Andrew Carnegie, reinvesting his money in railroad related industries (iron, bridges, rails), has been able to slowly earn his first big capital, which will be the basis for his later success.

The Scottish-born immigrant, eighteen in 1853, had been employed by Thomas A. Scott of the Pennsylvania Railroad Company as a secretary/telegraph operator at a starting salary of $4.00 per week.

Soon beginning a rapid advancement through the company, he eventually becomes the superintendent of the Pittsburgh Division in 1859.

Scott had also helped him with his first investments.

In 1855, he had been able to invest $500 in a successful firm called Adams Express.

He later invested money in sleeping cars for the Pennsylvania Railroad Company and bought part of the company that made the wagons, which again had turned out to be a very profitable investment.

Andrew Carnegie's employment by the Pennsylvania Railroad Company will prove vital to his later success.

The railroads are the first big businesses in America, and the Pennsylvania is one of the largest of them all.

Starting in 1853, he had worked as a secretary/telegraph operator at a salary of $4.00 per week under Thomas A. Scott.

At age eighteen, the youth had begun a rapid advancement through the company, becoming the superintendent of the Pittsburgh Division.

Carnegie had learned much about management and cost control during these years, and from Scott in particular.

Scott had also helped him with his first investments.

Many of these had been part of the corruption indulged in by Scott and the Pennsylvania's president, John Edgar Thomson, which consisted of inside trading in companies that the railroad did business with, or payoffs made by contracting parties "as part of a quid pro quo", as biographer David Nasaw writes. (Nasaw, David. (2005). Andrew Carnegie The Penguin Press, New York; pp.59–60).

In 1855, Scott had made it possible for Carnegie to invest $500 in the Adams Express, which had contracted with the Pennsylvania to carry its messengers.

The money had been secured by the act of his mother placing a $500 mortgage on the family's $700 home, but the opportunity was only available because of Carnegie's close relationship with Scott.

A few years later, he had received a few shares in T.T. Woodruff's sleeping car company, as a reward for holding shares that Woodruff had given to Scott and Thomson, as a payoff.

Reinvesting his returns in such inside investments in railroad-related industries: (iron, bridges, and rails), Carnegie has slowly accumulated capital, the basis for his later success.

Throughout his later career, he will make use of his close connection to Thomson and Scott as he establishes businesses that supply rails and bridges to the railroad, offering the two men a stake in his enterprises.

Before the Civil War, Carnegie had arranged a merger between Woodruff's company and that of George M. Pullman, the inventor of a sleeping car for first class travel that facilitated business travel at distances over five hundred miles (eight hundred kilometers).

The investment had proved a great success and a source of profit for Woodruff and Carnegie.

The young Carnegie had continued to work for the Pennsylvania's Tom Scott, and introduced several improvements in the service.

In spring 1861, Carnegie had been appointed by Scott, who was now Assistant Secretary of War in charge of military transportation, as Superintendent of the Military Railways and the Union Government's telegraph lines in the East.

Carnegie had helped open the rail lines into Washington D.C. that the rebels had cut; he had ridden the locomotive pulling the first brigade of Union troops to reach Washington D.C.

Following the defeat of Union forces at Bull Run, he had personally supervised the transportation of the defeated forces.

Under his organization, the telegraph service had rendered efficient service to the Union cause and significantly assisted in the eventual victory.

Carnegie will later joke that he was "the first casualty of the war" when he gained a scar on his cheek from freeing a trapped telegraph wire.

Defeat of the Confederacy requires vast supplies of munitions, as well as railroads (and telegraph lines) to deliver the goods.

The war demonstrates how integral the industries are to American success.

Andrew Carnegie had invested forty thousand dollars in Story Farm on Oil Creek in Venango County, Pennsylvania, in 1864.

In one year, the farm has yielded over one million dollars in cash dividends, and petroleum from oil wells on the property has sold profitably.

The demand for iron products, such as armor for gunboats, cannon, and shells, as well as a hundred other industrial products, have made Pittsburgh a center of wartime production.

Carnegie has worked with others in establishing a steel rolling mill and steel production and control of industry becomes the source of his fortune.

Carnegie had had some investments in the iron industry before the war.

After the war, Carnegie leaves the railroads to devote all his energies to the ironworks trade.

Carnegie works to develop several iron works, eventually forming The Keystone Bridge Works and the Union Ironworks, in Pittsburgh.

Although he had left the Pennsylvania Railroad Company, he remains closely connected to its management, namely Thomas A. Scott and J. Edgar Thomson.

He uses his connection to the two men to acquire contracts for his Keystone Bridge Company and the rails produced by his ironworks.

He also gives stock to Scott and Thomson in his businesses, and the Pennsylvania is his best customer.

When he builds his first steel plant, he will make a point of naming it after Thomson.

As well as having good business sense, Carnegie possesses charm and literary knowledge.

He is invited to many important social functions—functions that Carnegie exploits to his own advantage.

Carnegie believes in using his fortune for others and doing more than making money.

He writes: I propose to take an income no greater than $50,000 per annum! Beyond this I need ever earn, make no effort to increase my fortune, but spend the surplus each year for benevolent purposes! Let us cast aside business forever, except for others. Let us settle in Oxford and I shall get a thorough education, making the acquaintance of literary men. I figure that this will take three years active work. I shall pay especial attention to speaking in public. We can settle in London and I can purchase a controlling interest in some newspaper or live review and give the general management of it attention, taking part in public matters, especially those connected with education and improvement of the poorer classes. Man must have no idol and the amassing of wealth is one of the worst species of idolatry! No idol is more debasing than the worship of money! Whatever I engage in I must push inordinately; therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery. I will resign business at thirty-five, but during these ensuing two years I wish to spend the afternoons in receiving instruction and in reading systematically!

Standard Oil absorbs twenty-two of its twenty-six Cleveland competitors in less than four months in 1872, in what will later be known as "The Cleveland Conquest" or "The Cleveland Massacre".

John D. Rockefeller had in January 1870 formed Standard Oil of Ohio, which had rapidly become the most profitable refiner in Ohio and has grown to become one of the largest shippers of oil and kerosene in the country.

The railroads are fighting fiercely for traffic and, in an attempt to create a cartel to control freight rates, had formed the South Improvement Company, a Pennsylvania corporation, in the fall of 1871, in collusion with Standard and other oil men outside the main oil centers.

The cartel receives preferential treatment as a high-volume shipper, which includes not just steep rebates of up to fifty percent for their product, but also rebates for the shipment of competing products.

Founded by Thomas A. Scott, president of the Union Pacific Railroad in 1871-1872, the South Improvement Company had issued two thousand shares of stock, of which nine hundred are controlled by Rockefeller and his partners.

Rockefeller had then started negotiations to collude with the three major railroads running through Cleveland: the Pennsylvania Railroad, the Erie, and the New York Central.

The result of these secret negotiations were as follows: (1) The official rate per barrel from Cleveland to New York will be $2.56, but South Improvement will receive a $1.06 rebate; (2) The railroads will also pay South Improvement $1.06 per barrel of oil shipped that is not produced by South; (3) The railroads will also give reports of the shipping destinations, costs, and dates of all of South's competitors; (4) The commerce will be divided evenly among the railroads, with a double share going to Pennsylvania Railroad; and (5) South will provide tank cars and loading facilities.

The secret concessions would have helped lessen the "vicious" competition among the railroad lines by giving a steady, standardized flow of commerce, but word leaks out of the South Improvement Scheme, and the proposed one hundred percent increase in rail shipping rates inflames the independent producers and many smaller refineries.

Following a summit and vocal protest by the independent oil producers and refiners led by Pratt and Rogers of the Charles Pratt and Company refining interests of Brooklyn, New York, which comes close to physical warfare, including boycotts and vandalism, in western Pennsylvania in March 1872 (and comes to be known as the "Oil War"), the railroads soon agree to back down.

Pennsylvania revokes the cartel’s charter and equal rates are restored for the time being.

Although Rockefeller will become the target of many who decry Standard Oil's ruthlessness in subsequent years, the South Improvement rebate scheme had been Flagler's idea.

Undeterred, though vilified for the first time by the press, Rockefeller continues with his self-reinforcing cycle of buying competing refiners, improving the efficiency of his operations, pressing for discounts on oil shipments, undercutting his competition, making secret deals, raising investment pools, and buying rivals out.

The U.S. Congress had appointed an Electoral Commission (five Senators, five Representatives, and five justices of the U. S. Supreme Court) on January 29, 1877, after months of controversy, which, by straight party vote (eight to seven), awards the disputed electoral votes to Republican candidate Hayes, thus making him President.

The Republican victory in the Electoral Commission is due to promises made to Southern Democrats that the remaining federal troops will be withdrawn from the South, Southern patronage will be shared with Democrats, and appropriations will be made for Southern economic improvements, and at least one Southerner will be appointed to the cabinet.

A series of sectional bargains known collectively as the Compromise of 1877, brokered in part by Thomas Alexander Scott, president of the Pennsylvania Railroad, ensures Hayes’s inauguration.

The compromise essentially states that Southern Democrats will acknowledge Hayes as president, but only on the understanding that Republicans will meet certain demands.

The following elements are generally said to be the points of the compromise:

1) The removal of all federal troops from the former Confederate States. (Troops remain in only Louisiana, South Carolina, and Florida, but the Compromise finalizes the process.)

2) The appointment of at least one Southern Democrat to Hayes's cabinet. (David M. Key of Tennessee becomes Postmaster General.)

3) The construction of another transcontinental railroad using the Texas and Pacific in the South (this had been part of the "Scott Plan," proposed by Thomas A. Scott, which had initiated the process that led to the final compromise).

4) Legislation to help industrialize the South and get them back on their feet after the terrible loss during the Civil War.

In exchange, Democrats will:
• Peacefully accept Hayes's presidency.
• Respect blacks' rights.

Democrats complain loudly that Tilden had been cheated.

There is talk of forming armed units that will march on Washington.

President Grant beefs up military security in response.

No one marches on Washington, and Hayes is peacefully inaugurated on March 2; points 1 and 2 do take effect.

As regards the first and most important point, Hayes had already announced his support for the restoration of "home rule", which involves troop removal, before the election.

It is also not unusual, nor unexpected, for a president, especially one so narrowly elected, to select a cabinet member favored by the other party.

As for points 3 and  4, if indeed there is any such firm agreement, they are never acted on.

In any case, whether by an informal deal or simply reassurances already in line with Hayes's announced plans, talks with Southern Democrats satisfy the worries of many and so prevent a Congressional filibuster that had threatened to extend resolution of the election dispute beyond Inauguration Day 1877.

Woodward (1951) argues for an economic interpretation, whereby railroad interest meeting secretly at the Wormley Hotel in Washington had forged a compromise with aid to Southern railroads as the sweetener. (Woodward, C. Vann (1951). Reunion and Reaction: The Compromise of 1877 and the End of Reconstruction. Oxford University Press.)

However, no serious effort will be made to fund a railroad or provide other federal aid.

An opposing interest group representing the Southern Pacific will successfully thwart Scott's Texas and Pacific scheme and ultimately run its own line to New Orleans.

Hayes’s inauguration marks, for practical purposes, the restoration of “home rule” for the South—i.e., that the North will no longer interfere in Southern elections to protect the blacks and that the Southern whites will again take control of their state governments.

A bitter antagonism between workers and the leaders of industry had developed in the wake of the Panic of 1873.

By 1877, ten per cent wage cuts, distrust of capitalists and poor working conditions lead to a number of railroad strikes that prevents the trains from moving.

The Great Railroad Strike of 1877 starts on July 14 in Martinsburg, West Virginia, in response to the cutting of wages for the second time in a year by the Baltimore & Ohio Railroad (B&O).

Striking workers will not allow any of the stock to roll until this second wage cut is revoked.

The governor sends in state militia units to restore train service, but the soldiers refuse to use force against the strikers and the governor calls for federal troops.

The railroad strike meanwhile spreads to Cumberland, Maryland, stopping freight and passenger traffic.

When Governor John Carroll of Maryland directs the 5th and 6th Regiments of the National Guard to put down the strike, ...

...the militia attacks and kills citizens from Baltimore, which results in the strikers and onlookers to retaliate, attacking the troops in turn as they march from their armories towards B&O's Camden Station for the train to Cumberland, causing violent street battles between the striking workers and the Maryland militia.

When the outnumbered troops of the 6th Regiment fire on an attacking crowd, they kill ten and wound twenty-five.

The rioters injures several members of the militia, damage engines and train cars, and burn portions of the train station.

On July 21–22, the President sends federal troops and Marines to Baltimore to restore order.

Pittsburgh, Pennsylvania becomes the site of the worst violence.

Thomas Alexander Scott of the Pennsylvania Railroad, often considered one of the first robber barons, suggests that the strikers should be given "a rifle diet for a few days and see how they like that kind of bread."

However, local law enforcement officers refuse to fire on the strikers.

Nonetheless, his request comes to pass on July 21, when militiamen bayonet and fire on rock-throwing strikers, killing twenty people and wounding twenty-nine others.

Rather than quell the uprising however, this action merely infuriates the strikers, who then force the militiamen to take refuge in a railroad roundhouse, and then set fires that raze thirty-nine buildings and destroy one hundred and four locomotives and twelve hundred and forty-five freight and passenger cars.

On July 22, the militiamen mount an assault on the strikers, shooting their way out of the roundhouse and killing twenty more people on their way out of the city.