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 of 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 at Standard Oil, allowing him to eliminate or minimize competition in most markets, and ultimately leading to government use of antitrust legislation to force the breakup of Standard Oil.
Embracing New Technology. The most successful industrialists of the Gilded Age were flexible in their production methods and did not shy away from new technologies. They embraced research and development and understood that upfront cost and investment in new technologies ultimately allowed for more automation, less labor expense, more productivity, and reduced costs overall. The cost and efficiency savings allowed for further undercutting of competition with no loss of production quality, benefiting both the company and consumers.
Assembly Line. Henry Ford’s use of the assembly line revolutionized manufacturing by exponentially increasing production efficiency and speed. Instead of building one car at a time, Ford’s assembly line method assigned workers a specific task along a moving conveyor belt. They had all the tools needed at their station and the stations were placed close together. Therefore, labor became highly specialized and repeatable (if monotonous), allowing for more use of unskilled labor (easier to replace) since workers needed only limited overall knowledge of the production process. The assembly line method reduced the time it took to build a Ford automobile from 12 hours down to one hour and 33 minutes. It wasn’t long before this method expanded beyond automobiles to all areas of industrial manufacturing and production.
Better Wages. Despite a reputation for growing wealth inequality and persistent poverty during this time period, the fact is that real wages rose significantly. While upward wage pressure came in part due to the advance of labor union activity and better worker organization, the industrialists of the time also came to understand that better wages made for better worker retention, which was better for the company over the long run. Skilled workers saw the most benefit from these increases, especially those in booming sectors of the economy such as manufacturing and mining. Yet, real wages for unskilled labor still increased by an average of 1.43% per year during the Gilded Age, compared with only 0.56% per year during the Progressive Era (1900-1929) and 0.44% per year from 1990-2005. Inflation was relatively low during this period, so the increase in wages also increased purchasing power and overall standard of living, helping to facilitate the rise of the middle class in the United States.
In addition to these innovations, it’s important to note that the Gilded Age was a period unburdened by heavy government regulation, where the profit incentive was essentially unchecked. This may have led to excess in some areas and danger in others, but there’s no doubt the business environment fueled risk taking that fostered innovation the likes of which the world had never seen. Yes, there was increased inequality, but the period lifted the overall standard of living for all classes, more so than any other period in history up until that time.
This article is only a high level overview. For more on these innovations, the individuals behind them, and this fascinating period in American history, check out the following books.
- “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
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