Andrew Carnegie was an industrialist who led the enormous expansion of the American steel industry. He knew that wealth came from creative thinking and not from hard work. He spent six months a year traveling throughout Europe to have time to learn and reflect.
Andrew worked for the Pennsylvania Railroad as a telegraph operator. He rose rapidly in the company and learned about management and cost controls. The railroad industry was a pretty corrupt industry, with lots of insider trading and the payoff from contracts, and Andrew slowly accumulated some capital based on his investments. He invested $40k in a property in northwestern Pennsylvania that yielded over a $1m in cash dividends from oil.
On a trip to Europe, he saw how blast furnace technology could be used in the making of steel. He knew that steel would replace wood as a structural component in construction, so he built a new plant in the US. However, he also knew that he needed to bring attention to his new steel plant. Knowing the value a person places on their own name, he employed a rather ingenious marketing technique. He named his new plant the Edger Thompson Works after the president of his former company, the Pennsylvania Railroad.
Guess what: the trick resulted in him receiving his first order for 2000 rails. Andrew Carnegie knew the value of leverage and knew he was not an expert, so he hired experts. He hired the top scientists and top accountants to make his business the best. As a result of his leveraging their expertise, the cost of rail was reduced from $160 per ton to just $17 per ton in less than 5 years, allowing him to realize huge profits.
He believed in being an inch wide and a mile deep and kept his focus on steel, never expanding into other areas. The company always expanded in down markets, when labor and materials were cheapest. He coined the phrase,“Keep your eggs in one basket and watch the basket”. Andrew Carnegie knew how to make money and became one of the greatest philanthropists of all time. Andrew Carnegie understood the power of a person’s name and that focus is the key to success.
What can you learn from Andrew Carnegie’s example?
