Incredible Carnegie

Incredible Carnegie
By John K. Winkler

How do you know Andrew Carnegie? By his famous music hall, his libraries, his famous steel fortune, his endowments, or the controversy over who he was? Did he fall into the infamous category of the Great Robber Barons? Did he indeed turn a new leaf? Or was he a simply true to his word and core beliefs? What is his legacy and what is his genius? I picked up this book, simply because it was on my bookshelf. As I delved into it I learned about Andrew Carnegie, as he was viewed in 1931, the original copyright date of this 50¢ used bookstore diamond in the rough; the earnest work of my son TJ. It was an entertaining story.

Andrew Carnegie was not born with a silver spoon, rather of an immigrant Scot and son of a weaver. He was a small 5’4” persistent, witty, opportunistic capitalist who begin his road to riches in Pittsburgh as a telegraph operator at the age of thirteen. He worked hard as a lad of which earned him early rank in his telegraph years and then again to higher rank in his railroad years. At an early age, he taught himself the art of investments and pledged to himself to not have to work for a wage by the time he reached the age of 35. This amongst other lofty goals he did achieve. So you could read the above descriptive words of Carnegie as either adjectives or verbs towards his ideals.

Carnegie’s character of fate seemed to place him constantly in the right place at the right time. As head of the telegraph office he was at the crossroads of important information being transmitted and took advantage of every word. One could possibly accuse him in this day of “insider trading”, as he did invest on this information. He leveraged the returns of his early investments to make larger investments. He eventually found himself as the arbitrator in many disputes of the then “pig iron” industry, which eventually found his name on company paper in the Iron Business.

As a matter of conservative policy Carnegie never speculated thus held off on investing into the Bessemer Furnace and the discovery of mass production steel until he was certain of its return on investment. Carnegie knew nothing of the steel making process. But he did know how to put the right people from capitalist, scientists, engineers, entrepreneurs to laborers, on his team and put his money in the game exactly when the technology and the economy were prepared to make something of it. And when you were on his team, you produced or left. His shrewd business demeanor teaches one to demand in writing that of which is spoken. So I came to appreciate the labor of my Uncle Jimmy and my nephew Brian as I read the book. You come to realize how closely knitted are the worlds of economics and philosophy (politics) …law.

As a side note to Carnegies methodology, I also was intrigued to read about the government policy’s of the time and it’s role in intervening in business by passing laws in the United States allowing for Limited Liability Partnerships giving capitalists for the first time protection of their private interests against poor money management. The book describes the second collapse of the post Civil War economy as result of the collapse a Prime bank in 1870, Carnegie’s fortune became at risk due to the unbeknownst speculative investments of one of his associates. On the associates’ promise to temporarily surrender his share of their enterprise, Carnegie took action to secure the associates’ name in a reciprocal promise to assume to assume the bad debt. Once the associates name was cleared Carnegie did not restore his associate’s fortunes on the grounds that the promise he made was not in writing. This is one of the incidences that put the integrity and moral standards of Carnegie on social trial.

There are those that would say that Carnegie was out of order and treated his associate unfairly. And to this point you could debate in behalf of Carnegie on the grounds of the poor speculative investment of one person deserved first evasive action in business, second protective action, and then third control measures, independent of a government policy. Yet in the end Carnegie did ironically take advantage of the LLC Laws and conducted business accordingly. To think there was an opportunity to rewrite Wharton’s business textbooks as opposed to getting on a slippery slope of governmental protectionism…and we missed it!

The authors perspective of the Carnegie Steel Company was summed up in one word; feudalism. The company literally owned the ore mines in Minnesota, shipping lanes on the Great Lakes, the railroads across Pennsylvania, and the Coke and Steel companies; a conglomerate of everything steel and the whole process of making it; what a way to control cost. It was written in 1931; “This arrogant, mercurial little Kaiser was jealous of his rights, impatient of counsel.” Carnegie owned the Steel business, and had President Cleveland in his pocket, writing tariffs to protect him from international competition during the formidable years, the same way we are expected to tolerate liberal Europe protection and funding of the Airbus Industries to gain competitive advantage over the United States aerospace industry. When contrasting Carnegies’ plan to the survival plan of 2004, yes business is consolidating with a more intense focus on cost control. It is the method of continued dominance on the international business stage, so on that mark I give Carnegie an A+.

However Carnegie was NOT recognized as the hero or Prime Mover in this grand scheme to dominate the Steel Industry. He was a seen as a very fortunate man who was surrounded by a handful of Prime Movers, somewhat by fate, and partially by intentional plan, to create a dynasty and mountain of wealth for all those involved with Andra Carnegie on top. Did the people benefit? Well I must ask you to circle back to my original question. How do you remember Andrew Carnegie? Most I suspect would say Carnegie Hall. Some would say his libraries. Others would say the steel business. And the protagonists of liberal ideals where the common man can blame his lot in life on successful men, would site, Carnegie’s faults.

Carnegie did have faults, which left his legacy to debate. Some were perceived and some in my view were valid. He was a hard workingman in his youth and converted his labor into capital. He did that better than the better than average man. In his effort to leverage his industrial capital upon political venue exposed him to criticism. Some were warranted, for instance the steel tariffs were direct booty from his connections to presidents of both parties. He showed no loyalty to a party; only to he who could line his pockets. His forays in to literature, first reading, then writing exposed his moral integrity. Along these lines he once wrote a widely read article proclaiming the honor of the “working man’ and then turned on that same man in a Machiavelli manor during a bitter strike. This was the beginning of his images’ downward slope. Following this his circle of geniuses’ was caught defrauding the government in producing inferior armor for the US Navy. The New York Herald with reason pounced on Carnegie and Cleveland in the same way the New York Times now clobbers Dick Cheney George W. Bush and Haliburton today. How accountable do you hold the man at the top for the actions of the workingman? And how do allegations square with the notion of LLC’s? With these left un answered public perception (liberal press) tarnished Carnegie more than Cleveland. His public image drew fire from not so much the workingman, but the political liberals’ representation of the later.

When Carnegie, an entrepreneurial financier as opposed to a “steel man” finally sold out to JP Morgan the public was alarmed at the amount of wealth that was generated not only by Carnegie, but also by many other people connected to his enterprise. How dare people in America be successful!! It was proclaimed by Senators and Newspapers that America will soon belong to a new kind of king. When I read these words I was reminded of the mullahs of Iran who strike down the enterprising man once the appearance of authority could be challenged. Oh contraire to the vision of our founding fathers of this great Republic. Alone Carnegie amassed $450,000,000 at the closure of his deal with JP Morgan; a deal which formed US Steel. What he did with that money defines his legacy, no matter how one choose to perceive the man and his deeds.

His genius though is without doubt. To quote the author; “Carnegie knew the modulus of human elasticity by instinct. No one ever had to tell him how to ascertain the tensile strength of a man, the point to which he would stretch while preserving uniform diameter. To Andrew Carnegie the molecular construction of human character, its resistance to pressure and its final fracture point were known in the mysterious way in which fledgling find their nest. Behind the luck of his first seizure of capital was the power to seize upon the weakness and utilize the strength of the men with whom he was thrown. The moral specific gravity of every man was known to him instinctively; and he built a mighty organization with human atoms as instinct selected. This was the secret of his success.”

Of this wealth (capital, legacy), Carnegie gave back all but $25,000,000 (10%); of which he bequeathed to his family. In the winter of his years, he was quoted as saying “t is indeed more blessed to give than to receive.” He was certain that to take it with him would be a failure and a mark of an unsuccessful man. But in his vanity, the blessing he received was apparent influence he observed in providing intellectual wealth through thousands of libraries. And of course he and The People should feel blessed; his genius put America in a position to prevail through the trials of the 20th century. His foundations were endless with always an aim towards world peace. However, in the end he was brought before a Congressional hearing and challenged that his phenomenal philanthropy was a threat to the American foundation ??!! All in attendance shared his enjoyment of his turn about thrashing of a liberal Congress. But today, I suspect there are again those who would challenge his means as opposed to his ends. In that light I went back to my previous reviews from Travelers Choice and Prime Movers. Of the seven qualities in either book Andrew Carnegie gets a score of fourteen in my book

This author not only does a great job telling a story about Andrew Carnegie, he did a colorful job bringing in the supporting characters (other “Robber Barons”) of those great people that made America great in that era of Splendid Isolation.