Founders - #74 The Autobiography of Andrew Carnegie

Episode Date: June 2, 2019

What I learned from reading The Autobiography of Andrew Carnegie by Andrew Carnegie. ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

Nothing stranger ever came out of the story of this poor Scotch boy who came to America and step by step through many trials and triumphs became the great steel master, built up a colossal industry, amassed an enormous fortune, and then deliberately and systematically gave away the whole of it for the enlightenment and betterment of mankind. Not only that, he established a gospel of wealth that can be neither ignored nor forgotten, and set a pace in distribution that succeeding millionaires have followed as a precedent. Okay, so that's from the introduction of the book that I'm going to talk to you about today, which is the autobiography of Andrew Carnegie. And for today, I'm going to try not to duplicate and cover things I covered in last week's podcast,

because last week we got an introduction to both Andrew Carnegie and Henry Frick. So the focus of today is going to be things that are actually unique to this book. I'm just going to jump right into his early childhood. Oh, by the way, if I sound a little funny, I'm a little under the weather. But as with all things in life, I'm going to adopt a positive mental attitude and persevere and make sure I don't miss any weeks. So apologies if you find my voice distracting. Hopefully that's not the case. Okay, so I want to start with one of the traits that I definitely learned from Andrew Carnegie and other founders that we've put on the podcast so far, is this default level of optimism.

That's basically like your default way of approaching life. So we're going to get into that. And then he also is reflecting on what he feels is the grand rule of life. And I think this idea is fantastic. And to that end, Andrew's writing, he says, I think my optimistic nature and my ability to shed trouble and to laugh through life, making all my duck swans, as my friends say I do, must have been inherited from my grandfather. And then he's going to, he goes on the next paragraph where this, if you look up like famous quotes from Andrew Carnegie, this is one of the most famous quotes that's attributed to him. And I think probably the most important quote in the book. And he says,

A sunny disposition is worth more than a fortune. Young people should know that it can be cultivated, that the mind, like the body, can be moved from the shade into sunshine. Let us move it then. Laugh away trouble if possible. So I think this is important because you might have experienced this before where you might have a problem. Well, let me think back to the podcast I did on Henry Kaiser, where I think it was him that said that problems are just opportunities and workloads.

So I'm sure you've interacted with people that are more pessimistic and cynical, and there's a problem in front of them, and they just think it's the biggest thing in the world. There's nothing I could do. My life's over. the oh what was me kind of thing and then the other side of the spectrum you have people like like henry kaiser's just like okay that's a problem well that's just an opportunity dressed up in work clothes so let me look let me approach it that way i think as i get older i realize that there's very few things that are actually like black and white in life and the perspective in which you approach things uh influences like your enjoyment of life

heavily and i think that's what andrew's telling us here he's like listen a sunny disposition is worth more than a fortune and you should know that it can be cultivated meaning this is a skill it's a life skill that you develop through with uh over time and with experience and that the mind just like the body can be moved into the shade into from the shade into the sunshine i think it's extremely important now he goes right after he gives that great quote, he talks about this grand rule for life, which I think, again, is related to his choice to choose optimism in most things in life as opposed to pessimism.

And he's going to hit on that several times throughout the autobiography. And so now he gets into something that's very, very interesting. It's so much so that he calls it his grand rule for life. And he says, so it says, let's move it down. Let's laugh trouble away if possible. And one usually can, provided that self-reproach comes not from his own wrong doing. That always remains. So what he's talking about is uh well let me read the next sentence and i'll get into that he says the judge within sits in the supreme court and can never be cheated hence the grand rule of life and this is his grand rule of life thine own reproach alone do fear this motto adopted early in life has been more to me than all sermons i

have ever heard so when i read that i was really trying to think i was like what is he trying to tell us here he's like listen you can laugh your trouble away you can understand that um you could take like a more optimistic approach to life but only if you're not if you generally have not done something wrong so that's what he means when he says the judge within sits in the Supreme Court and can never be cheated. You know how you feel about yourself. You know if you're pitting for your best effort. You know if you're being a good person. You know if you're making a mistake and carrying on no matter what.

And I think that's extremely important that you cannot control the opinions of other people. There's no human that's ever existed that's been either universally loved or universally hated. That just doesn't exist. And therefore, like, if you're exposing yourself, like, oh, my God, what's this person going to think of me? Like, that really, it's a superpower when that really doesn't matter. As long as you are comfortable, the judge within, sitting inside of yourself that's analyzing it, analyzing you, analyzing yourself rather as long as that person is happy then i think there's no reason that you can't uh it ties into like what he was saying like you can you you can move your your mental state like i just jokingly said i'm going to adopt a positive mental attitude i say

that like ad nauseum to my friends it's like a davidism um because i do think like it's extremely important everything you're doing especially if something's hard um now on the flip side of that my friends. It's like a Davidism because I do think like it's extremely important, everything you're doing, especially if something's hard. Now, on the flip side of that though, you're not, you cannot run away from that inner monologue. Like if something's eating at you, if you know you're doing something that you shouldn't be doing or if you're, it's very important. Like I used to experience this like right before I go to bed, like, you know, your mind just wanders. You start to replay actions or things you said, and there's, everybody's going to have regrets in life.

You know, I have tons of them. And, um, I feel like the times where I've been most unhappy with myself is when I know I'm, I'm not putting forth my best effort or when I know I'm taking a shortcut or I know I'm not doing what I should, should do. And I don't think you can escape that. And, um, you know, that's, that was just, he's writing these words, let's say in the early 1900s, we're 115, 120 years later. And I think it's still true. The judge within sits in the Supreme Court and can never be cheated. Like, that's just a really

interesting way to describe that phenomenon. Okay, so I talked a little bit about this last week. I just think it's really interesting. think it's a really interesting dichotomy because he talks about his dad was displaced by new technology. And as a result of the displacement of new technology, Andrew experienced some life circumstances that actually motivated him to build wealth. So that we've seen multiple times right a lot of people that have hard upbringings they they use that as fuel motivation to to to right the wrongs they felt they experienced early on but what i also found fascinating is that andrew experienced several issues with his own workers when they were they were fearful that they were being displaced by new technology so this is something that that we just have to acknowledge that has happened throughout history,

and I would argue is probably being accelerated more so in the times that we're living in. So he says, the change from hand loom to steam loom weaving, his dad was a weaver, was disastrous to our family. My father did not recognize the impending revolution and was struggling under the old system. And let me just pause there before I continue. What's fascinating about that is it's impossible to know because he never drew the conclusion explicitly in the book whether he remembered. Like if this experience influenced something that happened to Andrew later on because if you remember, he first started out trying to manufacture iron because at the time, most railroads, most of the materials needed for the expansion of the United States, they were doing the bridges included. really fast that there's a new material, there's a new technology is one way to think about it. And that technology is steel. And steel has all these other advantages that iron does not. And so if one can find a way to produce, find an economic way to produce steel, it is inevitable that steel is going to displace iron. So he just happened to be at the right time

and the right place to make this observation. So he, in some sense, righted the wrong that his father always failed to do. So now Andrew's going to reference after his dad loses his job, they obviously have to flee. They come over to America. And his takeaway in one sentence is a good summary. He says, I remember that shortly after this, I began to learn what poverty meant. That's a hell of a sentence. And then the next one is what he's going to do about it. And he says, and then, then and there came the resolve that I would cure that when I got to be a man.

Excuse me, I left out the word that. He says, then and there came the resolve that I would cure that when I got to be a man. So he had to go through these uncomfortable situations and realize, hey, you know what? I don't want to find myself in this situation, so I'm going to damn sure do everything I can in my power to avoid the same fate that my father and then downstream the family is experiencing. So now he's in America. This is about his school and his work from an early age. And then another trait that I find common in a lot of these biographies is just a high level of disagreeableness, wanting to bend others to your, to the way you view the world and what you think is actually possible.

And so he says, school was a perfect delight to me. And if anything occurred, which prevented my attendance, I was unhappy. This happened every now and then because my morning duty was to bring water from the well. So I may have misspoke earlier. This is actually, this is before he moves to America. He's 10 years old at the time, still living in Scotland. So he says, I, uh, so he has to work in the morning to

bring the water from the well before he's allowed to go to school and he goes school day and then he has to work at night. Um, so he says, I, I had often the shop errands to run after school. So that in looking back upon my life, I had the satisfaction of feeling that I had become useful to my parents, even at the early age of 10. And I think that's a fundamental trait for humans. I think we all want to feel useful, whether we're 10 years old or fully formed adults. I became acquainted in a small way with business affairs even in childhood, and I'll talk about more of that in a minute. And then this is the high-level disagreeableness, though.

He says, I earned the reputation of being an awful laddie. In this way, I probably developed a strain of argumentativeness or perhaps combativeness, which has always remained with me. In the performance of these duties i was often late for school and i didn't take this like high level of disagreeableness it doesn't mean that you have to be a jerk i just think it means that you have a certain view on what you think you're capable of and most of what you're experiencing from the outside world tells you otherwise and that doesn't matter to you. Because I mean, why else would you start your company?

You know, I've talked about this all the time. One of the things like I think is the worst thing going on right now is in the United States, we're at the lowest rates of new company creation, like 40 years or something like that. And so it's standard, it's expected of you, you know, go get good grades, go to school and get a good job and so anybody deviates from that you're you're inevitably going to especially if you don't come from like a family

or an environment of entrepreneurship like you're going to get pushback and you see that all the time like oh you can't do that you can't do this that's impossible and so people that don't have that high level of disagreeableness might actually let other people persuade them into actually believing them. So I do think it's – and maybe this is just like me justifying how I am, but I do think it's a good trait to have. Okay, I'm going to read this next section to you, and then I'm going to relate it to how it makes me think of this quote I love by Jeff Bezos. So it says,

I cannot name a more important means of benefiting young people than encouraging them to commit favorite pieces to memory and recite them often. He makes a really important point here. Anything which pleased me, I could learn with a rapidity that surprised friends. I could memorize anything, whether it pleased me or not. But if it did not impress me strongly, it passed away in a few hours. So, okay. So let me see if I can explain my, like this, these disparate thoughts I'm having on this. Okay. So I think this gives you a mat. If you love what you're doing, like there's this whole debate about whether like you should follow your passion or if that's actually good advice or if it's bad advice. And I fall in the sense of,

listen, I have one life. I have no idea what happens to me after I die. Let's assume this is the only chance I get to exist. Like I don't, work is going to be a huge part of your life. It's going to take up, you know, 50% of the time you're actually conscious and awake. The idea of just struggling through something that you absolutely hate seems to me like a waste of life. Right. And unfortunately I feel that's like the default setting for most of humanity whether you're talking about like 115 120 billion people that have ever lived it's definitely the case for them and I would say most of the people alive today but he made this good point so Jeff Bezos has this great quote he's like listen you don't choose your

passions they choose you and he's talking about listen I was five years old when I started love love of rockets he's talking about, listen, I was five years old when I started Love of Rockets. He's like, I hit this lottery winning called Amazon. And the reason I liquidate a billion dollars a year in Amazon stock to fund my rocket company, Blue Origin, is because I've been obsessed with space and rockets since I was five. I didn't choose that passion. It chose me. And Jeff's advice to us is listen to it. You know what you're interested in, and you've got to kind of follow that path. And Andrew's hitting on this too because he's like, listen, I'll memorize anything. But if I don't actually care about it, it's not going to stick. So if you're giving advice to people, oh, don't fall for passion.

It's a bad idea. It's a mistake, et cetera, et cetera. I just feel the people that love what they do, even if it's hard are having such a huge advantage over people that don't. And I've told you many times, I keep all these quotes and, and, um, and clips and videos on my phone just to like, I referenced constantly over and over again. Cause I like to expose myself to ideas. Once I find an idea that's powerful, I think like, Oh, don't just read it once. Don't just watch it wrong at once. Like do it over and over again. Because as you change throughout time, the meaning of that changes as well.

For example, this, I bought Andrew Carnegie's and read Andrew Carnegie's biography the first time like years ago. And what I've noticed was almost every single highlight I made the first time I read it was very different from the ones that I made this time and the ones that I'm actually sharing with you.

Because I'm a different person than I was a few years ago. So anyways, I have a video that talks about this and it's in line with what Andrew's telling us and what Jeff is telling us and it's Steve Jobs talking about his advice about why you should follow your passions. That is the actual right path forward. So I apologize in advance for the audio quality. I'm playing it on my phone into the microphone, so hopefully this sounds good. But it's 50 seconds of Steve Jobs talking to us.

People say you have to have a lot of passion for what you're doing, and it's totally true. And the reason is because it's so hard that if you don't, any rational person would give up. It's really hard, and you have to do it over a sustained period of time. So if you don't love it, if you're not having fun doing it, and you don't really love it, you're going to give up. And that's what happens to most people, actually. If you really look at the ones that ended up being successful, unquote, in the eyes of society, and the ones that didn't,

oftentimes, the ones that are successful loved what they did so they could persevere when it got really tough. And the ones that didn't love it quit, because they're sane, right? Who would wanna put up with this stuff if you don't love it? So it's a lot of hard work, and it's a lot of worrying constantly. And if you don't love it, you're going to fail.

So you've got to love it. You've got to have passion. People say – Okay, so that's just my – my own personal opinion is more in line with like the Jeff Bezos, the Steve Jobs, the Andrew Carnegie, I think. And I've worked on so many things where it was just for money for years and you can make a ton of money and it sounds cliche where people are like, oh, it's not going to make you happy.

It doesn't unless you you're doing it. I mean, think about what Steve Jobs is doing. Like, he was worth $100 million at 22 years old, 24 years old, something like that. Like, he made more money before he was 25 than he was set for life. He came back to Apple and took no compensation in 97. Like, why would somebody do that? Like, they clearly love what they're doing.

Um, even if it's really hard, cause he even talked about like the struggles he was going through during that time period, he thought led to all the stress led to, you know, the growth of cancer ultimately took his life. Um, but I just think it's better to have a short life well-lived than a long one full of misery. That sounds really smart, but that's an Alan Watts quote. I can't take credit for that. All right. Let me skip ahead. Oh, so he's still talking with Andrew's talking about, I love this anecdote that he talks about from his early childhood that he applied now looking back on his life to the reason for his success. And he says, hire people that know more than you and then study human nature. He says, my first business venture was securing my companion services.

So think of friends. He has a funny way of talking. For a season as an employer. Remember, he's a little kid. The compensation being that the young rabbits, when such came, should be named after them. So they're trying to collect young rabbits. I don't know if they're going to sell the rabbits. I assume they're doing this for food rabbits. I don't know if they're going to sell the rabbits.

I assume they're doing this for food. I'm not entirely sure. And so to attract rabbits, you need food, right? So you need help. Andrew's getting all his little friends here to gather up a bunch of foods and flowers and stuff that rabbits eat and attract them. And he's saying, I have nothing to pay you, but I'll name the rabbits after you. And he says, remember the little kids. So he says, the Saturday holiday was generally spent by my flock, meaning my friends, in gathering food for the rabbits. My conscience reproves me today looking back when I think of the hard bargain I drove with my young playmates,

many of whom were content to gather dandelions and clover for a whole season with me conditioned upon this unique reward the poorest return ever made to labor alas what else have i had to offer them not a penny so he's saying listen it's really interesting that that humans would would um work give up their saturday for an entire season and do all this work for free in the sense that there's no monetary payment, but because you promised them something that they found valuable later on, which is being named after a rabbit, they would do that. And so he says, I treasure the remembrance of this plan as the earliest evidence of organizing power upon the development of which my material success in life has hung.

So he's like, listen, the only reason I made all this money, I was able to do the things I was able to do is because I had one skill and the skill was organizing large groups of people to work in cohesion. Is that the right word? To work together. So he says, a success not to be attributed to what I have known or done myself, but to the faculty of knowing and choosing others who did know better than myself. He continues, precious knowledge this for any man to possess. I did not understand steam machinery, but I tried to understand that much more complicated piece of mechanism, man.

So he's telling you, listen, I may not know the intricacies of how my factory works, down to every little detail, but I do understand humans. And that is a very valuable skill when you need to organize a bunch of them to work towards the same goal. And that is what actually derived my wealth, not the fact that I knew every little bit about like steam machinery, for example. Skipping ahead.

So I just want to hit on this because I think it's really important. Oh, and another thing. He's constantly, remember, he's writing these words 100 plus years ago. So he's going to say, man should do this. Man should do this. Men should do this. It's just the times. It's humans.

The ideas that he's giving us, they apply to women. They apply to men. It's just. The ideas that he's giving us, they apply to women. They apply to men. It's just humans do this. So I just want to obviously, I think it's obvious, but I want to point that out. Okay. So again, I'm going to reiterate his desire to work hard was fueled large in part to avoid poverty. And something that I feel is like, I don't like being dependent on other people.

I don't like, another way I've heard this put, and I've echoed this statement, it's like, I don't want to rely on the good graces of other humans as much as I can avoid it. And Andrew is echoing that here. He says, the great question now was, what could be found for me to do? So at this point, I think he's in America. I had just completed my 13th year

and I fairly panted to get to work that I might help the family to start in the new land. So they're in America. The prospect of want had become to me a frightful nightmare. Prospect of want is another way to say poverty. My thoughts at this period centered in the determination that we should make and save enough money to produce $300 a year. $25 monthly. So that's their family goal, which I figured was the sum required to keep us without being dependent upon others. And something I think his parents did that was really smart is they involved Andrew. Andrew's the oldest child. He basically ran the books of the family, even at a young age.

He knew what everybody was making. He knew what their expenses were. And I'll get into more about how that kind of echoes how he ran his business later on in life. But his father gets a job in the factory. Remember, he can't be a weaver anymore. And his father is able to get him hired as well. And so this is his first paying job and then also about the the happiness he experienced contributing to his family i think that's like the

the biggest thing that i didn't understand when i was younger it was much more selfish is like if you can involve yourself like the the satisfaction that comes from involving yourself into uh something that's larger larger than just your own life. And I'm talking about family. In Andrew's case, that's what he's talking about as well. So he says, in this factory, he also tamed for me a position as a bobbin boy. And my first work was done there at $1.20 per week. I talked about it last week.

It was a hard life. In the winter, father and I had to rise and breakfast in the darkness, reach the factory before it was daylight, and with a short interval for lunch, work till after dark. The hours hung heavily upon me, and in the work itself, I took no pleasure. But the cloud had a silver lining, as it gave me a feeling that I was doing something for my world, our family. So he's saying, hey, I'm willing to struggle if it's for the greater good. I have made millions since then, but none of those millions gave me such happiness as my first week's earnings. I was now a helper of the family, a breadwinner, and no longer a total

charge upon my parents. So ever since I read the book on Charles Goodyear, this term manic optimism hasn't left me. And I definitely feel Andrew had manic levels of optimism as well. So he's working in a factory. Eventually, he's working down in the basement. There's all these fumes and gases he has to inhale all day. And it made him sick and it made him vomit. So he says, if I had to lose breakfast or dinner, I had all the better appetite for supper and the allotted work was done. So think about what's happening here. The smell of oil made him sick and made him vomit, right?

So he's saying that's what he means by if I had to lose breakfast or dinner. I think he meant lunch because he says he has a better appetite for supper. Oh, well, more room in my stomach for dinner. That is manic levels of optimism. And when he talked about earlier, the quote I read where his friend said that he turns all ducks into swans. How many people, most people would be like, oh, woe is me. I mean, granted, I don't think kids should be working in that environment or adults for that matter.

But he just refused to give in to like the cynicism or the pessimism. And he's like, all right, well, I just have to look. What's the upside? Okay, I'm throwing up everything I eat, but I'll be extra hungry at night and my work is done. Next he, he, he starts to get like promoted really, really rapidly. And he hears about this office job. So he wanted, he desperately wanted to get out of factory work, wanted to get into the office. So he goes and takes a, he goes and visits Pittsburgh and gets hired. But the moral of this story before I read to you, is if you want something done, if it's important, don't delay.

Do it now. Because you know that we're prone to procrastination. And you have the time. You know you need to do it. So do it right now. And it's an example of that. So he says, the interview was successful. I took care to explain that I did not know Pittsburgh, that perhaps I would not do, meaning maybe I couldn't do the work, and would not be strong enough. But all I wanted was a trial.

That's also a good way if you need to get a job, saying, hey, just test me out. Give me a contract for two weeks, a month. Let me see if I can do it. And that kind of lowers the commitment level. So he says, he asked me how soon I could come and said that I should stay now if wanted, meaning, no, I'll start right now. And looking back over the circumstance, I think that answer might be pondered, excuse me, I think that answer might well be pondered by young men. It is a great mistake not to seize the opportunity. The position was offered to me. Something might occur. Some other boy might be sent for.

Having got myself in, I propose to stay there if I could. That is really, really smart that he picked up on that at such a young age. So, okay. This is books as being a vehicle for self-improvement and a reminder that we all should be kinder and this is definitely something like I need to work on because kind acts are remembered for a long time he's a young boy when he's experiencing the story I'm about to share with you and now he's writing about it 60 years later so he says talks about it 60 years later. So he says, talks about how busy he is.

He says, this did not leave much time for self-improvement, nor did the wants of family leave any money to spend on books. So in other words, I'm spending all my day working. All my money is going to my family. Yeah, I want to improve. Yeah, I know I should be reading, but I just don't have the resources at the moment. He says, there came, however, like a blessing from above, a means by which the treasures of literature were unfolded to me.

Colonel James Anderson, I bless his name as I write this, announced that he would open his library of 400 volumes to boys so that any young man could take out each Saturday afternoon a book which could be exchanged for another on the succeeding Saturday. So basically this guy is saying, hey, you can read a book a week for free. Just use my library and you can't get another book until you bring the other one back. Andrew also talks about it because he funded, later in his life, Andrew funded, I don't know, like 400 public libraries, some ridiculous number like that. And he talks about the fact that this, this act of kindness from this older gentleman, um, like it changed his life and he wanted to try to do the same for, for people

following after him. Um, so this is, uh, what I was mentioning earlier, how his family did something really smart by involving him into the family finances. And Andrew ran his business the same way. He would control costs and he would know every expenditure. So he says, every penny that I could save I knew was needed at home. My parents were wise and nothing was withheld from me. I knew every week the receipts of each of the three who were working. My father, my mother, and myself. I also knew all the expenditures. And so, you know, he had the

reputation of just, I don't care about revenue. I don't care about profit. I want to know the cost, cost, cost, cost. He kind of intuited at a very young age what Jack Bogle, the founder of Vanguard, would say. He's like, you need to avoid the tyranny of compound costs. And so in this case, he's like, I know how much we're making, but I also know down to the penny what we're spending it on. Again, I think you can't control the station you are in life currently, but you can control what you're going to do about it and make sure that you're not wasting any opportunity to pick up new skills because you know where those new skills are going to lead you in the future. This is an example of that. Andrew wasted no opportunities to learn new

skills. And so now he's in the office. He has to get there early in the morning and he has to sweep up. But he says, having to sweep up the operating room in the mornings, the boys, this is not a hospital, it's just the name of the office. The boys had an opportunity of practicing upon the telegraph instrument before the operators arrived. This was a new chance. I soon began to play with the key and to talk with the boys who were at the other stations who had like purposes to my own. Whenever one learns to do anything, he has never to wait long for an opportunity of putting his knowledge to use. So the reason I think this is so important is because this skill that he's picking up, right? He's not hired. He's not a telegraph operator, but he learns how to do it.

He learns Morse code. That skill leads him to working for this guy named Thomas Scott. Thomas Scott worked for the Pennsylvania Railroad. Getting introduced to, if he never learned how to operate a telegraph in his spare time, he would have never been introduced to Thomas Scott. If he never was introduced to Thomas Scott, he would have never worked for the Pennsylvania Railroad. If he never worked for the Pennsylvania Railroad, he would have never been introduced to the idea the doors years later uh that lead him to finding his life's work that's why it's just just don't waste any opportunity to learn something new even if you don't know when you're

going to apply it yet he didn't know no one could predict uh from the point from this point in his life how this is going to wind up it's just hey it's a good rule of living like let me just try to learn i always say like my fantasy um i'd like to learn things like Neo and the Matrix, where he sits in a chair, you download, now you're a black belt in jiu-jitsu, or you know whatever, calculus or physics or just anything. I would love that access to that technology, because I think, again, knowledge just makes us superhuman. Okay. Oh, so here's something interesting. So eventually Thomas Scott recruits him.

He's like, listen, the Pennsylvania Railroad is eventually going to run their own telegraph lines because the communication is so important to our business. Why don't you come over and run this for me, right? And what happens is he has some advice for us here. And what's happening at the time is Thomas is late to, he's working for Thomas for several months, maybe even over a year at this point. Thomas is late to the office one morning and there's a bunch of catastrophes on the railroad. So at this time, crashes were a lot more frequent than they were now. And this has happened before. And what he realized, because Scott gives him the order, right? Thomas Scott gives him the order.

And then Andrew's job is to relay that information. So, you know, he's kind of, he knows, hey, this situation happened. This is Thomas in the past has told me to do. And like, he kind of knows, he sees everything there. So he's in a conundrum. He's like, what do I do here? Like, I know the right thing he's he's in a conundrum he's like what do i do here like i know the right thing like what he would want to do if he wasn't here but i'm not allowed to he has to send a um communication to the railroad on what to do but he has to forge

basically say making it seem like it's coming from thomas scott as opposed to just Andrew. And so he winds up taking this risk, and then he tells – when Thomas gets to the office, he tells him what he did. And Thomas didn't say anything. He's like, okay, and just didn't say good or bad about it. But he realized through Thomas' actions that it was the right thing to do. So he says, the battle of life is already half won by the young man who was brought personally in contact with high officials. Okay, so Thomas is a high executive, this guy. At the time, Andrew's just a young guy,

like an assistant, basically. And the great aim of every boy should be to do something beyond the sphere of his duties, which is what he did. Something which attracts the attention of those over him. And what happens later on? Eventually Thomas stops giving him orders and just lets Andrew answer like the incoming, hey, what do you think Thomas we should do? Andrew starts dictating what they should do. Thomas realized, oh, this guy knows what he's doing.

I don't need to micromanage you now. And so go ahead and you know what I would do in this situation to go ahead and do that in the situation. So that winds up leading to more opportunities because as Thomas keeps getting promoted in the railroad, he constantly recommends that Andrew takes a spot to where he was. And that again, then Andrew becomes an executive, meets all these people, learns about investing, and again, opens the doors to run his company later on. So all these things are related. Okay, now I'm going to read something that's a little longer and at this point he started that bridge building company which is called keystone bridgeworks and i think this

this echoes a little bit what we learned about yvonne chenard about like quality as a distribution strategy and he says the lesson he learned from his bridge building business the surest foundation of a business is the quality of its product the keystone bridge works have always been a source of satisfaction to me almost every concern that had undertaken to erect iron bridges in america had failed many of the structures themselves had fallen and some of the worst railway disasters in america had been caused in that way Some of the bridges had given way under wind pressure, but nothing had ever happened to a keystone bridge. There has been no luck about it. We only used the best material and enough of it, making our own iron and later our own steel. We were our own severest inspectors and would build a safe structure or none at all.

When asked to build a bridge which we knew to be too insufficient strength or of unscientific design, we declined. Any piece of work bearing the stamp of the Keystone Bridge Works, we were prepared to underwrite. We were proud of our bridges. This policy is the true secret of success. Uphill work it will be for a few years until your work is proven, but after that it is smooth sailing. Instead of objecting to inspectors, they should be welcomed by all manufacturing establishments.

A high standard of excellence is easily maintained, and men are educated in the effort to reach excellence. I have never known a concern to make a decided success that did not do good, honest work. And even in these days of the fiercest competition, when everything would seem to be a matter of price, there still lies at the root of great business success, the very much more important factor of quality. So he's saying something left out there is that sometimes they'd bid against other bridge companies

and they would have a higher price, but because they had proven how good their product was, they would actually be awarded the contract. The effect of attention to quality upon every man in the service from the president of the concern, he uses the word concern, just think of business, down to the humblest labor cannot be overestimated.

And bearing on the same question, clean, fine workshops and tools, well-kept yards and the surroundings are of much greater importance than is usually supposed. So that's the whole idea of that. How you do one thing is how you do all things. So you can't really build the best product if you're not even taking care of the environment environment which you're doing your work so clean it up make sure your tools are well kept they're well maintained and everything

is clean okay so now this is an example of how he started to introduce cost accounting to manufacturing and again he's just a reminder to watch your cost and this blew my mind when he describes what the environment was in manufacturing beforehand. And again, that opportunity is still present to this day. When you actually go deeper and understand, for lack of a better term, how the sausage is made, you're going to find environments and questionable ways of doing things just like Andrew Carnegie did. And therefore, if you can solve that problem, there's an opportunity for you. So let me give you an example. As I became acquainted with

the manufacture of iron, I was greatly surprised to find that the cost of each of the various processes was unknown. It was a lump business. And until stock was taking and the books balanced at the end of the year, the manufacturers were in total ignorance of results. I heard of men who thought their business at the end of the year would show a loss and had found a profit and vice versa. So how crazy is that? They can't even tell you until the end of the year when they do all their accounting. How am I doing? Like you just never could run a business like that. I felt as if we were moles burrowing in the dark. And to me, this was intolerable. I insisted upon such a system of weighing and accounting being introduced throughout our works as would enable us to know what our cost was for each process and especially what each man was doing who saved material who wasted it and who

produced the best results to arrive at this was a much more difficult task than one could imagine every manager in the mills was naturally against the new system come on that's that's something we've seen over and over again people don don't like change. Even think about that. Think about how ridiculous a sentence that was based on a few paragraphs above that. Every manager in the mills was naturally against the new system. You don't even know what you're doing and you want me to continue on like this? Like you're ridiculous. That's just silly.

All right. Years were required before an accurate system was obtained. But eventually we began to know not only what every department was doing, but what each one of the many men working at the furnaces was doing and thus to compare one with another. They couldn't even tell the quality of their of their staff before this. How ridiculous that think about how large a component of expenses is labor labor is to most businesses and you don't even know which one's better than the other one of the chief sources of success in many uh in manufacturing is the introduction and strict maintenance of a perfect system of accounting so the responsibility for money and materials can be brought home to every man owners who in the office this is such a good point That he makes You take the same situation in a different environment

The same kind of thinking Which would be intolerable in one environment You accept in another This is what I mean about We're rationalizing and not rational Owners who in the office Would not trust a clerk with $5 Without having a check upon him

Meaning checking up on what he's doing These same people that trust a clerk with $5 without having a check upon him, meaning checking up on what he's doing. These same people that wouldn't give you $5 without oversight were supplying tons of material daily to men in the mills without exacting an account of their stewardship by weighing what each returned in the finished form. So you're nickel and diming. You're worried this guy might misuse $5 with the resources. Meanwhile, your largest other source of costs, raw materials and manufacturing. Maybe it might not be larger in labor, but it's up there. And you don't even know what's happening. That's silly. And you know what? It's interesting that this process was going on, playing out thousands and thousands of time.

Other people were running businesses, manufacturing for 100 plus years before this, maybe 50 plus years before this time period. And it took Andrew Carney to realize, hey, this is untenable. You can't do this. And by investing and taking years of doing the hard work, this gives him a massive, massive advantage later on. Because he's one of the few people who actually knows what his costs are. And once you know something, then you can manage it, and then he starts whittling it down, et cetera, et cetera. All right, another reminder is invest in technology, because just like a young Andrew wanted to avoid compound costs,

well, he wants to embrace the compounding savings that happens with new technology. So he talks about, you know, he's one of the first people to invest in, he would keep an eye on the new technology in iron and steel. And then when a better process came along, he would immediately jump on it. And a lot of people criticize him for this. So he says, I well remember the criticisms made by older heads among the Pittsburgh manufacturers about the extravagant expenditures we were making upon the new fangled furnaces. So something i would say humans scoring the abstract what does that mean in this situation before i continue on what i'm going to read all they see is the price on something that you're paying today is not abstract right

oh my god andrew carnegie is paying a million dollars for this machine hypothetically what is abstract is the savings that he's going to reap over the lifetime of that machine that's harder to calculate for us we like things that are right in front of our face so yeah i'm paying a million dollars up front but i'll recoup that million in the first three years and i'll keep the machine for 10 years which means i'm actually this million is going to benefit me anywhere from three to five million dollars depending on when i have to replace it but they are these old heads as he calls them older heads heads, are only focused on the non-abstract price that he's paying today. So he says, but in the heating of great masses of material, almost half the waste could sometimes be saved by using the new furnaces.

The expenditure would have been justified even if it had been doubled. Yet it was many years before we were followed in this new departure, meaning many years before other people figured this out. And in some of those years, the margin of profit was so small that most of it was made up from the savings derived from the adoption of the improved furnaces. Our strict system of accounting enabled us to detect the great waste possible in heating large masses of iron. This is probably one. I keep saying this for everything because he's got a lot of ideas. This is probably one, I keep saying this for everything

because he's got a lot of ideas. This is a very important idea. Andrew understood how valuable your attention is. So he's going to talk about realizing, and keep in mind, he was doing this with checking the newspaper every day. I can imagine what he would think today in the age of endless social feeds that never end.

So he talks about he's got to sell all of his, he's got some investments going on and some of them were publicly traded and he found himself compulsively checking the prices all the time. So he said, they included some stocks and securities that were quoted on the New York Stock Exchange. And I found that when I opened my paper in the morning, I was tempted to look first at the quotations of the stock market. As I determined to sell all my interests in every outside concern and concentrate all my attention upon my manufacturing concerns in Pittsburgh. Remember, this goes back to what his thing was.

He's like, listen, I don't know any people that build great fortunes by having their hands in a bunch of different things. If you looked at how great fortunes were made, it's by one person finding a business that they loved and being the best in the world in that business. So he's like, you know, put all your eggs in one basket and watch that basket, which is kind of funny that like modern finance tries to teach us opposite of that.

So he says, as I determined to sell all my interest in every outside concern and concentrate my attention upon my manufacturing concerns in Pittsburgh, I further resolved not even to own any stock that was bought and sold upon any stock exchange. Now, why is he doing that? Such a course should commend itself to every man in the manufacturing business and to all professional men. I would say to people everywhere. From the manufacturing man, especially the rule would seem all important. Ready? His mind must be kept calm and free if he is to decide wisely the problems which are continually coming before him. Nothing tells in the long run like good judgment and no sound judgment can remain with the man whose mind is disturbed

by the mercurial changes of the stock exchange. What he's telling us is like your attention is super valuable. And if you're splitting it on all these other things, that means your business over time will be less valuable. And he understood his own nature to realize, hey, if I own these stocks, I know myself. I'm going to check them every day. So what's the solution? If I check them every day, that's attention away from my business. So the solution is get rid of the stocks. He says, it places him under an influence akin to intoxication. What is not, he sees.

And what he sees is not, meaning he's confusing himself. He's fooled by randomness, to quote one of my favorite books. He cannot judge of relative values or get the true perspective of things. The molehill seems to him a mountain, and the mountain a molehill. And he jumps at conclusions which he should arrive at by reason. His mind is upon the stock quotations and not upon the points that require calm thought. Speculation is a parasite feeding upon values and creating none. So the moral of this section is, listen, your time is very valuable. And one of my favorite

quotes about this that, again, in today's day and age, people don't seem to understand. That's nice that social networks don't charge you any money, but it's not free. Your attention has valuable. And if you really thought about it, and most people don't because, again, humans score in the abstract, this is clear because money is not finite. You can make more, right? But time is finite. Therefore, the most expensive way to pay for anything is with time

avoid that okay um this is a story andrew never forgot i'm not gonna give you the background i'm just gonna read about two paragraphs to you um the takeaway for andrew was it's wiser to be optimistic than full of anxiety and worry. So there's this old guy. He says, on one occasion while we were comparing notes, he told me that he always found comfort in the story. An old man having suffered from all the ills that flesh his hair to and a great many more than is usually encounters

and being commiserated by his neighbors, I guess being chastised, replies, replies, yes, my friends, all you say is true. I have had a long life full of troubles, but there is one curious fact about them. Nine-tenths of them never happened. Right? So what is he describing? Anxiety. True indeed. Most of the troubles of humanity are imaginary and should be laughed out of court. It is folly to cross a bridge until you come to it. What's anxiety? It's about worrying about the uncertainty of the future. And so Andrew leaves us with a lesson., it is not so bad as anticipated.

And so Andrew leaves us with a lesson. A wise man is the confirmed optimist. So going back to his idea about, listen, you need to focus your efforts. Do not diversify. If you're not working on your best idea, you're doing it wrong. Work on your best idea and focus on that. Do not be distracted. And he says, I had become interested in building some railways in the Western states, but gradually withdrew from all such enterprises and made up my mind to go entirely contrary to the adage not to put all eggs in one

basket. I determined that the proper policy was actually to put all good eggs in one basket and then watch that basket. I believe the true road to preeminent success in any line, let's use any business, is to make yourself master in that line, make yourself master in that business. I have no faith in the policy of scattering one's resources. And in my experience, I have rarely, if ever, met a man who achieved preeminence in moneymaking who was interested in many people. It's investing in what you're doing. He says, most businessmen whom I've known invest in bank shares and faraway enterprises,

while the true gold lies right in their own factories. I have always tried to hold fast to this important fact. It has been with me a cardinal doctrine that I can manage my own capital better than any other person, much better than any board of directors. My advice to young men would be not only to concentrate their whole time and attention on the one business in life in which they engage but to put every dollar of their capital into it as for myself my decision was taken early i would concentrate upon the manufacturer of iron and steel and be the master of that so as you probably, I take a lot of notes on podcasts and talks

and all this other stuff. It's actually, if you go to davidcenra.com, you can see all my notes there. I'm slowly, I have like 5,000 plus individual notes that I'm slowly starting to add to the website. So davidcenra.com, you can see it for free. And I just, this, when I, it's funny, when I was reading this, I was also listening to this talk given many years ago by, it's a quick little video, it's on my website, about Charlie Munger and Warren Buffett on diversification. They're echoing exactly what Andrew Carnegie said 100 years earlier. And the quote is, this is from Warren Buffett, diversification is for people who don't know what they are doing. Look at how all the great fortunes were built.

So he talks about it. He's like it's madness to him and Charlie Munger that modern finance classes tell you diversify, diversify, diversify. He's like, listen, if you can invest in three great businesses in your lifetime, you'll become very rich. The idea that you have a list of, you know, you're supposed to invest in 40 or 50 businesses and you think you can understand them intimately. And he's like, why? If you know what you're doing, he's like, diversification is basically for people who don't know what they're doing, right? So if you just

want to not think about it, then buy the whole market. That's the whole index fund revolution that Jack talks about, that Jack Boga talks about. But what Warren is saying there is like, listen, if you've identified three great businesses, why would you put money into the 35th great business that you know? Like, no, you put it in number three, you put it in number one. Like that's not, you're not going to get outside success by just trying to replicate the market. And so I think this is extremely important. I would combine it with what he's saying. The two examples I think go hand-in-hand.

Listen, your attention is extremely valuable, so guard it. And two, put that attention to what you should be working on. Don't let yourself get distracted. So don't diversify focus all right and um so he gets into a little bit about like this whole issue with the labor shortage and the stuff that happened andrew's take is like listen if i was in home if i was in pittsburgh and wasn't scotland when this went down i would have just shut i would have just shut shut down and waited for the strike to be open. My partner chose a different route, right? And he says something, and I don't know if it's true

in the sense that this is because I don't know enough about his business. It was a private company. We're not privy to a lot of this information. But he says, I believe that higher wages to men who respect their employers and are happy and contented are a good investment, yielding indeed big dividends. This is the point I was trying to make last week, that it was unwise if you look at all costs of a business. They use the example in the book last week, that all costs are the same, whether vegetables or men, that didn't make sense to me. Because humans are dynamic and they respond in emotional ways. They're not vegetables. You can't just say, oh, all costs are the same.

And not only are not all the costs the same, but there's benefits to not turning over your workforce constantly, right? Benefits in the future that are only realized if those people stick with you. So I was listening to one of the founders of this company called Zapier. His name's Wade Foster, I think. And he was talking about it on a podcast. He's like, listen, we're a remote-only company. So he's like, I feel that being a remote-only company

helps our retention. Why would he bring that up? Why is that important? He's like, listen, our retention rate last year was 94%. They kept 94% of all their employees that started the year, finished the year with them. And his point he makes here is really, really important in my opinion. He says, when people stay longer, you have more

continuity. You get efficiencies of scale from employees staying at a long time. That is very similar to what Andrew is saying. I believe the higher wages to men who respect their employers and are happy, et cetera, et cetera, are a good investment yielding indeed big dividends. So that's the point I'm trying to make is like, listen, you might want to think you're cutting costs and actually saving money by making your wages as low as possible. I would say that you're actually going to make less money because truly talented people, like they know that there's a market for their skills. And so if you find people that are really good, you should do everything in your power to keep them in your company because look at it as more of an investment, not a cost.

I think that's the mistake that Frick was making and maybe to a lesser degree Carnegie was making. And then finally, it's funny how the book ends. I'll close on this. The very last sentence, I'm going to read you the sentence and then the note from, I guess, whoever published the book. It says, nothing is impossible to genius. Here, the manuscript ends abruptly.

And I just love that ending. Apparently, he was so distraught because of the outbreak of World War I, and he got so involved in politics and everything else that he never got back around to completing his autobiography. So if you want to read the whole book, I'll leave a link in the show notes. Or you can just go to amazon.com forward slash shop forward slash founders podcast. You can see this book and every single other book that I've done so far. And next week, I'm going to wrap up this three part series with a biography of Henry Frick. All right, thank you very much for listening and I'll talk to you next week.