Andrew Carnegie is another of the twenty books that Charlie Munger recommends at the back of the second edition of Poor Charlie's Almanack. If you've read any of my other reviews this will not surprise you, as I am working my way through his list. After all, if a man like Munger - whose thinking prowess is revered by a man of Buffett's abilities - takes the trouble to recommend only twenty books out of all those he has read over a long life time, surely one should actually read them?
You can see from the page count that even reading this book (described by the author as a 'massive tome') is a significant undertaking (let alone the 'many long years' that Wall spent on it). I am left with somewhat mixed feelings after finishing the book: admiration for the vast amount of research that went into it, but also a certain amount of disappointment that some part of Carnegie's character seemed to be missing.
When I reviewed 'Titan', the biography of Carnegie's contemporary, Rockefeller, by Ron Chernow (also on Munger's recommended list) earlier in the year I awarded the book a maximum five stars and said that it was as entertaining as a novel. I also said that I'd not read many biographies and so was somewhat hesitant in my opinion. Andrew Carnegie was thus a particularly useful book to read, as it covers a similarly successful businessman over roughly the same period and location.
I felt that Titan gave a fuller view of Rockefeller, the man, and the things that drove him. I've spent some time considering why Wall's biography of Carnegie seems somewhat two-dimensional in comparison. I've concluded that it probably has something to do with the way that Wall would say, for example, that Carnegie wrote a speech or worked on his autobiography but he doesn't give much indication of how Carnegie would actually spend his day.
Did he work all day on some days, or only at certain times of the day? How did he fit in work (whether business or, later, philanthropy) with the many visitors at Skibo in Scotland? Did he vary his work habits during the year as he moved between Scotland and the US? Did he plan his writing (he was a prolific author of speeches, articles and books) and did he find writing easy as well as enjoyable? I found the absence of these mundane details made it harder to identify with Carnegie.
That said, there were some very interesting and even exciting passages in the book. There is a marvellous story about how Carnegie's manager and business partner, Henry Clay Frick, was shot twice with a small pistol in the neck at short range and stabbed three times in the hip and legs by a would-be assassin. Frick sat in a chair without anaesthetic, directing the doctor as he extracted the bullets. He then insisted upon returning to his desk to cable his mother and Carnegie and to finish some urgent paperwork. It was at the time of the infamous strike at the Homestead plant and before Frick would allow himself to be taken home by ambulance he prepared this statement:
"This incident will not change the attitude of the Carnegie Steel Company toward the Amalgamated Association. I do not think I shall die, but whether I do or not, the Company will pursue the same policy and it will win."
Eventually Frick and Carnegie ended up in open warfare over the control of Carnegie Steel. Wall quotes sections of the board minutes as the fight begins and one feels almost like a direct spectator. Now you know something of Frick's character, you'll be unsurprised that I thought this was the most exciting part of the book.
Rather like Rockefeller, Carnegie retired from business and devoted himself to philanthropy. Also like Rockefeller, Carnegie found giving his money away more difficult and burdensome than actually making it (in fact it nearly gave Rockefeller a breakdown). I think the key here is that it is easy to give money away, but if you are determined to do it effectively (and it was anathema to men like Rockefeller and Carnegie to do it any other way) then it is extremely hard. Particularly when vast quantities of money are involved.
However, Wall's book contains a superb example of the superpower of incentives (and also of an extremely strong positive unintended consequence). Carnegie created an endowment to provide free pensions for university professors because he was concerned that their very low wages (senior professors earned salaries comparable to clerks working for Carnegie Steel) and lack of pensions were causing two major problems:
1. A lack of talented people becoming teachers.
2. Professors staying on long after they should have retired because it was the only way colleges could pay them a pension (again preventing entry of young people).
It had a huge effect because the trustees evaluated all of the colleges in the US and only approved around 50 of over 400 that applied (most were rejected because of low academic entry standards or because of sectarian requirements). The effect of the good teachers wanting to move to colleges where they could access a free pension was so strong that it forced a significant improvement of entry standards across the country, which in turn drove a significant improvement in standards in schools across the country that fed the colleges. It also forced many sectarian/religious colleges to become non-sectarian.
Munger has said that perhaps the most important job in management is to get the incentives right. The marvellous example above shows that, with the right incentives, apparently intractable problems can sometimes simply resolve themselves (just as with FedEx's initial delivery problems).
Overall, Andrew Carnegie is a fine and worthy book, but one that takes some reading.