37 pages • 1 hour read
Andrew Carnegie And The Rise Of Big Business
A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Summary
Chapter Summaries & Analyses
Key Figures
Themes
Symbols & Motifs
Important Quotes
Essay Topics
Tools
BetaChapters 7-8Chapter Summaries & Analyses
Chapter 7 Summary: “The Master Builder: A Structure of Steel”
For years, Carnegie has been interested in manufacturing Bessemer steel, as he thinks that steel would function better than iron for building railways. In 1872, Carnegie judges that the time is ripe for finally entering the steel manufacturing industry, and he partners with a number of colleagues from his railroad days to form a steel mill corporation, the Edgar Thomson Works. Construction on the steel mill coincides with the “Panic of 1873,” a credit crisis that leads to a depression in the American economy. Several of Carnegie’s partners are forced to pull out, and Carnegie sells his stocks in other corporations and “pours the money into the mill to keep it going” (95).
Carnegie encounters further crisis when his business partner and old friend, Tom Scott, falls into financial trouble. Scott had been trying to build the Texas Pacific Railroad, financing it by borrowing loans that he was unable to pay. Scott asks Carnegie to endorse the loans so he can keep the company solvent, but Carnegie refuses, fearing that his new steel mill would be dragged “down in the wreckage” if the Texas Pacific Railroad goes bankrupt (96). Carnegie’s decision protects his steel mill and earns him respect from the Pittsburgh banking community, but it also costs him his friendship with Scott.
In 1875, the Edgar Thomson Works is completed, and Carnegie sets about organizing the corporation following lessons he’s learned from his past businesses. One of Carnegie’s business principles is to always hire the “best man” regardless the cost (99). Accordingly, Carnegie hires steelworks expert Alexander Holleyas the plant’s designer, ensuring the plant is built according to the most up-to-date standards. Carnegie also hires a number of managers familiar with his systems of accounting and cost-analysis, allowing Carnegie to set prices of steel so as to maximize profits. Carnegie implements a bureaucratic organizational system for his company, establishing a chain-of-command so that “authority and responsibility” is always clearly delineated (100). Further, Carnegie engages in constant performance evaluations for his employees, promoting the top earners while firing those who lag behind.
As the head of Edgar Thomson Works, Carnegie serves as salesman for his new steel product. Carnegie uses his many connections from his railroad days, approaching his friends at various railroad companies to convince them to outfit their rail tracks in steel. In his many travels throughout the US and Europe, Carnegie seizes every possible chance to tout his steel, always claiming it to be “as good as England’s finest” (102). Carnegie also recognizes opportunities to sell his steel beyond his railway clientele. He negotiates numerous building contracts that make use of steel, including America’s first skyscraper, the Chicago Home Insurance Building. America’s expanding cities become the main buyers of steel, with railroads falling “from two-thirds to one-third of the steel market” (102).
Chapter 8 Summary: “The Master Manager: Costs, Chemistry, and Coke”
In this chapter, Livesay continues to describe the various ways Carnegie manages and grows his steelworks. One important factor for Carnegie’s success is his attention to scientific knowledge, which sets him apart from other steel manufacturers. Henry Phipps, one of Carnegie’s partners, convinces him to hire a chemist for the Edgar Thomson Company. The chemist discovers that ores previously thought to be too low-grade for use were actually of a high-grade quality, allowing the steel plant to increase its production.
Following this discovery, Carnegie begins following “chemical research” closely, always implementing the latest advances in research for his steel works. Carnegie frequently replaces still-useable machinery (such as blast furnaces) with newer models, knowing that the cost of new machinery would be paid for by the increase in profits provided by using the most advanced machines. This desire for the newest technologies requires Carnegie to reinvest the majority of profits back into the corporation, putting him at odds with his partners, who would rather keep the money.
Another innovation of Carnegie’s steelworks is to increase the scale and speed of manufacturing, both of which allow for cheaper costs of production. The traditional process for making steel required numerous steps, with the iron ore being transported to a new location between each step. Edgar Thomson Company’s superintendent, Bill Jones, devises a new machine, the Jones mixer, that eliminates the need for transportation, vastly speeding up production. Carnegie’s steel plants become known for their “rapid movement of material […] that distinguished [them] from their British counterparts” (118).
As the rate of steel production increases, Carnegie recognizes that he needs to increase supply of raw material in order to keep up with the pace of steel production. In 1881, Carnegie partners with the Henry C. Frick Coke Company, which produced coke, a high-carbon fuel and one of the raw materials Carnegie needs. Carnegie is impressed by Frick, and invites him to become a partner in the company. At the time, Carnegie had been searching for new leadership in the company. One previously-trusted manager, William P. Shinn, had been bought out by Carnegie due to a perceived lack of “loyalty” (122). While Carnegie’s brother, Tom, had served as chairman for a time, Tom found the job too stressful, eventually drinking himself to death in 1886. Carnegie feels that Frick could be his worthwhile successor, referring to Frick in a letter as “the man” he was looking for (124). In 1889, Carnegie appoints Frick chairman of the company, and Carnegie delights in the profits Frick brings in.
In the 1880s, Carnegie spends increasing amounts of time on his intellectual pursuits and personal relationships. Carnegie befriends numerous writers, including the British philosopher Herbert Spencer. In 1880, Carnegie meets Louise Whitfield, “the daughter of a New York merchant”; Carnegie would eventually marry her in 1886 (126). Feeling ready to retire, Carnegie publishes one of his most famous articles in 1889, “The Gospel of Wealth.” In the article, Carnegie outlines his plans to give away his fortune so as to support social institutions, including “universities, libraries, hospitals, parks, meeting and concert halls, swimming pools, and church buildings” (128). In Carnegie’s view, simply earning wealth for the sake of wealth is a social ill. In order to “justify their existence,” Carnegie argues, the wealthy must use their fortunes to support the betterment of society as a whole (128).
Chapters 7-8 Analysis
In these two chapters of his biography, Livesay focuses on Carnegie’s steel company, which Livesay argues to be the apex of Carnegie’s business work. As Livesay writes, in the seventeen years Carnegie spends on his steel works, he “yoked his management system to his sales abilities, built an integrated industrial complex with a diversified product-line, and became the best-known manufacturer in the world” (109). Previously in the book, Livesay has described Carnegie as an intelligent and loyal follower, working hard to learn from mentors such as Tom Scott. These chapters of the book see Carnegie totally transformed, taking charge of his own business and confidently innovating inside of that field. While before, Carnegie had spread his work across numerous fields, from railroads to iron to oil to speculation, Carnegie now focuses on bringing all of his knowledge to a single industry: steel. In so doing, Carnegie “led American manufacturing in to the new industrial world” (93).
Carnegie accomplishes this innovation by bringing a scientific precision to his industry. For centuries, the steel and iron ore industries had been run according to tradition, with mills only estimating how much materials needed to be bought, or how much market demands might be in a given year. Carnegie recognizes that such business practices lead to losses, and he insists on implementing a precise accounting system, with every single cost tallied, allowing Carnegie to tabulate the “exact amount of profit” earned in a single month (111). Such a body of data allowed Carnegie a foundation of objective facts on which he could make his business decisions. As Livesay notes, even though Carnegie didn’t possess “scientific understanding” of the steel mill’s chemical processes, he could clearly evaluate whether a new technique was working or not based on the resultant profits. Such attention to data and precision allowed Carnegie to micromanage his costs, leading to his principle “business policy”” “first, ‘Cut the prices; scoop the market; run the mills full’; second, ‘Watch the costs and the profits will take care of themselves’” (101).
Throughout these chapters, a recurring theme is the ways in which Carnegie’s personal relationships intertwine with his business life. Many of Carnegie’s relationships are portrayed as suffering from his devotion to his work. For instance, when Carnegie’s long-time mentor and close friend, Tom Scott, asks Carnegie for help during a business crisis, Carnegie declines, for fear of dragging his burgeoning steel mill into the financial turmoil. While Carnegie may have “saved his credit,” his relationship with Scott is forever ruined (96). Carnegie’s relationship with his younger brother, Tom, is likewise compromised, as Tom “had been in Andy’s shadow since childhood, and remained an unhappy satellite all his life” (123). Tom eventually becomes chairman of Edgar Thomson Works, where he is constantly subject to Carnegie’s insults, “outrageous demands,” and “flattery” (124). Tom cannot withstand Carnegie’s intensity, developing a drinking problem that would eventually kill him. Even Carnegie’s lover and eventual wife, Louise Whitfield, is often ignored by Carnegie, who goes off on frequent world trips without her. Carnegie may have business ingenuity, but his work ethic did not leave others unscathed.
Unlock all 37 pages of this Study GuidePlus, gain access to 8,800+ more expert-written Study Guides.
Including features: