William Vanderbilt was interviewed about the Nickel Plate several weeks before it first started running. “I don’t think much about it at all,” he casually told the reporters. “It’s no good. It’s very poorly built. You can’t tell me otherwise because I know. Why, who would want to risk their neck on a road built in the slipshod manner it was constructed? And then they talk about its being built so cheaply! That’s nonsense. I’ll bet you anything it cost more to build the Nickel Plate per mile of single track than it did the Lake Shore. Do I fear its competition? No, not much. I will bet the Lake Shore will earn at least six per cent on its capital the first year after the new road opens, and the new road will not earn expenses. Why, you ask? Well, I’ll tell you. It can’t get the business, and it has too many heavy expenses.”
“Do you think,” Vanderbilt was asked, “that there is any truth in the rumor that the road was built to sell?”
“Yes, I do. That’s all it could have been built for, because there is no business which it can get that warrants its construction.”
“Have you ever been asked to buy it, or any interest in it?”
“No, I cannot say that I have been asked directly to buy it, but I have been approached by persons who, I think, were to a certain extent authorized, and they gave me to understand that if I wanted to buy it, it could be obtained. I did not want it, however; I have no use for it. My present roads have plenty to do, but I do not know where I could find any business for a road like the Nickel Plate.”37
The syndicators of the Nickel Plate road knew just what they were doing. They invited Jay Gould to travel on their new road on his return from a western trip. Vanderbilt interpreted this as Gould’s inspection tour. To keep Gould from taking over the road and threatening his Lake Shore route, to prevent a rate war, Vanderbilt began buying its stock less than three weeks after the interview in which he had accurately assessed the limited prospects of the Nickel Plate.
“Your road is bankrupt,” Vanderbilt told one of its promoters.
“No one knows that better than I do,” he replied, “but do you want to compete with a receiver?”38
The road was ready for business on Monday, October 23, 1882. By Thursday, October 26, 1882, William Vanderbilt had acquired the Nickel Plate. The price he paid gave its promoters a $10 million profit. “For the price we paid for it, it ought to be nickel-plated!” Vanderbilt commented.39
Just as quickly as he had made his decision to purchase the road, he realized he had made his worst business blunder. As he had predicted, the road was facing bankruptcy within a year. Had he waited a little longer, he could have had the road on his own terms, rather than paying the exorbitant price that the speculators had set on their property. He could almost hear the Commodore explode: “Blatherskite! Beetlehead! Sucker!”
William must have wondered what his father would have done. He undoubtedly would have started a rate war to ruin the line and drive it out of business. But times had changed. Railroad peace, an end to rate wars, was worth a certain price. The only hitch in William’s theory was that his purchase of the Nickel Plate did not establish the peace he coveted. It instead merely encouraged new groups of speculators to view William H. Vanderbilt as an easy mark.
“Now Commodore,” a president of the Erie Railway had once said to Cornelius Vanderbilt, “nothing can hurt the New York Central until somebody builds a narrow-gauge road on the other side of the Mohawk.”
“It is impossible,” the Commodore snapped. “Such a road will never be built.”40
In the winter of 1881, four years after the Commodore’s death, work gangs, supported by a war chest of $50 million, began blasting out the right-of-way of the New York, West Shore and Buffalo. This new line was commonly called the West Shore because it followed the western bank of the Hudson from Weehawken, New Jersey, up to Albany, where it turned west along the Mohawk through Utica and Syracuse to Buffalo and the Great Lakes—the exact route, through the richest areas of the Northeast, that the main line of the New York Central followed on the eastern side of the Hudson and the opposite bank of the Mohawk.
Not only was there no economic need for the West Shore, it didn’t make much practical sense either. All passengers and freight had to be transported by ferry boats from New York City to Weehawken, where the line began, thus increasing the expenses and inconveniences of the new road. No, there was never any doubt as to why Jay Gould and his partners, who included John Jacob Astor III and a group of Civil War generals, were constructing this road, which threatened Vanderbilt’s crown jewel. “The West Shore was built as a blackmailing scheme, just as the Nickel Plate was,” William Vanderbilt told a reporter.41 It was nothing but “a miserable common thief caught with its hands in my pocket.”42
The West Shore began operations on June 4, 1883. This time, William Vanderbilt knew he had to fight. First he cut the Central’s freight rates between New York City and Albany from 25 cents a ton to 10 cents. The West Shore had used all of the $50 million it had raised to build the road; there was no money left over to wage battle with the mighty New York Central. Nevertheless, it gamely matched these cuts though its revenues were insufficient to pay the interest on its bonds and it was beginning to fall behind in paying its employees.
By June 1884, after one year of operation, the West Shore had gross revenues of $2,979,331 and expenses of $3,664,294. It declared bankruptcy. Its bonds were purchased by the Pennsylvania Railroad, the New York Central’s arch-rival, which Vanderbilt had always believed was behind the West Shore scheme. The receivers of the West Shore decided to go for broke and ruin the New York Central once and for all.
The West Shore cut its passenger rates between New York and Chicago from $12.00 to $10.50. The New York Central matched it. The West Shore cut to $9.00. The New York Central dropped to $8.00. The West Shore gasped, and dropped its passenger rates as far as it dared, to $8.30.
The effects of the rate war on both railroads were devastating. The West Shore was borrowing money to meet its operating expenses. The New York Central’s gross revenues fell from $33,770,721 for the year ending September 30, 1883, to $28,148,699 the following year, and to $24,429,411 the next, with net earnings falling to less than half of what they had been two years before. After government bonds, the bonds of the New York Central always had been regarded as the safest investment for the most conservative investor. All of that changed with the West Shore battle. In June of 1881, the Central’s stock was trading at 151 Vi. By June of 1884, it dropped to 99Vi. In the second quarter of 1884, the Central showed a profit of $733,812, or 82 cents a share. When this was compared to the $2 in dividends the Central paid out to its shareholders that quarter, it was obvious that the rate war could not go on forever. For the first time, William Vanderbilt cut the once inviolate New York Central dividend. The rate war continued, with the West Shore clinging to the logic that for each dollar it was losing, the New York Central had to be losing three; the Central’s demise was inevitable. While the receivers of West Shore waited, they eliminated all construction work and cut maintenance to the bone, to the point where equipment began to deteriorate. Vanderbilt again cut the Central’s dividend.
Now some of the old Commodore’s blood was coursing through his son’s veins. Two could play this game.
William Vanderbilt invaded the territory of the Pennsylvania Railroad, organizing a competing parallel line that would run from New York City to Pittsburgh—the South Pennsylvania Railroad, he called it. He was able to interest Andrew Carnegie in the line since it would cross the yards of his Homestead plant. Vanderbilt tossed $5 million into the pot, as did Carnegie, and the Rockefellers threw in another million. The work of laying the bed was pushed at full speed. Thousands of workmen in the Allegheny Mountains began detonating, slashing, grading, boring tunnels, constructing great stone piers for bridges.
Suddenly, the work stopped. When it became obvious that the nation’s two largest railroads were engaged in a fight to the finish, J. P. Morgan, anxious to calm the fears
of the English shareholders to whom he had sold Central stock, invited George Roberts, head of the Pennsylvania Railroad, and Chauncey Depew, representing the New York Central, for a cruise aboard his yacht, the Corsair. As the Corsair steamed around the outer New York Harbor and up and down the Hudson, he proposed that rather than threatening the very reputation of American railroads, they call a truce, suggesting that the New York Central buy the West Shore out of bankruptcy and that the Pennsylvania Railroad buy the South Pennsylvania from the New York Central.
By the end of the cruise that evening, a deal had been struck. The Pennsylvania Railroad repaid Vanderbilt for all the money expended on the South Pennsylvania. And the New York Central bought the West Shore at such a low price that it was doubtful competing roads would again be built for blackmail.
Compared to the savage Erie war between the Commodore and Daniel Drew, Jim Fisk, and Jay Gould, William Vanderbilt’s battle with the Pennsylvania Railroad had been a rather civilized skirmish. Who would say that William Vanderbilt had not proven himself to be a sensible businessman in terminating a war his father undoubtedly would have pursued to the finish?
5.
When backed into a corner, William Vanderbilt had shown himself to be as ruthless as his father. But the Commodore’s personality didn’t fit him. As numerous as the stories of the Commodore’s grasping covetousness were the stories of William’s quiet kindness and generosity. His wife, Maria, who had raised their eight children, adored him. She once remarked that he had “never said an unkind word to me during all the years we were married.”43 For that matter, no one, no member of his family, none of his business associates, none of his competitors, could remember his ever uttering an unkind remark. When any of his children needed his help, he was there. When his son Willie got caught in a stock market manipulation and lost millions, his father was there to bail him out, handing over to him $5 million in government bonds. Whenever a former employee of the New York Central or an old friend of his father’s needed help, William was there, writing a check to give someone a fresh start. Once a bondholder of the defunct predecessor of the Lake Shore and Michigan Southern Railway Company found a few coupons that had been lost in his desk for many years. Every time he tried to turn them in, he was told they were long overdue and could not be honored. Having exhausted his efforts in dealing with the railroad bureaucracy, the gentleman sent the coupons directly to William Vanderbilt. Vanderbilt replied by return mail, stating that the claim was just, and arranged for the immediate payment of the coupons.44
The management styles of the Commodore and his son William stood in stark contrast to one another. Where the Commodore had been shrewd and secretive, his son was open and forthright. Where the Commodore had made all decisions himself, his son delegated responsibility and sought the advice of others. Where the Commodore had wished to ruin all competition, his son was anxious to reach accommodations with his rivals. Where the Commodore had been intent on cutting all unnecessary service to raise profits, his son took pride in the quality of service his railroads provided. Yet as the press would have it, it was William H. Vanderbilt, not the Commodore, who was labeled forever as the archetypal robber baron.
The misunderstanding originated one fall day in October 1882, when William Vanderbilt was touring the western lines of his railroads aboard a private train of the New York Central. As the train was on its way from Detroit to Chicago, a reporter from the Chicago Tribune and one from the Metropolitan Press Bureau boarded his car to interview the railroad king.
One of the issues they raised was his new fast mail train to Chicago, a special run from New York to Chicago that took twenty-four hours, twelve hours less than his passenger trains. He was considering discontinuing this special service.
“Why are you going to stop this fast mail train?” he was asked.
“Because it doesn’t pay. I can’t run a train as far as this permanently at a loss.”
“But the public finds it very convenient and useful. You ought to accommodate them.”
“The public! How do you know, or how can I know that they want it? If they want it, why don’t they patronize it and make it pay? That’s the only test I have as to whether a thing is wanted or not. Does it pay? If it doesn’t pay I suppose it isn’t wanted.”
“Are you working for the public or for your stockholders?” the reporter persisted.
“The public be damned!” William Vanderbilt snorted in exasperation. “I am working for my stockholders. If the public wants the train why don’t they support it? What does the public care for the railroads except to get as much out of them for as small a consideration as possible? When we make a move, we do it because it is in our interest to do so, not because we expect to do somebody else some good. Of course, we like to do everything possible for the benefit of humanity in general, but when we do, we first see that we are benefitting ourselves. Railroads are not run on sentiment, but on business principles, and to pay, and I don’t mean to be egotistic when I say that the roads which I have had anything to do with have generally paid pretty well!”45
“Don’t forget the cussword,” the editor at the city desk told the reporters when they filed the interview later that day.46
As was consistent with his character, William Vanderbilt had expressed a valid business principle in an honest and straightforward manner. But the following headline was telegraphed to every major newspaper across the country the next morning: THE PUBLIC BE DAMNED! Those four words became the battle cry of politicians, preachers, and editors (“A Millionaire’s Motto,” the New York Sun called them; ““Billy Be Damned’ Vanderbilt” he was labeled by another47), expressing the public’s growing outrage at the excesses of big business, monopolies, capitalism, and greed. That entrepreneurial spirit, which once had been viewed as the foundation of the nation’s industrial growth, by now was seen in a different light: as a threat to the American public. Cartoonists reveled in depicting William Vanderbilt as a bloated plutocrat with flaring muttonchop whiskers, often with a dollar sign on his vest, standing on the backs of his downtrodden employees as he fleeced the public.
The story haunted him on the trip. When he returned to New York, he attempted to set the record straight. “Those who know me and are familiar with my manner of talking do not need to be told that I was greatly misrepresented in that Chicago interview….You ask me about that expression which has been put into my mouth. You say that it has become famous. I never used it, and that is all there is about it. Supposing that the expression which I am reported to have made revealed my real sentiments—do people think that I would publish such an opinion! That is not my way, nor my father’s!”48
“Nor my father’s!” That was an ill-advised afterthought, if ever there was one. Those who remembered the profanity of the hard-bitten Commodore could only smile and conclude, however mistakenly, “like father, like son.”
Assailed on every side—by labor problems, by family squabbles, by competition, by the public—William Vanderbilt plodded onward, head down, watching every step. The old Commodore’s words reverberated over and over: “Any fool can make a fortune. It takes a man of brains to hold on to it after it is made.” Again and again, William reviewed what might go wrong, what different calamities awaited him around the corner. He carefully divided his annual income into two parts: one for expenses, the other for investment. Distrustful of banks, he spread his money around, making small deposits in numerous financial institutions.
One fine day he must have looked up and concluded he had been doing something right: In January 1883, he confided to a friend that he was worth $194 million. “I am the richest man in the world.”49
In the six years since his father’s death, he had doubled his inheritance. He had made as much money in those six years as it had taken his father seventy years to accumulate. Never had so great a fortune been built in so short a time.
He was correct: He was the richest man in the world. One of the Rothschilds was reported to be worth $65 million an
d the duke of Westminster had a fortune of $50 million. An issue of London’s Whitehall Review noted that Vanderbilt’s wealth was greater than that of any member of the English nobility, and that he could “buy up all the Rothschilds and still remain richer than any duke.”50 He had $54 million in government 4 percent bonds, $4 million in government 4 percent bonds, $80 million of railroad bonds, $42 million of railroad stock, $3 million of state and city bonds, $2 million in manufacturing stocks and mortgages, $5 million of real estate, an art collection worth millions. From his government bonds he had an income of $2,372,000 a year, from railroad stocks and bonds $7,394,000, from miscellaneous securities $376,695, a total tax-free income of $10,350,000 annually—over $28,000 a day, $1,200 an hour, $19.73 a minute. His income each day was larger by far than the annual income of most businessmen of the day. He stated that his annual expenses were $200,000. At this rate, his fortune was growing at more than $10 million a year.
The Commodore had died believing that through the occult, he would know what his heirs were doing. Perhaps between playing the harp and singing hymns, the activities that he hoped would occupy his time in heaven, or maybe while trying to figure out how a camel might pass through the eye of a needle, if he was elsewhere, the Commodore noticed what his son had accomplished. Not bad for a blatherskite, he might have said. “There’s something to that boy, Bill, after all!”51
What did it mean to be the richest man in the world? To William Vanderbilt it meant very little.
He was constantly concerned about preserving his wealth, and was obsessed with scrutinizing his smallest expense. Just after he had invested $50 million in government bonds and was sorting them into stacks on his desk, he called for his private secretary, Isaac Chambers, to come into his office.
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