When the System Was Young

Andrew Carnegie (left) was born in 1836 to poor parents in Scotland. At age twelve, he moved to the United States, and within six years he had a job as a private secretary for a superintendent of the Pennsylvania Railroad. After years of working in the railroad business and earning his dividends, he left his job and entered the steel business. Within twenty years, the Carnegie Steel Company produced more steel than all the factories in Great Britain. This rise from rags to riches became the inspiration for many others to come.

            Carnegie, not a dumb man, had a very aggressive business plan to achieve his level of success. He wanted to control the largest portion of the steel business possible. He did this by buying out suppliers (coal fields, iron mines, ore freighters, etc.), a process now known as vertical integration. At the same time, he also bought out competitors, a process known as horizontal integ

ration. Through both these processes, he became the largest steel producer nationwide. In 1901 he sold his business, and retired to spend his money on charitable causes and other activities he found pleasant.

            John D. Rockefeller (right), the founder of the Standard Oil Company, had a very different approach to taking control of a market. Rockefeller used trust and merger

s to take control of a very large and profitable business. In 1870, Rockefeller paid his employees terrible w

ages, but sold his oil at a lower price then his competition, to drive them out of the market. He was selling oil at a price that made him lose money. Afterwards, once he controlled the entire market, he hiked up prices, to levels they had never been before. Although many critics argued he was robbing many people of their money, Rockefeller gave away millions of dollars to charitable causes, and the foundation of the University of Chicago, among other causes he supported. Both Carnegie and Rockefeller introduced new concepts to the world’s markets, and after making millions on the inexperience of the markets, they proceeded to donate almost 90 percent of their fortunes to education, the arts, and other causes.