Date: ______
Topic: The Rise of Big Business
Aim: Who were the Captains of Industry and how did they make their money?
Do Now: Answer the question below.
Pretend that you are a small business owner in Port Washington. Suddenly the demand for your product greatly increases in areas beyond Port Washington. In order to meet this new demand you need to expand your business. However there is one problem, you do not have enough money to pay for the expansion. You now must figure out a way to raise enough money so that you can expand your business.
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T-Notes: Industry Vocabulary
- Corporation
- Stock
- Dividend
- Free Enterprise System
Trusts and Monopolies
Andrew Carnegie
Andrew Carnegie (November 25, 1835 – August 11, 1919) was a Scottish-Americanbusinessman, a major philanthropist, and the founder of the Carnegie Steel Company which later became U.S. Steel. He is known for having built one of the most powerful and influential corporations in United States history, and, later in his life, giving away most of his riches to fund the establishment of many libraries, schools, and universities in Scotland, America and worldwide.
Carnegie made his fortune in the steel industry. His great innovation was in the cheap and efficient mass production of steel rails for railroad lines. He used the Bessemer Process which was a way of making strong steel at a lower cost.
In the late 1880s, Carnegie Steel was the largest manufacturer of steel and steel rails in the world. In 1888, he bought the rival Homestead Steel Works, which included coal and iron fields, a 425-mile (685 km) long railroad, and a line of lake steamships. Carnegie controlled all phases of the steel industry, from iron ore mines, to producing the steel to shipping the steel. This process known as vertical integration gave Carnegie a huge advantage because it reduced his cost to make steel. In 1892Carnegie launched the Carnegie Steel Company.
Due to the Bessemer Process & vertical integration, Carnegie was able to lower his price so much that his competition could not compete, so they either went out of business or had to sell to him. Carnegie's steel empire grew as he took over the J. Edgar Thomson Steel Works, Pittsburgh Bessemer Steel Works, the Union Iron Mills, the Hartman Steel Works, the Frick Coke Company, and the Scotia ore mines.
Andrew Carnegie spent his last years donating much of the money he made; as a result he was considered a great philanthropist. Carnegie wrote The Gospel of Wealth, in which he stated his belief that the rich should use their wealth to help enrich society. He owned Carnegie Hall in New York City and donated money for the building of libraries. Carnegie died in Lenox, Massachusetts, on August 11, 1919. He is buried in Sleepy Hollow Cemetery in Sleepy Hollow, New York.
John D. Rockefeller
John Davison Rockefeller, Sr. (July 8, 1839 – May 23, 1937) was an Americanindustrialist who played a prominent role in the early oil industry with the founding of Standard Oil (ExxonMobil is the largest of its descendants). Over a forty-year period, Rockefeller built Standard Oil into the largest and most profitable oil refining company in the world, and was for a time the richest man in the world.
If you are selling oil there are two costs that are important: the cost of the oil & the cost of transporting the oil. Since Rockefeller had so much oil to ship he worked out a deal with the railroads. He would pay full price at first but then the railroads would give him back half of his money, this was called a rebate. As a result of this lower shipping cost Rockefeller was able to drop his price to the point where his competition either had to sell to him or go out of business. If his competition would not sell to him then he would threaten them and their customers until they sold to him.
Standard Oil gradually gained almost complete control of oil production in America. In 1882 Rockefeller took control of his competition and formed the Standard Oil Trust. The firm was attacked by journalists and politicians throughout its existence.
In 1904The History of the Standard Oil Company, by Ida Tarbell was published. The book described all of the wrong doings committed by Rockefeller & Standard Oil. In 1890 the Sherman Antitrust Act was passed, this banned the formation of trusts and monopolies. Finally in 1911, the Supreme Court of the United States held that Standard Oil was involved in illegal monopoly practices and ordered it to be broken up into 34 new companies.
As his wealth grew, so did his giving, primarily to educational and public health causes, but also for basic science and the arts. In 1901, he founded the Rockefeller Institute for Medical Research in New York City. Rockefeller gave $80 million to the University of Chicago, turning a small Baptist College into a world-class institution by 1900.
Rockefeller had a long and controversial career in industry followed by a long career in philanthropy (donating money). He died on May 23, 1937; 26 months shy of this 100th birthday and was buried in Lake View Cemetery in Cleveland.
J. P. Morgan
John Pierpont Morgan I (April 17, 1837 – March 31, 1913) was themost powerful and prominent banker of the late 1800’s.He believed that his banks the House of Morgan, had helped to transform America into the world's most powerful nation; and privately, secretly, he gave money to the urban poor.
Corporations would come to him to borrow money. Morgan would make his money by these corporations repaying their loans plus interest or if the corporation could not pay the loan back then he would take over the corporation. He used his banking profits to buy his way into other industries. Morgan would also buy stock in struggling corporations for a very cheap price and then rebuild the company and run it.
After the Civil War, Morgan began buying up railroad companies and steel companies, including Carnegie Steel. He then consolidated or combined all of his individual companies into one giant corporation called the United States Steel Company. This was the first American run business to be worth more than $1 billion. Morgan took over other people's businesses and hated competition.
Morgan was a notable collector of books, pictures, and, other art objects, many loaned or given to the Metropolitan Museum of Art (of which he was president). Morgan was also a benefactor of the American Museum of Natural History, the Metropolitan Museum of Art, and Harvard University (especially its medical school).
Morgan died in 1913, while visiting Italy. His remains were interned in the CedarHillCemetery in his birthplace of Hartford.When Morgan died he had as estate of $80 million, that's $1.2 billion today, as compared to Rockefeller's worth of nearly a billion, that's $l90 billion today.
Cornelius Vanderbilt
Shipping and Railroad Baron Cornelius Vanderbilt (1794-1877) was a self-made multi-millionaire who became one of the wealthiest Americans of the 19th century.In the 1860s, Vanderbilt shifted his focus from shipping goods on steamships to the railroad industry, which was entering a period of great expansion. He bought up so much stock in the New York and Harlem Railroad that by 1863 he owned the line. He later acquired the Hudson River Railroad, theNew York Central Railroadand the Canada Southern Railroad. When he added the Lake Shore and Michigan Southern Railroad in 1873, Vanderbilt was able to offer the first rail service from New York City to Chicago.He consolidated all of these smaller railroads and formed the New York Central and Hudson River Railroad, one of the first giant corporations in United States history.
According to T.J. Styles, author of “The First Tycoon: The Epic Life of Cornelius Vanderbilt”: “This was a major transformation of the railroad network, which previously had been split into numerous short railroads because the different railroad lines had different gauges (width of tracks). The standard gauge (4 feet 8.5 inches wide) allowed him to connect his tracks and create a railroad network. The creation of a coherent network spanning several states lowered costs, increased efficiency, and sped up travel and shipment times.” He also increased his profits by giving his biggest customers rebates which helped him and his big customers but hurt farmers because the shipping prices they paid increased. Railroad barons also created pools to drive out competition. These were secret agreements between the biggest companies. They would divide up business in the area, split the profits and charge the same price. This would drive out the competition because they would start off by charging a low price until the competition was gone and then they would raise their price
During the last years of his life, Vanderbilt ordered the construction of Grand Central Depot (the forerunner ofGrand Central Terminal) in New York City, a project that gave jobs to thousands who had become unemployed during the Panic of 1873. Although never interested in philanthropy while acquiring the bulk of his huge fortune, later in his life he did give $1 million to Central University inNashville, Tennessee. (laterVanderbilt University).
Captains of Industry
J.P. Morgan / Andrew CarnegieWhat industry he was in?
Banking/Investment
What was the name of his bank(s)?
House of Morgan
What was the name of his company?
U.S. Steel Company
What was the significance of his company?
The 1st American owned company to be worth 1 billion dollars
Consolidation – to combine
How did he eliminate competition & make his money?
Morgan would make his money by these corporations repaying their loans plus interest or if the corporation could not pay the loan back then he would take over the corporation. He used his banking profits to buy his way into other industries. Morgan would also buy stock in struggling corporations for a very cheap price and then rebuild the company and run it.
What positive contributions did he make to society?
Morgan was also a benefactor of the American Museum of Natural History, the Metropolitan Museum of Art, Groton School, Harvard University (especially its medical school), the Lying-in Hospital of the City of New York and the New York trade schools. / What industry he was in? Steel
What was the name of his company? Carnegie Steel
Bessemer Process – A cheap way of making strong steel
Vertical Integration – To control all the steps in producing a product. He controlled all phases of steel production, from the mining to the making to the transportation.
Philanthropist – A person who donates money
What was the title of his book? Gospel of Wealth
How did he eliminate competition & make his money?
By using the Bessemer Process & vertical integration Carnegie was able to lower his costs which allowed him to then lower his price. His competition could not compete so they either had to sell to Carnegie or go out of business.
What positive contributions did he make to society?
He gave $2 million in 1901 to start the Carnegie Institute of Technology (CIT) at Pittsburgh, and the same amount in 1902 to found the Carnegie Institution at Washington, D.C. CIT is now part of Carnegie Mellon University. He owned Carnegie Hall in New York City and donated money for the building of libraries.
John D. Rockefeller / Cornelius Vanderbilt
What industry he was in? Oil
What was the name of his company?
Standard Oil Trust
Rebate – When you buy something for full price & then the company refunds part of your money.
The History of Standard Oil – Written by Ida Tarbell about all of the illegal things Rockefeller did
Sherman Anti Trust Act – Outlawed trusts & monopolies
How did he eliminate competition & make his money?
As a result of this lower shipping cost (rebates) Rockefeller was able to drop his price to the point where his competition either had to sell to him or go out of business. If his competition would not sell to him then he would threaten them and their customers until they sold to him.
What positive contributions did he make to society?
He founded the Rockefeller Institute for Medical Research in New York City. Rockefeller gave $80 million to the University of Chicago, turning a small BaptistCollege into a world-class institution by 1900. / What industries was he involved in?Railroads
What railroad companies did he acquire?
New York and Harlem Railroad
Hudson River Railroad
New York Central Railroad
Canada Southern Railroad.
Lake Shore and Michigan Southern Railroad
He consolidated all of the smaller companies and formed the New York Central and Hudson River Railroad
Define the word gauge - The width of tracks or the space in between the tracks
Define the term railroad network.
It is a series of connected railroad lines or tracks.
How did a standard gauge allow Vanderbilt to create a network of railroads?
The standard gauge (4 feet 8.5 inches wide) allowed him to connect his tracks and create a railroad network.
After the consolidation and the creation of a railroad network what two cities were connected?
New York City and Chicago
Explain how pools helped him drive out competition.
These were secret agreements between the biggest companies. They would divide up business in the area, split the profits and charge the same price. This would drive out the competition because they would start off by charging a low price until the competition was gone and then they would raise their price
What positive contributions did he make to society?
he gave $1 million to Central University inNashville, Tennessee (Vanderbilt University)
Vanderbilt ordered the construction of Grand Central Depot, this created jobs.
Carnegie Review
Rockefeller Review
JP Morgan Review
Vanderbilt Review
Captains of Industry and Corporation Review
1)How does a private business become a corporation? They sell stock
2)Ownership in a corporation is called? Stock
3)What are the two ways a stock holder can make money?
They can receive a dividend
They buy the stock for a low price and re sell it for a higher price once the stock price increases
4)What happens to the stockholders money if the company goes out of business?
They lose it and never get it back
5)Does a corporation have to pay dividends? No
6)When one board of directors controls the industry? Trust
7)When there is only owner and one company in the industry? Monopoly
8)Who does the free enterprise system benefit, consumers or owners? Consumers
9)Who do trusts and monopolies benefit, consumers or owners? Owners
10)Which captain of industry was involved in the steel industry? Name of the company?
Andrew Carnegie and Carnegie Steel
11)Which captain of industry was involved in the banking industry? Name of the company?
JP Morgan
Bank: House of Morgan
Company: US Steel
12)Which captain of industry was involved in the oil industry? Name of the company?
Rockefeller and Standard Oil