Andrew Carnegie

Context: In 1864, Carnegie invested $40,000 in Story Farm on Oil Creek in Venango County, Pennsylvania. In one year, the farm yielded over $1,000,000 in cash dividends, and petroleum from oil wells on the property sold profitably. The demand for iron products, such as armor for gunboats, cannons, and shells, as well as a hundred other industrial products, made Pittsburgh a center of wartime production. Carnegie worked with others in establishing a steel rolling mill, and steel production and control of industry became the source of his fortune. Carnegie had some investments in the iron industry before the war.  After the war, Carnegie left the railroads to devote all his energies to the ironworks trade. Carnegie worked to develop several iron works, eventually forming the Keystone Bridge Works and the Union Ironworks, in Pittsburgh. Although he had left the Pennsylvania Railroad Company, he remained closely connected to its management, namely Thomas A. Scott and J. Edgar Thomson. He used his connection to the two men to acquire contracts for his Keystone Bridge Company and the rails produced by his ironworks. He also gave stock to Scott and Thomson in his businesses, and the Pennsylvania was his best customer. When he built his first steel plant, he made a point of naming it after Thomson. As well as having good business sense, Carnegie possessed charm and literary knowledge. He was invited to many important social functions--functions that Carnegie exploited to his own advantage.  Carnegie believed in using his fortune for others and doing more than making money. He wrote:  I propose to take an income no greater than $50,000 per annum! Beyond this I need ever earn, make no effort to increase my fortune, but spend the surplus each year for benevolent purposes! Let us cast aside business forever, except for others. Let us settle in Oxford and I shall get a thorough education, making the acquaintance of literary men. I figure that this will take three years active work. I shall pay especial attention to speaking in public. We can settle in London and I can purchase a controlling interest in some newspaper or live review and give the general management of it attention, taking part in public matters, especially those connected with education and improvement of the poorer classes. Man must have no idol and the amassing of wealth is one of the worst species of idolatry! No idol is more debasing than the worship of money! Whatever I engage in I must push inordinately; therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery. I will resign business at thirty-five, but during these ensuing two years I wish to spend the afternoons in receiving instruction and in reading systematically!  Carnegie did not want to marry during his mother's lifetime, instead choosing to take care of her in her illness towards the end of her life. After she died in 1886, the 51-year-old Carnegie married Louise Whitfield, who was 21 years his junior. In 1897, the couple had their only child, a daughter, whom they named after Carnegie's mother, Margaret.  Carnegie made his fortune in the steel industry, controlling the most extensive integrated iron and steel operations ever owned by an individual in the United States. One of his two great innovations was in the cheap and efficient mass production of steel by adopting and adapting the Bessemer process, which allowed the high carbon content of pig iron to be burnt away in a controlled and rapid way during steel production. Steel prices dropped as a result, and Bessemer steel was rapidly adopted for rails; however, it was not suitable for buildings and bridges.  The second was in his vertical integration of all suppliers of raw materials. In the late 1880s, Carnegie Steel was the largest manufacturer of pig iron, steel rails, and coke in the world, with a capacity to produce approximately 2,000 tons of pig metal per day. In 1883, Carnegie bought the rival Homestead Steel Works, which included an extensive plant served by tributary coal and iron fields, a 425-mile (684 km) long railway, and a line of lake steamships. Carnegie combined his assets and those of his associates in 1892 with the launching of the Carnegie Steel Company.  By 1889, the U.S. output of steel exceeded that of the UK, and Carnegie owned a large part of it. Carnegie's empire grew to include the J. Edgar Thomson Steel Works in Braddock, (named for John Edgar Thomson, Carnegie's former boss and president of the Pennsylvania Railroad), Pittsburgh Bessemer Steel Works, the Lucy Furnaces, the Union Iron Mills, the Union Mill (Wilson, Walker & County), the Keystone Bridge Works, the Hartman Steel Works, the Frick Coke Company, and the Scotia ore mines. Carnegie, through Keystone, supplied the steel for and owned shares in the landmark Eads Bridge project across the Mississippi River at St. Louis, Missouri (completed 1874). This project was an important proof-of-concept for steel technology, which marked the opening of a new steel market.  In 1901, Carnegie was 66 years of age and considering retirement. He reformed his enterprises into conventional joint stock corporations as preparation to this end. John Pierpont Morgan was a banker and perhaps America's most important financial deal maker. He had observed how efficiently Carnegie produced profit. He envisioned an integrated steel industry that would cut costs, lower prices to consumers, produce in greater quantities and raise wages to workers. To this end, he needed to buy out Carnegie and several other major producers and integrate them into one company, thereby eliminating duplication and waste. He concluded negotiations on March 2, 1901, and formed the United States Steel Corporation. It was the first corporation in the world with a market capitalization over $1 billion.  The buyout, secretly negotiated by Charles M. Schwab (no relation to Charles R. Schwab), was the largest such industrial takeover in United States history to date. The holdings were incorporated in the United States Steel Corporation, a trust organized by Morgan, and Carnegie retired from business. His steel enterprises were bought out at a figure equivalent to 12 times their annual earnings--$480 million (in 2017, $14.1 billion).  Carnegie's share of this amounted to $225,639,000 (in 2017, $6.64 billion), which was paid to Carnegie in the form of 5%, 50-year gold bonds. The letter agreeing to sell his share was signed on February 26, 1901. On March 2, the circular formally filing the organization and capitalization (at $1,400,000,000--4% of U.S. national wealth at the time) of the United States Steel Corporation actually completed the contract. The bonds were to be delivered within two weeks to the Hudson Trust Company of Hoboken, New Jersey, in trust to Robert A. Franks, Carnegie's business secretary. There, a special vault was built to house the physical bulk of nearly $230,000,000 worth of bonds. It was said that "...Carnegie never wanted to see or touch these bonds that represented the fruition of his business career. It was as if he feared that if he looked upon them they might vanish like the gossamer gold of the leprechaun. Let them lie safe in a vault in New Jersey, safe from the New York tax assessors, until he was ready to dispose of them..." CANNOTANSWER

Question: What was Andrew Carnegie's great innovation other than adopting the Bessemer process?
Answer: The second was in his vertical integration of all suppliers of raw materials. In the late 1880s, Carnegie Steel was the largest manufacturer of pig iron,