Friday, May 30, 2014

Cornelius Vanderbilt: Ferry Owner Turned Railroad King

Cornelius Vanderbilt
Transportation is a viable mode of traveling from one place to another. It allowed economies to grow. It allowed people to see different places besides their home. The bigger your country, the more the mode and more integrated the transportation should be. The United States is one example of these big countries and during the 18th-century, many cash in on this industry. Among of this transport tycoons is the competitive "Commodore" Cornelius Vanderbilt. 

"Commodore” Cornelius Vanderbilt (May 27, 1794 – January 4, 1877) lived his life as a great tycoon in the maritime, then later, in the railroad industry, the two biggest transportation industries in the US. He used his great entrepreneurial skills and ruthlessness to get to the top of each ventures he took. He was criticized by some for his business practices and was labelled a Robber Barons. However, some admired him for his hardwork that made his life story a rag to riches story. Nevertheless, it was hard doubt that Cornelius Vanderbilt is part of the first batch of great businessmen in American History.

Cornelius Vanderbilt was born on May 27, 1794 in Staten Island, New York. He came from a Dutch descent family of Cornelius Vanderbilt and Phebe Hand. His family suffered hardship and poverty during his childhood. Because of their condition, he lacked a formal form of education. By the time he turned eleven years old, he began to help his father on their family business, which was ferry service. At the age of sixteen, he decided he wanted to start his own business. 

He began his modest business with the help of his entrepreneurial mind as well as cleverness. To start his own business, he needed a source capital. To get the capital needed for his new business, the young Cornelius Vanderbilt persuaded his mother to lend him a hundred dollars in exchange for his labor on their farm. Eventually, he managed to finish the work on the farm with the help of his friends and eventually got his $100 from his mother. He used the money to construct a small sailing periauger or a boat to start his own ferry business. With this single boat, Vanderbilt began to provide a very satisfactory ferry service for passengers crossing from New York to Staten Island and vice versa. Customers loved Vanderbilt’s service for his honesty and high standard but simple services.

In 1812, the devastating Napoleonic War reached America under the form of the War on 1812. From the breakout of war, Vanderbilt received lucrative contracts from the United States Government allowing him to expand his business. He was contracted to ferry provisions and soldiers across various forts in the New York Harbor. By the time the war ended, Vanderbilt earned a lot of wealth. This gave him the chance to purchase a new and bigger schooner for his business. By 1817, his net worth amounted to about $19,000 and earned him the nickname “Commodore”. Shockingly, Vanderbilt made an unexpected decision afterwards.

Being a future minded person, the young ferry entrepreneur decided to leave his business. The advent of the faster and more efficient steamboats made Vanderbilt to rethink the future of his business. The age of steamboats had arrived. His business, however, still relied heavily on sail masts ships, which were slower than steam-powered boats. Moreover, because steam-powered ships had lesser travel time, many passengers preferred it. Predicting the future collapse of his business, he decided to leave the industry; henceforth, he sold all his ships. He then moved to New Brunswick and opened a new business. He and his wife, Sophie Johnson, decided to open a tavern, named the Bellona House, which served as a resting place for travelers heading and returning between New York and New Jersey.

To support further his family, he accepted a job on a company of another ferry service owner, Thomas Gibbons. From his job, he received a modest salary of $1,000 per year. Gibbons was operating on the route of New York, New Brunswick, and New Jersey. Gibbons and Vanderbilt’s relation proved to be very close. Gibbons placed Vanderbilt as a top manager and a captain of one of his steamboats. Vanderbilt operated it on his best capacity and earned praises from his passengers for his very satisfying services.

The partners faced many problems during the years between 1818 up to 1826. One obstacle they fought was against Aaron Ogden. Ogden owned a license of monopoly on the trade route of New York City to New Jersey that was started by Robert Fulton. Gibbons wanted to break the monopoly to enter the lucrative route. On the state courts, Gibbons lose, but when the Supreme Court decided on the case, Gibbons won and the monopoly was removed.

In 1829, with Thomas Gibbon’s dead for three years, Vanderbilt resigned from the ferry company, now ran by a relative of Gibbons. Afterwards, he decided once again to start his own business. He used his earnings to buy new ferries that would cater the needs of passengers crossing New York and Peekskill. On that route, he faced competition from a certain businessman named Daniel Drew. His competition with Drew would reveal Vanderbilt’s tenacious and ruthless tendencies. Vanderbilt began to establish predatory pricing. He acted viciously and mercilessly against his competitor. He cut his price so low that it drained out the passengers from Drew’s ferries. This kicked out Drew from the business allowing Vanderbilt to operate the route with no competitors.

After Drew, he then turned his sight to the Hudson River Association that controlled the ferry trade in Albany. Again, Vanderbilt slashed prices to have his opponent bleed out of passengers and freights. The tactic worked for the second time. To save themselves from demise, the Association paid Vanderbilt more than $40,000 to make him back away from the route. The Commodore agreed and got the best of the Association and turned his ferries on Long Island Sound, Boston, and to other places in Connecticut. By 1834, Vanderbilt’s wealth amounted to $500,000 and became a towering figure in the ferry business.

In 1848, a new chapter on the business career of Vanderbilt opened. California gold rush was on and every prospector in the country wanted to go to the west to find there fortune, however, there was a problem. Transcontinental transportation system was not yet in existent, and so a prospector must take the long arduous journey by land across the vast western rigid terrains and hostile attacks from Native Americans. But there is another option. The second option was still long but safer route provided by the Pacific Steamship Company. Their route involved travelling by sea to Panama, cross the isthmus by wagons or horses, then another sea voyage from Panama to San Francisco. Vanderbilt saw opportunity on this lucrative traffic. He knew that if he could provide a shorter travel time for passengers, he could corner the market. He and his partners then established the Accessory Transit Company. He provided a shorter to California that reduced travel time by two days. His route involved travel by sea to Nicaragua, cross the country and another sea journey to San Francisco. Lucky for Vanderbilt, he got a charter for his company from the Nicaraguan government and allowed him to proceed. The business was so lucrative that Vanderbilt managed to build his own yacht, North Star. In 1853, he announced that he would resign as president of the Accessory Transit Company and would embark on a grand European tour aboard of the North Star.

When Vanderbilt returned from his grand European tour, he faced betrayal from his associates in the company. First, he was betrayed by his appointed caretaker of his company, Joseph L. White and Charles Morgan. The two bought out Vanderbilt from the company. When Vanderbilt returned, he launched a swift counterattack. After few months, he bought back his company from the two usurpers. The second act of betrayal against him was the collusion involving another associate of his, Cornelius Garrison. Garrison was a part of a plan to take out Vanderbilt’s ferry business in Nicaragua. This involved Garrison and an American adventurer in Nicaragua that took power and revoked the charter of Vanderbilt. Vanderbilt managed to take on Garrison while the coup plotters in Nicaragua were toppled immediately. However, Vanderbilt failed to get his charter back with the new Nicaraguan government.

Vanderbilt decided that he had enough troubles from his large passenger liner company. He sold the Accessory Transit Company and entered a much bigger venture. He opened a trans-Atlantic shipping business. He competed against two dominant shipping companies, the Cunard Line and the Collins Shipping Company. Vanderbilt started his business with only two ships, one named the Vanderbilt. The business, however, was not lucrative as he thought and began to sell his ships. During the Civil War, he pushed the Union to receive his donation, the Vanderbilt, to be refitted into a battleship. The Union accepted his donation.

During the Civil War, Vanderbilt began his interest on the growing and profitable industry of railroads. During the late 1850's he had already began to buy railroad stocks as he saw its  potential. In 1862, Vanderbilt began to buy more railroad stocks. On the same year, he acquired the New York-Harlem Line. Then he bought more stock and served as a board member to several railroad companies. He then aggressively and ruthlessly began to buy other railroad lines, such as the New York Central Railroad in 1867.

Vanderbilt was on his way to top, however, he would face a tough challenge from two dubious men. In 1868, Vanderbilt wanted to own another lucrative line, the Erie Line, which connected Lake Erie to New York.  He launched a hostile takeover by buying as many stocks as he can of the line in the New York Stock Exchange until he had the majority. This attempt of a hostile takeover began the so-called “Erie War.” Aggressive he might be, but the owners of the line, Jay Gould and James Fisk and with the help of his former competitor Daniel Drew, would not allow him to succeed easily. The three issued convertible bonds that could be exchange for stocks. As a result, with every conversion of bonds, watered stocks were produce. On this process, with the increase of number of stocks, Vanderbilt failed to gain the majority. Eventually, Vanderbilt accumulated losses to about $7 million on the stock market without even taking over of the Erie Line.

To compensate for his lost on the Erie War, he began to extend his network of railroad lines. Some lines were extended to the growing cities like Chicago and Cleveland. He bought the lines in Lake Shore, as well as the Michigan Southern Railroad. In 1871, he opened his iconic and majestic Grand Central Depot that connected the three lines of New York-Harlem, the Hudson, and the New York Central. The Grand Central Depot was the predecessor of today’s Grand Central Station. In 1875, he acquired the Canadian Southern and the Michigan Central. With these two acquisitions, Vanderbilt cemented his title as king of the railroads.

Besides railroads, the Commodore spent his money on other things as well. Besides his luxurious yachts, he also spent money on grandiose houses. In 1830’s he bought a mansion in New York alongside the rich and wealthy elites of the city. However, his arrogant and brush attitude made him an outcast. He also built a mansion in his hometown of Staten Island. In 1873, he financed the foundation of the Nashville Central University, which would later be renamed to Vanderbilt University.

On January 4, 1877, the Commodore Cornelius Vanderbilt died at the age of 82. Leaving a net worth of $100,000,000, most of which would be left to his son, William.

Bibliography:
Ingham, J. Biographical dictionary of American Business Leaders. Connecticut: Greenwood Press, 1983. 

Lawrence, B. Fascinating Facts from American History. Maine: J.W. Walch, 1995. 

Olson, J. Encyclopedia of the Industrial Revolution in America. Connecticut: Greenwood Press, 2002. 

"Cornelius Vanderbilt" Famous Entrepreneurs. Accessed May 25, 2013. http://www.famous-entrepreneurs.com

"Cornelius Vanderbilt" History. Accessed May 25, 2013. http://www.history.com.

"Vanderbilt, Cornelius - Overview, Personal Life, Career Details, Chronology: Cornelius Vanderbilt, Social and Economic Impact" encyclopedia.jrank.org. Accessed May 25, 2013. http://encyclopedia.jrank.org.
 

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