The First Tycoon

by T. J. Stiles

  Perhaps self-conscious of his lack of education, he avoided public speaking—a significant fact in that great era of oratory, when men and women passed the hours listening to long, elaborate speeches from politicians and ministers, lecturers and poets. But his recorded remarks show that he was capable of keeping his errant grammar under control in conversation. A more likely explanation for his reticence was given by those who knew him best: that he detested circuitousness, viewed loquacity as a kind of vanity and distrusted the rhetorical flourishes expected in this culture of the word upon word. When dictating letters, for example, he expected Wardell to preserve the brevity, the concentrated force, of his language. As Vanderbilt said in his terse Southampton toast, “He had been accustomed, all his life, to go direct to a point.”36

  When he plumped back into his seat at that dinner, another of his party rose: Horace Clark. At the Commodore's request, the ambitious lawyer gave precisely the sort of speech expected on this occasion, the kind that Vanderbilt loathed, larded with such passages as, “a few days of unalloyed pleasure, passed in contemplation of the Great Creator in his broadest and most glorious field—a few nights of calm repose, undisturbed by danger or fear—and lo! your magnificent shores burst upon our view.” Now that Vanderbilt was most emphatically a public man, he needed someone like Clark. He had thought he had found such an ally in Joseph White; but White's treachery had taught him to look within his own circle for someone more trustworthy.

  Clark wanted to be more than Vanderbilt's mouthpiece, but others stood in his way. His most serious rival was Daniel Allen, who had shown himself to be a quiet, shrewd businessman more like the Commodore himself. But Allen's split with his father-in-law over the steamship sale to Accessory Transit continued to fester. So he and his wife, Ethelinda, decided to spend a year in Europe. They had a son and a brother-in-law currently residing on the continent, and perhaps they hoped the time abroad might improve Ethelinda's health. “Mrs. Allen came on board the yacht from a sick bed,” Rev. Choules wrote, “and in a condition of extreme debility.” The months at sea seem to have helped immensely, and she and her husband said their good-byes at Gibraltar.37

  More ominous for Clark's future (though there is no sign that he thought of matters this way) was the thaw in Vanderbilt's relationship with Billy. The two had never spent so much time together; more than that, they socialized in a holiday setting overseen by Billy's eternally patient and kindhearted mother. Overshadowed by her domineering husband, Sophia's personality rarely flowers in the historical record, though a few suggestive comments come from Rev. Choules (however prone he may have been to praising everything and everyone, apart from the pope, whom he reviled). “Every day, everyone on board was made to see and feel the excellent qualities” of Sophia Vanderbilt, Choules wrote, “whose uniform amiable spirit was the regulator of the circle.”38

  Amiable patience marked William's manner as well. A story would later circulate that depicted father and son on the North Star's deck as it churned toward home, both of them puffing on cigars. Vanderbilt cocked an eye at Billy and said, “I wish you wouldn't smoke, Billy; it's a bad habit. I'll give you $10,000 to stop it.” The young man pulled the cigar out of his mouth and said, “You needn't hire me to give it up. Your wish is enough. I will never smoke again.” With a flick of his wrist, Billy tossed the cigar over the rail and into the waves below39 The tale is utterly apocryphal, but it survived because it reflected two truths: Cornelius's relentless testing of his son, and William's steady display of loyalty—a dutifulness that slowly affected his father.

  Onward the North Star sailed toward New York, cutting through clouds of flying fish, dredging through green Sargasso Sea islands of seaweed, and steaming into view of Staten Island. Back through the Narrows it went—firing another salute as it passed the home of Vanderbilt's mother—up to the Allaire Works, where the journey had begun. “On the dock were kind friends and beloved relatives,” Choules wrote, “and I almost felt that the entire four months of absence was but a dream! But I soon learned a painful fact… that the sweetest joys of life are dashed with bitter waters.”40

  FOR THE FIRST SUMMER IN TWO DECADES, Cornelius Vanderbilt did not go to Saratoga Springs. He was, of course, on the far side of the Atlantic, so Saratoga went on without him. “Senators and members of Congress are abundant,” the New York Times reported on August 12. Other notables included George Law; Thurlow Weed, the Albany newspaper editor and titan of the Whig Party; Edward K. Collins, head of a federally subsidized transatlantic steamship line; and Charles Morgan.41

  In the summer of 1853, it was Morgan, not the Commodore, who went each morning to the little temple erected over the Congress Spring, inside the hollow square of the Congress Hall hotel, where a boy lowered a staff to dip tumblers full of mineral water, three at a time. It was Morgan who played hands of whist with other Wall Street warriors, or sat in the evening in the colonnade of the Congress or the United States Hotel, smiling at the passing girl in white muslin and a pink sash, daringly wearing no bonnet, who made her way to a fashionable ball or a more casual “hop.”42 It was Morgan who took a carriage up to the lake to eat a dinner of wild game at the Lake House restaurant, famous for its crispy fried potatoes (or potato chips, as they would come to be known), a wildly popular dish invented by “Eliza, the cook,” in the 1840s.*

  By September 23, Morgan was back in New York, where he could not have missed Vanderbilt's return in the North Star. Every newspaper published the news, as if it were a matter of national import to announce (as the headline in the Times read), “Com. Vanderbilt's Pleasure Party at Home Again.” The New York Herald went further, notifying the Commodore that during his absence the Accessory Transit Company had fired him as agent and kept his money. It reprinted a letter from the corporation that had run on July 29. “It is quite true that since the departure of Mr. Vanderbilt the company have not paid him the twenty percent on the gross receipts of the transit route,” the company had stated, “for the plain and simple reason that, in their belief, he is largely indebted to the company, it having found it impossible to obtain a statement of the accounts of the agency during the time he had acted as agent for the steamers of the company.” The Herald added, “As soon as Commodore Vanderbilt gets fairly located again among us, it is expected he will furnish some exculpatory reply”43

  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. He never wrote “Yours truly,” but usually he signed, “Your obedient servant.” And it never would have occurred to him to give up legal redress. He had been suing his opponents since 1816; he knew that, even when the courts did not give satisfaction, legal action gave him leverage in negotiations.44

  But reply he did. As soon as he had wobbled on his sea legs into his office, he ordered Lambert Wardell to pull out pen and paper; he wanted to dictate a letter to James Gordon Bennett, editor of the Herald. “The statement made in the name of the company,” he wrote, “calls for a few words of explanation. To say nothing of the cowardice which, in my absence in a foreign country, dictated the calumnious statement referred to, it is none the less unfortunate that it was utterly false.”

  Cowardice and mendacity—the two cardinal sins in Vanderbilt's business code, and the two salient traits of Joseph White—drove him into a fury. He did not owe the Transit Company, he said; rather, it owed him some $36,000 for property (mostly coal and coal hulks) that he had sold along with the steamships, an amount that was to have been paid out of the first earnings of the ships. “My object in accepting the agency of the steamships… was chiefly to enable me to secure the amount of the company's unpaid indebtedness to me,” he explained.
“These earnings should come directly into my hands. I need not say that I would not have trusted the company for so large a sum of money upon any other terms.” His man in New York, Moses Maynard, had made the books freely available for inspection at any time. And, far from decrying lawsuits, he concluded with this warning: “My rights against the company will be determined in due time by the judgment of the legal tribunals.”45

  On September 29, the day after the Herald published Vanderbilt's angry letter, the Commodore and Charles Morgan met to discuss their conflict. Where they spoke is unknown, though Morgan's office was at 2 Bowling Green, only a few doors from Vanderbilt's. The Commodore proposed to refer the dispute to arbitration. Morgan seems to have thought well of the idea, but he declined to make a commitment, and the meeting broke up without any settlement.

  A split seems to have formed in Accessory Transit over how to proceed. On October 27, the Herald reported that it had agreed to arbitration; on the next day, the company refused, making petty excuses about the state of the accounts Vanderbilt had rendered. Indeed, it taunted him, in what sounds very much like the voice of Joseph White. “The company are desirous he should commence proceedings against them at once,” said the official statement, “and are afraid he will do nothing but threaten.” Vanderbilt's lawsuit, postponed to allow time for negotiations, would proceed.46

  THE BATTLE SEEMED TO energize Vanderbilt, for he simultaneously embarked on a series of breathtakingly huge financial transactions. First, his friend Robert Schuyler—now president of the New York & New Haven, the Illinois Central, and other railroads—asked for help. He had overextended himself in his vast stock operations, and the Independence, the ship he and his brother George had purchased from Vanderbilt, had sunk in the Pacific. He needed money, a lot of money; fortunately, he could offer thousands of railroad shares as collateral. Vanderbilt took them, loaning Schuyler $600,000 in October to see him through his difficulties. This was a staggering figure: if a merchant's entire estate amounted to that sum, he would be praised as extremely wealthy by the Mercantile Agency47

  Next came a fresh campaign on Wall Street led by Nelson Robinson—who, it appears, could not bear to remain in retirement as long as he owned twelve thousand Erie shares, waiting to be bulled. In mid-October, Robinson won reelection to the Erie Railroad's board of directors, and took over as treasurer; he was joined by Daniel Drew, who was new to the board. The two organized a “clique” of investors to run up the price of Erie. Vanderbilt agreed to cooperate, though he demanded a bonus in the form of a discount on the stock. He purchased four thousand shares at 70 each, 2½ below the market price. (How Robinson and Drew arranged the discount is unclear.) “The removal of so much stock, even temporarily from the market, was calculated to improve it [the price],” the New York Evening Post reported.

  With so many stock certificates sitting in Vanderbilt's office rather than circulating among brokers, Erie's share price immediately rose. Robinson made the most of it as he worked both the curb and the trading floor on Wall Street. “His name & influence put up the price,” the Mercantile Agency reported. “It went as high as 92 in April [1854] & he sold out.” Robinson made as much as $100,000 in this single operation. Vanderbilt garnered perhaps $48,000 in profit (less brokers' commissions), in a lucrative beginning to a long and ultimately tragic relationship with Erie.48

  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.

  Ambivalence, but not simple loathing: the Commodore simultaneously remained the archetype of the economic hero, the productive, practical man of business, precisely the sort popularly depicted as the opposite of the speculator. Indeed, the key to understanding Vanderbilt is that he saw no distinction between the roles defined by moralists and philosophers. He freely played the competitor and monopolist, destroyer and creator, speculator and entrepreneur, according to where his interests led him. The real conundrum lies in how he saw himself. His public pronouncements reflected Jacksonian laissez-faire values, as he denounced monopolies and touted himself as a competitor. Did he detect a paradox, then, when he sold out to a monopoly or sought his own subsidies? Most likely no. Competition had arisen in America conjoined with customs and mechanisms to control it. Vanderbilt saw “opposition” as a means to an end—war to achieve a more advantageous peace. On a personal level, he was acutely aware that he had won all that he possessed by his own prowess. And whatever he won in battle, he was ready to defend in battle.

  VANDERBILT'S COMBINATION of entrepreneurship and stock market gamesmanship also appeared in his elaborate plot to take revenge on Morgan and White. The first phase involved an attempt to drive down the Accessory Transit Company's share price. He faced long odds. In December, Morgan fed information to the New York Herald that won him the support of its influential financial column (despite Vanderbilt's protest that the numbers leaked to the paper were “calculated to deceive”). Rumors of the company's rich profits and bright prospects sent its stock price up to 27⅝.50

  Seemingly in defiance of reality, Vanderbilt deployed a platoon of brokers on the stock exchange to sell Accessory Transit short, starting on January 5. “The bears made a dead set against it,” the Herald reported. Vanderbilt shorted five thousand shares—that is, sold five thousand shares that he did not own—at 25, on contracts that gave him up to twelve months to deliver the certificates. He gambled that the price would go down in the interim, so he could buy the shares for less, thus making a profit when he delivered them. “This looks like a most determined opposition,” the Herald noted. Morgan started buying to keep the price up, making for a direct battle between the two titans.

  The next day the New York Times reported, “The contest of Bull and Bear opened… on Nicaragua Transit stock, [and] was followed up with considerable spirit by the buyers for the rise. The large seller yesterday it is now confidently asserted is Mr. Cornelius Vanderbilt, and the buyer Mr. Charles Morgan, the President and managing man of the Company; both old heads on the Stock Exchange, and wealthy.” The Herald, too, observed the “immense pressure from the bears,” as Vanderbilt's brokers sold feverishly in an attempt to drive down the share price, but “Nicaragua” stubbornly rose. “The enormous sales… had an effect quite contrary to that intended. The probability is that the same party [Vanderbilt] will not try the same game a second time. It was a desperate move, and must result in serious loss.” Now firmly on Morgan's side, the Herald reporter cited the “present able management” of the company and its glowing annual report, concluding that it was “rash to bear the stock.”51

  The gold coming down from the mountains led to an international rush to California. In early 1849, Vanderbilt sent his son Corneil around Cape Horn in a schooner to work on a ferry in San Francisco Bay He jumped ship, as did the gold-crazed crews of dozens of vessels, turning the San Francisco waterfront into a floating graveyard. Library of Congress

  California's primary channel to the Atlantic coast consisted of steamship lines and a land crossing at Panama. Vanderbilt created a rival transit route across Nicaragua. This engraving shows a sternwheel riverboat in the harbor of Greytown on the Atlantic, having loaded passengers from a steamship in the background, as it enters the San Juan River, bound for Lake Nicaragua. Library of Congress

  The San Juan River flows from Lake Nicaragua to the Atlantic through a dense rain forest. This 1880s photograph shows a steamboat in a wide, shallow section. Vanderbilt personally piloted the first passengers on his Nicaragua line up the river in 1851. Library of Congress

  At the head of the San Juan River was the village of San Carlos. This photograph from the 1880s shows the great Lake Nicaragua in the background, along with typical thatched-roof huts. A fort also guarded this strategic point. Library of Congress

  On leaving the San Juan River, passengers
transferred to larger sidewheel steamboats that traversed Lake Nicaragua's 110-mile expanse. The western landing was at Virgin Bay, where a large pier was eventually constructed. This somewhat exaggerated engraving shows the twin cones of the island of Ometepe. Library of Congress

  A twelve-mile carriage road connected Virgin Bay with the little Pacific port of San Juan del Sur, which was virtually uninhabited until Vanderbilt personally chose it as the terminus of the transit route. Passengers transferred between steamship and shore by means of launches. Library of Congress

  By 1851, San Francisco had emerged as a major American city, nourished in part by Vanderbilt's steamship line to and from New York. This photograph looks east across the bay toward Yerba Buena Island. It reveals the shipping that thronged the new wharves and the dense grid of substantial brick buildings that were constructed in the wake of repeated fires. Library of Congress

  This 1854 engraving shows the Narrows at the mouth of New York Harbor, with Staten Island in the foreground, Long Island to the right, and in the distance on the far right the cities of Brooklyn and New York. Library of Congress