Coal and the iron and steel works that consumed it were, 125 years ago, the foundations of Andrew Carnegie’s fortune.(1) So, his life would seem unlikely to hold lessons for investors concerned about global warming. But it does.

Carnegie’s Causes

The Scottish immigrant had two great causes. Most recognize his name today in the US and UK for his philanthropic investments in vehicles offering opportunities for human betterment: Carnegie libraries, university scholarships, Carnegie Hall, Carnegie Mellon University, teacher pensions (TIAA-CREF), etc.

The Carnegie Endowment for International Peace is one of the legacies of the second cause: convincing the Great Powers of his day to agree to mechanisms, such as dispute arbitration, that might avoid war.

In the first, he succeeded fabulously. In the second, he failed utterly.

Peace & Anti-imperialism

War and imperialism were to the turn of the twentieth century what global warming is to the turn of the twenty-first.

Today’s frames of reference for “the peace movement” rarely extend earlier than the early 1960s “Ban the Bomb!” in the UK and the late ‘60s “Give Peace a Chance!” in the US. Few recall the causes Carnegie supported in both countries a century ago, probably because they were so spectacularly unsuccessful.

In the two decades before World War I, the Great Powers – France, Germany, Russia, and the UK – and others devoted ever greater resources to armaments and the forces to support and use them. The massive battleships called “dreadnoughts” epitomized this first great arms race.(4) Neither trench warfare nor the poison gas we instantly associate with World War I figured much in the pre-war public or military – or Carnegie’s – imaginations.

Nonetheless, the horrors of war and its effects on civil society had long troubled Carnegie. The Spanish-American War – the US’s entry into the race for overseas possessions – galvanized him. The acquisition of the Philippines in 1898 and the consequent 10-year insurrection made clear to him the corrosive effects of imperialism on our political system and national character.

Among the greats of his time, Carnegie was almost alone in recognizing the danger in the arms race. In 1909, he told an audience:

It is true that every nation regards and proclaims its own armaments as instruments of Peace only … but just as naturally every nation regards every other nation’s armaments as clearly instruments of war…. Thus each nation suspects all the others, and only a spark is needed to set fire to the mass of flammable material.(5)

Think of Al Gore on global warming and you have Andrew Carnegie on war.

The richest man in the world lived to see 1914 signal the futility of his efforts. He survived World War I by nine months. He died not long before his perennial opponents, led by US Sen. Henry Cabot Lodge (R-Mass.), scuttled American participation in the League of Nations.

Five Lessons

The lessons of Andrew Carnegie’s futile campaigns for world peace are plain enough for investors and business people anxious about the consequences of global warming. How to build a strategy based on these lessons is less clear.

First, being right is not enough. From the late 1890s until 1915, Carnegie published tens of thousands of words and gave dozens of speeches describing the dangers of the global arms race and imperialism and offering solutions to both. In the main, he was right both in his alarums and his remedies.(6)

Second, building public alliances on the key issues, even with your political enemies, is a necessity. In retrospect, Carnegie’s great opportunity came in late 1898 and early 1899. He had a real chance to defeat the treaty by which the US acquired the Philippines.

Carnegie reached out to his arch-foe on domestic issues, William Jennings Bryan, the leading pacifist and Democratic anti-imperialist of his era.(7) Carnegie’s overture came, apparently, with conditions unrelated to what should have been their common cause. Bryan balked. The treaty passed the Senate by one vote.(8)

Third, supporting leaders who only hint at commitment to the cause leads to disappointment – followed by disaster. Time and time again, Carnegie, the master of nuance in business negotiations, wishfully turned national leaders’ throw-away lines on peace into commitments. Based only on his increasingly desperate hopes, between 1901 and 1914, Carnegie successively dubbed Presidents Theodore Roosevelt, William Howard Taft, and Woodrow Wilson and Kaiser Wilhelm the “Man of Destiny” who would lead the cause of peace.

In fact, they felt no pressure from their broader constituencies to act. The lesson for global warming campaigners could not be plainer: build a popular movement and tend your coalitions!

Fourth, never underestimate the emotional power of the “national interest.” In Carnegie’s time, from the Philippines to the Balkans to Panama, emotion and patriotic fervor prevailed over reason and genuine self-interest. Today’s environmentalists confront similar challenges in their opponents’ proclamations of economic disaster should the US impose domestic carbon limits.

The Men of Destiny rejected ending the naval armaments race and they frustrated international dispute arbitration. They invoked national character, national interest or national destiny. No question, this position proved popular everywhere from the US to Russia until its cost in blood and GDP became too great. Indeed, countering national interest arguments has never been easy and only rarely succeeded.

The US decisions to boycott the Rio Summit and to reject the Kyoto Protocol rested on little more than whipped-up fears about devastating our economy by giving up sovereignty over our emissions. These decisions, too, were popular among a broad US constituency.

Fifth and finally, beware of “realism”! Perhaps one crisis a century since the Enlightenment compels actions that fall outside the deep wisdom – the realism – of politics and diplomacy. Global warming is our crisis.

Realism that serves well in normal times becomes delusional in such crises. Carnegie played by the rules of his era. He argued based on reason in elite newspapers and journals. He sought to persuade, to cajole, the responsible conservative leaders of his time. But to the Men of Destiny, realism dictated competing in the arms race – and using these arms when the spark was struck.

The early twentieth century’s naval arms race and contest for empire, Carnegie learned, required war’s opponents to think beyond common views of what was realistic and therefore reasonably achievable.

Today’s Challenge to Business

I see Andrew Carnegie as the herald of our era. He recognized the great challenge of his age and took it on. There is a nobility in his naivety.

Much depends on today’s leaders of business and institutional investors learning from Carnegie’s failures. They must mobilize constituencies in their spheres to address global warming. The UK supermarket chain Tesco’s carbon labeling effort is an excellent example of leadership.(9)

In the face of catastrophe, no longer can the business of business be just business.(10)

Endnotes

1. The facts in this article come from David Nasaw, Andrew Carnegie [2006] (New York: Penguin Books, 2007). The conclusions and surmises are mine, unless otherwise noted. Contrary to the jacket blurbs, Nasaw’s will not be the definitive life of Carnegie. He spends far too little time on Carnegie’s context and environment in business and philanthropy and far, far too much on his personal life, especially his recreations. Nonetheless, it’s a worthwhile read.

2. I use “investments” deliberately. Carnegie often conditioned his gifts on commitments from, say, municipalities to fund the services associated with the buildings he commissioned. See e.g., Nasaw, op. cit., pp. 605-06.

3. Argentina, Brazil and Chile were among those building or buying dreadnoughts.

4. Before he sold his businesses into what became US Steel, Carnegie had sold steel plating to the US Navy for its new generation of ships. He rationalized this in terms of his fiduciary obligations to his (junior) partners.

5. As quoted in Nasaw, op. cit., p. 726.

6. Carnegie appears to have focused primarily on the naval arms race as did most of his contemporaries. He certainly did not foresee the great land war. But what he did foresee was a global conflict of unimaginable scale and consequence.

7. Bryan would resign as Woodrow Wilson’s Secretary of State in protest over Wilson’s determination to enter World War I. His was one of the rare resignations on principle by a US cabinet officer.

8. Nasaw, op. cit., pp. 556-59.9.

9. See e.g., Lara Maung, “Climate Change: Tesco’s Strategy - Green Revolution in Store,” EthicalCorporation.com, July 6,2007 [http://www.ethicalcorp.com/content.asp?ContentID=5228]

10. Many have received credit for this phrase, including President Calvin Coolidge and business giant Alfred P. Sloan. Whoever created it, Ian Davis recently put it to great effect: “. . . [b]illions of dollars of shareholder value have been put at stake as the result of social issues that ultimately feed into fundamental drivers of corporate performance. In many instances, a “business of business is business” outlook has blinded companies to outcomes (or shifts in their implicit “social contract”) which often could have been anticipated.” In my opinion, war and global warming are clearly such issues. See Ian Davis, “The Biggest Contract,” Economist, May 28, 2005, pp. 69, 70. Davis is worldwide managing director of McKinsey & Company.