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

by T.J. Stiles

“The most disastrous blunder of Walker,” observed the New York Herald, “was his coup d’etat against ‘the house of Vanderbilt.’” The Commodore’s role in Spencer’s mission was suspected by the press as soon as the first reports reached New York in January.

This is such a crazy story. He literally funded an army to overthrow the rogue government to keep his route through Nicaragua open.

And yet, it cannot be denied that Vanderbilt played a decisive role in Walker’s downfall. He had found the filibuster’s weak point, crafted the plan to strike it, selected the agent to carry out the operation, and paid its costs. The Central Americans likely would have won in the long run without his help—but with it, they won in the short run. “Mr. Vanderbilt… has shown the ablest generalship,” the London Times observed. “Walker’s most formidable enemy has conducted the campaign from New York.”

ON MARCH 9, 1857, the New York Tribune announced the Supreme Court’s decision in the Dred Scott case. “THE TRIUMPH OF SLAVERY COMPLETE,” declared one of its many headlines. The enslaved Scott had sued for his freedom on the grounds that he had resided in the free Wisconsin territory; Chief Justice Roger Taney ruled against him. Negroes, he wrote, “had no rights which a white man was bound to respect.” What shocked the majority of the Northern public was not the blatant racism, but the implication that free states had no power to bar slavery within their borders.

The great question for any new administration was patronage—the doling out of federal offices to create a network that would support both the party and the president personally.

Scarcely had this mayhem died away than the nation fell into the greatest financial crisis in twenty years—the Panic of 1857. In retrospect, the warnings of a collapse look all too clear. There was railroad overexpansion: of the twenty thousand miles of line built in the 1850s (tripling the total length of track), 2,500 were constructed in 1857 alone. There was the end of the Crimean War: Russian wheat now flooded the international market, hurting American exports. There was France’s need for money: French banks borrowed from those in England, which raised English interest rates, which led British investors to sell off their American securities and invest at home, which undercut stock prices in the United States. And there was the heady effect of nearly nine years of California gold, which had fed speculation and inflated credit. Since the start of the gold rush, the number of banks in America had doubled, to more than 1,500.

The carriage was the great recreational institution of New York’s rich.

As the 1860s began, Vanderbilt attained wealth and influence never before imagined for a private American citizen—“almost kingly power,” as the Chicago Tribune said. He controlled American steamship traffic on the Atlantic Ocean, and stood as the largest shareholder in Pacific Mail.

When the California postal contract expired after Congress adjourned without making arrangements for a new one, Vanderbilt refused to carry any more mail. This edict threatened to add weeks to communication between the two coasts by forcing the mail to be carried overland. The Commodore relented only after President Buchanan begged him to reconsider and promised to ask Congress to pay him retroactively.

Though Raymond never used the exact phrase “robber baron,” it entered the American lexicon as a term for an industrialist who wields his power unscrupulously, to the harm of others. Yet it is essential to note how the metaphor originated. Raymond criticized Vanderbilt for preying upon monopolists. He attacked him for, as he wrote elsewhere, “driving too sharp a competition.”100 In “Your Money or Your Line,” Raymond derided “competition for competition’s sake; competition which crowds out legitimate enterprises… or imposes tribute upon them.” On July 13, 1860, he called on “our mercantile community to look the curse of competition fully in the face.”

Interesting. Vanderbilt profited more from taking down monopolies than from being one it seems like.

The truth is that neither Andrew Jackson nor Daniel Webster, nor anyone else who had helped to create the Democratic and Whig parties, had imagined a man like Vanderbilt. Few previously had accumulated so much wealth, in either absolute or relative terms; and there was probably no one who had ever possessed such sway over public affairs—over the survival of a railroad, or a government, or over the great corridor to California.

Unions could not restrain Vanderbilt from slashing wages and firing strikers; no federal or state laws prohibited his inside trading on Wall Street; few taxes touched his wealth; no regulatory agencies examined his vast affairs or rendered them transparent.

Future tycoons wouldn't have it as easy

Beyond all analysis of Vanderbilt’s historical role, it is worth remembering that men willingly followed this difficult, profane titan, even at the risk of their own lives. It was not because he was generous or kind, but because he was a man of genuine prowess. No one, they knew, understood steamships better; no one, they knew, was more willing to face personal danger; no one, they knew, was truer to his word. Vanderbilt was many things, not all of them admirable, but he was never a phony. Hated, revered, resented, he always commanded respect, even from his enemies.

Important

“Some would call me a merchant.” In some ways, this old-fashioned and highly general term remains the best description. Shipper? Financier? Industrialist? Railroad director? He was all these things.

His early career as a railroad manager [i.e., starting in 1863] was 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. That it was created by Vanderbilt would be too much to say; but he was the first great actor in it, and apparently hastened its coming.

Often these consolidations would prove highly beneficial for the public—though only incidentally because it was good business. And his takeovers would heighten the growing distinction between corporations and their flesh-and-blood shareholders and managers.

Contented with his realm, he would conquer a neighbor in order to eliminate its harassment of his domain. New conflicts with new neighbors would follow, leading to further conquests, until he gained a vast, consolidated kingdom—much as the Caesars pressed their boundaries forward to pacify the barbarian tribes that always lay beyond.

“Did you not take it for granted,” one of them asked, “that the Central Railroad were legally bound to pay you a $100,000 annually?” “When you talk about ‘legally’ I suppose your next question will be: ‘Why didn’t you prosecute them?’” Vanderbilt replied. “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.… The law, as I view it, goes too slow for me when I have the remedy in my own hands.” As he elaborated a few minutes later, “Let the other parties go to law if they want, but by God I think I know what the law is; I have had enough of it.”

The tendency of power—of the modern aristocracy of capital—is toward disregard of individuals and individual convenience and comfort. We already begin to feel the first grindings of the approaching tyranny of capitalists or corporations.… Every public means of transit is in the hands of the tyrants of modern society—the capitalists.… Even the State Legislatures can barely hold their own against these powerful monopolies. They can bribe and bully and cajole, so as to squelch any bill directed against them.

And yet, not all of what happened in Albany can be blamed on graft. Both sides of the dispute made serious arguments. The titanic watering of Erie stock struck many as illegal, not to mention immoral; and Vanderbilt’s seeming attempt at monopolizing New York’s trunk lines appalled others.

The Erie War proved to be the most serious defeat of Vanderbilt’s railroad career. His corner had been thwarted, his attempt at revenge had failed, and his losses had been heavy—perhaps as much as $1 million, though they remain impossible to calculate. But it was not the defeat that the public imagined. Observers in Wall Street and the press saw him as a voracious monopolist, so they assumed that he had wanted the Erie itself, something he explicitly denied. Indeed, what is most striking is not the failure of his corner, but how he rallied on the brink of disaster and forced his enemies to restore much of what he had lost.

VANDERBILT RATHER LIKED his enemies. For decades, he had deftly switched from enmity to friendship, embracing Drew, Morgan, Garrison, Corning, and others once their wars ended. He never took business disputes personally.

No longer semipublic bodies, railroads now functioned entirely as business enterprises, operated for maximum profit, bought and sold in the market, managed as business logic would dictate. That logic led inexorably to consolidation. The day of the giant corporation had arrived.

Now, because of the increasing financial integration of the country, the fears and hopes of a few hundred men on Wall Street could shake the nation. More than any other man, the Commodore frightened or excited those few hundred, driving them as he willed. With the wave of one hand he created tens of millions in new wealth; with a wave of the other, he crushed his enemies; with cold-eyed calculation, he gambled with the lives of millions. The American people were fortunate that he gambled so well, but they had no say in how he placed his bets. Black Friday posed a great question: What was the place of a railroad king in a democracy of equals?

Vanderbilt confessed his belief in “clairvoyance.” A deep accumulation of evidence suggests that he started to attend séances as early as 1864. In 1870, the high point of Spiritualism in American history, this was not unusual.

The giant corporation would bring Americans of all stripes into its orbit with remarkable speed. A professional and managerial middle class began to emerge as the educated and skilled went to work as engineers, lawyers, technical experts, clerks, and middle managers for large companies.

There is a double irony to all this. Vanderbilt had first marched onto the economic battlefield like a Viking warrior, storming the ramparts of corporations under the banner of the individual competitor. Now his flag fluttered from the greatest corporate fortress to date—one with a monopoly on rail transportation into Manhattan. He had put aside the sword in favor of statecraft. All he wanted was to be left alone to manage his realm.

Even with these great affairs—and expenses—weighing on him, Vanderbilt may have found the strength to pick up one of the most massive companies outside of the railroad industry: Western Union, the giant telegraph monopoly.

By all logic, Cornelius Vanderbilt should have gone before any of his many familiars who died in 1872. He turned seventy-eight that year, decades past life expectancy. He had survived fistfights, boiler explosions, a train wreck, heart trouble, Nicaraguan rapids, exposure to tropical diseases, Atlantic storms, and wagon smashes. Yet he endured as those younger than himself passed away.

Vanderbilt was being a bit disingenuous himself; he may have had a large, perhaps even controlling, stake in Western Union, though he did not take part in its management, let alone in this attempted corner. More ominously, he now condemned his own sons-in-law as “the gang of stock speculators.”

The reporter broke the silence by asking about “the cause of the rottenness in Wall Street.” The Commodore, “giving one of his keen glances over his spectacles and speaking deliberately,” delivered an astute impromptu lecture. I’ll tell you what’s the matter—people undertake to do about four times as much business as they can legitimately undertake.… There are a great many worthless railroads started in this country without any means to carry them through. Respectable banking houses in New York, so called, make themselves agents for sale of the bonds of the railroads in question and give a kind of moral guarantee of their genuineness. The bonds soon reach Europe and the markets of their commercial centres, from the character of the endorsers, are soon flooded with them.… When I have some money I buy railroad stock or something else, but I don’t buy on credit. I pay for what I get. People who live too much on credit generally get brought up with a round turn in the long run. The Wall street averages ruin many a man there, and is like faro.60

The Panic of 1873 started one of the longest depressions in American history—sixty-five straight months of economic contraction. In the next year, half of America’s iron mills would close; by 1876, more than half of the railroads would go bankrupt.

As Vanderbilt pointed out, railroad overbuilding was an underlying economic problem, and it was exacerbated by Wall Street’s craze for railway securities. When the bubble burst, the consequences were felt across the country with devastating suddenness and severity65

He also decided to take an active role in the management of Western Union, in which he was reputed to hold a large, even controlling, share.

Vanderbilt turned eighty on May 27, 1874. After amassing the greatest personal fortune in American history, he had protected it against the greatest financial crisis in American history. Now, at last, he could take on the role he had long envisioned for himself—letting his son and Amasa Stone serve as his prime ministers as he sat back on his throne, an attentive but retiring emperor. Of course, it was never quite that simple.

The impact of big business would even be seen in Americans’ choice of heroes, particularly the mythologization of Jesse James as an avenger of the small farmer against banks and railroads. In reality, he cast himself as a Confederate avenger against the victorious Union—but the wider nation wanted a champion of the individual against the faceless institution, and so it drafted James.80

With each lie, each bad check, the Commodore’s frustration grew. By May 1875, their alienation had grown to the point that Corneil would try to get a job on the New York Central for a friend of his by asking for help from Thurlow Weed. He knew that Weed had greater influence with his father or brother than he had.

few nineteenth-century businessmen equaled Vanderbilt in his impact on American history. A handful of rival candidates come to mind—-John Jacob Astor, John D. Rockefeller Sr., Andrew Carnegie, J. P. Morgan, perhaps Jay Gould and Thomas A. Scott—but arguably none proved to be so influential at so fundamental a level over a period so formative or so long.

With his role in Gibbons v. Ogden, he helped to transform the Constitution by tearing down state-erected barriers to trade and shattering the remnants of the eighteenth-century culture of deference. Vanderbilt epitomized the commercial, individualistic society that emerged in the early nineteenth century, and contributed to the creation of a culture in which competition was a personal, economic, and political virtue.

Though he transformed Nicaragua into a target for filibusters, he delivered the decisive blow against William Walker, one of the most dangerous international criminals of the nineteenth century, in the face of Washington’s inaction and hostility.

If he had been able to liquidate his $100 million estate to American purchasers at full market value (an impossible task, of course), he would have received about $1out of every $9 in existence. If demand deposits at banks are included in the calculation, he still would have taken possession of $1 out of every $20.

If Gates had liquidated his entire estate (to American buyers) at full market value at that time, he would have taken $1 out of every $138 circulating in the American economy* Even this comparison understates the disparity between the scale of Vanderbilt’s wealth and that of any individual in the early twenty-first century, let alone his own time.