Cornelius Vanderbilt

 

 

Upon his death in 1877, at age 82, Cornelius Vanderbilt, also known as Commodore Vanderbilt, was the wealthiest man in the United States and probably the greatest of the nineteenth century railroad barons. Earlier in his business career he probably was the greatest shipping tycoon in the United States. His estate was worth 100 million dollars, a sum unheard of in those days. He left the bulk of his estate to his son William Henry Vanderbilt, because he was the only child who had been actively involved in the business that produced the Vanderbilt fortune. William Henry also had been instrumental in building and expanding the railroad business since he joined his father in the management of the organization upon becoming an adult.

Cornelius was born in Port Richmond, Staten Island, New York on May 27, 1794. His parents were poor and his father earned his living by providing low level transportation services. As was usual for the common people in those days, Cornelius went to work at age 11, and was employed by his father. We know little of his parents but his ancestors came from the town of De Bilt, in the province of Utrecht in the Netherlands. His great great great grandfather was Jan Aertsen who came to New Netherland as an indentured worker in 1650, at the time of the early Dutch settlements including New Amsterdam. Cornelius married his first cousin, Sophia Johnson [1795-1868] on December 19, 1813 when he was only 19 and she was only 18 years old. They had their first child, Phebe Jane Vanderbilt [1814-1878] the following year in 1814. Eleven more surviving children followed until the last one, George Washington Vanderbilt [1839-1864], was born twenty five years later.

Between the years 1805 and 1810 Cornelius worked for his father and for the ferry services serving Staten Island. In 1810 when he was sixteen years old he convinced his parents to lend him $100 so he could buy a sailboat to start his own ferry and freight business. They provided him with the money but with the understanding that he would share the profits from the business with his parents. He used the money to start a passenger and freight service between Staten Island and New York City. There was a lot of competition in the ferry service business, but Vanderbilt competed on the basis of lower fares, asking as little as 18 cents per trip. He was quite successful and apparently was able to repay the $100 loan to his parents within one year. According to local lore, he was even able to earn a $1,000 for his parents during the first year of operations as part of their share in the profits.

The War of 1812 provided new opportunities for growth. The forts around New York City expanded and Vanderbilt obtained a government contract to supply them. Between 1814 and 1818 he expanded with additional schooners for freight and passenger services in Long Island Sound and in the coastal trade from New England to Charleston, South Carolina.

In 1818 he sold all his sailing vessels and became a steamboat captain and partner with Thomas Gibbons who operated a ferry service between New Brunswick, New Jersey and New York City. The Vanderbilt-Gibbons partnership charged only a quarter of the competitive fares. It soon became the dominant ferry service on the busy Philadelphia-New York City route. During the 1818-1829 time period the partnership made a fortune.

In 1829 Vanderbilt decided to go on his own and began passenger and freight service on the New York City-Peekskill Hudson River route. Again he competed on the basis of price and quickly eliminated the competition. He then expanded his service to Albany, New York. He also opened passenger and freight service to the Long Island Sound, Providence and Connecticut areas. By the 1840s Vanderbilt had a fleet of 100 steamships and he had become the biggest employer in the United States. At that point he not only competed on the basis of price but also on the basis of comfort, size, speed, luxury and elegance in the steamship passenger transportation industry.

During the California gold rush in 1849, Vanderbilt began steamship service to San Francisco by way of Nicaraqua. His competitors used the Panama route which was longer. Vanderbilt was able to cut two days off the length of the trip to San Francisco, and it was 600 miles shorter. This part of his transportation business netted him over one million dollars per year. As a result he became the principal transportation service provider on the East Coast to San Francisco route.

In the 1850s he did two possibly foolish things. In 1853 he decided to take his first vacation ever. He had a steam yacht built and made a triumphant tour of Europe. While on his trip he had left the management of the business to contract managers. They tried to fraudulently take over the business while he was away in Europe. Although they were not successful, his temporary absence from his business proved to be costly, but he quickly recovered. Another not so successful business attempt was trying to compete against the British Cunard Steamship Line, a line subsidized by the British government, on the North Atlantic passenger service route. This also proved to be a failure. So the old fox discovered that not all his ventures were automatically successful.

In the 1860s he became aware that the big growth in the future for the transportation industry was not by way of water but by way of rail. So he became interested in railroad transportation, which was then still in its infancy. But instead of building new railroads, he took the easier route of buying existing railroads. He acquired the Long Island Railroad followed by the New York and Harlem Railroad and the Hudson River Railroad. In 1867 he also acquired the Central Railroad and merged it with the other railroads he already owned. As he had done with his shipping ventures, he focused on improving service and on upgrading capital equipment while maintaining low fares. He eventually merged all his initial acquisitions into what became known as the New York Central Railroad. It is estimated that he made $ 25 million in the first five years from his railroad ventures.

The eventual main heir to his empire, his son William Henry Vanderbilt, influenced his father to expand rail service into the direction of Chicago. To do so they acquired the Lakeshore and Michigan Railway, the Michigan Southern, the Canadian Southern and the Michigan Central Railroad, creating for that time the largest American system of railway transportation.

In 1868 Cornelius lost his wife Sophia. This was a great loss to him. She had provided him with ten still living children and apparently was a good business woman herself, supporting and advising him in many of his business decisions. One of the things that is not widely known is the fact that Cornelius was a meticulous planner and analyst. Before he entered into any deal or venture he would meticulously analyze it and have it evaluated by others before making a decision. Many people attribute his success to luck. In reality Cornelius was a super smart and astute business man and hands-on manager of his many businesses. Although he may have made some mistakes along the way, he was always able to either cut his losses or extract himself from the occasional debacle. And undoubtedly, he often involved his wife Sophia in many if not most of his business decisions.