How steel tycoon Andrew Carnegie redefined wealth — by giving it away

This Q&A is part of America: 250 Years Bold, a CNBC multiplatform series highlighting the leaders, institutions and ideas that have shaped the United States over the past 250 years.

Dame Louise Richardson, president of the Carnegie Corporation of New York, leads one of the nation's most influential philanthropic institutions. It has awarded more than $16.5 billion in grants since its founding in 1911. In this conversation, Richardson discusses Andrew Carnegie's rise from immigrant to industrialist, his belief that wealth carries responsibility, and how his legacy continues to influence education, democracy, and opportunity in America today.

Richardson: Andrew Carnegie, in his day, was the richest man in the world. He was a spectacularly successful industrialist, but he was also the godfather of modern philanthropy. He pioneered scientific philanthropy. He pioneered philanthropy based on on evidence, and not to mention generosity. He was determined to give away his entire wealth for the greater good of the society from which he had benefited. He came from very humble beginnings in Scotland. His entire family lived in a single room upstairs while his father worked on the cotton loom downstairs. They were fairly destitute and had to emigrate. So they emigrated to Pittsburgh, where, at the age of 12, he became a bobbin boy in a cotton factory.

Richardson: He built the largest steel company in the world. In fact, in the 1890s it was producing more steel than all of Britain, Carnegie Steel in Pittsburgh, and he was successful because he was innovative. He was always looking for talent. He was very aware that he wasn't educated, so wanted to surround himself by people who were more highly educated than he was. So, he brought in talent. He would bring in chemists. For example, he hired the best chemist [who devised] the optimum mix of chemicals to produce steel. He was very open to innovation like the Bessemer Process [a revolutionary method of making steel by blowing air through molten iron to remove impurities, dramatically lowering costs and powering the rapid industrial expansion] or other newfangled ways to make steel more cheaply and more durable. He also pioneered the idea of vertical integration, that is to say, owning the entire supply chain, from the raw materials to the distribution of the of the finished product. So, he was innovative, he was creative, and he was very focused on costs. He used to say the mantra in his factory was take care of the costs and the profits will take care of themselves. So, he was a hard driving, hard charging businessman, but very open to innovation, very willing to take risks, and very clever about how he did it.

Richardson: Andrew Carnegie wrote quite a lot, and he wrote a book called "The Gospel of Wealth," which spelled out his views on philanthropy. The most famous line from that book is "the man who dies rich dies disgraced." He believed that it was the responsibility of people who acquired wealth to distribute it for the greater good. He wanted every aspiring person to have access to a free public library. So, he set about building free public libraries, and in the course of his life, he funded 2,500 of them worldwide. He wanted every young person, or every person who wanted to educate themselves, to have access to a library.

Richardson: Today, Carnegie Corporation of New York is focused on education, advancing democracy and advancing peace. These were the issues that mattered most to Andrew Carnegie, and these are the issues that matter most to us today. We seek to advance peace by supporting conflict resolution, by supporting academic work on the nature of peace by supporting knowledge about adversarial countries, so that Americans know more about countries with which we have difficult relations. We believe that education is a way of mitigating the impact of having adversarial relations. We're also deeply committed to education. Most of our work today is on K-12 education, ensuring that young people emerge with the strongest possible public education that will get them into productive jobs or good universities. We are also believe in democracy. Democracy is the core value of this society, and it has been under strain at the moment, so we are investing very much in efforts to mitigate the polarization which we feel is undermining our democracy today.

Richardson: In thinking about the next 250 years, the great advantage of philanthropy is, unlike politicians, we don't have a short time horizon. We can invest in something now, in the expectation or in the aspiration that it would pay off decades from now. So, for example, we're investing in lots of academic research. It would be years before this research is finalized, years again before the recommendations are implemented, but we can afford to take a long-term perspective. So, philanthropy, I think, can also help take the rougher edges of society by supporting libraries, by supporting music, by supporting parks, by supporting things that may not make economic sense, but help culturally to build a society and knit a community together, and the benefits of that may be generations away.