The First Tycoon: The Epic Life of Cornelius Vanderbilt (71 page)

From the deck of the Vanderbilt steamer, Captain A. G. Jones peered through his own telescope at the approaching steam sloop as it emerged out of the sun glare. He could see it flew the Stars and Stripes, but he surveyed it with suspicion. Suddenly he exclaimed, “If that isn't an English rig, you may shoot me!” He was certain it was the English-built commerce raider, the
Alabama
. He ordered the engineer to put on all steam in an attempt to outrun the predator.
⁷¹

Jones's ship was not the
Champion
, but the
Ariel
. The aging sidewheeler had steamed out of New York Harbor on December 1, bound for Aspinwall, and it carried no chests of gold. “The boat crowded to capacity with human beings, and some scarcely human,” wrote passenger George Willis Read. “The confusion and discomfort on board surpassed anything by far I have ever before experienced. The cooking was
filthy
beyond my powers of description. The smell and filth, with the rough sea, has kept me seasick most of the time.” Read was so disgusted that he interrupted the story of the
Alabama
's appearance to write that he ate only a baked potato that day. By the time he reached the deck, the
Alabama
had fired a blank cartridge and run up the rebel ensign.

“I knew it was the 290 at first sight,” Read added. “When I first saw her she was coming up behind us, a mile and a half in the rear, as near as I could guess. She is a splendid ship, and could sail around us with ease. The Capt. put on all steam, and hoped he could get off, but she [the
Alabama]
turned broadsides, and shot two heavy balls. I stood on deck, close to the aft, or back, mast. Saw the smoke rise, the balls leave the guns and come tumbling and whizzing towards me.” One round neatly severed the forward mast. At the urging of a marine officer on board, Jones surrendered.
⁷²

“I was very anxious to destroy this ship,” Semmes wrote, “as she belonged to a Mr. Vanderbilt of New York, an old steamboat captain who had amassed a large fortune in trade, and was a bitter enemy of the South.” After Captain Jones went aboard the
Alabama
, Semmes told him that “Vanderbilt had given one of the finest steamers in the world to the Government with which to run him down, and he would destroy everything of his he fell in with,” according to the London
Times
. “Capt. Jones says the only ship that Semmes fears is the
Vanderbilt,”
the
Chicago Tribune
reported. “He [Semmes] made many inquiries regarding her speed and armament, but obtained no information whatever. He laughs at all the other ships we have.”

Semmes planned to burn the
Ariel
after landing the passengers in Jamaica, but reports of a yellow fever epidemic there caused him to change his mind. Instead, he had Jones sign a bond obliging Vanderbilt to pay $261,000 to the Confederacy thirty days after the United States extended it formal recognition. Then he let the steamship go. Not only had Semmes captured a Panama steamer headed in the wrong direction, his preoccupation with the
Ariel
caused him to miss the
Champion
, which arrived safely in New York with a million dollars in gold.
⁷³

The fate of the
Ariel
, on the other hand, remained unknown in New York. Vanderbilt and the specie shippers waited with growing anxiety for its return from Panama. A report that it had encountered the
Alabama
reached the city but not word of the ultimate outcome. As the
New York Times
reported, they were “prepared to mourn her.” Then, on December 28, it finally arrived unharmed, “and cut short the several obituaries that were in preparation for the occasion.”
⁷⁴

“It strikes me that the rebel steamer
Alabama
is now looking for a homeward-bound California steamer,” Vanderbilt wrote to Welles the next day. “If the steamer
Vanderbilt
, or some other of sufficient speed, could be placed in the Caribbean Sea to convoy the steamers on leaving Aspinwall for two and one-half or three days up to the west end of Cuba, then returning to Aspinwall to be ready for the sailing of the next steamer, which is ten days apart, it would give ample security and would give her a better chance to fall in with the 290.” He said he would order his ships to sail by way of the western end of Cuba; he anticipated little trouble north of the island, given the presence of a U.S. blockading squadron in the Florida Keys. Welles agreed, and forwarded Vanderbilt's letter to the captain of the USS
Connecticut
with orders to carry out his instructions.
⁷⁵

Semmes considered Vanderbilt not only a symbol of Union power and resolve, but a major force in his own right for the South's defeat. The rebel captain would not get a second chance at the Atlantic & Pacific liners, now that the Commodore had arranged for a naval convoy, but he did see a chance to strike at another enterprise organized by “the bitter enemy of the South.” From the newspapers he captured, he learned about Banks's expedition. The press did not know where it was headed, but Semmes sifted through the various guesses and came to a wise conclusion. He accordingly set his course for the Gulf of Mexico; with any luck, he would descend on the vulnerable transports and blow them out of the water, along with their thousands of Union troops and countless tons of arms.

On the evening of January 11, 1863, Semmes closed in on a line of ships off the Gulf Coast. It turned out not to be Banks's expedition, but a blockade squadron. Semmes had guessed wrong, sailing to Galveston, Texas, rather than the mouth of the Mississippi. One of the Union ships, a side-wheeler named
Hatteras
, pulled out of formation and gave chase. Semmes ordered the
Alabama
about and ran, firing all the while with a large gun mounted on a pivot at the stern, throwing eighty-five-pound explosive shells. In a battle of just fifteen minutes, the
Alabama
sank the
Hatteras
.

It was, in many respects, a lucky victory. Semmes's business was to avoid Northern warships, not fight them. And the hardest to avoid was the biggest and fastest, the one specially assigned to hunt him down. “He thinks the
Vanderbilt
much too heavy for him,” a South African newspaper reported on September 13, 1863. “In commenting upon the probable consequences of an encounter with the
Vanderbilt
, Captain Semmes spoke with much modesty about the power of his own ship.… His opinion is, that the
Vanderbilt
has much greater speed than the
Alabama
, and that it will be impossible for him to get away from her.” Referring to each ship's broadside, Semmes fretted that the
Vanderbilt
“threw twice my weight in metal.”

For a few days near the Cape of Good Hope, the
Vanderbilt
came close to catching the famous Confederate commerce raider—even passing close by in a fog bank—but the prey slipped away. In June 1864, the USS
Kearsarge
finally destroyed the
Alabama
in battle off the French port of Cherbourg. By then, the rebel cruiser had captured or destroyed sixty-four merchant ships, nearly crippling the U.S. commercial fleet.
⁷⁶

VANDERBILT'S INSTRUCTIONS
for convoying the Panama steamers marked a virtual end to his direct involvement in the Civil War. Cynicism would color later assessments of his efforts, growing out of the deep suspicion of nineteenth-century Americans—particularly newspaper editors—toward wealthy and powerful men. Cynicism, of course, always seems to be the most sophisticated position to take; yet it is also the laziest (along with hero-worship, its direct opposite).

An honest reading of the evidence shows a proud, prickly, and highly capable man of immense personal force—one who was also deeply patriotic. Welles's refusal to accept the
Vanderbilt
as a gift, or any of Vanderbilt's steamers at a fair purchase price, essentially forced the Commodore to take enormous sums of money from the federal government in charters fixed by brokers who had every interest in running up the rates. When given the chance, he served his country to the utmost while refusing any remuneration. The notion of a scandal surrounding the Banks expedition does not stand scrutiny. Just one ship out of the entire fleet slipped through inspection when it clearly should not have—and this at a time when Vanderbilt was chartering every steamer available in New York under a tight deadline. Southard exacted a commission (on the sailing ships only) through methods so indirect that Vanderbilt can hardly be blamed. Furthermore, Southard did his job, fitting out the vessels with the expertise expected of him. Vanderbilt's prompt and capable response to the
Merrimack
scare throws new light on this oft-told tale, for he played an important part in a strategic victory that usually is credited to the
Monitor
alone. And the gift of his eponymous steamship was an unprecedented act of patriotic charity, worth nearly $1 million.

Vanderbilt needs no special pleading. A man of his unfathomable wealth, obsessed with maintaining the power to defend himself against his enemies, could (and did) withstand a great deal of cynicism. But perhaps his elemental humanity requires a few words of defense. Derided by the most sneering of his contemporaries, he remains unreasonably fixed in the historical imagination as lacking all sensitivity, as an iron-hearted man of money. A man of money he most definitely was, often harsh and profane. But he possessed a tenderness that had become more and more visible in the years after the cruise of the
North Star
in 1853. Here we read a comment of how he and Sophia enjoyed their trip together to Washington; there we read Vanderbilt's truly warm letters to the family of his daughter-in-law, Ellen Williams Vanderbilt. Such signs would continue to accumulate.

This emotional inner life was certainly affected by the fate of that other member of his immediate family who was called to national service during the Civil War. Lieutenant George W. Vanderbilt commanded the inglorious recruiting station in Boston until April 1, 1862. On April 17, the regular army promoted him to the rank of captain, and named him aide-de-camp to General John C. Frémont, commander of the Mountain Department. But it seems unlikely that George ever saw duty beyond the Back Bay. He fell sick and went on a leave of absence even before his promotion. The illness—consumption, by one account—was clearly serious. At some point in 1862 or 1863, he traveled to Nice, France, to recover his health. Curiously, another George W. Vanderbilt from New York fought in the war, a doppelgänger to the Commodore's son, winning glory as a cavalry officer that the George of West Point and Washington Place would never earn.
⁷⁷

It was a bitter twist for Vanderbilt, who dearly loved both his country and his youngest boy. He offered his son as a sacrifice to the nation in its hour of greatest need, and the nation took it. But the sacrifice was wasted, without purpose, without honor, leaving George only the pain and humiliation of a body that refused to function.

If Vanderbilt suffered as his son departed for Europe with a doubtful future, he also maintained that single-minded strength of will that had carried him to such heights. As the Civil War continued to rage in 1863, he went into battle to protect his private interests with a cunning and ferocity that would astonish the world—and seal his place in history.

*1
Merrimack
was commonly spelled without the final “k.”

*2
Writers often mistakenly describe the gold premium as the price of gold
per ounce
, which only would be true if the weight of a gold dollar was 1/100 of an ounce. (It was, in fact, more than five times that amount.) Setting the price of gold by the ounce emerged far later. The distinction is important, for it speaks to the true nature of the gold market in the 1860s as a currency exchange.

Chapter Fourteen

THE ORIGINS OF EMPIRE

F
ew men in wartime New York were better known than Cornelius Vanderbilt—or so often misjudged. Thousands recognized him as he drove his fast horses through the streets each day, sitting erect on a light racing wagon with reins in hand, long white sideburns flowing down his cheeks, keen eyes squinting ahead. The fastidious Commodore always dressed in black and wore a white cravat typical of a passing generation, now affected largely by clergymen. One afternoon he left his office on Bowling Green and caught a stage headed north on Broadway. In front of him sat two young men dressed in the street finery favored by New York thugs. “I looked them over rather sharply, as I am accustomed to do,” Vanderbilt recounted to a friend. One of the pair turned and looked back; he did not recognize the dignified old man in the white cravat, but assumed that he was a minister of the gospel. “I suppose you think I'm going to hell?” the rough asked. “No,” Vanderbilt replied. He told the youth (as he later related) that “he seemed pretty badly off just then, but he appeared to have good stuff in him, and I guessed he'd come out all right.” The stranger turned to his friend and exclaimed, “Universalist, by God!”
¹

Individuals far better informed than this one came to wrong conclusions about the clerical-looking Commodore (who spent very few of his many days in any kind of church, Universalist or otherwise). They still do. Even in retrospect, it is difficult to appreciate the true dimensions of his wealth and the power it gave him. The American economy grew rapidly but unevenly. New York towered over the rest of the developing nation as would be impossible in later centuries; wealth concentrated there, and financial markets matured there, far faster than anywhere else. It was the preeminent American port, the preeminent banking center, the home of the preeminent stock exchange. Securities held in New York could be liquidated or hypothecated rapidly. Vanderbilt was not only far richer than most rich men, he also occupied a strategic location in which he could use his fortune as a lever to move even greater masses of wealth and personally affect the economy nationwide.
²

Vanderbilt himself struggled to describe his role as his financial capacities grew. “I… am connected with shipping,” he vaguely told a Senate committee on December 30, 1862. Then he felt obliged to add, “I run steamship lines.” Then he qualified again, observing, “Some would call me a merchant.” In some ways, this old-fashioned and highly general term remains the best description. Shipper? Financier? Industrialist? Railroad director? He was all these things. He guided the Atlantic & Pacific Steamship Company, and managed its strategic relations with Pacific Mail. His engine works and shipyard produced pistons, boilers, and steamers. He purchased half a million dollars in Connecticut state bonds. He served on the boards of the Harlem, Erie, New Jersey Central, and Hartford & New Haven railroads.
³

The very diversity of his activities makes it difficult to understand his true significance, for it is often impossible to know where he placed the lever of his fortune. He made an art out of hiding his hand, having risen with the original generation of New York and New England's smart men, the wily pioneers of free-for-all commerce who knew how to speak and say nothing. He would make this connection himself in dodging an inquiry from a New York State Assembly committee. “Let me answer your question by asking another,” he would say, “as the Yankee does.”
⁴

In 1863, much of the mystery would disappear. That year he embarked on a new course, the last in his long business career. The results would cast a shadow over millions of people, if not the entire nation; indeed, Vanderbilt's historical importance would become apparent to all, rising above his furtive methods like a mountain peak above the clouds. In step with an increasingly specialized economy, he would concentrate his resources in a single industry, the most important of the nineteenth century: the railroads. So great would be his impact that a leading business journal could eulogize him, without fear of contradiction, as “the most striking figure in the American railroad world.”
⁵

Vanderbilt was striking enough already, with his vast wealth and control over major steamship lines, but his transformation from Commodore to railroad king would give him a significance that was cultural as much as economic. He would lead a revolution in American life, one that was terribly obvious to his contemporaries but perhaps less so to later generations. The lingering image of post-Civil War railroads is one of construction—think, for example, of the Chinese and Irish work crews who laid the transcontinental lines through mountains and wilderness—and it is an image with a solid basis in fact. After a wartime pause in new building, U.S. railroad mileage would more than double, from about thirty thousand in 1860 to seventy thousand by 1873, as the loose net of tracks that overlaid the American map became a fine mesh. But Vanderbilt would play little role in this process. Though he would build critical (and lasting) new infrastructure, he would lay few new lines and take no interest in the West, where construction through virgin land was most pronounced.

Vanderbilt, rather, would pioneer the rise of the truly gigantic business corporation. This process would leave an imprint on American society every bit as deep as the expansion of the physical railroad network itself. His role in this revolution would prove more startling in his own day than the mere fact of his riches. As the
Railroad Gazette
would write of him in 1877,

His early career as a railroad manager [i.e., starting in 1863] was distinguished by a series of bold, startling, revolutionary measures which attracted universal attention and had an effect reaching far beyond the lines and companies with which he dealt directly. The Vanderbilt era was the first great era of consolidations. That it was created by Vanderbilt would be too much to say; but he was the first great actor in it, and apparently hastened its coming.
⁶

Consolidations
. The word seems quaint, an old-fashioned version of the eye-glazing phrase “mergers and acquisitions,” yet it was fraught with portentous meaning in the 1860s. Vanderbilt's consolidation of one railroad company into another into another into an empire would mark a profound change in the nature of the corporation itself. As late as the Civil War, a strong sense lingered that corporations were public bodies, chartered to channel private capital toward public ends—specific, limited ends. Early business corporations even operated under time constraints. The Richmond Turnpike Company had expired on schedule, and even the New York & Harlem Railroad had had to renew its charter in 1859 before it lapsed. Most corporations had come into existence during the life-spans—indeed, the active careers—of their stockholders and managers, who did not necessarily imagine that their companies would outlast their own involvement in them. The Pacific Mail directors had tried to sell out to the Commodore in order to pay off the stockholders and shut down permanently.

Starting in 1863, Vanderbilt would progressively destroy the last vestiges of this long-held conception. Drawing on his extensive experience with the corporate form, he would strip it of its remaining public character as he finished the long process of converting it into a vehicle for private gain alone. His consolidations would submerge older railroad companies into a behemoth to serve the requirements of efficiency and profitability; in so doing, he also would drown the original public purpose of these companies' charters, to serve specific localities over well-defined routes. Often these consolidations would prove highly beneficial for the public—though only incidentally because it was good business. And his takeovers would heighten the growing distinction between corporations and their flesh-and-blood shareholders and managers. He would separate companies from the individuals originally associated with them, transforming them into impersonal and permanent, or very long-lived, institutions.
⁷

Historian Alfred D. Chandler Jr. famously referred to the rise of the large business enterprise—a rise led by the railroad corporation—as a “managerial revolution” in American business. The demands of a geographically sprawling railroad with thousands of employees necessitated the creation of a bureaucracy of salaried, professional managers; these managers imposed a “visible hand” on economic decisions that remade the smaller, simpler market economy of old. By creating one of the largest railroad companies the world had ever seen, Vanderbilt would directly shape this business transformation. But the sheer size of his enterprises would give him a larger cultural significance. He operated on an unprecedented scale, amassing some of the first interstate corporations in American history, which gave him a chokehold over the nation's arteries of commerce. The gigantic entities he helped pioneer would overshadow forever after the old landscape of individuals and small partnerships. They would also infuse American life with an institutional, bureaucratic business culture—what scholar Alan Trachtenberg calls the “incorporation of America.”
⁸

Vanderbilt would emerge as the first great icon of this revolution. This self-taught native of the eighteenth century would masterfully play the instruments of the corporation to gather unparalleled power in his own hands and contribute to a stark polarization of American society. Yet his ascendancy can hardly be dismissed as a curse. He would also create vast new wealth and forge one of the most efficient, lowest-cost transportation routes in the world, speeding American economic growth and opening new opportunities for investors and consumers. His contemporaries would have good reason to mark his rise as the start of a new era—and to give his name to it.

How did he do it?
Why
did he do it? Observers typically have accepted the simplistic formula that he suddenly realized that railroads, not steamships, were the technology of the future.
⁹
In truth, what he started in 1863 emerged naturally from his earlier career. He had been embroiled in railroads since the 1830s, served as the Stonington's president in the 1840s, and his involvement in the industry had increased in the 1850s. But too often writers have credited him with deep-laid plans of conquest, a systematic scheme to build an iron Rome.
¹⁰
There is another interpretation that better fits the unknowability of the future before it becomes the past, an interpretation more complimentary, perhaps, of the Commodore's abilities. Though he was an excellent planner, he was still more accomplished as an improviser, a master of the unpredictable rough-and-tumble of business combat. He possessed a keen eye for strategic opportunities in his opponents' tactical errors, for turning successful skirmishes into full-blown campaigns. When he first started, he had little inkling of what he eventually would accomplish.
¹¹

The irony of this, the most successful phase of Vanderbilt's career, is that he would resist each of the battles that brought him to new heights of wealth. He would consistently pursue diplomacy with connecting railways, accepting war only as a last resort. Contented with his realm, he would conquer a neighbor in order to eliminate its harassment of his domain. New conflicts with new neighbors would follow, leading to further conquests, until he gained a vast, consolidated kingdom—much as the Caesars pressed their boundaries forward to pacify the barbarian tribes that always lay beyond.

These epic wars of conquest began humbly, with what might be called a hobby. In 1863, he cocked an eye at the most bedraggled railroad in New York: the Harlem, the benighted line that he twice had rescued from bankruptcy. His initial interest in the company need not have concerned the public at all, except that it led him into a conflict with one of the great perils that plagued American democracy in the 1860s, that of government corruption. The elected officials of New York flapped around what they assumed to be the mere corpse of a company, each looking to tear off a piece for himself. Vanderbilt would not let them. The origins of his empire, then, lay not in his godlike foresight, but in his determination to punish the greed of a few foolish men.

ON FEBRUARY 16, 1863
, Cornelius Vanderbilt wrote to former governor Edwin D. Morgan to decline a request to stand as an incorporator of a hospital for invalid soldiers. “I feel it a duty I owe myself to keep my name aloof from any association with public acts granted by legislative bodies,” he wrote, “inasmuch as whenever my name has appeared before such bodies, without any regard to the justice of the object, it has been looked upon as a speculation, and with an eye of jealousy.” Vanderbilt's concern for his personal honor is striking, and his wish to reduce his visibility even more so. “At this late day,” he added, “I am desirous of keeping myself aloof from any public transaction of any kind or nature.”
¹²