Guide to Lecture 3 (Andrew Carnegie)
Achievements
Learned Morse code, became
telegraph operator
Started the steel industry
Philanthropist—Carnegie Hall,
Carnegie-Mellon University
Symbolized the American
Dream
Like stock character of success
novel
Horatio Alger the novelist
1867-1899—20 million books
Synonymous w/ self-made
success
Life and Career
Nov. 1835—born in
Dunfermline, Scotland
Father of working class--weaver
1843—300 year history of
Like novel hero, Carnegie got
big break in 1852
Tom Scott of Pennsylvania RR
Salary of $35/month as
secretary
weaving changed w/ power
Learned key management skills
loom mill
RR needed to run efficiently
1848--relocated to Pittsburgh
Cost accounting procedures
“Chain migration”, “America
Bureaucratic organization
letter”
Support structure on arrival
Age 12—hired as bobbin boy in
textile mill ($1.20/week)
Formal education stopped
By age 14--12 hour days,
bookkeeping classes
1849—messenger boy for
telegraph firm
Pittsburgh at source of Ohio R.
Close to coal deposits
Oil found nearby in 1859
PRR became largest private
firm in world
1859—Scott became VP,
Carnegie head of P’burgh
division, age 24
Became a true capitalist
1856--Adams Express Co.—10
shares, $600
Value of investment and use of
borrowed funds
1863—paying over $1,400/year
1868—rich man, $50,000/year
1870s—trip to England—
Bessemer Process, steel
3 to 5 tons/day—do in 15
min.
1872—first plant (ET Works),
beg’g. of Carnegie Steel
Race w/ J.P. Morgan of Federal
Steel
1901—opening a plant to make
tube
Sold Carnegie Steel to Morgan
for $480 million
Morgan—combined w/ 8 largest
Production zoomed, prices fell
steel mills to form US Steel--
“Scoop the market”
$1.4 billion, largest firm in
1873--$58 per ton of rails
1889--$25
1900--$11.50
Nerves in chaotic marketplace
Business combinations
Pools or cartels to fix prices
and divide up the market
world
Carnegie now retired w/ $300
million share of sale
By death in 1919, gave almost
all away
Gospel of Wealth
Social responsibility
Gentlemen’s agreements
Give back to society
Trusts and outright mergers
Schools, libraries, concert
1890s—Carnegie trying to
halls
dominate
Not much for his heirs (10%)
Vertical integration—
Avoid aristocracy in US
acquisition of raw materials
Confiscatory estate taxes
1880s—bought coke and
limestone firms
Iron deposits in Mesabi Range
Negotiated 50-year lease with
John D. Rockefeller
1890s economy oligopolistic
Phase 3 of integration—mfr. of
finished steel goods