The First Tycoon

Here is a book that is a must read for those interested in economic history.


T. J. Stiles, “The First Tycoon” (The Epic Life of Cornelius Vanderbilt), Alfred A. Knopf, 2009, 719 Pages
Cornelius Vanderbilt was born on Staten Island during George Washington’s presidency, he rose from boatman to builder of the nation’s largest fleet of steamships to lord of a railroad empire. Lincoln consulted him on steamship strategy during the Civil War; Cornelius donated his huge steamship to the Union. This eponymous steamship, Vanderbilt, was refitted and served, along with the Monitor, to bottle up the Confederate ironclad Virginia for most of the war. Vanderbilt did more than perhaps any other individual to create the economic world we live in today. His multi-state consolidation of many railroad systems created the only economic structure that could organize, finance and manage such a huge conglomerate: the corporation.

The First Tycoon is an excellent book describing economic development from 1810 to Vanderbilt’s death in 1877 when his fortune was estimated at $100 million dollars. His fortune is the least important legacy he created. The dynasty he sought to leave did not happen.

My Notes:

Pg. 33: Commerce in 1816 consisted of the physical movement of people and goods; it only flowed as smoothly as transportation technology and infrastructure would allow. And transportation was a problem that deeply troubled merchants and lawmakers alike. The nation’s road network could best be described as barely in existence. In 1816, a Senate committee found that it was as expensive to move a ton of goods thirty miles overland as it was to bring the same ton across the Atlantic from Europe.

Pg. 41: The governing elite in early 1800 saw no conflict of interest in using public office to enrich themselves (they still don't). As society’s natural leaders, they reasoned, they should be entrusted with economic stewardship as well. This outlook, this merging of the private and public roles of the elite, was the essence of mercantilism, in which the state empowered private parties to carry out activities thought to serve the public interest. The standard reward for such an undertaking was a monopoly. This mercantilism is what Vanderbilt had to fight against throughout most of his career.

Pg. 61: Gibbons v. Ogden (1824) was a case in which the Supreme Court of the United States held that the power to regulate interstate commerce was granted to Congress by the Commerce Clause of the Constitution. Thomas Gibbons was operating a competing ferry service which had been licensed by Congress in regulating the coasting trade. Ogden obtained an injunction from a New York court against Gibbons to keep him out of New York waters, maintaining that navigation was not a distinct form of commerce, and was thus a legitimate area of state regulation. Gibbons then sued for entry into the state, and the case was appealed to the United States Supreme Court. The Supreme Court ruled in favor of Gibbons.

Pg. 66: Gibbons v. Ogden came at an extraordinary moment. Within a year, the most important work of public engineering of the era, the Erie Canal, would be complete foam Albany to Lake Erie. The unleashing of steamboats in New York waters and the opening of the canal that connected the nation’s interior to the Atlantic coast would integrate markets and open the way for new economic growth. They would also guarantee New York City’s dominant position in the American economy, and make way for Vanderbilt’s rise.

Pg. 168: Prior to Vanderbilt, stock share prices ultimately rested on what it had cost to physically create the company, not how much it earned. Investors looked instead to a return on that cost in the form of dividends—often referred to as ‘interest on capital.’ Par value was usually $100 per share and only that amount of shares in $100 multiples that the construction costs amounted to were issued. A price over par—above $100—was a premium paid for the certainty of a reliable return. A price below implied risk.

Pg. 205: After the 1849 discovery of gold in California, Vanderbilt established a steamboat transportation system from New York through Nicaragua by train and on to California by another steamboat. This success by Vanderbilt had national consequences. Simply put, he helped transform a rush for gold into the lasting establishment of American civilization on the Pacific. And he did it not only without a federal subsidy, but in completion with the subsidized line which ran through Panama (a longer distance).

Pg. 271: William Walker was an American filibuster or pirate who attempted to conquer several Latin American countries in the mid-19th century. He appointed himself president of the Republic of Nicaragua in 1856 and ruled from that year to 1857. He was executed by the government of Honduras in 1860. Filibustering had entered the American vocabulary around 1850 as a name for armed invasions of foreign territory by private American citizens—generally with the hope of annexing those lands to the U.S.

Pg. 301: Dred Scott case: Chief Justice Roger Taney ruled that Negroes had no rights which a white man was bound to respect. What shocked the majority of the Northern public was not the blatant racism, but the implication that free states had no power to bar slavery within their borders.

Pg. 335: n 1864, at the age of seventy, Vanderbilt abandoned his lifelong career in shipping as he amassed a railroad realm. Nine years later, he faced the Panic of 1873, an economic cataclysm that he was able to use to consolidate his rail road system.

Pg. 382: If one word could describe the railroad system in 1860, it would be fragmented. A total of 30,626 miles of track draped the American landscape; hundreds of companies made up that network, which had as many as seven different gauges (widths between tracks), from 4 feet 8 ½ inches (standard in New England, New York, and Pennsylvania) to 6 feet (used on the Erie Railway and some thirteen smaller lines). This confusion dated back to the origins of the system in the 1830s and ‘40s. Rather like the old turnpike companies, railroad corporations had been created by the merchants of various cities and towns to funnel trade toward themselves. Local communities fiercely resisted the integration of the network for fear that business would roll right past them; they wanted breaks between railroads, despite the inefficiencies imposed on long-distance commerce. By the stat of the Civil War, such legal restrictions largely had been eliminated, but the profusion of incompatible gauges and fragmentation into scores of companies persisted, with conseq1uent costs from ‘breaking bulk’ (loading freight from one car into another) and outbreaks of hostilities between connecting lines.

Pg. 402: The development of a national railroad system was the most tremendous and far reaching engine of social revolution which has ever either blessed or cursed the earth wrote a contemporary of Vanderbilt. It magnified the steamboat’s impact, instilling a mobility in society that unraveled traditions, uprooted communities, and undercut old elites. It integrated markets, creating a truly national economy.