How steel magnate Andrew Carnegie redefined wealth by giving it away

This Q&A is part of America: 250 Years Bold, a CNBC multiplatform series highlighting the leaders, organizations and ideas that have shaped America over the past 250 years.

Dame Louise Richardson, president of the Carnegie Corporation of New York, leads one of the most influential philanthropic organizations in the United States. Since our founding in 1911, we have awarded more than $16.5 billion in grants. In this conversation, Richardson discusses Andrew Carnegie’s rise from immigrant to businessman, his belief that with wealth comes responsibility, and how his legacy continues to influence education, democracy, and opportunity in America today.

RICHARDSON: Andrew Carnegie was the richest man in the world at the time. Although he was a spectacularly successful businessman, he was also the godfather of modern philanthropy. He was a pioneer in scientific philanthropy. He was a pioneer in evidence-based philanthropy, not to mention generosity. He was determined to donate all his wealth to the greater good of the society from which he had benefited. He was born in Scotland to a very poor family. His entire family lived in one room upstairs, and his father worked downstairs on the cotton loom. They were quite poor and were forced to migrate. So they moved to Pittsburgh, and at the age of 12 he became a bobbin clerk in a cotton mill.

RICHARDSON: He founded the world’s largest steel company. In fact, Pittsburgh’s Carnegie Steel, which in the 1890s produced more steel than all of Great Britain, was successful because he was innovative. He was always looking for talent. He was well aware that he was uneducated and wanted to surround himself with people who were more educated than himself. So he brought talent. He would bring in a chemist. For example, he hired the best chemists who devised the perfect mixture of chemicals to make steel. He was very open to innovations like the Bessemer process (a revolutionary steelmaking method that blew air into molten iron to remove impurities, dramatically lowering costs and facilitating the rapid expansion of the industry) and other new methods of making steel cheaper and more durable. He also pioneered the idea of ​​vertical integration, or owning the entire supply chain from raw materials to distribution of the finished product. That is, he was innovative, creative, and very cost-conscious. He often said that his factory’s philosophy was that if you covered the costs, the profits would take care of themselves. So he was a hard-driving, hard-charging businessman, but he was very open to innovation, willing to take risks, and very smart about how he did it.

RICHARDSON: Andrew Carnegie was a very prolific author, and he wrote a book called “The Gospel of Wealth,” which detailed his views on philanthropy. The book’s most famous line is, “He who dies rich dies ashamed.” He believed that those who acquired wealth had a responsibility to distribute it for the greater good. He wanted free public libraries to be accessible to all willing people. There he set out to build a free public library, funding 2,500 libraries around the world during his lifetime. He wanted libraries to be accessible to all young people, or anyone who wants to educate themselves.

Richardson: Today, the Carnegie Corporation of New York is focused on education, promoting democracy, and promoting peace. These were the questions that mattered most to Andrew Carnegie, and they are the questions that matter most to us today. We aim to advance peace by assisting with conflict resolution, supporting academic research on the nature of peace by supporting knowledge about adversaries, and learning more about the countries with which Americans have difficult relationships. We believe that education is a way to reduce the impact of adversarial relationships. We are also passionate about education. Much of our work today revolves around K-12 education, ensuring that young people receive the strongest possible public education to prepare them for productive jobs and good universities. We also believe in democracy. Democracy is a core value of our society, and as tensions are currently rising, we are investing heavily in efforts to reduce the polarization that we feel is undermining democracy today.

Richardson: When we think about the next 250 years, the big advantage of philanthropy is that, unlike politicians, we don’t have a short-term horizon. We can invest in something now with the hope or desire that it will pay off decades later. For example, we invest in a lot of academic research. Although it will take many years for this study to be completed and many more years for the recommendations to be implemented, we can afford to take a long-term view. So I think philanthropy can also help us get through the rough waters of society by supporting libraries, supporting music, supporting parks, supporting things that may not make economic sense, but culturally they help build society and bring communities together. And the benefits may last for generations to come.