Rathenau studied mechanical engineering at the Polytechnic Institute in Hannover and the Technical University of Zurich. Rathenau worked briefly in a locomotive factory August Borsig in Berlin where he deepened his knowledge in various workshops and companies.
He returned to Berlin in 1865, where he acquired together with a former school friend, a small machine factory. Part of the start-up capital came from the dowry of Mathilde Nachman, the daughter of a wealthy Frankfurt banker, which in 1866 he married. He continuously succeeded establishing the production of portable unit steam engines. The company was converted into a corporation and Rathenau opposed such plans. In 1873, crisis came as a result which resulted in liquidation and Rathenau was eliminated.
There followed a nearly ten-year period of searching. Rathenau visited the World Exhibition in Vienna in 1873, Philadelphia in 1876 and in Paris in 1878. Especially on the trip to America he was impressed by the wealth of technical innovations and the efficient working methods. His efforts to build a telephone network speech in Berlin failed due to the monopoly of the imperial post. Even his attempts to win Werner von Siemens for the plan of an electric street lighting, ended with no interest.
As Rathenau in 1881 looked at the International Electricity Exhibition in Paris Edison's invention of the electric light bulb, he recognized the future prospects of electricity as an energy source for lighting fixtures and machines. After lengthy negotiations, Rathenau in 1882 acquired the rights for the commercial exploitation of the patents of Edison in Germany. Due to the discretion of the financing banks, there was at first only the establishment of a Study Group, until 1883 when the German Edison Society of Applied Electricity was founded as a limited company under the direction of Rathenau. This was done without prior agreement with Werner von Siemens, a contract provided for a deferred interest and limited cooperation.
1887 succeeded Rathenau, to break away from the American Edison Company and to increase the capital to 12 million marks. The German Bank and Siemens rose as a shareholder in the now General Electric Company (AEG) firmierende companies. Rathenau's expansive corporate policy initiated the rise of AEG, which almost surpassed Siemens century as the leading electrical company. The small study company became an international company with around 3000 workers and employees of the early 1890s.
More and more, there was no cooperation between Rathenau of AEG and Siemen. In 1888 negotiations began on a resolution of the Patent Cooperation Treaty. Early 1890s, the conflict expanded into a price war in all areas before 1894 when an amicable unbundling of contractual relationships were reached. A mixture of cooperation and competition remained in the aftermath for example in the field of wireless communications, after the Telefunken company was founded as a joint venture at the request of Kaiser Wilhelm II.
Behind the dispute was the clash of two contrasting types of entrepreneurs formed by corporate cultures. Werner von Siemens was acting on the basis of a family business inventor and entrepreneur who proceeded cautiously and with his own technical know-how in new markets. Rathenau, however, is often referred to as the first "Manager entrepreneur," the risk-takers boarding specialized from the beginning on the basis of in patents with aggressive marketing strategies in evolving markets. Rathenau represented a new and "modern" type of entrepreneur. Even as the electric industry was around the turn of the century in a crisis, he succeeded and AEG strengthened through targeted merger, expanding to almost 70,000 employees.
In 1912 Rathenau withdrew because of illness and was represented by his son Walther Rathenau, who had come along with his late brother Erich Rathenau in 1903 to the turn of the century in the AEG- Directorate. After the death his son Walther Rathenau in 1915 took over as chairman of AEG.
Rathenau died at the age of 76 years at the consequences (including leg amputation) of his diabetes mellitus on 20 June 1915 in Berlin.