He that cannot reason is a fool,
He that will not a bigot,
He that dare not a slave. —An inscription in Andrew Carnegie’s library, inspired by the same he saw in the library of Mr. Stokes of the Pennsylvania Railroad.
One day, a man and his young son were returning from the seashore, a few miles away from their home. The child was tired, so the father was carrying him on his back. As he was making his way up a steep hill, the father remarked about the heavy load. He hoped that the child might suggest that he walk for a bit. In reply he heard the following words:
“Ah, Faither, never mind, patience and perseverance make the man, ye ken.”
The man kept going, though he was unable to suppress his laughter.
The child was Andrew Carnegie. He would grow up to become the second richest American of all time (according to American Heritage and Business Insider), making most of his fortune in the steel industry.
Carnegie’s story is a fascinating example of an individual being able to create immense wealth from nothing. His family moved from Scotland to America when he was little, and had very little money. One of Carnegie’s first jobs was working as a messenger boy. Showing himself to be resourceful and intelligent, he graduated to a telegraph office clerk at a railroad company. He then rose steadily up the ranks, eventually ending up with his own steel mills, which could produce the best and strongest steel in the country. In 1901, at the age of 66, he sold his steel mills to a holding company organized by Pierpont Morgan (of J.P. Morgan), called the United States Steel Corporation, retiring from industry and becoming one of the richest men in the world.
How did he do it? If it’s possible to reduce the reasons for his success down to essentials, I think they would be the following two things.
First, he understood people from a very early age, and he had a talent for managing them. Even as a little boy, he organized his young playmates into workers. His family kept pet rabbits. Carnegie managed to get his friends to gather dandelions and clovers for his rabbits in return for a promise to name new rabbits after them. It was, in Carnegie’s own words, “the poorest return ever made to labor.”
Second, he took ownership of his work. If there was a problem, he assumed that it was his responsibility to find a solution for it. Rather than wait for his boss to tell him what to do, he would work on solving it. This kind of resourcefulness and initiative is what attracted the eye of every manager he worked with, leading to very quick promotions. The following story is a striking example of this:
Death or Westminster Abbey
This memorable incident happened when Carnegie was working as a clerk and operator at a telegraph office of the Pennsylvania Railroad company. Carnegie writes:
One morning I reached the office and found that a serious accident on the Eastern Division had delayed the express passenger train westward, and that the passenger train eastward was proceeding with a flagman in advance at every curve. The freight trains in both directions were all standing still upon the sidings. Mr. Scott was not to be found. Finally I could not resist the temptation to plunge in, take the responsibility, give “train orders,” and set matters going. “Death or Westminster Abbey,” flashed across my mind. I knew it was dismissal, disgrace, perhaps criminal punishment for me if I erred. On the other hand, I could bring in the wearied freight-train men who had lain out all night. I could set everything in motion. I knew I could. I had often done it in wiring Mr. Scott’s orders. I knew just what to do, and so I began. I gave the orders in his name, started every train, sat at the instrument watching every tick, carried the trains along from station to station, took extra precautions, and had everything running smoothly when Mr. Scott at last reached the office.
Scott had heard about the delays and was anxious to find out how things were going. He was about to start giving orders when Carnegie spoke up and told him about what he had done. Scott stared at him without saying a word. Then, still without saying anything, started looking over Carnegie’s work. After being satisfied that nothing was amiss, he walked away to his desk.
Scott couldn’t voice his approval, but he also didn’t want to reprimand his subordinate for doing good work. The problem was solved, and everything was running smoothly. Carnegie took a risk and overstepped his authority, but he also took ownership of his work, he took responsibility for solving the problem at hand without needing to be told what to do. He knew he could do it, and so he did. This is the best kind of employee one could hope for.
Later Carnegie found out that Scott spoke to the head of the freighting department about what happened. It turns out that Scott wasn’t angry, he was just shocked and surprised at the initiative of his young clerk. Scott could recognize talent (having hired Carnegie in the first place), so from that day on “it was very seldom that Mr. Scott gave a train order.”
The goose that lays the golden eggs
One characteristic of great businessmen is the ability to seize an opportunity. One day, Scott asked Carnegie if he had five hundred dollars. He had an investment opportunity for him, ten shares of Adams Express stock that just became available. As Carnegie writes, at the time his capital was nearer “five hundred cents,” but, nevertheless, his reply was that he thought he could manage that sum.
That evening he explained the situation to his mother, who, being very supportive of her son, was ready to do everything to make this deal happen. The family paid five hundred dollars for the house they were living in, so she thought she might mortgage the house in exchange for the money:
My mother took the steamer the next morning for East Liverpool, arriving at night, and through her brother there the money was secured. He was a justice of the peace, a well-known resident of that then small town, and had numerous sums in hand from farmers for investment. Our house was mortgaged and mother brought back the five hundred dollars which I handed over to Mr. Scott, who soon obtained for me the coveted ten shares in return.
This was Carnegie’s first investment. One day, he received a letter from Adams Express. The envelope contained a monthly dividend of ten dollars. For the first time Carnegie received money from an investment, money that was not directly connected to his time. “It gave me that first penny of revenue from capital—something that I had not worked for with the sweat of my brow. ‘Eureka!’ I cried. ‘Here’s the goose that lays the golden eggs.’”
The philosopher’s stone
Carnegie’s steel mills were one of the first to employ a chemist, something his competitors pronounced “extravagant.” This investment proved to be extremely profitable as the company was able to develop new methods of smelting which allowed them to make use of resources that others simply discarded. “It is hardly believable that for several years we were able to dispose of the highly phosphoric cinder from the puddling furnaces at a higher price than we had to pay for the pure cinder from the heating furnaces of our competitors.” His competitors would throw away this cinder into the river at Pittsburgh because they couldn’t use it.
But it is still more unbelievable that a prejudice, equally unfounded, existed against putting into the blast furnaces the roll-scale from the mills which was pure oxide of iron. This reminds me of my dear friend and fellow-Dunfermline townsman, Mr. Chisholm, of Cleveland. We had many pranks together. One day, when I was visiting his works at Cleveland, I saw men wheeling this valuable roll-scale into the yard. I asked Mr. Chisholm where they were going with it, and he said:
“To throw it over the bank. Our managers have always complained that they had bad luck when they attempted to remelt it in the blast furnace.”
Carnegie then arranged for a man in his service by the name of Du Puy to buy up all this roll-scale from Chisholm, which Carnegie made happy use of. This continued for a while. Unfortunately, Chisholm died prematurely, which robbed Carnegie of the opportunity to see his reaction on eventually finding out that he was giving away this valuable resource. His successors, however, learned what was going on and followed Carnegie’s example.
It was years after we had taken chemistry to guide us that it was said by proprietors of some other furnaces that they could not afford to employ a chemist. Had they known the truth then, they would have known that they could not afford to be without one.
The philosopher’s stone is a mythical substance that is said to turn base metal into gold. The truth is, such a thing exists, but it is not a stone—it is the human mind.
A much more complicated piece of mechanism
Remarking on his youth, Carnegie wrote: “I did not understand steam machinery, but I tried to understand that much more complicated piece of mechanism—man.” An example of his knowledge of human nature can be seen in how he managed negotiations. There was one incident when a men’s committee were making unfair demands, influenced by one particular “bully.” During his meeting with the committee, Carnegie used a skillful social trick to demolish the instigator’s influence:
We met in the usual friendly fashion. I was glad to see the men, many of whom I had long known and could call by name. When we sat down at the table the leader’s seat was at one end and mine at the other. We therefore faced each other. After I had laid our proposition before the meeting, I saw the leader pick up his hat from the floor and slowly put it on his head, intimating that he was about to depart. Here was my chance.
“Sir, you are in the presence of gentlemen! Please be so good as to take your hat off or leave the room!”
My eyes were kept full upon him. There was a silence that could be felt. The great bully hesitated, but I knew whatever he did, he was beaten. If he left it was because he had treated the meeting discourteously by keeping his hat on, he was no gentleman; if he remained and took off his hat, he had been crushed by the rebuke. I didn’t care which course he took. He had only two and either of them was fatal. He had delivered himself into my hands. He very slowly took off the hat and put it on the floor. Not a word did he speak thereafter in that conference.
Was Carnegie fair in dealing with this man? We’ll never know the details, but whatever the case, what’s important is that his approach was the winning one, and in that way it is instructive. It is only by learning to understand that “much more complicated piece of mechanism” that we can be successful when dealing with people, because if we don’t, we’ll be at the mercy of those who do.
As masters of the craft
All of us have our strengths and inclinations, which make us better suited for certain activities and certain jobs. Mr. Kloman was an extremely talented engineer at Carnegie’s steel plants. His salary was great, but he was lured away by Carnegie’s competitors, who told him that Carnegie was restraining his business genius by keeping him as a mere engineer. Unfortunately, Kloman was not as good a businessman as he was an engineer, and his business ventures all ended up in bankruptcy. Had he understood what he was best suited for, he would have been much richer and happier.
Mr Kloman’s ambition had been to be in the office, where he was worse than useless, rather than in the mill devising and running new machinery, where he was without a peer. We had some difficulty in placing him in his proper position and keeping him there, which may have led him to seek an outlet elsewhere. He was perhaps flattered by men who were well known in the community; and in this case he was led by persons who knew how to reach him by extolling his wonderful business abilities in addition to his mechanical genius—abilities which his own partners, as already suggested, but faintly recognized.
Carnegie himself had made a choice to focus his career on industry rather than finance, even though he could have probably found great success there also. When he was still young and working at the telegraph, he learned to operate his machine with such skill that he could do it in a dark room during a thunderstorm. This skill came in handy when he traveled to London to make a deal. When the details of the deal were arranged with the other party, he telegraphed back to America the same day, communicating the document and getting back any changes that needed to be made. Before the telephone and the internet, the telegraph was the fastest way to communicate across the Atlantic, but few could use it as efficiently as Carnegie.
Junius Morgan, with whom he was working, was surprised the next morning to find that Carnegie had already returned with amendments from America, and remarked to others that this man would go far. Later, Junius would try to recruit Carnegie into a more active role in finance, but Carnegie was more attracted to manufacturing, he wanted to make something real rather then speculate capital, so he rejected finance for industry, narrowing down his focus even further to just steel. This focus in turn helped him overtake his competitors and produce the best steel in the country, leading to a spectacular exit with the United States Steel Corporation deal. Writing about Kloman, Carnegie remarked: “How foolish we are not to recognize what we are best fitted for and can perform, not only with ease but with pleasure, as masters of the craft.”