A Tough Life: Carnegie Makes Good with Steel

By the late 1880s, Carnegie had established himself as the world’s largest manufacturer of raw iron, steel-rails and coke. After purchasing rival Homestead Steel Works in 1888, Carnegie integrated his assets together under the Carnegie Steel Company. Worth an estimated $25 million, Carnegie became the proud owner of the world’s largest steel company.

His estimation of the promising future of steel proved to be correct. Over its first ten years, the Carnegie Steel Company increased its profits from $2 million to $40 million. It was not smoothly sailing all the way, however. In 1892, Carnegie’s partner, Henry Frick decided to lower employee wages without the approval of Carnegie. Workers subsequently went on strike, which resulted in Frick calling in over 300 armed strikebreakers. After a daylong battle, which ended when the governor placed the plant under martial law, ten men had been killed and hundreds wounded. The strike was over, but Carnegie was furious with Frick. In 1899, after growing conflict with Frick, Carnegie finally decided to buy him out for $15 million.

With his staunch belief in democratic principles, Carnegie organized his company along those same lines. He wanted his workers to have a stake in the company and thus created his unique vision of profit sharing. He also encouraged competition between pairs of workers, pushing them to outdo the other. In some instances, men who used to be friends stopped talking to each other for years. Carnegie incorporated his enterprises as limited partnerships, with himself as the controlling partner and he never once sold any stock publicly.

While his staff began to see their interest in alignment with that of the company, Carnegie also fueled his company’s growth by introducing the tactic of counter-cyclical investment. Whereas his competitors liked reinvesting their profits in new capital during their good times, Carnegie shifted his purchasing to slump times, when prices were lower. Because he well understood the business cycles of boom and bust, Carnegie took advantage of this. Thus, after the economic slump between 1893 and 1897, Carnegie’s profits began to flood in.

At the age of 65, Carnegie began considering retirement. He had changed his enterprises into standard joint stock entities and felt that the time had come for him to relinquish control. The question then became, to whom? On March 2, 1901, renowned American investment banker John Pierpont Morgan offered Carnegie the price he wanted and negotiations were concluded. In the country’s largest industrial takeover to day, the U.S. Steel Corporation was established, the first billion-dollar company in the world. Carnegie received almost $230,000,000 worth of bonds in the sale, and had a special vault built to house them in New Jersey.

In addition to making a fortune in steel, Carnegie owned the Pittsburgh Locomotive and Car Works Company, as well as 18 English newspapers. Upon retirement, Carnegie began to disperse his enormous wealth towards the public interest and for social advancement. He established numerous public libraries throughout both the U.S. and U.K as well as throughout other English-speaking countries. He also created numerous foundations dedicated to the arts, science and patriotism. By the time he died in 1919, Carnegie had given away $350,695,653. The last $30,000,000 was given away after his death to similar charities.



A Tough Life: Carnegie Makes Good with Steel

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