This is the amazing story of Andrew Carnegie (1835 – 1919), one of the four “robber barons” of the USA and the richest man in the world at that time. His autobiography was written over a century ago but makes for a fascinating read even today as the basic principles on which he built his business are even more relevant now.
He lived the classic American dream – a poor immigrant who went on to become an industrialist with passion, hard work and risk taking. His empire was in steel, railroads and construction. By education he only went to school for a couple of years but he rode the waves of modern technologies of his times – telegraph, mining (coal and oil), construction (railroads and bridges) and iron and steel.
Its fascinating to read about Carnegie’s journey. Most of his ventures were partnerships with like minded people who were forward looking, experimental in their approach and were specialists in their fields. They were the first ones to back the modern Bessemer furnaces from England (which only a century ago was the Industrial capital of the world). They had modern book keeping in their factories that allowed them to keep a track of the cost of goods being produced on an (almost) real time basis. Till then most of the steel industry did not know the status of their P&L till the books got tallies at the end of the year. They had a system where workers were rewarded for suggestions in process improvement and some of them rose to the level of partners and plant managers. Most importantly, they developed a process of determining the level of ferrous content in the ore using chemistry and began paying mine owners accordingly. As things were, some mines who had a very high iron content did not produce good results if treated normally and hence found no takers. Carnegie steel works was able to modify their process in such a way that they could use this better ore and pay a lesser price for it as no other mill would buy the ore (thinking it was inferior) and produce the best steel in the world at the lowest cost. The sellers were thankful to them for being the only buyers of their ore and the Carnegie mills enjoyed this arbitrage for a long time. They were backward integrated by owing the coal mines, railroads and ships from transportation of their goods.
Most importantly was his fixation for a solid balance sheet and staying away from projects where the margin of safety was low. The economic and stock market cycles were vicious a century ago (central banks were yet to discover their true power) and the reason Carnegie always had funding available was his fixation on the solidity of their balance sheet. There is a mention in a couple of places in their following the “spirit of the law” and not just “letter of the law” and avoid “cuteness” so that the business had a rock solid reputation. Because of his reputation he also underwrote a number of public issues of stocks and bonds as capital was getting raised to establish large industries.
The best part – The Gospel Of Wealth. He exited the business at the age of 65 (to a JP Morgan controlled entity, another “robber baron”) and focussed the rest of his life in giving away all his wealth. Libraries (2800 approx) and public places were the favourite subjects of their attention along with universities (Carnegie Mellon). Many trusts were also established – the one to support teachers post retirement was close to his heart. What stood out for me was the “heroes fund” that he set up with an objective of helping the families of people who lose their lives in a heroic act that they could have chosen to be a bystander in. Marvellous isin’t it?
He travelled the world and had a great equation with his workers, although he is also infamous for one of the big strikes that took place in one of their plants. He had a big social circle and also was an advisor to politicians on matters of foreign affairs. The book also details the role that parents can play in shaping their children and how his life was shaped by the people around him.If you are looking for some inspiration you will definitely find it in the life of Andrew Carnegie beautifully captured in his autobiography and Gospel of Wealth. He was the original “Man Of Steel” (sorry Superman).