The Master of Capitalism: Cornelius Vanderbilt Pt. 2

Hey everyone. Welcome back. 

In 1877, the Railroad Gazette wrote about the recently deceased Cornelius Vanderbilt. Evaluating his career, the piece highlighted that his early moves were quote “distinguished by a series of bold, startling, revolutionary measures which attracted universal attention and had an effect reaching far beyond the lines and companies with which he dealt directly. The Vanderbilt era was the first great era of consolidations,” end quote. In the last few years of his life, Cornelius Vanderbilt shifted his attention from steamships to the railroads and completely remade himself and the country in the process. 

Cornelius Vanderbilt dominated every industry he entered and the railroad was no different. A man born of meager means, Vanderbilt grew to be a titan of many industries - mastering and heavily influencing the modern American economy in the process. Vanderbilt took no prisoners and did not forgive those who had the temerity to betray him - preferring instead to crush them and make them pay dearly for their mistakes. Last week, I started my journey into America’s original tycoon - so this week I am wrapping up my coverage of the Commodore and Railroad King. How did Vanderbilt get involved in the Civil War? What drew him into the railroads? And what is his legacy?

Grab your cup of coffee peeps. Let’s do this. 

When I left you last week, Cornelius Vanderbilt had successfully exacted revenge against former business partners Joseph White and the Accessory Transit Company when the company refused to honor the terms of a settlement. At the close of the decade, Vanderbilt was a millionaire and could have easily ridden off into the sunset - or off to Europe - to enjoy the spoils of his various economic wars. Alas, there was a larger war brewing for which Vanderbilt would play a role. 

As the country welcomed the 1860s, Vanderbilt sat on a level of wealth and influence never seen before in American history - and the press was starting to take notice. The Chicago Tribune described Vanderbilt as having quote “almost kingly power” unquote. In a country that took pride in freeing itself from the reigns of a tyrannical king, such a comparison must have been quite jarring for readers. Additionally, in 1859 The New York Times wrote a piece criticizing Vanderbilt, highlighting the precarity of increased concentration of wealth in one man. In an era before unions commanded any real strength or there was any federal oversight over Wall Street, Vanderbilt was a man walking alone with only his conscience as a guide post for what constituted right and wrong. 

As the country headed into Civil War, Vanderbilt sought to help the union by donating his largest steamship, the Vanderbilt. In a letter to the United States Navy Secretary Vanderbilt wrote partially quote, “I feel a great desire that the government should have the steamer the Vanderbilt, as she is acknowledged to be as fine a ship as floats the ocean, and, in consequence of her great speed and capacity, that, with a proper armament, she would be of more efficient service in keeping our coast clear of piratical vessels than any other ship,” end quote. The ship would require retrofitting to add a cannon and rifles, but otherwise Vanderbilt felt the ship was ready the best suited for protecting the coast from attack. Vanderbilt was happy to allow the Navy to set the price or, if they were so willing, donate the ship. He proposed the same offer for several other steamships. 

The offer was denied. Either because the union believed the war was going to be quick or a matter of pride, the U.S. Navy declined to accept the ships in donation and opted to charter them instead. This meant that Vanderbilt received a significant amount in fees, over $300,000. The Navy did actually buy two boats in 1861 for $90,000 each - two boats, ironically enough that Vanderbilt did not want to sell. As the war dragged on, Vanderbilt would eventually come face to face with President Abraham Lincoln in meeting with Secretary of War Edwin Stanton where they solicited the magnate’s help. Vanderbilt finally donated his steamship and was later awarded a Congressional Gold Medal. 

In 1863 at the age of 69 when others were slowing down, Cornelius Vanderbilt continued at full speed, transitioning into the final phase of his career: the railroads. Vanderbilt’s curiosity had been piqued in 1833 when he was thrown into a ditch from the primitive locomotive. Like the steamship, Vanderbilt saw the potential of the railroad and how it could remake the transportation industry and had dabbled in the industry since the 1830s. He had so much faith in the earning power that Vanderbilt did something quite daring - he put all of his resources into this single industry. Had he failed, Vanderbilt’s life may have been a cautionary tale - a warning of how not to invest. As it turned out, the Commodore would become the railroad king and become one of the most culturally and economically significant people of his lifetime. 

Although Vanderbilt built a reputation as a ruthless power broker, biographer TJ Stiles argues that when it came to the railroad, Vanderbilt sought to quote “pursue diplomacy with connecting railways, accepting war only as a last resort. Contented with his realm, he would conquer a neighbor in order to eliminate its harassment of his domain,” end quote. According to the biographer, Vanderbilt’s domination happened almost by accident - when, in 1863 Vanderbilt decided to take control of a struggling line: the New York and Harlem Rail. 

Vanderbilt took control of the company and was elected president by the board. Foregoing a salary, Vanderbilt focused on turning the beleaguered rail line into something that was profitable. The endeavor pitted Vanderbilt against New York City’s corrupt political officials, but through his ability to manipulate the markets, Vanderbilt again was able to come out on top - and, perhaps more importantly, it helped lay the foundation for what would become a railroad empire. After Harlem, Vanderbilt sought out - and took over - the Hudson River Rail, the Lake Shore and Michigan Southern Railway and the New York Central. But it was the New York Central that earned him the moniker of Railroad King. 

Vanderbilt’s quest for the New York Central Railroad in 1864 would stretch for an almost unbearable three years, leading to some fraught battles and Vanderbilt exacting his vengeance by practically isolating the city of New York during a blizzard. The move was a public relations misstep with the New York Herald editorializing quote, “railroad corporations, whether ruled by boards or held within the grasp of a single individual, should not forget that they owe some consideration to the people who grant them special and valuable privileges, and to whose patronage and support they are indebted for their success,” end quote. 

The incident prompted intervention by state legislators who mandated arbitration over any disputes. Forced to sit in front of a committee to answer questions, the elderly but still imposing Cornelius Vanderbilt testified about the incident quote “It is not according to my mode of doing things, to bring a suit against a man that I have the power in my own hands to punish” he continued “The law, as I view it, goes too slow for me when I have the remedy in my own hands” end quote. It was clear Vanderbilt cared very little about the law and felt that he had other means at his disposal to ensure those who failed to follow through on their agreements paid a hefty price. 

No sooner did his battle over the New York Central end did Vanderbilt have to contend with yet another foe - this time against his longtime business partner Daniel Drew and the formidable Jay Gould. Drew was on the board of the Erie Railroad and had recently led a bear campaign on the company’s stocks, much to the annoyance of Vanderbilt who filed a legal injunction to prevent him from doing it again. Seeing Vanderbilt’s legal action as a signal that the relationship was fraying, Jay Gould approached Vanderbilt and shared that there was a small group coalescing together to boot Drew from the board. Gould had come to ask Vanderbilt for the proxy on his 10,000 Erie shares for the vote. 

Vanderbilt was initially hesitant. He did not trust Gould and he told him as much. Gould promised the offer was sincere, even providing Vanderbilt a financial guarantee that if trusted, Drew would not be re-elected to the board. Vanderbilt agreed. Somehow Drew learned of the scheme and managed to convince the Commodore to change course and rescind his proxy. Drew was saved and when the board held their election in October, Drew remained safely seated. Everything seemed to be fine, until January 1868 when Erie stock began to fall. 

What Vanderbilt did not yet realize was that he had been double crossed. In showing Drew mercy, the Commodore actually gave his longtime business partner a chance to build an alliance with newcomers Jim Fisk and Jay Gould. Taking advantage of an incredibly flawed and under regulated system, the trio decided to short-sell the Erie stock and converted railroad bonds into new shares of stock. The board authorized $5 million in what was called convertible bonds which they then exchanged for 50,000 new shares of stock which essentially diluted or watered down the existing stock in circulation and threatened Vanderbilt’s financial position. Perhaps a victim of hubris, Vanderbilt was convinced he could outspend the plot and kept buying the stock. The situation got so out of hand that eventually a judge stepped in and issued an injunction freezing the company from issuing any more stock. 

Warrants were issued for Drew, Gould, and Fisk who absconded across the river to New Jersey - but not before taking $7 million in cash and Erie stock certificates. Beyond the reach of New York, the men continued issuing new stock certificates - and Vanderbilt kept buying them up. Yet no matter how much Vanderbilt bought, he could never gain control as the Erie board just kept printing more certificates. Vanderbilt rightfully criticized the stock issuance, arguing that the certificates were worthless and disreputable. The madness prompted the New York legislature to step in to consider whether it was, in fact, legal, to issue a bunch of unsecured stock. Jay Gould made his way to Albany with cash to help convince anyone on the fence to vote their way. 

While legislators were debating the issue upstate, Daniel Drew was trying to negotiate a deal with the Commodore. On April 19th, Drew offered to return Vanderbilt’s money in return for the shares, apparently because Drew wanted to take over Erie himself. Drew’s scheme did not last long as it was quickly discovered by Fisk, who attached Drew’s personal finances to the deal. Drew next switched to trying to settle with Vanderbilt - intentionally leaving Fisk and Gould in the dark. Vanderbilt finally agreed - on the condition that he would not sell his shares back to the Erie Railroad. The Railroad King wanted nothing to do with the railroad - even the offloading of the company’s stock. 

So, on paper, Daniel Drew paid Cornelius Vanderbilt for his 100,000 shares of Erie Railroad stock but the Erie War as it would go down in history, would be one of Vanderbilt’s roughest defeats. None of his normal tricks worked - he wasn’t able to corner the market, his efforts at exacting vengeance failed, and in the end it had cost him money. While Vanderbilt had recouped most of his financial losses, the mogul - perhaps for the first time in his career - suffered a catastrophic blow to his reputation - and what made it worse? The blow came at the hands of relative newcomers Jim Fisk and Jay Gould. 

On April 20th, the New York state legislature passed the Erie bill legalizing the issuance of diluted stock by the Erie railroad company. 

Despite fighting the Erie war, Vanderbilt was a man dedicated to his business and focused on increasing his bottom line. Thus, while battling it out with the likes of Gould, Fisk, and Drew, Vanderbilt was also reviewing how else his New York line may increase profits. This led him to a meeting with John Rockefeller. One of the other titans of industry covered in my episode a few months back, Rockefeller was just coming into his own as Vanderbilt was an established magnate. A lot of oil shipped out of New York and Vanderbilt asked to meet with Rockefeller to establish a mutually beneficial partnership. Rockefeller, a little cocky in his youth, tried to make the Railroad King come to him, but he quickly learned that Vanderbilt’s magnetism was strong. The two eventually came to an agreement and began a long, economically prosperous relationship. 

Overseeing New York’s rail service, Vanderbilt realized there was a need for a centralized station for the various lines to operate. Thus, in 1869 he commissioned construction for the Grand Central Depot on 42nd Street. Known today as Grand Central Station, the depot opened in 1871 and boasted improvements such as elevated platforms that were even with the train car to allow for easy entry and exit as well as modern comforts for those waiting for their trains including restaurants and waiting rooms. At the time of its opening, the Grand Central Depot was the largest in the world and could accommodate up to 150 train cars at once. 

Vanderbilt’s life’s work built to a critical moment and it all came together on January 27, 1870 when the New York Central & Hudson River Railroad convened its first stockholders meeting. As TJ Stiles explains, quote “the creation of the New York Central & Hudson River stands as a historical landmark, showing us where the era of big business - the Vanderbilt era - well and truly began,” end quote. The massive railroad became one of the largest corporations in American history with a valuation of $90 million, easily eclipsing even the most profitable competitors. The amount of growth was truly incredible, as just twenty years prior the most profitable company had not exceeded $10 million in value. The corporation was - in fact - massive - and counted 740 miles of physical track, 400 locomotives and in 1870 transported more than 7 million passengers. 

Vanderbilt enjoyed his massive success until January 4, 1877 when his body finally gave out at the age of 82. The immediate cause of death listed was exhaustion - understandable for a man who spent nearly his entire life dedicated to dominating industries and amassing incredible wealth. Upon his death, Cornelius Vanderbilt was worth an estimated $105 million - over $3 billion in today’s currency. I am utterly depressed to say that despite being the wealthiest man in the country at the time of his death, Vanderbilt’s estate would not even place him in Forbes’ top 50 richest Americans. Gross. 

Of the men known today as the robber barons of the Gilded Age, I think Cornelius Vanderbilt is perhaps one who both witnessed and took part in the most transformative period in American history. Entering the world during the presidency of George Washington and living through the Civil War when it was not clear whether the United States would survive, Vanderbilt saw a nation completely remade in new and fascinating ways. He was also a significant part of at least some of those changes - helping to push forward the railroad that linked the country together and as biographer TJ Stiles tells us was a true pioneer when it came to the growth of the business corporation. Vanderbilt was many things - ruthless, forceful, powerful, unforgiving. But he was also a man who had a vision - right or wrong. He helped remake the American economy and paved the way for mega millionaires that would become synonymous with the Gilded Age.  

Despite these two episodes, I still have only managed to scratch the surface of Vanderbilt’s life and career. If you are interested in the minutiae that is Cornelius Vanderbilt then I highly recommend picking up TJ Stiles biography The First Tycoon. It is comprehensive and gets into the Commodore’s personal life - something I had to mostly skip here. Before I sign off, I want to welcome Tibbs to the Patreon! Welcome! You too can support the show where for as little as $3 per month you can access some bonus material via the Patreon feed. All money goes back into the show through hosting fees and research materials - plus you get a shout out and history stickers should you so choose. Learn how you can support the show through the website at www dot civics and coffee dot com. 

Thanks, peeps. I will see you next time.