Andrew Carnegie is one of the greatest givers of modern history. But, he is also remembered as a robber baron.
Famously saying “the man who dies rich, dies disgraced,” he left a legacy of philanthropy that is unmatched nearly 100 years after his death. His donations made possible more than 2,500 libraries and many other institutions including Carnegie Mellon University, Carnegie Hall, the Carnegie Institution for Science, and the Carnegie Corporation of New York. (carnegie.org)
At one time, he was dubbed the “millionaire socialist” by the New York Times and believed “socialism is the grandest theory ever presented.” But, he also oversaw a brutal battle to destroy labor unions in his organizations and beyond. His life is a reminder that conflicts between the most moral choice and the most profitable choice frequently arise in business.
By tracing his journey, conscious capitalists can explore why his business actions and morals diverged. And, by understanding his conflict, develop strategies to avoid or overcome it.
For Carnegie, Business Was Ruthless
Carnegie focused on driving efficiency and lowering price.
One strategy was to pursue economies of scale aggressively. “[He] was the first to build from scratch a giant, integrated, Bessemer rail mill… which remained for decades the largest steel works in the world.” (Chandler and Hikino. Scale and Scope: the Dynamics of Industrial Capitalism).
Another strategy was to reduce the cost of production by driving down labor costs. Carnegie recognized that “Labor is usually helpless against capital.” (Autobiography of Andrew Carnegie) And, while he reflected on the humanity of labor in his writing, he exploited this power imbalance professionally.
Eventually, Carnegie amassed a variety of assets and great wealth, including building “the largest steel manufacturing company in the world,” in part due to his drive to lower the cost of production. (carnegie.org)
But, his relentless drive created conflict. While he viewed himself as a benevolent employer, his competitiveness meant he had to continually fight to keep labor costs down. And, while professionally successful, fallout from these efforts would taint his legacy.
The Disaster and Triumph of Homestead
For years, Carnegie and his affiliates had worked to break unions at Carnegie plants and reduce wages. This playbook was in effect at Homestead Steel Works where the “goal was to both cut the mill’s workforce and lower the remaining workers’ wages.” (Kahan. The Homestead Strike: Labor, Violence, and American Industry)
While Carnegie was traveling, his deputy Henry Clay Frick was tasked with handling a contentious labor dispute. Frick proposed making an offer so bad the union couldn’t accept it. The strategy would let Frick shut down the plant and strengthen his negotiating position while passing blame to the union. Carnegie message to Frick was simple, we “approve of anything you do.” (Kahan. The Homestead Strike: Labor, Violence, and American Industry)
Later, Frick attempted to force the union to sign a deal by hiring non-union workers to take the place of union workers. In order to maintain control of the plant during this transition, he engaged a private police force. But, upon the arrival of the private police force, a 12-hour battle ensued, eventually killing at least 12, including several members of the private police. (pbs.org)
The strikers initially maintained control of the plant. But, less than a week after the battle 8,000 members of the state militia were sent to restore order. And, in a further effort to exercise control, over 100 strikers were arrested, “some of them for murder; though most were finally released.” (history.com)
Frick’s strategy proved successful. In the face of an overwhelming force, the union was broken. Following Carnegie Steel’s success, the company “moved quickly to institute longer hours and lower wages.” (history.com)
And, the financial gain was not limited to Homestead. The aftermath of these events set a precedent throughout the country, and a meaningful steel union would not return in the US until the mid-1930s. (Serrin. “A Chapter of Industrial History Closes With the Homestead Steel Works” New York Times)
From a profit perspective, Carnegie had won the battle and the war. It was a business triumph.
But, from a moral perspective, the incident was a disaster with personal ramifications.
Carnegie Was Much More Than A “Robber Baron”
I can sympathize with accusations of hypocrisy. There is some validity to this perspective. But, the truth is more complicated.
While it’s impossible to know how these events affected Carnegie, it’s clear he sought to distance himself from blame.
In his Autobiography, Carnegie relayed the reports from “the old men” not part of the riot who said, “if [Carnegie] had been at home the strike would never have happened.” And, in return, he claimed that “Had the Homestead men been our own old men… it’s scarcely possible that the trouble there in 1982 could have arisen”. Although, a search for evidence to back up this interpretation found nothing. (Kahan. The Homestead Strike: Labor, Violence, and American Industry)
But, the degree to which Carnegie committed to giving, whether due to a moral calling or guilty conscious, reflects a man who cared about something other than accumulating wealth. While it’s common for the wealthy to engage in philanthropy, few give away the vast majority of their fortune.
He made a monumental effort to have a positive impact on the world: founding more than 2,500 libraries and funding numerous other social projects. But, he still left a complicated legacy.
What Can Carnegie Teach The Conscious Capitalist?
While a legacy is partially built on fortunes donated and institutions built, even the greatest philanthropists will be judged by their actions. And, as Carnegie did, when we look back on our own life it will be impossible to untangle the professional and the personal.
Carnegie’s story is a reminder that professional success and doing the right thing can be a balancing act. While not always in conflict, conflicts will arise. And, the impact from both perspectives must be considered.
For a socially conscious entrepreneur, it may be desirable to find industries where it is easier to avoid conflicts.
For products that are not commoditized, the roadmap for the conscious capitalist can be significantly less rocky. For premium brands, such as Patagonia or Plum Organics, consumers are willing to pay more for products with a social mission.
This premium may be justified either because consumers simply want to support a “good” company or because the company’s social mission adds to the power of its brand story.
However, in other industries, conscious capitalists may find the path forward littered with conflicts. When selling a commodity, price competition can make conscious capitalism nearly impossible. This is the situation Carnegie found himself in. Stuck between the choice of professional success or “the right thing.”
Reflecting on Carnegie’s legacy, the easiest approach may be to seek sectors where competition on price is limited. However, there are strategies to bring social good to commoditized industries.
One approach is to explore ways to de-commodify products. One very visible implementation of this strategy is organic labeling standards. While fruits and vegetables may look identical in the supermarket aisle, an organic sticker lets producers charge a premium.
Another approach is to look for opportunities where there is an economically and morally attractive opportunity that the market has not identified.
Peter Boyd (Time4Good) reflected on addressing this challenge while he was COO of the Carbon War Room. There has been significant friction to adopting CO2 reducing projects. But, surprisingly, a huge share unimplemented projects were ROI positive. Meaning that even in a “commoditized” industry, there are opportunities for a socially conscious entrepreneur to create a more profitable and ethical business while addressing a social issue.
What we can learn from Carnegie’s story is that conflicts will arise. And, it is just as important to be strategic your social mission as it is to be strategic in your financial mission.
– Nick (@nicholascaplan)
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Disclaimer: This article may not reflect the opinions of Team Good, LLC or anyone else at the organization.