The Richest Man in the World, circa 1900

Pavel Sokolovsky
6 min readFeb 21, 2018

“Mr. Carnegie, … I want to congratulate you on being the richest man in the world.”

-J.P. Morgan to Andrew Carnegie¹

Scale enables amazing accomplishments. But, scale is like a double-edged sword — it cuts both ways. While increasing scale makes some objectives easier, it certainly makes others much harder.

To own 80 shares of Amazon and exchange them for cash is a trivial matter. To exchange 80 million, however, is a different story. (fun fact: Jeff Bezos owns almost this many shares of Amazon).

To donate $300 to a good cause is easy. To donate $300 billion, not so much.

To earn one’s place in U.S. history as a tycoon, scale is required. Andrew Carnegie’s story offers a window into the challenge of scale.

The first thing to keep in mind as we think about Carnegie Steel is its massive scale.


[Carnegie’s] firm eventually controlled supplies of everything needed to make steel: iron ore and coal deposits; railroads to transport everything; and marketing networks for the finished product. By the 1890s, Carnegie Steel made more steel than the entire country of Great Britain. In 1900, its annual profit was $40 million. (source:

It was by far the largest company in one of the largest industries of its day. And its shares were privately held. Mostly by Andrew Carnegie.

And eventually, Andrew Carnegie needed out. He wanted to give away all of his money, and he really couldn’t do that without liquidity.

Because of its scale, the business was immensely valuable. The price that Carnegie demanded for it was a whopping $400 million. That doesn’t sound like much in today’s dollars. But let me paint you a picture…


The total wealth of the United States in 1900 was $88 billion. That means Carnegie Steel was worth about 0.5% of the U.S. What would that look like today?

$422 billion. Seriously, nobody had that kind of money. Okay maybe one guy. Really… Only a single individual could put this sort of deal together. It was J.P. Morgan.

Morgan was another master of scale. He had some experience in combining firms to consolidate an industry.

His first venture, in 1891, was to arrange the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric, which became the dominant electrical-equipment manufacturing firm in the United States. (source:

In fact, he had already started his work in the steel industry. The Federal Steel Company was created in 1898, consolidating the “Illinois Steel Company … the Minnesota Iron Company, Lorain Steel Company of Ohio, the Johnson Company of Pennsylvania, and the Elgin, Joliet & Eastern Railway.”²

This unique skill-set, experience, and situation made Morgan the only man who could offer Carnegie the liquidity he would need to carry out his second act.

Charles Schwab (who ran Carnegie Steel) had been talking with Morgan, envisioning a great consolidation for the industry. That consolidation would later be known as the United States Steel Corporation (U.S. Steel).

When the time came for the acquisition offer for Carnegie Steel, it was Schwab who raised the issue with him. From David Nassau’s Andrew Carnegie:

After their golf game, [Schwab] and Carnegie retired to the cottage, where Schwab presented Morgan’s offer. According to Schwab, Carnegie professed some reluctance at first, but then agreed that it was time to sell. With his blunt, stubby pencil in his hand, he wrote down the price he wanted for his properties. Schwab took the slip of paper directly to Morgan. Carnegie’s price was $400 million. Morgan accepted it.¹

The Carnegie family’s share, $304 million, was paid in 50 year gold-backed bonds, yielding 5% interest. Other shareholders were paid in common and preferred stock of the newly formed combine.

The resulting U.S. Steel Corporation became the very first $1 billion company, with total capitalization of $1.4 billion.

Carnegie was able to manage the liquidation of his stock, but only with the help of J.P. Morgan, and only as an effective IOU due in 50 years. Talk about scale.

“The man who dies thus rich dies disgraced.”

— Andrew Carnegie

Carnegie had always intended to give his money away, and he got to work right away. Nobody had ever given away this large a sum before, so he had to pioneer his own methods for getting it done. His method was to apply his successes at organizing scaled businesses to his many give-away programs. Two of the programs were grants for new libraries and church organs.

Carnegie had designed a decentralized and highly efficient bureaucracy for giving away his money. His personal staff of secretaries, assistants, and bookkeepers at East Ninety-first Street looked after library and church organ donations.¹

The scale of the enterprise isn’t easy to visualize.

But give it a shot…

He lived for almost 20 years after his sale of Carnegie Steel.

During his lifetime, Carnegie would give 1,419 grants, at a cost of $41 million … for 1,689 public libraries in the continental United States, Hawaii, and Puerto Rico. … An additional $15 million was spent to build 660 libraries in Britain and Ireland, 125 in Canada, 17 in New Zealand, 12 in South Africa, and smaller numbers in the West Indies, Australia and Tasmania, the Seychelles, Mauritius, and Fiji.¹

That’s almost 70 grants per year of underwriting and funding, for 20 straight years. And that is just one of the giveaway initiatives Carnegie undertook.


However, he was destined to fail at giving away all of his money.

It had dawned on Carnegie the year before that, try as he might, he was not going to be able to personally dispose of his fortune in his lifetime. He had been defeated in the end by the inexorable logic of compound interest.¹

Scale eventually got the best of Carnegie. The man who mastered scale was eventually mastered by his creation. But life, cruel as it may be sometimes, is not without silver linings…

By the end of his life in 1919, “He had distributed $350 million, but had $30 million left, which went into the [Carnegie] Corporation’s endowment.”³ This organization continues to give away money today. As of 2016, it was sitting on an endowment of $3.3 billion, and giving away about 5.5% each year.³

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