The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  With the approach of the Civil War, the Commodore's influence on history continued undiminished. 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. Vanderbilt played a significant role in the Union war effort—one perhaps best measured by the Confederates' failure to interrupt the shipment of gold from California. More important, he took on the role of railroad king as railways became central to American life. Step by step, he overcame the fragmentation of the system and built unprecedented new infrastructure. With his son as operational manager, he reduced costs and introduced new efficiency into long-distance transportation, helping to integrate the national economy and transform it into an industrial empire.

  All this formed a legacy that would remain central to the United States into the twenty-first century—from its individualistic, opportunity-minded culture to its sprawling, continental scale to its dense transportation networks. And yet, he may have left his most lasting mark in the invisible world, by creating an unseen architecture which later generations of Americans would take for granted. The modern economic mind began to emerge in Vanderbilt's lifetime, amid fierce debate, confusion, and intense resistance. The imagined devices of commerce gradually abstracted the tangible into mere tokens, and then less than tokens. Money transformed from gold coin to gold-backed banknotes to legal-tender slips of paper and ledger entries of bank accounts. Property migrated from physical objects to the shares of partnerships to par-value stock to securities that fluctuated according to the market, that could be increased in number at will. Like a ghost, the business enterprise departed the body of the individual proprietor and became a being in itself, a corporation with its own identity, its own character, its own personhood.

  Over the course of his career, Vanderbilt lived out the history of this abstraction, the invention of this imagined world. More than that, he took it to a new level by pioneering the giant corporation. By consolidating his New York lines into the New York Central & Hudson River Railroad, he constructed something larger than himself, not to mention virtually every other enterprise that had ever existed. It was a massive organization, one that served to depersonalize, to institutionalize, American business and life. It helped to lead the way to a future dominated by large enterprises possessing wealth and power that changed not only the economic landscape, but the political one as well. A new matrix began to emerge, as radicals began to think of the state as the natural counterweight to the business corporation. This, too, is Vanderbilt's legacy.

  The Commodore's life left its mark on Americans' most basic beliefs about equality and opportunity. He epitomized the Jacksonian ideal of every man being free to compete and rise on his merits, and that ideal remains a bright thread in the fabric of American thought. Yet his unprecedented wealth—and with it, unprecedented power—signaled that inequalities were exploding in size with the new corporate economy. Mark Twain's term “gilded age” came to stand for the extreme polarization of riches and poverty in the late nineteenth century, a polarization that Vanderbilt led. His life marks the start of the Era of Great Fortunes. And when he handed down the bulk of his fortune to one son and his sons, he created something that his fellow citizens had long thought to be the corrupt artifact of the aristocratic societies of Europe—that is, he started a dynasty. His example would be followed by Rockefeller and Ford and others. The inheritance of such fortunes had been roundly condemned in the early republic; indeed, early critics of the corporation feared that it would undermine the natural process by which estates were broken up upon death. Vanderbilt and the dynasts who followed him not only created a Gilded Age, they caused their fellow Americans to reexamine the place where opportunity and equality collided.

  But Vanderbilt's admirers as well as his critics demand attention. On January 5, 1877, the directors of the U.S. railroads Vanderbilt had led as president—the New York & Harlem, the New York Central & Hudson River, and the Lake Shore & Michigan Southern—met and issued a joint tribute to their chief. It was hagiography of course, but it spoke to how his followers saw him at the moment of his death. An excerpt:

  The truest monument to CORNELIUS VANDERBILT is the fact that he so organized his creation that the work will go on, though the master workman is gone.…

  His career was a dazzling success. In an age and a country distinguished for their marvelous personal triumphs, his achievements rank among the most extraordinary and distinctive of all. Thoroughly practical and faithfully wrought out, their splendor yet gives them the tinge of romance.… He was essentially the creator, not the creature, of the circumstances which he moulded to his purposes. He was the architect of his own fortune. Beginning in a humble position, with apparently little scope of action and small promise of opportunity, he rose, by his genius, his indomitable energy and his clear forecast, to the control of vast enterprises involving millions of property and connected with the interests of millions of people.…

  It is to his lasting honor that his uniform policy was to protect, develop, and improve the interests with which he was connected, instead of seeking a selfish and dishonorable profit through their detriment and sacrifice. The rights and welfare of the smallest stockholder were as well guarded as his own. In a period of crafty devices for sinister ends, he taught the way of success through legimate means.…

  With all his brilliant success, his frank simplicity of character and habits remained unchanged. In the height of his rare fortune he was the same direct, provident, unostentatious man as before he had mounted to his large opportunities. The sterling qualities of his strong and commanding individuality were deeply appreciated by all who were associated with him. He was firm and true in his friendships.3

  It was no wonder that the press devoted massive attention to his death. It was as if a head of state had died—the self-made chief executive of a country that he himself had invented, rather like a cross between George Washington and Genghis Khan. Generations had come of age in his shadow. At his funeral on Sunday, January 7, 1877, the great and powerful, past and present, came to salute him: Peter Cooper, Charles O'Conor, Thurlow Weed, Edwin D. Morgan, Cyrus W. Field, Daniel Drew, Marshall O. Roberts, Frank Work, William E. Dodge, and Augustus Schell, among many others. After a viewing of the body at 10 Washington Place and a ceremony at the Church of the Strangers, a line of carriages carried his casket down to Whitehall Slip, where he had first set foot in New York three-quarters of a century before. It crossed the harbor on the ferry he had created, to be buried in the family tomb.4

  His children would agree that he was a hard man. They often suffered from his imperious manner, most pronounced when among his family. When his onetime friend John Morrissey heard of his death, he said, “Well, he died without making a bad debt or leaving a friend. See how all of them went to bed happily last night.” Later Morrissey would declare, “I have known in the course of my life burglars, fighting men, and loafers, but never have I known such a bad fellow as Commodore Vanderbilt.”5

  But Morrissey was one of those who had hoped to get rich quickly and effortlessly from his association with Vanderbilt. So were all of the Commodore's bitterest enemies, including Joseph L. White and John M. Davidson. Most of those foes who met him in open combat—Cornelius Garrison, Charles Morgan, Marshall Roberts, William Aspinwall, Erastus Corning, and his quondam partner Daniel Drew—admired him, and socialized with him after their conflicts ended. It is a fact of human nature that one need not be nice to be liked and respected, and so it was with Vanderbilt. His fellow businessmen appreciated his forthrightness, capability, honesty, dignity, sense of honor, and force of personality. They felt that he had earned his pride in himself. More than that, they knew that Vanderbilt was as accomplished and patient as a diplomat as he was fierce and unrelenting as a competitor. More and more over the years, he sought compromise, common ground, accommodation. As a railroad leader, he
fought each war of conquest only as a last resort, after repeated negotiations had failed.

  The image of Vanderbilt as the man of force is powerful, so much so that it can easily be forgotten that he was a man, emotional and complicated. Here and there, his vulnerabilities and sensitivities poke through the cracks of the stony historical record. He was often difficult with both his wives, yet he loved and needed them. He was disgusted with Corneil's weaknesses, yet he agonized over his own inability to bring about his reformation, and he cherished Corneil's wife, Ellen, and her family. He was a difficult father for all of his sons. With his immense personal capabilities, he set an impossibly high standard. Even William suffered in his father's huge, dark shadow, yet Vanderbilt also respected William's decisions once he had given his son the authority to make them. The Commodore browbeat the younger generations of his clan, too, yet he gave his sons-in-law the highest positions of responsibility in his businesses, and repeatedly sought favors from presidents and associates for his nephews and grandsons.

  His family loved him in return, as could be seen even in the pain he sometimes caused them. The Thorns, for example, felt wounded by the Commodore's remark that their children were not Vanderbilts—because his opinion mattered to them. Corneil, too, deeply loved his father. During the Commodore's final hours on his deathbed, Corneil wrote to George Terry, “I fear the time is at hand & God knows I regret it.” But Corneil would not last much longer than his father. With his inheritance he reportedly repaid his debt to Greeley's estate, then managed to fall into bankruptcy once more. On April 2, 1882, with Terry in the next room, he put a revolver to his temple and shot himself to death. Frank followed on May 4, 1885, falling dead of a stroke at 10 Washington Place. Her letters and diary make clear that she loved her husband deeply; though more than four decades younger than he, she lasted barely eight years without him.6

  The Commodore did value one family member more than the others in a most important respect. He intended to found a dynasty, and he planned for William to lead the next generation. The fortune he passed down largely to his eldest son is impossible to calculate. The press guessed that it was worth anywhere from $85 million to $115 million, based on the par value of what his holdings might have been in his railroads and Western Union. On the day that Vanderbilt died, Worcester—who handled many of his personal affairs—told a reporter, “About $100,000,000 is as near to a fair valuation as can be put upon the estate of Mr. Vanderbilt.” Three problems make it impossible to find a more exact figure. First, the market value of his stock fluctuated. At the start of 1877, in the midst of the depression, it was low compared to recent years, though not at the absolute bottom; prices would rise as the economy improved. Second, up to almost the moment of Vanderbilt's death, he hid his shares under others' names, as his notes to James Banker and Worcester's testimony show. Worcester himself may not have known the full story. Finally, Vanderbilt transferred much of his wealth to William and his sons before his death. He gave all of his real estate, worth many millions, to William at about the time of his marriage to Frank, and transferred tens of thousands of railroad shares at various times. When William died on December 8, 1885, his estate was estimated at $200 million, and he was admired for doubling his inheritance in just a few years. In fact, there is good reason to believe that, had the Commodore lived eight years longer, and left his estate just as it was but kept it together as a single unit, his fortune would not have been worth much less than William's was when he died.7

  How does $100 million or so translate into twenty-first-century dollars? These pages have not provided modern equivalent figures, in the conviction that historical dollar amounts cannot honestly be converted. They are irreducible facts that can be understood only in their contemporary context. The economy was not simply a balloon that inflated over time; in the nineteenth century it was lumpy, with partially integrated markets, uneven currency supplies in different regions, periods of rapid growth and dramatic increases in economic complexity, and long periods of deflation. At some point in the twentieth century, even the smallest, most remote communities in America would find themselves woven seamlessly into the national—even the international—financial system. This integration of all economic life into a single web, dominated by the Federal Reserve Bank, would prove to be the culmination of much of Vanderbilt's life of entrepreneurship and institution building. But it had not yet come into existence during his own time. Rural areas in the South and West frequently lacked access to banking; they were the areas most heavily dependent on cash, yet they were plagued with raw cash shortages. In 1876, the last full year of Vanderbilt's life, the comptroller of the currency reported that the combined total of all greenbacks, national banknotes, fractional currency, and gold and silver coin in circulation amounted to $900,676,194—just $19.77 for each of the estimated 45,550,000 citizens. Even this figure is deceptively large, for national banknotes were concentrated in bank-rich regions, particularly the Northeast.8

  On the other hand, these figures do provide some context for the scale of Vanderbilt's fortune. 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. By contrast, Forbes magazine calculated in September 2008 that William Henry Gates III—better known as Bill Gates—was the richest man in the world, with a net worth of $57 billion. 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. The calculation for 2008 uses the Federal Reserve's M2 figure, the most literal equivalent to the 1876 comptroller's report; the money supply in the far more complex modern economy is generally thought to include a far broader range of financial instruments, a tally referred to as M3.9

  Vanderbilt cultivated William and William's sons as his heirs, instructing them to preserve the empire and perpetuate the dynasty For an impious man, it was his greatest grasp at immortality, greater even than the creation of his university. But fathers rarely imprint themselves on their sons. No sooner had the trial over the Commodore's will ended in 1879 than William agreed to sell 250,000 shares of New York Central & Hudson River to a syndicate organized by banker J. P. Morgan. Morgan's consortium bought them at 120, for a total payout of $30 million. This was not a majority stake, and William and his sons retained a large percentage of the hundreds of thousands of remaining shares; but the family now worked closely with Morgan, who served as maestro of a banking syndicate that established interlocking directorates in the major railroads to tamp down the competition that had driven so many lines into bankruptcy. Morgan, together with William's sons, particularly Cornelius II, established a Board of Control that brought to fruition the great project started by the Commodore. Charles F. Adams Jr. would write in 1888, “The most perfect organization is that now known as the Vanderbilt system.”10

  William ostensibly sold out because a bill was pending in the legislature to bar any family from having majority control of the Central. Chauncey Depew, who knew Albany better than anyone, counseled in favor of the sale. But there is reason to think that William was simply worn out. He lacked his father's year-after-year resilience in the face of hostility Where the Commodore had been calmest in the heat of battle, unleashing his temper largely at home, William seems to have been a kind father but a poor corporate diplomat. Even his ally Morgan wrote that he “irritated and harassed” other businessmen, and pursued “legal quibbles which would be disgraceful to any Bowery lawyer.” Rather than slowly limit his role in business without giving it up, as his aging father had done, he retired to a life of luxury. He constructed twin mansions on Fifth Avenue between Fifty-first and Fifty-second s
treets, and filled them with fine art.11

  His children followed suit, constructing their own Fifth Avenue palaces. In March 1883, William K. and Alva Smith Vanderbilt threw a costume ball that stood as one of the great extravagances of the Gilded Age. “I wish the Vanderbilts didn't retard culture so very thoroughly,” Edith Wharton wrote to a friend. “They are entrenched in a sort of thermopylae of bad taste, from which apparently no force on earth can dislodge them.” William H. Vanderbilt's mansion was eventually demolished (as was 10 Washington Place), though some of those built by William's children still remain, from the Breakers at Newport to the Biltmore in Asheville, North Carolina—monuments to an outrageous self-indulgence that the Commodore would have scorned, made possible by an enormous disparity in wealth that the Commodore pioneered.12

  The story of the subsequent generations has no place here. Suffice it to say, as Louis Auchincloss does, “With the death of Cornelius II in 1899 at the age of only fifty-six, the Vanderbilt dynasty at the New York Central really came to an end.” The family would play a role in the mighty corporation until its eventual merger with the Pennsylvania and the state takeover that soon followed, but “the sense of a family leader was gone.”13 The fortune was built on America's first great industry, but also the first industry to mature and fade, as the Commodore's descendants spent their money and enjoyed themselves. Descendants live on, but the family has drifted out of the main currents of history.