The ‘Gilded Age’ is the post-Civil War time period in United States history from approximately the 1870s to the very early 1900s. Among other things, the United States saw unrivaled exponential economic expansion and wealth creation. While the period also saw poverty and political corruption, the period saw significant real wage growth across the population for both skilled and unskilled labor. Railroads, oil, factories, finance, manufacturing, mining, personal transportation, electricity, and many other industries experienced massive expansion and technological innovation. It’s been said that the pace of development and innovation over this time period has yet to be matched in history. The wealth creation was staggering and led to materialistic excess by the rich in comparison to the poverty of the poor. Yet, it was a period of disruption and transition from the old to the modern world that eventually benefited society overall, creating whole new industries, technologies, and opportunities.
This period was led and defined by the ‘Robber Barons’ – the industrialists and financiers who amassed massive wealth and fostered great innovation and technological advancement. Among the most famous of these were people like Andrew Carnegie, John D. Rockefeller, Cornelius Vanderbilt, Jay Gould, J.P. Morgan, Henry Clay Frick, John Jacob Astor, Henry Flagler, E.H. Harriman, and Henry Ford (although a bit later) to name a few. These titans of industry and capitalism are legends of American business and history. For all their faults (of which they had many), they embody the essence of the American Dream, that no matter your starting station in life – hard work, persistence, determination, and applied intelligence can bring wealth and prosperity.
Although the term ‘robber baron’ has historically carried a negative connotation due to perceived (and actual) exploitation and monopolistic business practices, there is no denying the incredible impact they had on the way the world conducts business. Their contribution to the progress and economic explosion of the United States and the world is likewise undeniable. Studying their business methods and innovations provides valuable insights and actionable practices that modern businesses and entrepreneurs can and do implement today. Here are several ways these people revolutionized business, all of which are still applicable today.
Focus on Costs
Andrew Carnegie famously said, “Watch costs, and the profits take care of themselves.” By ruthlessly focusing on lowering the costs of doing business, Carnegie was able to produce steel at lower prices than his competition, forcing them out of business or forcing them to sell their operations to Carnegie. Eliminating unnecessary costs and expenses allows a business to be more flexible and better able to react to an evolving business climates.
Vertical Integration
Vertical integration is the business strategy in which a company controls multiple stages of production, thus exercising more control over its supply chain. This strategy reduces costs, increases profit margins, increases production efficiency, minimizes ‘red tape’ and middlemen, and leads to faster production and distribution. Andrew Carnegie is often credited with pioneering the vertical integration method in his steel business by controlling the mining operations, steel production, and distribution of the finished product. John D. Rockefeller also used vertical integration extensively with his Standard Oil business by taking control of oil production and refineries, transportation, refining, and distribution.
Embracing New Technology and Processes
The most successful industrialists of the Gilded Age were flexible in their production methods and quick to embrace new technology to be more competitive and efficient. There are numerous examples of this but perhaps the best is Andrew Carnegie’s embrace of the Bessemer process, which turned steel production from a laborious and expensive process to one that was less labor intensive, cheaper, and more scalable. Likewise, Henry Ford’s development of the assembly line itself was born out of his own experience as a young man working on an assembly line. Henry Ford’s use of the assembly line revolutionized manufacturing by exponentially increasing production speed and decreasing cost. It also reduced errors and increased consistency in product quality. The assembly line is still used in manufacturing around the world today and it is one of the greatest productivity improvements in history. Instead of just accepting the status quo, these men sought to make the process more efficient.
Better Wages
Despite a reputation for growing wealth inequality and persistent poverty during this time period, wages for the working class actually increased significantly. This was true for skilled and unskilled labor alike. Henry Ford famously doubled the wages of his workers (from $2.50 to $5 a day) in order to reduce turnover and increase worker morale and productivity. The increased wages provided the working class with more disposable income, fueling further economic growth through increased demand.
Philanthropy
The most unexpected lesson may be what the barons did with their fortunes. Andrew Carnegie gave away roughly 90 percent of his wealth, endowed more than 2,500 libraries, and argued in his 1889 essay ‘The Gospel of Wealth’ that “the man who dies thus rich dies disgraced.” John D. Rockefeller founded the University of Chicago and the Rockefeller Foundation, giving away over half a billion dollars in his lifetime. Whatever one thinks of how the money was made, the barons grasped something enduring: a fortune hoarded is merely money, but a fortune deployed becomes a legacy.
In addition to these innovations, it’s important to note that the Gilded Age was a period unburdened by significant government regulation. While some regulation was necessary to protect consumers and the environment, the lack of onerous regulation allowed businesses to innovate and grow rapidly. Modern entrepreneurs can learn from this by advocating for sensible regulation that protects the public without stifling innovation and economic growth.
This article is only a high level overview. For more on these innovations, the individuals behind them, and the era in which they occurred, please see the following books. These are all great reads for anyone interested in business, history, or the American Dream.
- “Meet You in Hell – Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership That Transformed America” by Les Standiford
- “Titan: The Life of John D. Rockefeller, Sr.” by Ron Chernow
- “The First Tycoon: The Epic Life of Cornelius Vanderbilt” by T.J. Stiles
- “Andrew Carnegie” by David Nasaw
- “Dark Genius of Wall Street: The Misunderstood Life of Jay Gould, King of the Robber Barons” by Edward J. Renehan, Jr.
- “The Hour of Fate: Theodore Roosevelt, J.P. Morgan, and the Battle to Transform American Capitalism” by Susan Berfield
- “Iron Empires: Robber Barons, Railroads, and the Making of Modern America” by Michael Hiltzik
For additional information, quotes, and books on relevant famous individuals, please visit the SAGE PROFILES page on the site. Please also visit the SAGE BOOK RECOMMENDATIONS page for many other great reads sure to add to your worldly wisdom. As an Amazon Associate I earn from qualifying purchases.
