How Andrew Carnegie Went From $1.20 a Week to $309 Billion ... Then Gave It All Away
Andrew Carnegie was one of the richest men in world history, but he didn't start that way -- and he intentionally didn't end up that way.
Andrew Carnegie: The Gospel of Wealth
Andrew Carnegie sold his steel company, Carnegie Steel, to J.P. Morgan for $480 million in 1901. According to the Carnegie Corporation, Carnegie's personal peak wealth was about $380 million, or around $309 billion by today's standard.
For context, Money ran a piece in January about the 10 richest Americans. The top three people on that list -- Jeff Bezos, Bill Gates, Warren Buffett -- had $290 billion combined.
Carnegie wasn't always wealthy -- or even American. His parents, Will and Margaret Carnegie, sold their belongings in Scotland to come to America when Andrew was 13-years-old. They settled in a suburb of Pittsburgh, living in just two rooms above a weaving shop. Carnegie's relatives ran the shop, and Will eventually took over, but the business failed.
So Carnegie started working as a bobbin boy in a cotton mill. He worked long hours and earned $1.20 … a week.
The following year, Carnegie worked as a messenger for a telegraph company, and he taught himself to use the equipment. He used those skills to land a job with the Pennsylvania Railroad, a job that would help shape his future. It helped him learn about the railroad industry so that he could identify smart investments -- even if he did not yet have the wealth to make those investments.
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When Thomas A. Scott, Carnegie's boss at the Pennsylvania Railroad, told him that the Adams Express Company intended to sell 10 shares, Carnegie's mother was willing to mortgage their house to get the $500 he needed.
After that, Theodore Woodruff approached Carnegie with the idea of sleeping train cars and offered him a share in the Woodruff Sleeping Car Company. In order to invest, Carnegie had to secure another bank loan.
The gamble paid off -- two years after investing, Carnegie began to see returns of $5,000 annually. That was more than three times his salary from his job at the Pennsylvania Railroad.
During the Civil War, Pittsburgh became an important place of production for gunboats, cannons and more. Carnegie invested in an oil well that yielded more than $1 million in cash dividends, and he also worked to create a steel rolling mill.
After the war, Carnegie focused his efforts on ironworks, including the Keystone Bridge Works and Union Ironworks. He used his connections to the Pennsylvania Railroad Company management to secure contracts and build tracks across the state.
As his wealth grew, Carnegie began to develop the principles of giving that would define his later career. When he was 33, Carnegie wrote a letter to himself, urging himself to live modestly and charitably.
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Andrew Carnegie's letter to himself
St Nicholas Hotel, N York
Thirty-three and an income of $50,000 per annum.
BY THIS two years I can so arrange all my business as to secure at least 50,000 per annum. Beyond this never earn -- make no effort to increase fortune, but spend the surplus each year for benevolent purposes. Cast aside business forever except for others. Settle in Oxford and get a thorough education, making the acquaintance of literary men this will take three years active work -- pay especial attention to speaking in public.
Settle then in London & purchase a controlling interest in some newspaper or live review & give the general management of it attention, taking a part in public matters especially those connected with education & improvement of the poorer classes.
Man must have an idol -- the amassing of wealth is one of the worst species of idolatry. No idol more debasing than the worship of money. Whatever I engage in I must push inordinately therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery. I will resign business at 35, but during the ensuing two years, I wish to spend the afternoons in securing instruction, and in reading systematically.
Carnegie did not retire by the age of 35, as he had planned. Instead, he continued to grow his influence within the steel industry over the course of three decades. He opened his first steel plant in 1875, bought a rival steel company, the Homestead Steel Works, in 1883, and formed the Carnegie Steel Company in 1892.
Using technological advances including the Bessemer process and vertical integration, Carnegie built the largest steel empire in American history. When he eventually sold his company to John Pierpont Morgan, it was the largest deal in American history -- $480 million, of which Carnegie's share was worth more than $225 million.
He was paid in J.P. Morgan's first-mortgage gold bonds, and he needed to build a vault just to protect them.
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Carnegie was 66 when he sold his company in 1901, retiring 31 years after he had predicted. However, he did spend the rest of his career in philanthropic pursuits. In his most famous piece of writing, The Gospel of Wealth, Carnegie said that "The man who dies thus rich dies disgraced," and he spent the rest of his life doing his best to live by that.
From 1901 until his death in 1919, Carnegie distributed $350 million to schools, libraries, colleges and other public works, primarily across the English-speaking world. He believed that the best way to spend what he called "excess wealth" was to put it to long-lasting causes for world peace, art and education.
Doubtless, this was inspired by his own childhood, when he attended the Free School in his native Dunfermline, Scotland, which had been given to the town by Adam Rolland, or by his time with Colonel James Anderson, an American who opened his library to local working boys when Carnegie was young.
Yet despite his efforts, Carnegie still died rich. In his will, Carnegie gave $30 million, the bulk of his remaining fortune, to the Carnegie Corporation, which he hoped would help establish international laws and foster world peace.