Andrew Canagie Essay Essay, Research Paper

Andrew Carnegie

The Rise of Big Business

Andrew Carnegie was born in Dumferline, Scotland, in November of 1935. His parents

were Will and Margaret Carnegie. He also had a brother, Tom. The main income for the

geographic location where he grew up was weaving linen. The people who engaged in this type

of employment considered this an art since it had relatively unchanged since medieval times.

Andrew’s father was one of those craftsmen. Since there had been so little change in this type of

work, they were really caught off guard when machine production came around. For some, this

industrialization was good. The Carnegies were lead to believe that this was the way they should

be headed. At first the returns were good for them, but prices and demand fell, and they were

left without anything. The whole looming industry was virtually gone; and with that, it was clear

that there would be no trade for Andrew to learn.

They had received letters from time to time about the possibility of work in America. After

the looms fell through for them, they realized that they didn’t have much of a choice of what to

do. So, they borrowed the money for the voyage from Scotland to New York in the hopes of

having a fresh start. Losing everything they had didn’t sit well with Andrew or his mother. The

family left in shame and determined to make it in there new environment.

Upon arriving they immediately set out for work. Will found door-to-door work with a

loom, Margaret with shoe binding, and Andrew found work as a bobbin boy in a local textile

mill. Andrew was a hard worker and had the ability to adapt to any type of work. He was

offered a job as a messenger boy for a telegraph company and he jumped at the opportunity to

get out of the terrible conditions of the mill. Andrew seemed to be in the right place at the right

time for his advances. He was also willing to do anything to succeed. He was working long

hours and still had the drive to attend classes. With the messenger job, Carnegie not only was

able to “network” with most everyone, but he kind of knew how to manipulate or pursued

people; he learned how to say what people wanted to hear. Carnegie was making steps toward

becoming successful in whatever he did. From the factory to office boy, messenger, part and full

time telegrapher, Carnegie seemed to be destined for greatness.

Because of Andrew’s abilities and understanding of the telegraph system, he was offered a

job by one of Pennsylvania Railroad’s superintendent of its western division, Tom Scott. He

hired Carnegie to be his personal telegrapher and to assist him in dispatching trains over the

western division’s mountainous main line. Here Andrew was able to really maximize the

opportunity set before him. He did public relations work, observations into how shipments were

made and received, and mastered the controlling of the division’s operations. In 1859, Scott

was promoted to vice-president and appointed Carnegie superintendent of the western division.

This was Andrew’s big break. His knowledge of operations and innovative thinking pushed him

to the top of his field. From the years1859-1865, Carnegie expanded the road and increased

traffic to an all time high. By doing this, cost per ton-mile fell. This process was his calling. The

ability to lower costs.

From there Carnegie learned how to make money without lifting a finger: investing. He also

learned that it didn’t matter whose money was being used for the transactions as long as the

return exceeded the cost. It was this type of mentality that led him into investing in sleeping cars,

oil companies, and bridge companies at that time. All of these business adventures were not all

successes, though. The bottom line for him at this time was to invest no matter what. Carnegie

also learned that he could make money off of selling bonds and shares of stock. He had an

amazing ability to understand the working structures of the business world. Nothing could

escape him. All of this knowledge seemed to be building up in to something immense; “Big

Business”. Even though Carnegie was destined for greatness, he lied at times, concealed

information, and misrepresented facts to get to the top of his game.

In November of 1872, Carnegie went from capitalist to entrepreneur by forming a company

to manufacture Bessemer steel. This company was set up to use the money that he obtained

while working for the railroad as well as his knowledge about new cost-based management

techniques. Carnegie’s philosophy was to cut costs as much as possible and the rest would take

care of itself. He did this by carefully tracking where every penny was spent and was able to

“scoop the market”. The two ways to cut costs were to speed up production and cut labor

costs while maintaining those production levels. He also believed in the cannibalization of his

equipment which meant that he would produce as much as possible even if it meant sacrificing

his machines. Machines cost less than men. His hunch paid off and prices were kept down and

production was high.

Carnegie was driven on returning profits form his company back in to his company to expand

growth. He was the master at this technique and he knew it. This process was great for

expansion and for profits, but for the people that had shares invested, a waiting game of when

they would get a return had started. Andrew was also on the cutting edge of updating his

machinery and the use of different techniques to improve production and to lower costs. He

even hired a full time chemist on his staff to be on top of the scientific aspect of steel production.

Carnegie proved that he would stop at no lengths to cut labor costs even going as far as tying

steel prices to wages on Jan. 1st, 1888.

At one point though, he may have gone a little too far. With wages dependent upon steel

prices, wages rose if prices did. There was a bottom for the reversal of this practice, though.

The Homestead strike was partly caused by this practice and the fact that Carnegie and Frick

wanted to eliminate the union. Many live were lost in this battle which started when Frick

ordered the Pinkertons to come down river on barges and attempt to be smuggled in to the plant

and re-open the plant with non-union workers. The plan didn’t work.

After the strike there were some years (1893-1894) that were considered depression years.

Carnegie pushed through these tough time and managed to push costs down even more and

come out with an amazing $4,000,000 net profit; the next closest competitor had a $1,000,000

loss for the same time period. Andrew was quite amazing in his ability to make money. His

company posted record profits in the next few years topping out at $40M in 1900. After a

meeting with Charles Schwab in Jan. of 1901, Carnegie decided to sell out. He sold his

company to J.P.Morgan for $480,000,000. The sale of this company was combined with

another company to become United States Steel. Much of his fortune was given away in the

years that followed. This gave him inner peace. He gave libraries, church organs, and founded

institutes and established schools. He passed away on August 11, 1919; and he had given it all

away.