The Man Who Owned America
THE FIRST TYCOON
The Epic Life of Cornelius Vanderbilt
By T.J. Stiles
Knopf. 719 pp. $37.50
Cornelius Vanderbilt, the Staten Island farm boy who rose to become America's transportation king, was the richest man of his time, but terms like "richest" don't do him justice. In 19th-century America's untaxed, unregulated Wild West style of finance, his grip on the economy was so complete as to be barely comprehensible by today's standards.
By the time of his death in 1877, Vanderbilt's assets equaled one out of every 20 dollars in circulation. In "The First Tycoon," historian T.J. Stiles reassesses Vanderbilt's life and influence. "It was as if a head of state had died," writes Stiles, "the self-made chief executive of a country that he himself had invented, rather like a cross between George Washington and Genghis Khan."
This democrat-cum-despot was born in 1794, son of an entrepreneurial father who operated one of the many ferries that plied New York waters and of a money-lending mother who once foreclosed a mortgage on her widowed daughter. The death of a brother elevated 11-year-old Cornelius to eldest son; he went to work delivering cargo for his father, a job that Stiles suggests taught him the strategic importance of transportation and "the ferryman's ability to demand his own price." By age 16 Cornelius was a skilled sailor, a canny investor in boats and a brawling young man with a raging temper who competed with single-minded ferocity.
Although barely schooled, Vanderbilt grasped the emerging technologies of the steam age instinctively. From the moment he became an independent steamboat operator in 1828, he besieged and swallowed his competitors until he amassed the world's largest fleet. He survived these wars of attrition through prudent financing and by shaving costs (Vanderbilt made his passengers pay for services a la carte, and they complained just like today's airline passengers).
Vanderbilt's greatest gift was brute force of personality. When, at age 70, he immersed himself in consolidating the railroad business, it seemed inevitable that he would create the greatest railroad empire in the world. The vast network of strategic monopolies he made swelled Vanderbilt's treasure chest to $100 million by the time he died in 1877. Three years earlier, he had completed a huge series of rail improvements and depot stations in New York City, including the first incarnation of what is now Grand Central Terminal. By then, the Commodore had become a terrifying symbol of the market's power exploited to ultimate advantage -- even though, ironically, his rate wars lowered transportation costs for everyone.
Vanderbilt's colorful battles made him a magnet for mythology. Much of what has been written about him until now was dictated by his enemies. Stiles, a superb researcher, has unearthed quantities of new material and crafted them into the illuminating, authoritative portrait of Vanderbilt that has been missing for so long; Stiles has also debunked several myths about Vanderbilt, such as that he showed no tenderness toward his family and that he died of syphilis.
At times, the chronicle of Vanderbilt's exploits can read like a long parade of steamboats and locomotives chugging past the reader. Thankfully, the parade is interspersed with entertaining accounts of Vanderbilt's chilly, awkward relations with his longsuffering first wife, Sophia; his 13 children; his spiritualist medium friend and probable mistress, Tennessee Claflin; and his better-loved second wife, Frank Crawford Vanderbilt. The other major characters in Vanderbilt's life were his allies and opponents in epic business clashes, especially financiers Jay Gould and Daniel Drew. These clashes, intricate as military operations, are important bits of financial history, filled with human drama.
Vanderbilt created his empire by swimming with the tide of larger economic forces: he "grasped one of the great changes in American culture: the abstraction of economic reality," in which paper money, stock certificates and corporate voting shares replaced direct trade in gold, tangible assets and private shares in business ownership. At times, he himself refused to fit neatly into this changing world. He championed competition when it suited his needs, then embraced monopolistic barriers once his conquests were complete. Yet in his self-interested pragmatism, Vanderbilt simply behaved like most tycoons.
In his old age, the crusty Commodore became a diplomat, seeking peace with his rivals and helping free Jefferson Davis from prison after the Civil War. His grandest gesture was to show the North its obligations to the shattered post-war South. He sent a huge sum at the time, a million dollars, to Nashville to endow a university. Like other things associated with Vanderbilt -- a steamboat, a locomotive, a son and two grandchildren -- it wound up being named after him.
Yet despite determined efforts, he failed to found a dynasty. Combative like their father, his heirs battled over, then dissipated, his wealth. Vanderbilt's statue now looks south from the Grand Central Terminal he founded toward the port he fought to dominate. His influence in crafting the corporation as a tool of modern business is undeniable. Yet it is the conciliatory gesture embodied in Vanderbilt University that remains his most enduring legacy.
Alice Schroeder is author of "The Snowball: Warren Buffett and the Business of Life" and a columnist for Bloomberg News.