The First Tycoon: The Epic Life of Cornelius Vanderbilt (Pulitzer Prize Winner)

by T.J. Stiles

If he had been able to sell all his assets at full market value at the moment of his death, in January of that year, he would have taken one out of every twenty dollars in circulation, including cash and demand deposits.

Wow

Vanderbilt had first amassed wealth as a competitor in the steamboat business, cutting fares against established lines until he forced his rivals to pay him to go away. The practice led the New York Times, a quarter of a century before his death, to introduce a new metaphor into the American vernacular by comparing him to the medieval robber barons who took a toll from all passing traffic on the Rhine.

Rockefeller, Carnegie, Gould, Morgan—all were just beginning their careers when Vanderbilt was at his height.

“You seem to be the idol of… a crawling swarm of small souls,” Mark Twain wrote in an open letter to Vanderbilt, “who… sing of your unimportant private habits and sayings and doings, as if your millions gave them dignity”

Lol

He played a leading part in the creation of a new entity, the giant corporation, that would dominate the American economy in the decades after his death.

In 1799, the state of New York passed the Gradual Manumission Act, phasing out slavery over twenty-eight years.

Dutch law extended substantial autonomy to women, compared to British custom, and the fact was reflected in society “Strong and assertive Dutch wives were commonplace,” observe two historians of New York City. Even after the English conquest, the tradition persisted, and Dutch women conducted business in their own names.

“The desire of riches is their ruling passion,” a French observer wrote of Americans at this time, “and indeed their only passion.”

And yet, New York remained in the moment of its dawn. In 1790, it remained the second city in population in the United States, with only 33,131 to Philadelphia’s 54,388. New York nearly doubled by 1800 to 60,515, but even then it was hardly a grand affair. In 1811, one visiting Scotsman dismissed it as an “overgrown sea-port village.”

Thirty years earlier, John Adams had expressed other reservations. “With all the opulence and splendor of this city, there is very little good breeding to be found,” he had noted in his diary. “They talk very loud, very fast, and all together. If they ask you a question, before you can utter three words of your answer, they will break out upon you again, and talk away.” These habits would never really change.

In 1816, a Senate committee found that it was as expensive to move a ton of goods thirty miles overland as it was to bring the same ton across the Atlantic from Europe.

Even more important, Vanderbilt and his contemporaries understood that the steam engine (or, to put it more broadly, motorized transportation) was the most dramatic technological breakthrough since the advent of the printing press at the dawn of the Renaissance. To move on water at will, against wind, tide, and current, was to transform a fundamental fact of life; to say that it marked a revolution is to give an overused word its proper weight. A practical education in steam would be worth a few days of taking orders.

Until the Revolution, wrote historian Bernard Bailyn, Americans had assumed “that a healthy society was a hierarchical society in which it was natural for some to be rich and some poor, some honored and some obscure, some powerful and some weak.” Perhaps most important, “it was believed that superiority was unitary, that the attributes of the favored—wealth, wisdom, power—had a natural affinity to each other, and hence that political leadership would naturally rest in the hands of social leaders.”

The old order was collapsing on the aristocrats, following inexorably from the Revolution their fathers had helped lead. More and more, the scions of great families accepted their declining influence and devoted themselves to business.

“Chief Justice John Marshall’s great disquisition on the commerce clause,” writes legal scholar Leonard W. Levy, “is the most influential in our history.” In constitutional terms, it completed his great nationalist project, the establishment of federal supremacy. It struck down the New York steamboat monopoly as an affront to Congress’s exclusive jurisdiction over interstate commerce, refuting the claim that the states shared power in that area. In practical terms, it threw the high court’s weight behind the gathering momentum of competitive individualism—of laissez-faire—in American law and culture.

A century after Gibbons v. Ogden, legal historian Charles Warren hailed the decision as “the emancipation proclamation of American commerce.”

Commerce, interstate commerce in particular, was the stuff of daily life as never before. The chief justice proclaimed that, yes, the United States was a common market; no matter how the states would later eat away at the edges of his ruling, he gave voice to what most Americans now believed—that freedom of movement and trade across state lines was a basic right.

Alexis de Tocqueville later would observe that the “respect, attachment, and service” that held men together in aristocratic societies had disappeared in America; now they were bound by “money only”

WAS THERE EVER A PRESIDENT like Andrew Jackson? This lean and predatory Tennessean, with his bristling mane of gray hair, resembled nothing so much as a hungry wolf, a creature of ferocious passion and territorial instincts, whether defending his inner landscape of honor or the physical boundaries of the United States. The only chief executive to have killed a man in a duel, this former general had defeated the British at New Orleans in 1815, crushed Indian tribes, and essentially conquered Florida. His presidency saw the last conflict with Native Americans in the Old Northwest (the Black Hawk War in 1832) and the forced removal of five Indian nations on the infamous Trail of Tears. A cloud of danger hung about the age of Jackson.

Pride is often the door to humiliation.

Great line

For one thing, Vanderbilt became an ardent admirer of the young doctor. You saved my life, he would often tell him. “If I had died in Jersey in 1833,” he would add, decades later, “the world would not have known that I had lived. But I think I have been spared to accomplish a great work that will last and remain.”

The corporation was a “truly republican institution,” declared John Quincy Adams, “of which every class of the community may share in the benefit, proportionate to their means and their resources.” Jacksonians saw corporations as the grasping of rich men for special privileges; but one bank president argued that America’s “absence of large capitalists [had] been remedied by corporate associations, which aggregate the resources of many persons.”

On a daily basis, most Americans rarely interacted with corporations; they still lived in a society of farms, small businesses, and independent proprietors. Jacksonians viewed corporations in much the same way that the evangelists of the Second Great Awakening saw the Masons or popery: as a corrupt conspiracy, a mysterious encrustation on the beautiful simplicity of the true religion. As artificial beings, Gouge intoned, “corporations have neither bodies to be kicked, nor souls to be damned.”

Bodies to be kicked lol

If ever corporations were necessary, it was now, for railways were far more costly and far more complex than textile mills (almost all of which were owned by individual proprietors or partnerships).

For six weeks Vanderbilt was struggling, gasping, inert. Then there occurred something perhaps as straightforward as the response of his immune system, or the seeping of air out of the pocket outside his lung. Or perhaps the cliché applies—that he simply refused to die. There is no underestimating his force of will. Whatever the explanation, for the second time in three years he had avoided seemingly certain death. After a month and a half in bed, he found his feet again and wearily reentered the world of the living.

The Norfolk Herald was the first newspaper to give him the honorific title of “Commodore.” At the time, it was the highest rank in the United States Navy,

The steamboat trade had always been the most aggressively competitive business in America. Its fare wars, populist advertising, and highspeed racing embodied the nation’s individualistic, unregulated society. It also embodied its mechanized, unregulated violence, with its deadly boiler explosions and reckless desperation to defeat the opposition.

When Charles Dickens visited the United States in 1842, he marveled at the American “love of ‘smart’ dealing, which gilds over many a swindle and gross breach of trust.” He often pointed out a man who was getting rich “by the most infamous and odious means,” yet was “tolerated and abetted” by the public. He always asked, “In the name of wonder, then, what is his merit?” Back came the invariable reply: “Well, sir, he is a smart man.”

In the eighteenth-century culture of deference, the differentiations of rank could not have been more clear: wealth, social status, and political power had been wrapped in a bundle as tight as the leases that bound tenant farmers to manorial lords. But the destruction of that culture wiped out the rules of hierarchy, replacing them with a mad scramble for standing.

The very qualities that made Vanderbilt a formidable businessman—his ferocity, his obsession with control—left him unable to manage the murkier negotiations of love, affection, and fatherhood.

Almost everyone who traveled between New York and Boston took a Vanderbilt boat or a Vanderbilt train.50

But already forces were in motion that would upend the population of the continent, launch the nation toward civil war, and unleash an ambition in Vanderbilt greater than anyone could have imagined.

In 1848, the corporation was still emerging out of a political conflict over the best way to create commercial facilities for the public good (namely banks and transportation infrastructure—turnpikes, canals, and railroads).

Whigs had favored direct government action, from the Bank of the United States to state-owned railroads such as the Michigan Central, or else public-private partnerships, as in the Camden & Amboy Railroad. Jacksonians had wanted to limit government, fearing that “the money power” would capture it to enhance the advantages of the wealthy over their fellow citizens; like Adam Smith, they viewed corporations with a jealous eye.

New York was the primary point of departure for voyages to San Francisco. Though far up the Atlantic coast from Panama, it was the most important city in the United States, easily reached by rail or steamboat from elsewhere in the Northeast. As one historian notes, New York had a “unique position as the national city-system’s hub.” Travelers to California came from across the settled states to New York to make their departure.

ONE DAY IN THE FUTURE there would be a name for it: vertical integration. Late in the nineteenth century, John D. Rockefeller and Andrew Carnegie would emerge as leading exponents of this form of organization, in which a single owner takes control of businesses at every step of the manufacturing process, from mining raw materials to production of finished goods.

The success of Vanderbilt’s Nicaragua venture had national consequences. Simply put, he helped transform a rush for gold into the lasting establishment of American civilization on the Pacific. By steeply reducing fares and offering faster service, Vanderbilt sped up the flow of migrants to the West and gold to the East, where it had a significant impact on the economy. And he did it not only without a federal subsidy, but in competition with the subsidized line.

IF THERE WAS ONE RELIGIOUS RITE that Vanderbilt believed in, it was marriage. Weddings brought him sons-in-law—and sons-in-law made trustworthy assistants, which were hard to find in the treacherous business world at mid-century. Vanderbilt’s own sons sorely disappointed him, but his daughters gave him a steady succession of replacements in the form of their husbands. In the end, he would rely on no son-in-law, not even Daniel Allen, more than Horace F. Clark.

Vanderbilt had added up the numbers, and calculated that it would be more profitable to strand dozens, perhaps hundreds, of passengers in a tropical country, exposed to diseases for which they had no resistance, in a region chronically short of shelter and amenities, than to hold his ship. Of all the things the Commodore would be accused of in his long career, it would never be said that he had gone soft.62

In pursuing his own interests, Vanderbilt acted as he always had, both creating wealth and punishing his enemies. But, as his businesses achieved a truly national scale, those who benefited and suffered from his decisions multiplied into the hundreds of thousands, and, eventually, millions. Like the marketplace itself, Vanderbilt was a paradox—both a creator and a destroyer.

Vanderbilt’s discovery of this treachery provided the context for what is said to be one of the most famous letters in the history of American business: “Gentlemen: You have undertaken to cheat me. I won’t sue, for the law is too slow. I’ll ruin you. Yours truly, Cornelius Vanderbilt.” This terse, belligerent note is pure Vanderbilt. It is also mythology. It first appeared decades later, in Vanderbilt’s obituary in the Times, and its validity is dubious at best.

Success in this operation had been far from certain, but Vanderbilt “was a bold, fearless man,” Wardell later explained, “very much a speculator, understanding all risks and willing to take them.”49 As Vanderbilt’s notoriety as a speculator rose, so would the public’s ambivalence toward him.

Since Washington existed entirely for the seasonal gathering of Congress and a mere handful of year-round civil servants (the entire State Department staff consisted of eighteen men), it had few attributes of a true city. It lacked proper water or sewage works; parks remained undeveloped tracts, overrun by weeds; most government buildings were small, drab brick structures; even the Capitol and the Washington Monument sat unfinished. The most common business seems to have been the boardinghouse. “Music and drama were so ill-cultivated,” Nevins noted, “that a third-rate vocalist or strolling troupe created a sensation.”54 This was the town that Vanderbilt traveled to in January to press his war on Accessory Transit.

WITH ALL HIS ENEMIES CHASTISED, Vanderbilt had to decide what to do next. No matter how significant he was as a financier, temperamentally he wasn’t suited to merely play the money man. He was a builder of enterprises—more specifically, he was a competitor. He was accustomed to taking a leading role in transportation, which was by far the largest sector in the American economy; that meant he was accustomed to being a public figure, for transportation was the great meeting ground of public and private interests in the nineteenth-century republic. It is not surprising, then, that as soon as he closed up his California lines he launched an attack on the sea lanes to Europe.

For all his contradictions over the years, he remained the master competitor, the individual who did more to drive down costs and open new lines in steam navigation than any other. More than that, he had helped shape America’s striving, competitive, productive society. Waging war with his businesses, he had wrought change at the point of a sword. He was the selfish revolutionary, the millionaire radical.

Laboring for someone else had been seen as a temporary condition, until a man set up his own farm or shop; now lifetime employees began to appear on the American scene—still few in number, but significant nonetheless.

“Filibustering” had entered the American vocabulary around 1850 as a name for armed invasions of foreign territory by private American citizens—generally with the hope of annexing those lands to the United States.

Very different meaning than now

In retrospect, filibustering can seem like a curious footnote to the antebellum era, a case of quixotic eccentrics racing down one of history’s blind alleys. In reality, it was a significant element in the United States’ slide toward civil war. Militants in the South embraced the movement in hopes of enlarging the territory open to slavery; the filibusters’ focus on Cuba, for example, was due in part to the island’s proximity to Florida and the fact that large-scale slavery already existed there. Perhaps most important, filibustering reflected the explosion of freelance violence as civil society and respect for political norms disintegrated in the fight over slavery’s growth in the 1850s.

The Commodore had spent some $700,000 on its hull, and by the time he installed the plush sofas, carved rosewood, and titanic twin engines, he would pay out more than $900,000. This sum suggests that the Mercantile Agency sorely underestimated his wealth when it guessed that he was worth $5 million—for not even the risk-taking Commodore would have devoted almost 20 percent of his entire fortune to just one ship.2 But the great cost of the Vanderbilt does reveal his confidence. He constructed this ship to compete on the Atlantic; he was staking a huge sum on his ability to defeat the heavily subsidized Collins and Cunard lines. Then again, no one in the steamship business could calculate the costs, the risks, the profits as accurately as Vanderbilt.

Kruger followed him to the top deck, “and was immediately surrounded by Costa Rican officers,” he later reported, “who had been lying down flat on deck, concealed from view. Mr. Spencer then told me that he had taken all of the steamers and was in command of all the river.” Spencer declared that he had seized the boats in the name of Commodore Vanderbilt, and he demanded the surrender of the fort. Kruger balked, but the steamboat crew told him about the Costa Rican force hidden in the trees. “Mr. Spencer told me (when I hestitated) that the innocent blood of my men would fall on my head, as we would certainly be put to death by the Costa Ricans,” Kruger recalled. “I concluded to surrender.”