This is the second in my series of posts about the five businessmen the History Channel profiled in a terribly un-historical miniseries titled The Men Who Built America. You can click here to read Part 1.
Post #2: Cornelius Vanderbilt’s Early Career
The History Channel exaggerated Cornelius Vanderbilt’s role in the post-Civil War railroad industry to some extent. By 1968, the year where the History program really starts, Vanderbilt was in his mid-seventies and suffering from syphilis-related dementia, and his son William was for all intents and purposes running his businesses.
At any rate the really remarkable part of the Cornelius Vanderbilt story is the early years, when he started with nothing and achieved tremendous success.
Vanderbilt was born on Staten Island in 1794, the same year Eli Whitney patented his famous cotton gin in Georgia. His father, also named Cornelius, farmed a few acres of land for sustenance and ferried people and freight back and forth across the Hudson River to earn what little spending money the family ever had. The older Cornelius was fond of alcohol, and not overly fond of hard work, so the Vanderbilts were never very prosperous.
Here’s how biographer Edward Renehan Jr. described the family estate and income:
Along with the tiny house, the property included a few acres that Cornelius tilled rather unenthusiastically to produce vegetables and grains that were mostly consumed by his own family. Meanwhile, for cash money, he continued his Manhattan runs in the (small sailboat he owned) charging so-much per trip to transport other men’s produce and goods.
When the younger Cornelius was around eleven years of age his father took him out of school and put him to work on the boat. The boy may have inherited some of his father’s vices, but laziness was not one of them. He made the business more productive from the time he entered it. When not working on the boat or helping the older Cornelius salvage the cargos of wrecked ships, he worked on his parents’ farm.
In 1810, at the age of sixteen, Cornelius, who would soon come to be known as “Commodore” Vanderbilt, bought a small boat of his own for a hundred dollars and went into business for himself.
There are differing stories about how he came up with the money. According to Encyclopedia Britannica he borrowed it from his parents. Wikipedia says that he either borrowed the money from his parents or formed some sort of partnership with his father until he earned enough to go into business for himself. According to Renehan’s book the Commodore’s parents agreed to pay him the hundred dollars he needed if, in addition to his other chores, he would clear and fence a rock-strewn piece of property they owned, and get it to produce a corn crop for the first time.
However he may have done it, all sources agree that Vanderbilt went into the boating business at age sixteen. Unlike his father, the younger Vanderbilt was driven to succeed. He took business from other boat operators in the area by going out on the water in weather that kept his competitors at home. He kept his boat full and busy by charging lower prices and soliciting customers aggressively. He developed a reputation for dedication and reliability, qualities that customers found attractive in an industry where boozing and brawling were too common.
When the military started building fortifications in New York in anticipation of war with England, Vanderbilt took full advantage of the opportunity. He was able to keep his boat fully loaded and in continuous operation for several months hauling building materials, workers, and soldiers.
By the age of nineteen the Commodore had already saved up enough money to commission a shipyard to build him a sixty-five foot sloop to replace his little sailboat. When the sloop was ready to launch he hired a couple deck hands to help him sail it.
Vanderbilt was still only nineteen when he got married. From the beginning he was an unfaithful and thoughtless husband.
The subject of Vanderbilt’s personal life invites comparison with the lives of some of the other great movers and shakers of the nineteenth century. Vanderbilt was un-religious, profane, and lustful. He and his wife Sophia had thirteen children, and he was just as cold and cruel to his children as he was to his poor wife. He made no secret of the fact that he was unfaithful to her, and for the last several years of her life she suffered from syphilis that he’d apparently contracted from a prostitute and given to her. He never donated a dime to charity until his second wife persuaded him to make some donations to a church and a university when he was in his seventies.
John D. Rockefeller, to cite the opposite extreme, was a devout Baptist and a devoted husband. He always gave generously to charities, even when he was still young and poor. He would rush home from the office after a day of running one of the wealthiest and most powerful companies in the world, and get down on the floor of his house to play with his children.
The two men’s personal lives couldn’t have been more different, yet their business practices were quite similar. Despite the Commodore’s lack of fidelity to his wife, he was absolutely faithful in business deals. Anyone who shook hands with Vanderbilt could count on him to deliver. And as ruthless as he could be with his competition, he never betrayed the trust of a business partner, vendor, or customer. A deal was a deal with Vanderbilt.
Rockefeller, just like Vanderbilt, always dealt honorably with his partners and customers. And just like Vanderbilt he was a ruthless competitor who always played to win.
Both men understood the importance of hiring and retaining good people; although Rockefeller was more polite with his employees than the foul-mouthed Commodore.
Interestingly, Vanderbilt was a little slow in developing the communication skills that a man needs to have to succeed greatly in business. Early in his career, according to Renehan, he preferred hauling cargo to carrying passengers, because the cargo didn’t try to talk to him while he was piloting his boat. Eventually he learned to work with and for people without being rude.
The opposite extreme in this area would probably be that born salesman Andrew Carnegie. From childhood Carnegie liked people and had a knack for making people like him. On the ship from Scotland to the US the twelve year old Carnegie made himself so popular with the ship’s crew that they taught him the various skills of a seaman, and even shared their meals with him. When, at age thirteen, he got a job delivering telegrams, Carnegie distinguished himself not only for speed and efficiency by also for his people skills. He disciplined himself to remember the names and faces of all the businessmen to whom he delivered messages, and if he chanced to see a customer on the street he would run up, call the customer by name, and deliver his telegram on the spot.
While the teen-aged Vanderbilt was still learning the rules of business etiquette, he did at least offer many other virtues that customers appreciated. He worked long hours seven days a week and constantly looked for ways to increase the efficiency of his operations. He jealously guarded his reputation for dependability.
At the same time, he had a keen eye for opportunities and made strategic moves that almost always succeeded. He lived frugally and re-invested his profits in his business. In 1814 he commissioned a shipyard to build him three more boats. He took personal command of a schooner that operated mostly on the Hudson River, and hired captains and crews for his original sloop and the two other vessels.
In 1815 the twenty-one year old Commodore bought half interest in a fifth vessel, an ocean-going schooner named the Charlotte. This was a good strategic move on his part, because the Charlotte was built for the open ocean and his partner was an experienced sea captain. During a trip from New York to Savannah Vanderbilt absorbed everything his new partner could teach him about commanding a ship on ocean waters.
There are certain common elements running through America’s great rags to riches stories, and one is that most of the great fortunes were made in either transportation or communications. (This includes the staggeringly huge pile of money that Alexander Graham Bell would have made if he hadn’t sold most of his AT&T shares way too soon. The investors who bought those shares from Bell must have felt like geniuses.) The telegraph, the telephone, and the shipping and railroad industries all earned great fortunes for those who made important contributions and invested wisely. John D Rockefeller, who was semi-retired by the time the Ford Motor Company started creating demand for petroleum as a motor fuel, actually made more money from twentieth century gasoline sales for automobiles than he’d made during his active career selling kerosene for illumination.
Even Carnegie, known to history as a steel mogul, focused on the transportation business for much of his career. The iron and steel bridge that Carnegie and James Buchanan Eads built across the Mississippi was a major milestone in American transportation, and when Carnegie later moved his focus from bridge building to steel making he focused his business on making rails for sale to the railroads.
Vanderbilt focused on transportation from his start in business at the age of sixteen until his death sixty-six years later. He excelled at the day to day details of running an efficient business, and at the same time he was able to focus on the future and make good long term strategic decisions. For the first eight years of his career Vanderbilt learned everything he could about nautical transportation, focusing entirely on sail-powered sloops and schooners. Then, in 1818, he sold off his whole fleet, put the proceeds in a bank account, and accepted a job as captain of a steamboat owned by an entrepreneur named Thomas Gibbons.
Vanderbilt’s initial salary was a fraction of what he’d been making running his own business, but in light of subsequent events it’s easy to understand why he made the move. Next week’s post will cover Vanderbilt’s years as a Gibbons employee.
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