The First Tycoon

by T. J. Stiles

  This same intense pride pulsed through his drive to win the California mail contract. He dispatched Daniel Allen to Washington with letters for Postmaster General N. K. Hall and Secretary of the Navy William A. Graham, saying that he could carry the mail via Nicaragua in twenty-five days, faster than any other route. “I am willing to pledge my reputation,” he declared, “and it is well known to those who know me (and among those is the present Secretary of State), that I will make no such pledge unless certain of its fulfillment.” That new secretary of state was Daniel Webster, whom Vanderbilt had known since he first traveled to Washington in 1821. Henry Clay himself presented Vanderbilt's bid to the Senate. “I dare say it is well known to every Senator, as it is to almost every person in the United States, that Mr. Vanderbilt has been one of the most successful and enterprising persons engaged in that description of navigation,” Clay said. “All this is offered by this liberal, enterprising, and distinguished gentleman, without asking for one dollar of present appropriation.”18

  Vanderbilt seems to have bounced back fully from the humiliation of the London trip. With a little prodding on his part, politicians and the press hailed his reputation. On March 6, the New York Herald, the same paper that had derided the canal as a mere “speculation,” effusively praised the Nicaragua route—and Vanderbilt himself.

  Commodore Vanderbilt's character for energy and go-aheadativeness is well known in this community, and apart from other considerations, the fact that he is connected with this enterprise is a guarantee to the public that both of these great projects—the construction of an ocean ship canal, and that of a transit route—will be finished at the earliest moment practicable. He is a man whose resolution is indomitable, and before whose determination obstacles, no matter how great, disappear as the morning dew before a July sun.19

  It was not the first time Vanderbilt was titled “Commodore,” but afterward his name rarely appeared in print without this honorary rank. He was becoming a cultural icon.

  Despite the support of Webster and Clay, Vanderbilt failed to convince Congress to alter the existing mail contracts. Against George Law's skill at lobbying and William H. Aspinwall's aristocratic connections, he could make no headway—particularly after the U.S. Mail and Pacific Mail Steamship companies agreed in January to cease competing with each other, the first retreating to the Atlantic and the latter to the Pacific.20 But Vanderbilt had delivered a clear warning that he was going to fight for the California trade, with English capital or not. And when he fought, he usually won.

  ONE DAY IN THE FUTURE there would be a name for it: vertical integration. Late in the nineteenth century, John D. Rockefeller and Andrew Carnegie would emerge as leading exponents of this form of organization, in which a single owner takes control of businesses at every step of the manufacturing process, from mining raw materials to production of finished goods. A vertically integrated company captured profits (or reduced costs) at every point. Perhaps more important, in an age when few industries existed it helped ensure supply that otherwise might be diverted to a competitor.21 Ship owner Charles Morgan understood the principle as early as the spring of 1851, when he bought control of a leading engine manufacturer in Manhattan, T. F. Secor & Co., and renamed it the Morgan Iron Works.

  Ironically, Morgan's move quickened Vanderbilt's own steps toward a vertical integration of his budding steamship business. Already he had taken direct control of the Simonson shipyard, which constructed hulls; now he joined with the men whom Morgan had bought out, T. F. Secor and John Braisted, along with Daniel Drew, to purchase New York's other large steam-engine plant, the Allaire Works. “The works are immense,” remarked the Mercantile Agency, “one of the most extensive in this city.” Located at 466 Cherry Street on the East River near Corlears Hook, the Allaire Works would now be run by a corporation, commanded (not surprisingly) by Vanderbilt's sons-in-law: Daniel Allen as president, and James Cross as treasurer. The purchase hinted at the size of both Vanderbilt's means and his ambition.22

  By the time the Mercantile Agency took note of all this, Vanderbilt's preparations for opening the Nicaragua route were advancing rapidly. Already the Prometheus carried California passengers—to Panama for now, until the transit route was ready. The steamboat Director plied Lake Nicaragua, carrying enterprising migrants who found their own way overland and down the San Juan River. The boat grossed $32,000 for the canal company in January alone. (The canal company owned the boats and infrastructure within Nicaragua, though not the oceangoing steamships.) The Orus had smashed onto the rocks of the Machuca rapids, but Vanderbilt sent down two specially constructed, shallow-draft, iron-hulled steam boats, the J. M. Clayton and the Sir H. L. Bulwer

  Meanwhile, he pushed ahead with his efforts to put steamships on both sides of the isthmus. He had two under construction in New York, the 1,000-ton Daniel Webster and the 1,800-ton Northern Light; both would receive Vanderbilt's customary walking-beam engines from the Allaire Works, and would run on the Atlantic, along with the Prometheus. For the Pacific, he fittingly bought the 900-ton Pacific (while it was en route to San Francisco) and the 600-ton Independence. It was still not enough tonnage.

  On June 17, passengers on the big new North America, which already had its steam up for a voyage from New York to Galway Ireland, were startled to learn that the ship would sail to California instead. Vanderbilt and Daniel Drew had bought it from P. T. Barnum. Barnum recalled the Commodore's amusement when they first met. “Why, I expected to see a monster—part lion, part elephant, and a mixture of rhinoceros and tiger,” Vanderbilt exclaimed. “Is it possible that you are the showman who has made so much noise in the world?” Like more than one businessman in the 1850s, Barnum had dangled his feet in the ocean and found the waters too cold.23

  “We are happy to have it in our power to announce the opening of the new route to the Pacific,” the New York Evening Post declared at the end of June. “Cornelius Vanderbilt is the principal proprietor of this line, which is sufficient guaranty [sic] for the superior speed and equipment of the vessels.” Passengers thronged to the upstairs office at 9 Bowling Green, next to the offices of other lines on “steamship row,” to buy tickets. “The Vanderbilt line was then the rage,” recalled passenger William Rabe.

  On July 14, Rabe boarded the Prometheus at Pier No. 2 on the Hudson River for the inaugural voyage of the Nicaragua transit route. “On board I found… Mr. Vanderbilt himself,” Rabe wrote a few weeks later. Rabe pressed the Commodore about whether the Nicaragua transit truly was in working order; otherwise Rabe and some of the other passengers might go on to Chagres and cross Panama. “Mr. Vanderbilt said that we would get through before any other passengers who had started about the same time for California, and insisted upon our going.”24

  Unknown to Rabe and the other passengers, Vanderbilt accompanied them because he had a mission to perform. He embarked on this journey to Nicaragua to meet a political threat, one that endangered his entire canal-and-transit enterprise. Due to the nature of the problem, he brought Joseph White, the company counsel and fixer. Before they returned to New York, Vanderbilt would have reason to wonder if White himself was not a greater danger than any problem in Nicaragua.

  Government and nature seemed to conspire against Vanderbilt and his inaugural passengers at every step. After ten days at sea, the Prometheus anchored at Greytown, where they boarded the Bulwer, one of the iron-hulled riverboats. The first sign of trouble was a demand from the town's officials that the boat obtain their permission to ascend the San Juan River, in clear violation of the Clayton-Bulwer Treaty. White haughtily replied that “the only way to prevent us was to blow us out of the water.” On they went—only to run aground. Most of the passengers leaped into the river “to drag her over, trying to lift her up, or pull her along,” in Rabe's words. Humiliatingly it took a boatload of sailors from the Bermuda, a British warship, to lift the steamer over the bar.

  The next day, the tightly packed little paddlewheeler steamed to the Machuca rapids, where
the passengers stared at the ominous wreck of the Orus, rusting on the rocks. As the pilot scraped the hull of the Bulwer helplessly into the rapids, it seemed likely that the boat would follow the Orus's example. Once again, Vanderbilt took the wheel. At fifty-seven, he already could be considered somewhat elderly by the standards of the day. Yet he radiated power, both physical strength and force of personality. And so, deep in the wilds of Nicaragua, on a treacherous jungle river, Vanderbilt poured on the steam and piloted his first passengers into the rapids. “Back we were swept,” wrote another traveler. “At it again; the boat's nose was brought out of the current, and all our steam applied. ‘Now she moves,’ cried one. Now she nears the rocks; puff, puff—up, up—not a word—all silent—how we gazed silently at the shrubbery fringing the water's edge, marking our headway. At length we passed the peril, and gave three hearty cheers, shot through one set of rapids, then ran aground on the next.”

  After spending a night trying to run the mighty Castillo rapids, again using ropes, chain, and a winch to haul the boat over, Vanderbilt had to give up. The passengers piled into Nicaraguan bungos and were paddled up to San Carlos, where they boarded the Director. “To my astonishment I found the lake a boisterous expanse of water, running as high as the angry Atlantic,” Rabe wrote. Hungry, sopping wet, and seasick, the passengers finally arrived on the western shore, where they were ferried to land in canoes or carried on the shoulders of Nicaraguan porters. The passengers went on to California, some happy, some convinced that the transit was not really ready. Vanderbilt mounted a horse and galloped off to Granada, together with White, to complete his mission.25

  Rumor had it that the Nicaraguan government, disturbed at the lack of progress on the canal, planned to revoke the company's charter. Vanderbilt knew that the canal would take far longer than originally envisioned, while the transit business offered immediate profits. To protect the latter from delays to the former, he wanted to separate the two enterprises by chartering a transit company26 But on his arrival in Granada, he learned that Nicaragua had once again descended into civil war. The unity government of 1849 had collapsed. The Liberals had risen in revolt; two hostile governments now faced each other, a Conservative one in Granada and a Liberal rival in León. It was a moment that called for great prudence.27

  No one ever accused Joseph L. White of excessive prudence, or perhaps any prudence at all. Believing the Conservatives to be the friendliest government, he “promised to send men and arms to their support, assuring them at the same time that all resident foreigners were on their side,” a reporter wrote. He said he could help wrest control of Greytown from the British. He also paid out $20,000 in bribes.28 On August 14, the Conservative government agreed to charter the Accessory Transit Company, transferring to it the canal company's crucial monopoly on steamboats in exchange for 10 percent of its profits and $10,000 per year.

  All this alarmed the Liberals. On August 25, John Bozman Kerr, the (notably bigoted) chief U.S. diplomat in Nicaragua, sent a warning to Secretary of State Daniel Webster from León. “Mr. White seems very naturally to have regarded these people as mere children, who could be led or driven any way he might be disposed,” he wrote; “but I fear he may have carried his contempt for their intellect somewhat too far.” One cynical journalist expressed ironic admiration: by dangling the false promise of a canal, the company had won a monopoly on the transit—“in my humble opinion, the most clever speculation which ever came into a Yankee's head.”29

  Too clever, perhaps. On August 22, the rival Liberal government in León addressed an angry letter to White and Vanderbilt. By choosing sides, the Liberals declared, “you have lost the neutrality of a foreigner.” The Accessory Transit Company was created under a curse. White had been true to his nature, and so put the enterprise on the path to destruction from the start.30

  For the time being, White's gamble seemed to pay off. The Conservatives remained safely entrenched in Granada, where they were well placed to protect the transit route. Rumor had it that the Prometheus carried a shipment of two thousand muskets to them in the fall of 1851. And Vanderbilt's new company flourished. Workers blasted rocks from the San Juan's rapids, and a steam sawmill arrived for construction of a plank road to San Juan del Sur. The creation of Accessory Transit as a separate corporation gave it access to the power of the stock market to gather capital through sales of bonds, issues of new stock, or calls for additional payments from the shareholders. The Commodore's sidewheelers now sailed the Atlantic and Pacific oceans, packed with passengers attracted from the Panama route by lower fares. Vanderbilt earned vast sums from his ships, and as agent of Accessory Transit he kept 20 percent of each $35 ticket for the Nicaragua crossing.31

  The success of Vanderbilt's Nicaragua venture had national consequences. Simply put, he helped transform a rush for gold into the lasting establishment of American civilization on the Pacific. By steeply reducing fares and offering faster service, Vanderbilt sped up the flow of migrants to the West and gold to the East, where it had a significant impact on the economy. And he did it not only without a federal subsidy, but in competition with the subsidized line.

  Thanks in large part to reduced transportation costs, San Francisco matured from a dust-blown, mud-lined tent camp with gambling saloons into a brick-walled, warehouse-filled commercial center with gambling saloons. Numerous devastating fires in the city's first few years destroyed the shanties and rough wooden buildings thrown up by the first settlers; by necessity sturdy masonry structures went up along the orderly streets that stretched from the bay up the steep hills. “The characteristics of a Spanish or Mexican town had nearly all disappeared,” wrote one resident. “Superb carriages now thronged the street, and handsome omnibuses regularly plied between the Plaza and the Mission.… The old stores, where so recently all things ‘from a needle to an anchor’ could be obtained, were nearly extinct; and separate classes of retail shops and wholesale warehouses were now the order of business. Gold dust as a currency had long given place to coin.” It was still a fast town, but it also became a place of aristocratic display. “A striking change was observable everywhere and in everything. The houses were growing magnificent, and their tenants fashionable.”32

  The pulse of commerce between the Atlantic and Pacific coasts beat twice a month, a pace set by steamship departures. Every two weeks, “steamer day” sent San Francisco into a frenzy, as bankers prepared shipments of gold to New York houses, merchants called in debts to make payment to eastern suppliers, and everyone prepared letters and packages to mail to the “states.”33 When steamers were expected, all eyes watched the tower atop Telegraph Hill, where signalmen would announce the approach of a paddlewheeler by running out oversize wooden semaphore flags—two long black boards, hanging down on either side of a tall pole. The signal's centrality to life in the city was seen during a performance by a visiting theater company. At a climactic point in the play, an actor flung out his arms, the sleeves of his black robe hanging down, and asked, “What does this mean?” A wag in the audience shouted, “Sidewheel steamer!” The knowing audience erupted in howls of laughter.34

  As the owner of one of the two primary steamship lines, Vanderbilt emerged as a powerful presence in San Francisco, where he never had and never would set foot. Railroad and newspaper promoters there besieged him with requests for investment. “If you knew of the hundreds of applications that we have daily for the same thing,” he replied to one, “you would at once see that it would be ruinous to grant them.”35

  Rather than send money to California, Vanderbilt needed it close to home. His Nicaragua line posed a serious threat to the established interests on the Panama route, and those enemies had decided to strike back.

  THE GHOST OF VICE PRESIDENT Daniel D. Tompkins bedeviled Cornelius Vanderbilt. When Tompkins had sought state assistance to develop Staten Island during the War of 1812, the New York legislature had chartered the Richmond Turnpike Company. Under the company's aegis, Tompkins started the first steam ferry to th
e island, which became known simply as the Staten Island Ferry. When Vanderbilt took over the ferry in 1838 it was still technically the Richmond Turnpike Company, the creature of eighteenth-century mercantilist philosophy. As such, it differed from later corporations in one important respect. This artificial person existed for a fixed term of years, after which its charter would expire. Just before it perished on April 1, 1844, its chief officers—Vanderbilt and Oroondates Mauran—assigned its leases and real-estate titles to two private citizens, Cornelius Vanderbilt and Oroondates Mauran. When Mauran died in 1848, Vanderbilt, as we've seen, purchased his stake, and was immediately forced to defend his title to the corporation's lands. New York's attorney general argued that the dead company's property reverted to the state. Vanderbilt battled back in court, where he repulsed the state's assault year after year. The ferry was worth defending, and it could pay for a few lawyers: the New York Times estimated its annual profits at $50,000.36

  George Law never showed much interest in Staten Island. From his office in the Dry Dock Bank, he turned his eye toward Albany and Washington, where he bribed and bargained his way into government contracts, or to Panama, where his U.S. Mail Steamship Company connected to Pacific Mail, and where he had invested hundreds of thousands of dollars in the stocks and bonds of the Panama Railroad. By mid-1851, he had taken a number of steps to restore the original steamship monopoly. He had reached an agreement with Pacific Mail to divide the oceans (as noted earlier); he had purchased Charles Morgan's rival steamships, the Empire City and the Crescent City, along with Morgan's agreement to abandon future competition; and he had driven off or intimidated most of the lesser steamship owners who dared oppose him.37 And then Vanderbilt opened the Nicaragua route.