Builders of Industry: Carnegie and Ford

Lesson 1

Carnegie: the bobbin boy from Scotland

Andrew Carnegie was born in 1835 in Dunfermline, Scotland, in a cottage where his father worked a hand loom weaving linen. It was skilled work, and for a while it fed the family. Then steam powered factories arrived, cloth poured out of mills faster than any man at a loom could match it, and the weavers of Dunfermline watched their trade die under them. Young Andrew grew up in a house that was getting poorer, in a town full of angry, thoughtful working men, and the lesson stayed with him for life: a new machine can lift millions and crush the people it replaces, sometimes in the same year.

In 1848, when Andrew was twelve, the family borrowed money, sold what they could, and sailed for America, settling among fellow Scots in Allegheny, Pennsylvania, across the river from Pittsburgh. His father went into a cotton factory, and, Carnegie writes, his father “also obtained for me a position as bobbin boy, and my first work was done there at one dollar and twenty cents per week.” He adds, plainly, “It was a hard life.” Father and son rose in the dark, walked to the factory before daylight, and worked until after dark, with a short break for lunch.

Soon he moved to a bobbin factory, running a small steam engine and firing its boiler in the cellar, work that frightened him so much that he sat up in bed at night worrying over the steam gauges. He hid the fear from his parents, who, he says, had troubles of their own. Yet he also insists the misery had a bright edge: he was now a helper of the family, a breadwinner, and no longer only a charge on his parents. Scotland had given him one more gift, too. Its parish schools had taught him to read with appetite, and a local benefactor in Allegheny opened a small library to working boys. The bobbin boy read everything he could reach.

Lesson 2

Carnegie learns the telegraph and the railroad

The telegraph office saved him. Pittsburgh needed messenger boys to deliver telegrams, and the job paid a little more, put him in clean clothes, and, better still, put him inside the room where the city did its business. Carnegie delivered messages to merchants, manufacturers, and railroad men, learned their names and their affairs, and made himself useful on purpose. He also taught himself the instrument. Arriving early, he practiced on the office keys before the operators came in, and he learned to take messages by ear, from the sound of the clicking, at a time when most operators still read the paper tape. Few boys in America could do it, and people noticed.

One of the people who noticed was Thomas A. Scott of the Pennsylvania Railroad, then building itself into one of the largest companies on earth. Scott took the teenager on as his private secretary and telegraph operator, and Carnegie found the mentor of his life. From Scott he learned how a great railroad actually ran: how traffic, repairs, wages, and coal all became numbers, how a division superintendent thought, and how capital was raised and spent. When Scott rose, Carnegie rose with him, becoming a superintendent himself while still a young man, responsible for keeping trains moving on a busy stretch of line.

The railroad also taught him to invest. Watching insiders, he bought small stakes in sleeping cars, in express companies, in a bridge company, and in oil lands, sometimes with borrowed money, and he saw his dividends arrive like a second salary. During the Civil War he served in Washington helping to organize the military telegraph and rail transport, then returned to the railroad. By his late twenties he understood three things most men never learn together: how messages move, how big systems are managed, and how ownership pays better than wages. He was ready to stop working for the system and start owning one.

Lesson 3

Steel and the art of cutting costs

Carnegie left the railroad for iron, then bet everything on steel. A new British method, the Bessemer process, blew air through molten iron and burned out impurities in minutes, turning out steel rails far faster and cheaper than the old puddling furnaces. Carnegie saw it in England, came home convinced, and built great steel works near Pittsburgh, hiring the best managers he could find and giving them room to run. His timing was lucky and his judgment was real: America was laying railroads across a continent, and every mile wanted steel rails, steel bridges, and steel beams, all stronger than iron and soon cheaper too.

His famous edge was not a secret machine. It was accounting. Visiting older iron makers, he was stunned to learn that nobody knew what each step of production cost. As he puts it, “I felt as if we were moles burrowing in the dark, and this to me was intolerable.” So he installed weighing and cost sheets at every stage, until he knew what each process cost, what each man produced, who saved material, and who wasted it. Managers rose or fell by those numbers. He bought his own ore lands, coal fields, and coke ovens, charmed low freight rates out of the railroads, and squeezed every cent between the mine and the finished rail.

The order of his priorities matters, and he states it himself: quality first, for “the surest foundation of a manufacturing concern is quality. After that, and a long way after, comes cost.” Costs, watched weekly and cut relentlessly, let him lower prices in hard times while rivals who kept no such books sold at a loss without knowing it. Steel rails that had once been a luxury became cheap enough to web a continent, and Carnegie Steel became the largest steel company in the world. In 1901 he sold it to J. P. Morgan, and it became the heart of the new United States Steel Corporation, the first billion dollar company.

Lesson 4

Carnegie gives it all away

Carnegie had promised himself, long before he was rich, that great wealth was not his to hoard. In his famous essay of 1889, retold in his autobiography, he argued that a rich man holds his surplus as a trust for the community, and that the man who dies rich, dies disgraced. Retiring in 1901 with one of the largest fortunes in history, he set out, in his own words, on the task “of wisely disposing of surplus wealth,” and he treated giving it away as a full time job, harder, he liked to say, than making it had been.

His method was deliberate. He rarely handed out cash to individuals, which he thought encouraged dependence. Instead he built ladders and let people climb: free public libraries above all, more than 2,500 of them in towns across America, Britain, and beyond, each given on one firm condition, that the town provide the site and pledge public money to keep the library open and free forever. His first library went to Dunfermline, the town that had cast his family out to poverty. He also funded organs for churches, university buildings, a hall for peace in The Hague, and pension funds, including, pointedly, a relief fund for his own steelworkers, which he opened in 1901 writing, “I make this first use of surplus wealth” to acknowledge, he said, the debt he owed the workmen who made his success.

By his death in 1919 he had given away the great bulk of his fortune, roughly 350 million dollars, and the Carnegie foundations his money created still give today. Judge the giving fairly, because Lesson 8 will weigh the harder record too. But the libraries are a fact set in stone and brick across thousands of towns: a former bobbin boy put a free library within reach of ordinary people on a scale nobody before him had attempted, and he did it because, as a working boy, one small borrowed library had changed his life.

Lesson 5

Ford: the farm boy and the engine

Henry Ford was born in 1863 on a farm at Dearborn, Michigan, and he hated farm work, not farming people, but the sheer waste of human strength he saw in it. As he opens his own story: “It was life on the farm that drove me into devising ways and means to better transportation.” As a boy his toys were tools, every scrap of machinery was a treasure, and at twelve, on a trip to Detroit, he met a steam road engine, the first self propelled vehicle he had ever seen. He talked the engineer into explaining the whole machine on the spot. He never really thought about anything else again.

At sixteen he walked to Detroit and apprenticed as a machinist, working days and repairing watches at night to pay his way. He learned steam engines, then the new electrical trade, rising to chief engineer at the Edison Illuminating Company, a good, safe, well paid post. In his spare hours, in a brick shed behind his house, he built a light gasoline engine and then, in 1896, a little four wheeled carriage he called the Quadricycle, which he had to smash part of his own doorway to get out. The shed door was too narrow. The car was not. America, he was sure, was waiting for exactly this: a car an ordinary farmer could afford.

Twice he started companies, and twice he parted with his backers, who wanted to build expensive cars for rich men while Ford wanted a cheap, tough car for everyone. In 1903 he tried a third time with the Ford Motor Company, built racing cars to prove his machines, and fought his way through a long patent lawsuit brought by a combination that claimed to own the automobile itself. He won. The court fight made him a folk hero to ordinary people: the farm boy who beat the trust. By 1908 he was free to build the one car he had dreamed about since the road engine stopped him on a Michigan lane.

Lesson 6

The Model T and the assembly line

The Model T arrived in 1908, and Ford kept it deliberately simple: one design, one chassis, strong light steel, high clearance for rutted country roads, and parts any country blacksmith could understand. He said his goal was a car built for the great multitude, priced so low that no man earning a decent salary would be unable to own one. Then he did the thing that made the dream real. Year after year, as production grew, he cut the price instead of pocketing the gains, from 850 dollars at the start to under 300 dollars by the middle of the 1920s. His reasoning was his whole philosophy in one line: “the only foundation of real business is service,” and a business exists to serve the people, not merely its owners.

The price cuts were possible because of the moving assembly line. In April 1913 Ford's engineers tried it on one small part, the flywheel magneto. In Ford's own words, “I believe that this was the first moving line ever installed,” its idea borrowed in part from the overhead trolleys of the Chicago meat packers. Work that one man once did whole, in about twenty minutes, was split into twenty nine small operations as the part moved past the men, and the time fell first to about thirteen minutes, then, with tuning, to five. Applied to the whole chassis, the line cut assembly time from twelve hours and twenty eight minutes to one hour and thirty three minutes.

Understand what the line did to work itself. It made cars cheap, and it made jobs simple, repetitive, and tied to the pace of a chain. A man no longer needed years of craft training, which opened factory work to immigrants and farm boys by the hundreds of thousands, and bored and wore out many of the same men. Both halves of that sentence are the Model T story. By 1927, when production ended, more than fifteen million had been built, half the cars on earth were Fords, and the automobile had stopped being a rich man's toy.

Lesson 7

The five-dollar day

By 1913 Ford had a problem money created and only money could solve. The new assembly line needed men to stay, and men hated it: the work was fast, loud, and monotonous, and in 1913 the company had to hire roughly a thousand men for every hundred jobs it needed to keep filled, just to replace those who quit. Training replacements was expensive, absenteeism wrecked the line's rhythm, and Ford, who watched costs the way Carnegie watched cost sheets, saw turnover itself as a cost. On January 5, 1914, he announced a shock. In his book's words, the plan set “the minimum wage for any class of work and under certain conditions was five dollars a day,” roughly double the going factory wage, and at the same time the working day shrank from nine hours to eight.

The five dollars was not simple charity, and Ford says so. It was structured as a share of profits, paid to workers who met conditions, and the company sent investigators from its Sociological Department into workers' homes to check on cleanliness, savings, drinking, and family life before awarding it. That prying was real, and many workers resented it even as they banked the money. Ford defends the bargain in cost terms: “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made.” Relieved of money worries, he argued, men worked steadier, stayed longer, and grew more efficient.

The effects spread far beyond Highland Park. Thousands of job seekers crowded Detroit. Rival employers, furious at first, had to raise their own wages or lose their men. Workers who made cars could now plausibly buy cars, and the Model T market grew with its makers. Historians still argue over Ford's motives, generosity, publicity, turnover, and a wish to keep unions out all played their parts, but the fact stands: in one announcement, the best known industrialist in America doubled the standard wage, shortened the day, and made the high wage itself into a respectable business strategy.

Lesson 8

What they got right and wrong about work and wealth

Now weigh both men whole, because both of their books are arguments for themselves, and a wise reader discounts accordingly. Carnegie's autobiography, published after his death, presents a friend of labor who rose by merit. Ford's book, written with Samuel Crowther, presents a servant of the public who only ever wanted to help. Each portrait is partly true. Each leaves out the part where other people paid. Start with Carnegie and Homestead. In 1892 his company locked out the union steelworkers at Homestead, Pennsylvania, demanding wage cuts. Carnegie was in Scotland. His partner Henry Clay Frick, left in charge, fortified the works and brought in Pinkerton guards by river barge. On July 6 the guards and strikers fought a day long gun battle on the riverbank, and men on both sides were killed and wounded. State militia then occupied the town, the strike was broken, the union was destroyed at Homestead for a generation, and Carnegie, who had once written kindly words about unions, let Frick's victory stand. He was sick about it in private letters. In public, the libraries kept rising.

Ford's record has the same double shape. The same company that paid the five dollar day fought union organizing for decades through its Service Department, a private force under Harry Bennett that spied on workers and answered organizers with violence. In May 1937, outside the great River Rouge plant, Bennett's men beat union organizers, including Walter Reuther, on a public overpass while news photographers watched. The pictures from the Battle of the Overpass shamed Ford before the whole country, and in 1941 Ford became the last of the big car makers to recognize the auto workers' union. Ford also used his newspaper, the Dearborn Independent, through the early 1920s to publish a long series of antisemitic articles, collected and spread abroad as The International Jew, that blamed Jewish people for wars and financial panics. The articles were false and they did lasting harm. In 1927, facing lawsuits and a boycott, Ford signed a public apology, disowned the articles, and closed the paper. The apology was real, and so was the damage that made it necessary.

So what did they get right? Each saw, earlier than his rivals, that the future belonged to low prices and high volume: steel cheap enough to build a continent, a car cheap enough for a farmer. Each understood that costs hidden are costs doubled. Ford's five dollar day, whatever its motives, doubled real wages and helped invent the mass consumer. Carnegie's giving set the pattern of the modern foundation and filled thousands of towns with free books. What they got wrong was the human side of their own systems: each treated the people inside his works, in the end, as parts of the works, to be managed, investigated, locked out, or beaten back when they asked for a voice of their own. Read their books, learn their methods, and keep both halves of the record in view at once. That is the whole lesson.

Sources

The Books Behind This Course

This course is taught from the two men in their own words. Both books are free to read in full at Project Gutenberg.

• Autobiography of Andrew Carnegie, by Andrew Carnegie (1920), Project Gutenberg
• My Life and Work, by Henry Ford, with Samuel Crowther (1922), Project Gutenberg

Graduation

You finished Builders of Industry

You followed a bobbin boy to a steel empire and a farm boy to the moving line, priced the cost sheets and the five dollar day, walked the library towns, and weighed Homestead, the Overpass, and the Dearborn Independent without flinching. You now know how mass production was built, what it gave ordinary people, and what it cost them. Congratulations.

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