How Andrew Carnegie Made His Fortune
Andrew Carnegie was a Scottish-American industrialist and philanthropist, who led the expansion of the American steel industry. In today’s episode, we’re going to learn how Carnegie claimed the title of richest man in the world in his time. We’ll discuss his philanthropy, the tectonic shifts he leveraged, and other strategies he used to find success.
Carnegie’s Entrepreneurial Journey
Andrew Canegie was born in 1835 in Scotland. He went to school at the Free School in Dunfermline. When he was 12 years old, his family met hard times. Hoping to have a better life for themselves and their kids, they borrowed money from Carnegie’s uncle to move to Pennsylvania. After moving to a new country, Carnegie’s father struggled to find work at first, but eventually he and his son both got jobs in a cotton mill (Source: Wikipedia).
Carnegie worked from dawn until dark as a bobbin boy, carrying bobbins to the workers at the looms and earning $1.20 per week. Later, he was hired as a messenger for a local telegraph company. There he taught himself how to use the equipment and was promoted to telegraph operator. With this skill, he landed a job with the Pennsylvania Railroad, where he was promoted to superintendent when he was 24 (Source: Carnegie.org).
As he worked for the railroad, Carnegie started making investments with the help of some mentors. He got substantial returns from his wise choices he’d made, and he left the railroad in 1865 to pursue other business interests.
Several years later, most of his time was dedicated to the steel industry. He created the Carnegie Steel Company, which revolutionized steel production. He became a dominant force in the industry by owning everything he needed in the steel process: raw materials, ships and railroads for transporting the goods, and even coal fields to fuel the steel furnaces (Source: Biography.com).
Philanthropy
“The man who dies thus rich dies disgraced.” — Andrew Carnegie
In 1901, Carnegie shifted his attention to giving back. He sold his company to J.P. Morgan, retired, and devoted himself to philanthropy. His donations in the U.S. totaled to about $288 million and his donations in the British Empire totaled to about $350 million (Source: Britannica.com).
Carnegie had started his philanthropic work many years earlier by building libraries and making donations. He said, “It was from my own early experience that I decided there was no use to which money could be applied so productive . . . as the founding of a public library.”
When Carnegie worked as a bobbin boy, he was determined to improve his lot. He couldn’t afford the $2 subscription for the local library, and he definitely couldn’t afford to buy books. Carnegie sent a letter to the library administrator, asking for access to the library. The administrator turned him down flat, so Carnegie got the letter published in The Pittsburgh Dispatch.
“He made his case so well that the administrator backed off immediately,” explains Carnegie’s biographer David Nasaw. “And the library was opened to working men as well as apprentices.” (Source: NPR.org)
Carnegie ended up donating about $5 million to the New York Public Library in 1901 as he expanded his philanthropic efforts, and more than 2,800 libraries opened with his support (Source: Biography.com).
He created many trusts that sought to improve education such as the Carnegie Trust for the Universities of Scotland, intended for the improvement and expansion of the four Scottish universities and for Scottish student financial aid, and the Carnegie Dunfermline Trust, intended to aid Dunfermline’s educational institutions (Source: Britannica.com).
“To try to make the world in some way better than you found it is to have a noble motive in life.” — Andrew Carnegie
If we’re able to, we should give back in any way that we can. It can be as simple as donating to charity or volunteering in our community. As Carnegie found, giving back is one of the best ways to find fulfillment.
Tectonic Shifts Carnegie Leveraged
Here are two business tectonic shifts Carnegie leveraged to grow his success.
- Railroads
Carnegie’s career really started to take off when he got a job at the Pennsylvania Railroad Company as a secretary/telegraph operator at a salary of $4.00 per week ($124 by 2020 inflation) (Source: Wikipedia). While he didn’t dominate the railroad industry like Cornelius Vanderbilt, Carnegie used the industry to grow his career and make connections.
When he was 24, Carnegie was asked by Thomas A. Scott, who hired Carnegie, to be the superintendent of the Western Division of the Pennsylvania Railroad. His salary increased to $1,500 a year ($43,000 by 2020 inflation). Carnegie learned a lot about management and cost control during these years, which would help him run his future business (Source: Wikipedia).
Carnegie’s career didn’t start in time to leverage the growth of the railroad industry like Vanderbilt, but he still used the industry’s growth to propel his own career. Like Carnegie, if we see a tectonic shift happening, we can still leverage it in more ways than one. We might not be able to be Google right now, but we can still use the internet to launch our business and find success.
- Steel and New Innovations
Early on, Carnegie saw there would be a huge demand for iron and steel. He founded the J. Edgar Thomson Steel Works, which would become the Carnegie Steel Company. Borrowing from Britain, Carnegie’s steel plants were the first in the U.S. to use the new Bessemer steelmaking process. He implemented many new innovations to make the company more efficient and reduce the cost of making steel (Source: Britannica.com). By 1889, Carnegie Steel Corporation was the largest of its kind in the world (Source: Biography.com).
Carnegie was always quick to leverage new innovations to his advantage. Sometimes we may be hesitant to implement new technology because we’re not sure it will be successful. We should follow Carnegie’s example by adopting new technology before our competitors do. If we do, then we will be able to pioneer that new technology and help to work out the kinks faster than our competitors.
Other Secrets to Success
Here are three other strategies Carnegie utilized to help him in his career.
- Educate Yourself
Carnegie didn’t have the best education, but he still sought to educate himself. He took advantage of the generosity of Colonel James Anderson, who opened his personal library of 400 volumes to working boys each Saturday night. Carnegie consistently borrowed from Anderson and was very grateful to him. This is when he decided to give back if wealth ever came to him (Source: Wikipedia).
Despite not having the best formal education, Carnegie took advantage of the resources around him. Likewise, we can all take advantage of the resources around us. We can use the internet to do research and take advantage of public libraries around us to further educate ourselves. We can also ask people in our lives to mentor us and teach us their knowledge.
- Put All Your Eggs in One Basket
Carnegie said, “I believe the true road to preëminent success in any line is to make yourself master in that line. I have no faith in the policy of scattering one’s resources, and in my experience I have rarely if ever met a man who achieved preëminence in money-making — certainly never one in manufacturing — who was interested in many concerns. The men who have succeeded are men who have chosen one line and stuck to it.”
When we spread ourselves too thin, we can only become good at all of those things. If we want to become great, we need to focus on becoming great at a specific thing. Start-up companies who try to do it all often don’t find as much success as ones that pick a specific and narrow niche and stick to it. Indeed the more narrow the niche, the better it often is for the business because there are people out there who are looking for that specific thing who don’t want general help.
“My advice to young men [and women] would be not only to concentrate their whole time and attention on the one business in life in which they engage, but to put every dollar of their capital into it,” Carnegie said.
- Invest in Others
Carnegie was able to make his initial investments and find his initial success through the relationships he had. In addition, Carnegie paid special attention to his relationships with his employees. It is said that he was famous for knowing his employees personally and rewarding them for good performance. Furthermore, many of the strikes were appeased through Carnegie listening to and understanding his employee’s complaints (Source: Crowdcruw.com).
Sometimes we get caught up in the numbers or the problems of our business, but we need to remember that in the end, business is about people; it’s about helping people. When we develop our relationships with the people around us and show them that we care, our business can greatly benefit from it.
Key Takeaways
Here are some of my key takeaways from this episode:
- If we’re able to, we should give back in any way that we can. Giving back can be one of the best ways to find fulfillment.
- If we see a tectonic shift happening, we can leverage it in more ways than one. We might not be able to be Google right now, but we can still use the internet to launch our business and find success.
- We should follow Carnegie’s example by adopting new technology before our competitors do. If we do, then we will be able to pioneer that new technology and help to work out the kinks faster than our competitors.
- We can take advantage of the resources around us to educate ourselves.
- If we want to become great, we need to focus on becoming great at one specific thing.
- In the end, business is about helping people. When we develop our relationships with the people around us and show them that we care, our business can greatly benefit from it.
Next Steps
- Get a free ebook about passion marketing, and learn how to become a top priority of your ideal customers at PassionMarketing.com.
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