Andrew Carnegie - The Khuram Dhanani Blog
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Khuram Dhanani

Andrew Carnegie

Carnegie Hall, one of the most iconic concert stages in the world, sits in the heart of Midtown Manhattan. The venue has something in common with Pittsburgh’s Carnegie Mellon University and over 2,500 Carnegie Libraries scattered worldwide. The commonality, of course, is founder Andrew Carnegie, an entrepreneur who contributed the funds and philosophy to establish each of these institutions. A millionaire many times over, Carnegie cemented his legacy by ensuring that future generations would have the same access to arts, education, and personal enrichment opportunities that he had.

Carnegie was born in Dunfermline, Scotland, in 1835. His father wove linen on a hand loom in the family’s home and earned a decent living. By the time Andrew was 10, however, industrial weaving mills had made his father’s occupation obsolete and the family fell into poverty.

Moving to the United States and settling near Pittsburgh, an industrial center, Carnegie’s father eked out an uncertain living by weaving linen at home and selling it door-to-door. Like many children of this era, Andrew worked to help support the family and overcome the trauma of poverty. Starting with a job in a cotton mill at 14, Andrew soon became a messenger boy for the Pennsylvania Railroad, working his way up to telegraph operator and then as the administrative assistant for a powerful railroad executive.

With his father in poor health, Andrew became the sole breadwinner for the entire family. Despite the overwhelming responsibilities he faced, Andrew educated himself through voracious reading, memorizing Shakespeare’s plays, and gaining a sophisticated appreciation of classical music. Carnegie became convinced that such enrichment was as essential to personal success as hard work, and later credited his self-education with sufficiently teaching him about the world to find success with a wide variety of investments and projects.

During the Civil War, Carnegie was hired to fill his boss’s position, and he began making a series of astute investments in railroad equipment, oil, bridge, and manufacturing companies. By 30, he retired from the railroad and used the financial leverage of his investments to support himself and his family. Before long, Carnegie was making about $50,000 a year at a time when the average middle-class wage earner brought home $500 to $700 per year.

At age 35, Carnegie’s life got really interesting as he became an industrial tycoon. Focusing on the steel industry when new manufacturing technology made it possible to produce steel in large quantities, Carnegie proceeded to build a fortune. A man of action, Carnegie executed his plans with great success.

Constantly on the lookout for new technology that would improve efficiency, Carnegie was willing to invest heavily in it, sometimes buying the technology outright so he would have exclusive access. Delegating as much of his work as possible to his executives, he offered them a few percentage points of ownership in the company instead of a high salary, giving them an incentive to monitor costs and maximize profits.

Carnegie enjoyed writing and published several books detailing his world travels, along with an economic history of the United States. His most famous work was “The Gospel of Wealth”, a philosophical treatise detailing what Carnegie felt were the moral responsibilities of the rich. He believed the wealthy had a duty to enrich society by donating as much of their excess income to causes that would benefit as many people as possible. The article was viewed favorably by the public and earned Carnegie a reputation as a leading philanthropist. 

During his rare free time, Carnegie lived the philosophy of the “Gospel of Wealth.” In 1891 he funded the construction of New York’s state-of-the-art classical music performance center, Carnegie Hall. 

Then in 1895, he established the Carnegie Institute of Pittsburgh, a cultural mecca that housed a natural history museum, an art museum, and a music performance center. The Institute also provided technical education programs for local residents. The institute eventually merged with another school and became Carnegie Mellon University.

Selling his steel business to J.P. Morgan when the steel industry was booming, thus getting top dollar and not holding on to get every penny, Carnegie was no longer concerned with running a giant company and had the freedom to do what he wished with his time. He concentrated on philanthropic causes, supporting education and the arts. Remembering how reading had helped him overcome the limitations of an impoverished childhood, Carnegie established trust funds to support the creation of several thousand free public libraries across all America. He also endowed a scientific research institute in Washington, D.C., and funded a pension system for university professors.

Carnegie engaged in philanthropy overseas as well, devoting special attention to establishing colleges, libraries, and cultural centers in his native Scotland.  He funded libraries and other institutions on six continents. In the U.S., Carnegie became one of the first prominent white philanthropists to support African American education, contributing significantly to the Tuskegee and Hampton Institutes. It is estimated that Carnegie gave away approximately $350 million during his lifetime, equal to about $11 billion in today’s money.

By 1910, as his health was beginning to fail, Carnegie focused on supporting world peace and created the Carnegie International Endowment for Peace, which funded several international diplomatic centers and courthouses. To keep his money flowing to the educational and cultural causes he loved, he created the Carnegie Corporation, organized to continue distributing his fortune after his death, which came in 1919.

Carnegie’s name is still widely known today, more than a century after his death. Millions of people around the world use the libraries, educational institutions, and cultural centers he established. While many wealthy individuals donate significantly to charity, Carnegie made philanthropy a lifetime vocation and a moral calling, living his creed that individuals capable of enriching themselves can, and should, improve the lives of others.

You can see from the quantities example that he did not let the three myths of entrepreneurship get his way. Carnegie had no experience, capital, or connections and yet through his natural brilliance, he was able to not only persevere but make himself one of the world’s most wealthy men.

It’s possible that his clicking point was the need for financial security, coming from his experiences with extreme poverty during his childhood. It’s possible also to argue that each of the other clicking points had an influence on his life. Lack of financial security could trigger the need to compensate for the pain of negative experiences, with the feelings of inadequacy he may have felt as a teenager working in the cotton mills near Pittsburgh. It’s certainly possible that he chose the freedom of making investments and going into the steel industry as a way of escaping the requirements of his executive position with the Pennsylvania Railroad, or that somewhere within his psyche there was the hunger for recognition, driving him to build a king’s wealth. Certainly, he defeated all his competitors and stood alone as one of the Titans of early American industry.

And yet, perhaps the most significant influence in his life was the desire to leave an incredible legacy by devoting his wealth to the improvement of society by creating educational and cultural opportunities for people around the world, allowing millions to improve their minds and spirits. 

While the success of Carnegie’s life is stunning, the events in the life of Charles E. Merrill, a founder of Merrill and Lynch, will also impress you with the incredible degree of innovation, and his ability to compete with giant Investment corporations by developing an unrecognized market. Using Merrill’s example, you may find just the right angle for yourself!

Khuram Dhanani
Khuram Dhanani
Khuram Dhanani
kd@softstonecapital.com