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.
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