day.
But Carnegie was no longer just thinking about bridges; with his new steel mill able to create steel in such large volumes, it was time to think bigger.
Living the impossible dream
Now that Andrew Carnegie had his own steel mill, he decided to name it Edgar Thompson Steel Works after the president of the Pennsylvania Railroad Company. He thought that naming the mill after the most influential man in the railroad business would help him get bigger orders and would also garner him some public appreciation.
In 1875, Andrew Carnegie received a huge order of 2000 steel rails. That was a big order for those days.
Other than being able to produce a large amount of steel, the mill was also very efficient. This was due to some business tactics employed by Carnegie. One such tactic was to keep track of every penny.
Carnegie firmly believed that if he controlled costs, profits would follow. To control costs, he started making his laborers work 12 hours a day, seven days a week. He only gave one holiday to his workers – on 4 July, the American Independence Day. This helped Andrew get the maximum value out of his workers.
Sadly, while Carnegie raked in the dollars, accidental injuries and deaths became common at Carnegie Steel, as protective gear was not provided to the workers.
Carnegie also deliberately designed the production process to use unskilled laborers performing repetitive tasks, making the workforce easily replaceable. Although many industrialists used to overwork their workers and give them low wages, Carnegie always prioritized cost-cutting and efficiency.
Always willing to spend in order to improve efficiency, he raised productivity and began replacing manual labors with machines.
Machines were installed to improve material handling. These included overhead cranes and hoists, which speeded up the steelmaking process and boosted the production capacity of Carnegie’s mills.
At age 33, Andrew Carnegie wrote himself a letter vowing to retire in two years and to devote his life to philanthropy. However, two years later, he was still working and surrounded by more controversy than ever before.
The next part of this article will discuss Andrew Carnegie’s rivalry with another American business magnate, John D. Rockefeller, his infamous partnership with Henry Frick, his huge business deal with John Pierpont Morgan, and some notable philanthropic work in his final years.
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