Andrew Carnegie owned Carnegie Steel Company, the dominant steel producer in the United States during the late 1800s. He sold it to banker J.P. Morgan in 1901 for $492 million, and it became the core of United States Steel Corporation, then the largest corporation in the world.
Carnegie Steel Company
Carnegie launched the Carnegie Steel Company in 1889, but his involvement in steelmaking started earlier. He opened his first steel mill, the J. Edgar Thomson Steel Works, in 1875 in Braddock, Pennsylvania. Over the next decade and a half, he built an integrated network of steel and iron supply, manufacturing, and transportation that was unmatched in the industry.
What made Carnegie Steel so powerful was its vertical integration model. Rather than buying raw materials from other suppliers, Carnegie owned nearly every piece of the supply chain. The company controlled the mines that extracted iron ore and coal, the railroads and ships that transported those materials to factories, and the mills that turned them into steel. It even owned the distribution channels: railroads running to eastern cities and barges on the Mississippi River carrying steel westward. By controlling every stage from raw material to finished product, Carnegie kept costs low and competitors at a distance.
Carnegie’s Earlier Companies
Before steel made him one of the richest people in history, Carnegie built his fortune through a string of investments and business ventures. His first major move came in 1856, when he borrowed money from a local bank and invested $217.50 in the Woodruff Sleeping Car Company, which made sleeping cars for railroads. That investment paid off handsomely and gave him the capital to keep building.
In 1861, he formed the Freedom Iron Company, which experimented with the Bessemer process for making steel. That same year, he put $11,000 into an oil company in Titusville, Pennsylvania, using profits from the sleeping car investment. By 1863, he had stakes in several businesses at once, including the Piper and Schiffler Company, the Adams Express Company, and the Central Transportation Company, which together brought in more than $13,000 in returns.
Two ventures stood out as stepping stones to his steel empire. In 1865, Carnegie and several associates reorganized the Piper and Schiffler Company into the Keystone Bridge Company, which built bridges with iron instead of wood. Carnegie’s former mentor, Tom Scott, loaned him half of the $80,000 he needed for his share. Two years later, Carnegie established the Keystone Telegraph Company with associates from the railroad industry. These bridge and infrastructure businesses gave Carnegie deep knowledge of iron and steel demand, setting the stage for everything that followed.
The Sale to J.P. Morgan
By the turn of the century, Carnegie Steel was producing more steel than all of Great Britain. In early 1901, J.P. Morgan, the most powerful banker in the country, approached Carnegie about buying the company. The deal came together after Charles Schwab (Carnegie Steel’s president, not the modern brokerage founder) visited Carnegie at a cottage near St. Andrews Golf Course north of New York City. Over a round of golf, Carnegie agreed to sell for $492 million.
Morgan then merged Carnegie Steel with nine other steel companies to create the United States Steel Corporation, capitalized at $1.4 billion. That made U.S. Steel the first billion-dollar corporation in American history. Carnegie’s personal share of the sale made him one of the wealthiest individuals alive, and he spent much of the rest of his life giving the money away, funding libraries, universities, and philanthropic foundations that still operate today.