He was the first robber baron. Other familiar names associated with the nineteenth century—John D. Rockefeller, Andrew Carnegie, J. P. Morgan—were young men in the early days of their careers when he was at the peak of his fame. Following the Civil War, he became the richest person in American history, and to this day remains the second-richest, bested only by Rockefeller. (Yes, richer by far than Jeff Bezos, Bill Gates, and Warren Buffett, insofar as such things can be determined.) More importantly, he was one of the original architects of the modern corporation, “consolidating” one regional railroad into another to form one of the country’s first massive, impersonal corporations. And he singlehandedly restored order and stabilized the US economy in the midst of one of the most severe financial panics in our history.
The First Tycoon: The Epic Life of Cornelius Vanderbilt by T. J. Stiles (2009) 773 pages @@@@@ (5 out of 5)
Winner of the National Book Award and the Pulitzer Prize for Nonfiction
A life spanning 18 presidencies
This man, Cornelius Vanderbilt, is the subject of T. J. Stiles‘ magnificent biography. Researched in great depth, written with verve, and scrupulously balanced, The Last Tycoon rejects the one-dimensional portrait of Vanderbilt as an illiterate, uncouth tyrant, restoring him to the complex, contradictory, brilliant, flesh-and-blood person he really was while correcting significant errors in previous histories of mid nineteenth century America.
Born in the second year of George Washington’s presidency, “Commodore” Vanderbilt witnessed the passage of 83 years, outliving not just nearly all his contemporaries but several of his children as well. His life spanned the administrations of the nation’s first 18 presidents but (in my judgment, not Stiles’) proved more consequential than all but four of them (Washington, Jefferson, Jackson, and Lincoln). In several ways, the Commodore (as he was known through the last half of his life) had far-reaching impact on the growing nation: pioneering the efficient, low-cost passage to California in the wake of the Gold Rush, thus helping knit the country together, accelerate Western population growth, and shift tons of gold from the West Coast to fuel economic development in the East; leading the development and rationalization of the railroad network that heightened New York’s preeminence as the country’s financial center and biggest port; and breaking new ground in the development of the entity known as the corporation.
Cobbling together the modern corporation
In hindsight, it seems to me, it was Vanderbilt’s groundbreaking work in piecing together his railroad empire that has left the biggest imprint on our times. Stiles painstakingly relates how the Commodore’s patient and protracted campaign eventually created the massive New York Central Railroad, one of the first of the huge corporations that soon came to dominate American life. (The other was the Pennsylvania Railroad, with which Vanderbilt alternately collaborated and competed.)
As Stiles makes clear, it’s difficult for us today, living in a world awash in corporations, to understand that the term “corporation” bore an entirely different meaning for much of the nineteenth century.
Originally, the corporation was a creature of the state, chartered for a specified number of years to advance the public interest in a particular way — building a canal, for example. The time limits fell by the wayside as the nineteenth century proceeded, but state-chartered corporations otherwise looked much the same in 1870 as they had in 1810: for example, a small group of wealthy investors would pool their money to build a railroad from one town to the next, seek a state charter, hire the dozens or even hundreds of employees they needed, then operate the business for as long as it proved profitable (which was not always the case!). As there weren’t that many wealthy investors with the necessary legislative connections, the number of corporations was strictly limited. The board and officers of any corporation could be easily identified, and it was they who personally managed the company. Capitalization was limited, usually no more than a few million dollars at most.
More than anyone else, Cornelius Vanderbilt changed all that. As the US economy grew from mid-century through the Civil War, Vanderbilt shifted his efforts from the steamboat business he had dominated (meriting the honorific “Commodore”) into the fast-growing railroad industry. Just as steamboats had dominated transportation for decades, the railroads — the “high tech” of their day — soon far surpassed them. As Stiles notes, “The railroad sector surpassed all other industries combined, and individual railway corporations overshadowed any other kind of firm. Most manufacturing was still conducted in family-owned workshops and small mills; very few factories represented as much as $1 million of investment . . . Even the largest commercial banks rarely boasted a capitalization of more than $1 million. By contrast, at least ten railroads had a capitalization of $10 million or more even before the [civil] war began.” Small wonder that Vanderbilt, with his monumental ambition and ego, was drawn into the fray!
As the country’s population grew, fueled by increasing immigration, and the attractiveness of New York’s port became irresistible, “Western” (not Midwest) farmers and industrialists alike were demanding ever-great shipping capacity from West to East, and the Commodore responded by financing and running a series of small railroads that constituted strategic links along the way. His unsurpassed talent as a business strategist and financier enabled him to outsmart and outperform his competitors. The end result was the creation of a corporation that employed not dozens or hundreds but tens of thousands, encompassed thousands of miles of track across the Northeast and Midwest, and was capitalized in the tens of millions of dollars (the equivalent of billions today).
With a few exceptions — notably, Vanderbilt himself in his waning years — these behemoths could no longer be managed by amateurs. The modern corporation was born, with its insatiable need for salaried functionaries filling bureaucratic niches. Within a decade of Vanderbilt’s passing in 1877, the US Supreme Court enshrined the change in law by insisting that corporations are persons, entitled to all the rights embodied in the Fourteenth Amendment. The rush was then on to a world in which the corporation is king.
Anyone interested in US history — or, for that matter, anyone who loves biography — will find The Last Tycoon to be a superior reading experience. Three cheers for T. J. Stiles!
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