The First Tycoon

by T. J. Stiles

  Vanderbilt remained immensely fond of the clan Corneil had married into. In early 1860, the Commodore wrote to Corneil's father-in-law, Oliver Williams, promising to visit “your sweet home.” In some of the most telling lines he would ever write, he added, “Your famally is the only one on earth that I ever say a word to on paper. I much dislike to write & never do out side of business matters.”86

  ON THE NIGHT OF OCTOBER 16, 1859, John Brown led eighteen men into the federal armory at Harper's Ferry, Virginia. A veteran of the fighting against border ruffians in Kansas, he now hoped to spark an uprising by slaves in the South. Instead, Colonel Robert E. Lee and Lieutenant J. E. B. Stuart arrived on the scene with a force of U.S. Marines, who stormed the arsenal on October 18, captured Brown and sixteen of his men, and killed two in the process. The abolitionist stood trial and died on the gallows on December 2. “His name may be a word of power for the next half-century,” George Templeton Strong wrote in his diary. The Wall Street lawyer had no sympathy for the antislavery movement, but “Old Brown's demeanor” moved him. “His simplicity and consistency, the absence of fuss, parade, and bravado, the strength and clearness of his letters, all indicate a depth of conviction that one does not expect in an Abolitionist,” he wrote. “Slavery has received no such blow in my time as his strangulation.”87

  John Brown's raid confirmed the worst suspicions among “fire-eaters” in the South. When the newly elected House of Representatives tried to choose a speaker in December, Southern Democrats and Know-Nothings blocked the Republican plurality from naming John Sherman, the moderate brother of William T. Sherman. But they could not elect their own man because Horace Clark and a handful of other anti-Lecompton Democrats stood in their way—though Clark refused to vote for Sherman. “Common report attributes the conduct of [Clark] more to the influence of his father-in-law, Mr. Vanderbilt, than any other,” the Chicago Tribune reported. “Mr. V's mail steamship interests are too valuable to be sacrificed by a single vote for Speaker.”88

  Certainly the Commodore did not wish to alienate the Democratic administration. At the moment, though, both Clark and Vanderbilt were deeply enmeshed in an even more complicated negotiation. William Aspinwall—the merchant prince, the founder of the Pacific Mail and Panama Railroad companies, the man who had given his name to a city in Panama—had decided to give up. He had opened secret talks with Vanderbilt, and on November 25 he presented the Pacific Mail board with the results: a tentative agreement to shut down the North Atlantic Steamship Company, sell to Vanderbilt Pacific Mail's seven ships on the Pacific for $2 million, distribute the proceeds to the stockholders, and terminate the corporation. Despite some dissent, the board empowered Aspinwall to conclude the negotiations. Vanderbilt prevailed on Clark to remain in New York to finalize the talks alongside Marshall Roberts, despite Clark's eagerness to go to Washington.

  At nine in the evening on November 29, Clark sent a one-line note to Vanderbilt: “I am quite satisfied that the proposed arrangement is wholly impracticable.” The problem was that Clark and Roberts insisted on a guarantee that the directors of Pacific Mail would not go on to compete against Vanderbilt's company as individual proprietors, newly enriched with the Commodore's money. They insisted that Aspinwall give his personal word of honor that there would be no competition—which he “peremptorily declines to give,” Clark and Roberts wrote on November 30. Aspinwall replied that this demand was a “new feature,” that he could not possibly speak for the stockholders as individuals. “It is a great pity,” Vanderbilt concluded.89

  This argument reveals the culture of American business in a moment of transition. On the eve of 1860, after decades of experience with—indeed, mastery of—the abstractions of the new economy, Vanderbilt and his ring still saw little distinction between the corporation and its stockholders. Theirs was not an elaborately worked-out philosophical position; rather, it was the product of a long tradition of controlling competition with formal and informal agreements—as well as raw self-interest. Yet it demonstrates how even the most sophisticated businessmen held to a tangible understanding of the world of commerce. The financial columnist for the New York Herald found it astonishing that Aspinwall and his fellow directors refused the demands of Vanderbilt's representatives. “Without such a guarantee, in fact, Mr. Vanderbilt would have made the worst of bargains,” the newspaper observed. “In ordinary cases, it is the vendor who guarantees his purchaser against competition; in this case the vendor was the Pacific Mail Company, which was going into liquidation and out of existence on the consummation of the bargain; the guarantee, therefore, was naturally sought from the individual directors, from whom alone opposition was to be expected.”90

  In January 1860, Joseph Scott, the guardian of the machine works and steamboats at Punta Arenas, walked into Vanderbilt's office on Bowling Green. “I had always expected there would be a line there [in Nicaragua], and that probably he would run it, and if I could sell the things then, I could receive enough to pay my services,” he later testified. But the line never reopened, and the property fell into ruin. “I went to Mr. Vanderbilt for a settlement,” Scott reported, “to see if he would take the things off my hands.” Instead, he went to work for Vanderbilt as agent of the Atlantic & Pacific Steamship Company in Aspinwall, Panama.91

  Pacific Mail felt the pain of continued competition. It lost a reported $100,000 in the last quarter of 1859 alone, and its prospects looked grim. In January, Vanderbilt's iron-hulled Champion arrived in San Francisco, and greatly impressed the city's cynical residents. “As far as we can ascertain by full inquiry the Commodore shows no symptoms of yielding,” the New York Tribune remarked. The newspaper was correct. When Samuel L. M. Barlow, a key figure in Pacific Mail, suggested the possibility of a compromise to Horace Clark, Clark offered no encouragement. “The Commodore was here [in Washington] yesterday and I endeavoured to sound him [out] on the subject. He is more indifferent than I hoped to find him,” Clark wrote on January 16. “Let me suggest to you that you go right straight to him and talk to him yourself.”92

  Clark's letter was a warning of Vanderbilt's determination, but also an invitation to further talks. Once again, Aspinwall and Barlow began to meet secretly with the Commodore. They soon arrived at a new agreement, one that obviated the need for guarantees of any kind. They would divide the business in half, Pacific Mail retreating to its eponymous ocean and Vanderbilt's Atlantic & Pacific Steamship Company restricting itself to the Atlantic. (This was the same basic agreement they had made in 1856, before Walker had disrupted everything.) Vanderbilt was to bring his new Champion back around Cape Horn, receive $50,000 to pay for the voyage, and sell the other, much older ships based in San Francisco to Pacific Mail for five thousand shares of stock and $250,000 in cash, to be paid in ten monthly installments. He would not be allowed to trade the shares for two years. (Vanderbilt owned the ships, so he took this payment himself.) The North Atlantic Steamship Company would be shut down. The two parties would split fares and postal payments according to mileage (giving Vanderbilt 30 percent). The plan would establish a new, more stable monopoly93

  There was only one problem: the Panama Railroad did not want a settlement with Vanderbilt. It profited enormously by carrying passengers for both sides, and it had enjoyed a record business during the fare war. A number of the railroad's directors sat on the Pacific Mail board, and they were certain to resist the agreement. So Aspinwall played a trick. He invited those directors to take a junket with him to Panama. He boarded the steamship in New York with his trunks, along with his guests; then, moments before the ship sailed, he announced that pressing business would keep him at home. When the directors returned from Panama, they discovered to their irritation that the treaty with Vanderbilt had been signed and ratified in their absence.94

  As the 1860s began, Vanderbilt attained wealth and influence never before imagined for a private American citizen—“almost kingly power,” as the Chicago Tribune said. He controlled American steamship traffic on the Atlan
tic Ocean, and stood as the largest shareholder in Pacific Mail.95 (In 1860, Daniel Allen took a seat on the company's board of directors to represent his father-in-law's interests.) Vanderbilt arranged a lasting rise in fares (though not to their previous heights), and along the way prevented his friend Roberts from starting a rival line without paying him a penny. When the California postal contract expired after Congress adjourned without making arrangements for a new one, Vanderbilt refused to carry any more mail. This edict threatened to add weeks to communication between the two coasts by forcing the mail to be carried overland. The Commodore relented only after President Buchanan begged him to reconsider and promised to ask Congress to pay him retroactively. Vanderbilt expanded his role in New York's railroads as well. Already a director of Harlem, he helped Drew restructure the bankrupt Erie's debt (for a very large fee), and joined him on the Erie's board of directors.96

  One by one, Vanderbilt's enemies lost, surrendered, or met with a violent death. Law had given up; Collins had failed; Morgan, Garrison, Aspinwall, and even Joseph Scott had accepted his terms. Others were less wise, or less fortunate. On August 14, 1859, an uprising in Costa Rica overthrew President Mora. He was executed on September 30, 1860. Even the irrepressible William Walker reached the end of his piratical career. The British captured him on his latest filibustering expedition, and handed him over to the Hondurans, the nearest Central American authorities. They unceremoniously shot him to death on September 12, 1860.97

  And then there was Joseph White, who had plagued Vanderbilt from the beginning of the gold rush. In January 1861 White returned to Nicaragua, this time to buy exclusive rights to harvest rubber. As he swung in a hammock on the porch of a hotel, he began to talk with another American, Jonathan Gavitt. “It appears that this conversation was not of a very pleasant character, as Mr. Gavitt had been several months in Nicaragua on business of a similar nature to that of Mr. White's, and the former thought the latter was trespassing on his ground,” the New York Times reported. Gavitt sent his servant to retrieve his revolver, then shot White in the leg. After seven days in tremendous pain, White died.98

  ON NOVEMBER 4, 1859, VANDERBILT sued Henry J. Raymond, editor of the New York Times, for libel. The article in question—a patently false report that Vanderbilt had supported Walker's last expedition—was hardly the issue. After all, journalists of the day relied heavily on rumor and innuendo; newspaper reporting was inaccurate on a regular basis. The point, Vanderbilt argued in his legal complaint, was “that the said article in the Times is the result either of personal ill-will toward him or interest averse to his, which leads to the said newspaper being impelled to assail and if possible injure him.” Personal ill will indeed. Raymond responded with insults the very next day. “We are at some little loss to understand the meaning of this sudden floundering of the Commodore—this explosion of blubber at the prick of a newspaper paragraph,” he wrote. “We don't know whether it indicates that he is growing old and touchy, or that he is becoming ambitious of notoriety.”99

  But this attack was also a matter of politics. During the late 1850s, even into 1860, the New York Times waged a crusade against Vanderbilt. On February 9, 1859, Raymond published perhaps his most memorable assault, “Your Money or Your Line,” berating Vanderbilt for forcing Pacific Mail to pay his monthly subsidy under the threat of his renewed competition. In this piece, Raymond crafted a lasting metaphor in American culture: the robber baron.

  Like those old German barons who, from their eyries along the Rhine, swooped down upon the commerce of the noble river and wrung tribute from every passenger that floated by, Mr. Cornelius Vanderbilt, with all the steamers of the Accessory Transit held in his leash, has insisted that the Pacific Company should pay him toll, taken of all America that had business with California and the South Sea, and the Pacific Company have submitted to his demand.… He has… devoted himself to the study of the steam navigation of his country—not with the object of extending its development, but for the purpose of making every prosperous enterprise of the kind in turn his tributary or his victim.

  Though Raymond never used the exact phrase “robber baron,” it entered the American lexicon as a term for an industrialist who wields his power unscrupulously, to the harm of others. Yet it is essential to note how the metaphor originated. Raymond criticized Vanderbilt for preying upon monopolists. He attacked him for, as he wrote elsewhere, “driving too sharp a competition.”100 In “Your Money or Your Line,” Raymond derided “competition for competition's sake; competition which crowds out legitimate enterprises… or imposes tribute upon them.” On July 13, 1860, he called on “our mercantile community to look the curse of competition fully in the face.”

  To later generations of Americans, Raymond's critique would make no sense. Vanderbilt was a robber baron because he was excessively competitive? Vanderbilt's enterprises were not “legitimate,” even though they were more successful than those that supposedly were? Was competition supposed to have no winners or losers? And wasn't it Pacific Mail that was the monopolistic force that restrained trade by buying off competitors (a policy that made it immensely profitable)?

  Raymond's arguments reflected a deep and persistent strain of Whig philosophy. The editor himself was a “reliably orthodox” Whig, and his newspaper was founded by “Whig bankers,” as two historians write.101When he tried to express his loathing for Vanderbilt, he drew on a political vocabulary, a political mind-set, now decades old, crafted in a younger America with limited capital and few large enterprises. The Whigs had strongly believed in economic development, and had championed legal devices such as corporations to assist wealthy men in concentrating capital for useful purposes. Pacific Mail, which originated in a federal plan to guarantee mail service to the Pacific coast, offered a perfect example of their ideals; more than that, the elite status of its incorporators appealed to social prejudices that lingered among old New York Whigs. Raymond even depicted corporations as fragile creations. In “Your Money or Your Line,” he made the argument that “no joint-stock company… can ever be a match for a single man” who possessed a large sum of money. Raymond gave voice to a certain strand of Whig thinking that had always condemned the destructive tendency of free competition, casting it as piracy that annihilated capital.

  “The idea of depicting Vanderbilt as a corsair because he establishes rival lines to successful steamboat companies is not consistent with experience or common sense,” argued Harper's Weekly, in a direct counterblast to the Times's famous editorial. “It is because competition is free—because it is encouraged in every branch of trade and enterprise—that this country has become rich and prosperous.”102 On March 5, 1859, Harpers published an adulatory profile of the Commodore in which it continued this argument. “It has been much the fashion to regard these contests as attempts on his part to levy black-mail on successful enterprises.… He must be judged by the results; and the results, in every case, of the establishment of opposition lines by Vanderbilt has been the permanent reduction of fares.” It added, in a much-quoted line, “This great boon—cheap travel—the community owes mainly to Cornelius Vanderbilt.”

  This defense of the Commodore sounds more logical to the mind-set of later centuries, but it, too, drew upon an earlier generation's political rhetoric—that of Jacksonian Democrats. Harpers argued that he had championed the fight against the aristocratic elite, against those artificial monsters the Whigs loved so much: “powerful corporations, who enjoyed a monopoly of the traffic, and whose wealth and obvious soullessness were a terror to steamboat men.” It praised Vanderbilt, on the other hand, specifically as an individual, in battle against such devils. “We have heard it said that no man in this country gives employment directly or indirectly to so many persons,” the Herald wrote. “He began life by working to live, he now lives to work.”103

  The truth is that neither Andrew Jackson nor Daniel Webster, nor anyone else who had helped to create the Democratic and Whig parties, had imagined a man like Vanderbilt. Few p
reviously had accumulated so much wealth, in either absolute or relative terms; and there was probably no one who had ever possessed such sway over public affairs—over the survival of a railroad, or a government, or over the great corridor to California. Nor did he exist in some kind of polar opposition with corporations and monopolies. By 1859, he operated almost entirely through corporations; he proved himself an expert at using the stock market to concentrate capital or avenge himself on his enemies, and emerged as a master of corporate structure. He saw the corporation as just another type of business organization. For many old Whigs and Democrats, on the other hand, the corporation remained a political animal. Whigs had approved of it as a means of harnessing private enterprise for the public good; since corporations remained few in number, they may not have imagined that they one day would become commonplace. On the other side, Democrats who praised Vanderbilt's competition failed to grasp that he was using the corporate form to create enterprises on an unprecedented scale, gaining control over vast channels of commerce. He represented a new creature on the American scene, and political language and logic had not yet come to terms with him.

  Vanderbilt was clearly an unsurpassed competitor, and the good he thereby wrought was well described by Harper's Weekly. He was a fighter by nature, a cunning and proud warrior. He always felt that he could take care of himself, under any circumstances. He seems to have believed the Jacksonian rhetoric he so often repeated, a creed of laissez-faire individualism, a vision of a world in which any man might get ahead by his natural gifts rather than government favors. And yet, in pursuing his private interests wherever they took him, he felt no obligation to act in the public interest; when competition had served its purpose, he freely sold out or constructed new monopolies. As he operated on a vast new scale, he brought to a head the contradiction inherent in the private ownership of public works—a paradox that would grow starker when he moved from steamships into railroads in the climactic phase of his life.