Andrew Carnegie Principles

I read a great biography about Andrew Carnegie by Harold Livesay recently. Below are some “Carnegie Business Principles” I pulled out of my reading of the book.

One quick thing the book reinforced is that humans are complicated. It’s impossible to find someone who is universally virtuous or universally vile. Carnegie is a good example. He lives on as one of the most successful businessmen of history but he wasn’t perfect and parts of his story get messy. In the end, he finds lots of redemption in the fact that he gave away his fortune to charity as he had planned on doing for decades.

Principles

Jump into a wave of growth

None of “Andy’s” accomplishments would have happened had his family not taken a big leap of faith to come to an uncharted, undeveloped land that was filled with a promise of growth and improvement.

Have fervent FAITH in growth and change as a constant

Like most productive folks, Carnegie was a massive optimist who loved America and the opportunities it presented him and his family with. Cynicism and opportunity seizure don’t mix.

Try many things, experiment

Before becoming a master of the universe, Andy spent his boyhood doing what he could to help his family after they arrived in America. He worked long hours in a difficult factory job but at night he started to prepare for a life of higher level managerial work by taking classes in accounting.

Love the challenge and responsibility over salary

When Andy was given one of his first promotions he remarked on how much more proud he was to be able to sign his name as a “Superintendent” and the recognition and pride in this new challenge and responsibility than he was in any bump in pay.

Study the future

This is kind of like Gretzky’s “Understand Where The Puck Is Going.” Carnegie’s Dad was stuck in his old ways trying to eek out a living operating a loom. Andy saw America as a blank canvas a thought bigger about the owning a part of the growth of the nation and studying what would be the things that would be vital to this new nation.

Get in the NECESSITY business, not the WANT business

I’m not sure Carnegie actually thought out this, he just knew he’d want to be fulfilling the highest demand goods. Today, with so many products and apps product selection and discernment around actual demand (“product-market fit”) is especially important. In today’s world I am reminded of what Reed Hoffman has said about trying ti invest in technology that appeals to the “Seven Deadly Sins” as an insurance measure of sort: That until we live in a world without “sin” demand will remain for products that tap into this.

Be a Systems Thinker (p. 97)

Carnegie was described as a “consummate organizer” and was constantly seeking the perfect balance to his system of production.

Know when to get IN and when to get OUT

Andy avoid losses and pain a number of times by divesting himself of certain things at the right moment — sometimes working hard behind the scenes in a dubious ways to guarantee a favorable outcome.

Focus on sales

Andy hired technicians and just focused on growth.

Reputation is critical

From a young age Carnegie was able to secure favorable loans and treatment because of his record of success. He’d often do major deals where he stood to profit significantly and would never have any of his own money at play, all because of the strength of his name. Later in life, in an effort to shield him from bad press round difficult labor issues in the steel factories he tried to preserve his name by have Henry Frick deal with these tricky things while he was off at his castle in Scotland.

Invest heavily in efficiency

Whereas The Brit’s would use a factory furnace until it completely broke, Andy would replace a functioning furnace if new furnace tech came along that could outpace the existing tech in output over a period of time that made sense.

Invest heavily in quality

Andy ended up buying up competitors who come up with technical innovations that reduced the cost or improved the quality of steel.

Cut costs like a madman – “Scoop the Market”

Despite being willing to invest heavily in efficiency, Carnegie pissed off all of his colleagues by being super hawk eyed on the books and working to cut expenses at the same time. It almost seems like a contradiction but the truth is that Andy was just completely interested in the long game and the bottom line over time. He was building for the future and knew that he just needed to cut out all superfluous or negotiable expenses but that expensive investment in technology would yield cost reduction later. He looked to cut production costs so we he could pass these savings off to steel buyers as his overarching principle was to go out and “scoop the market” and protect the longevity of the business by offering the best product at the lowest price. (Reminds me of Amazon.)

Be data oriented

Andy demanded his managers back up business decisions with data. He depended deeply on reason and data to support his own decision making over emotion and intuition.

Delegate technical details

Andy wasn’t a trained metallurgist. He depended on the expertise of others.

Incentivize top employees

Andy made many men millionaires when he sold to J.P. Morgan. He valued offering equity over high salaries.

Get away; travel

While running the steel company Carnegie would still sometimes go away for six-months sometimes.

Delay marriage

For most people this is probably a terrible idea. There is a great deal of research that points to the union of marriage, when the right partner is chosen, as a highly productive force that helps families grow wealth and generally promotes happiness. That said, Carnegie didn’t get married until 52 and this is just a list for his life and is not meant to be universally prescriptive. The book didn’t go into much detail on Carnegie’s thoughts on this delay in starting a family. I imagine it was a function of his tunnel vision for so many years.

Control the whole stack

Carnegie fought to buy up key suppliers and was aggressive in finding out ways to minimizing railroad transportation costs.

Create partnerships

Through his dealings over the decades, Andy became, basically, a part of a powerful oligarchy.

Sidenote: During my reading, I decided I wanted to email the author to tell him how much I was enjoying his work. I especially enjoyed his editorial commentary and the way he judiciously jumped around a bit within the chronology if it made sense (as opposed to being ridged in not “giving anything away”). Unfortunately, Harold died a couple of years ago so I’ll never get to let him know. It looks like he was well-liked. He too has an interesting bio and spent most of his life studying and writing about the businessmen who shaped early America.

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