The First Tycoon: The Epic Life of Cornelius Vanderbilt
by T.J. Stiles
400 pp., $17.50
The history of American philanthropy is deeply intertwined with the history of American business. It is especially intertwined with the pioneering wealth creators, who have long been among the great drivers of American philanthropy. To understand the charity of Rockefeller, Carnegie, and Ford, you must study the industrial revolution; to understand that of Gates, Ellison, and Dell, you must study the digital revolution.
Wealth is a necessary, but not sufficient, condition for philanthropy. It is perfectly possible to have massive wealth without an inclination toward charitable giving. In his superbly researched and elegantly written new biography, T. J. Stiles introduces us to one such individual: Cornelius Vanderbilt (1794–1877), perhaps the first significant wealth creator in American history. Indeed, in a July 2007 study, the New York Times ranked Vanderbilt the second-wealthiest individual in American history (when adjusting for inflation), behind only John D. Rockefeller.
The subtitle of Stiles’ biography is “the epic life of Cornelius Vanderbilt,” and Vanderbilt’s long and productive life was indeed epic. “Probably no other individual made an equal impact over such an extended period on America’s economy and society,” Stiles writes. It is a remarkable claim for such a careful author, and one which Stiles justifies in great detail.
When Vanderbilt died in 1877, he left an estate valued at about $100 million. In inflation-adjusted dollars, his 2009 net worth would equal roughly $143 billion. Stiles quite correctly reminds us, however, that such comparisons are notoriously inexact, and points to another useful metric: total net worth as a percentage of money in circulation. In 1877, the United States circulated currency of about $900 million. Vanderbilt therefore held 1/9th of the currency of the United States. By contrast, according to the Federal Reserve’s M2 estimate, which provides the closest approximation to 19th-century currency standards, Bill Gates’ $57 billion represents roughly 1/138th of the currency in circulation. (According to the Fed’s M3 estimate, which includes a much broader range of modern financial instruments, Gates’ wealth as a percentage of currency is even smaller.)
Cornelius Vanderbilt made his money in the great 19th-century transportation revolution. When he was born in 1794, people traveled with technologies that would have been familiar to Alexander the Great. Wind propelled ships across water, and muscle (horse, donkey, or human) moved freight on land. By the time Vanderbilt died, ships were powered by coal and steam, and freight traveled on iron rails at speeds and with loads that would have been incomprehensible to his parents. Vanderbilt was indispensable in making those changes possible.
Vanderbilt’s life and fortunes centered on New York City. His long career—he remained in charge of his companies until 1876, when he was 82—began on the Hudson River, where he operated a passenger ferry. He made his first serious money during the War of 1812, when the “Commodore” captained a small ship that helped break the Royal Navy’s blockade of New York. When passenger railways began to be constructed in the 1830s, Vanderbilt invested in them. He continued to build steamships, however, and was a major player in the race to transport hundreds of thousands of passengers from the Atlantic to the Pacific during the great California Gold Rush of 1849. He was also intensely involved in failed efforts to build a canal across Nicaragua in the 1850s, and fought William Walker, an American “filibusterer” who tried—and nearly succeeded—in seizing Nicaragua and turning it into his own private fiefdom.
Vanderbilt was a consummately practical man, and he understood the pace of technological change. In 1864, he sold off his last steamship interests. From then on, he would concentrate on railroads. He took control of the foundering New York and Harlem Railroad—and made it profitable. An early master of modern corporate tactics, he bought out railroad after railroad. In 1870, he consolidated his key railways into the New York Central and Hudson River Railroad, one of the first giant corporations in American history. By the time he died, Vanderbilt controlled many of the most important railroads in the United States and Canada.
Indisputably, Vanderbilt’s business enterprises benefited the nation. His railroads greatly facilitated commerce, linking markets and expanding opportunity. In New York alone, his influence was immediately visible. Stiles cites historians Edwin Burrows and Mike Wallace, who note that a freight terminal Vanderbilt constructed along Manhattan’s Lower West Side attracted “wholesalers, express companies, packing-box firms, and dry-goods commission merchants” like a “gigantic magnet.” About 200 businesses, Burrows and Wallace calculate, moved their operations to take advantage of Vanderbilt’s railroad depot.
Moreover, Vanderbilt’s personal intervention in 1869 may well have saved the United States from a major financial crisis. A group of speculators attempted—and nearly succeeded—in cornering the gold supply. Vanderbilt freed up sufficient capital to keep the panic from escalating into a depression. He was hailed as a hero, the savior of Wall Street. “The only thing more remarkable than his recklessness,” writes Stiles, “was his success.”
Vanderbilt was indisputably a great capitalist—but not, as Stiles shows, a particularly great philanthropist. He left most of his fortune to his children, and less than 5 percent of his wealth to charity. (That said, the $2–3 million that Vanderbilt dedicated to philanthropy was more than anyone else of his generation.) Nevertheless, for most of his life, Vanderbilt did not show much interest in helping others. Stiles recounts an incident from sometime around 1873. A Catholic priest showed up in Vanderbilt’s offices with $10 he had found that belonged to the New York Central. Vanderbilt instructed his accountant to place the money in the railroad’s accounts. The priest hinted that the money could do a great deal of good if it were given to the Roman Catholic Church. Vanderbilt’s accountant thought the $10 was an appropriate reward for the priest’s honesty. Vanderbilt chose to do nothing, and sat silently until the priest left. Once the priest was gone, he said, “There’s considerable good in religion after all.”
Such incidents made Vanderbilt seem like a skinflint. Certainly many contemporary journalists thought so, perhaps most notably among them Mark Twain. In 1869, Twain launched a vicious attack on Vanderbilt, whom he saw as representative of a society growing increasingly materialistic, selfish, and corrupt. “You observe that I haven’t said anything about your soul, Vanderbilt,” Twain sniped. “It is because I have evidence that you haven’t any.” Twain admonished Vanderbilt to make an act of public contrition by making major charitable contributions. “Do go, now,” Twain wrote, “and do something that isn’t shameful.”
Twain’s attack was unfair. Vanderbilt was an intensely private man who disliked making splashy contributions to obtain favorable publicity. In 1863, for example, Vanderbilt declined to contribute to a hospital for wounded soldiers. “I feel it a duty I owe myself to keep my name aloof from public acts granted in association with legislative bodies,” he wrote. “At this late day, I am desirous of keeping myself aloof from any public transactions of any kind or nature.” As the New York Herald observed in 1869, Vanderbilt “does not go much to churches, and no one sees his name on a subscription paper, nor ever will. In his charities, which are numerous and liberal, he exhibits the reticence which marks his character as a man of business. He despises cant and humbug and pretentious show.”
Nevertheless, Vanderbilt did make two quite public charitable contributions. Both centered on the Civil War. In 1861, Vanderbilt offered to donate the pride of his fleet, the Vanderbilt, to the Union navy. The Secretary of the Navy, expecting a short and decisive war, refused the offer. By March 1862, Union leaders had changed their minds. The Confederate ironclad C.S.S. Virginia steamed out of Hampton Roads, Virginia, sinking two and smashing one of the Union’s wooden frigates. Although the ironclad U.S.S. Monitor engaged and turned back the Virginia, Union leaders were shaken by the encounter.
Abraham Lincoln called on Vanderbilt for help. Vanderbilt fitted his flagship for combat and donated it to the Navy. For a while, the Vanderbilt was used to help bottle up the Virginia at Hampton Roads. Later, it was converted into a cruiser and joined the hunt for the Confederate merchant-raider Alabama.
When the guns at last fell silent, Vanderbilt became interested in reconciling North and South, an interest that increased after the sudden death of his first wife, Sophia, in 1868. After a whirlwind courtship, Vanderbilt married the dignified (if curiously named) Frank Crawford, more than 40 years his junior, who said she was a distant cousin of Vanderbilt’s. Crawford was an Alabama native, and, according to Stiles, “an unrepentant Confederate.” “Vanderbilt,” Stiles writes, “found himself intrigued by Frank’s Southernness.”
Such intrigue in turn fed Vanderbilt’s desire to help the South recover from the ravages of war. It inspired his best-known charitable legacy: the establishment of Vanderbilt University. The creation of the school dates to 1873, when Holland N. McTyeiere came to New York for medical treatment. McTyeiere was a bishop in the Southern Methodist Church. Perhaps more importantly, he was the husband of one of Frank Crawford’s cousins. His relationship with the new Mrs. Vanderbilt led to frequent visits to the family’s mansion at 10 Washington Place. During those visits, McTyeiere explained to the Vanderbilts that the Southern Methodist communion had authorized the creation of a new university, a means to help the South recover from the war. Vanderbilt liked the idea, and contributed $1 million to the school. He had two conditions: that the school be located in Nashville, and that McTyeiere be in charge.
The best statement of Vanderbilt’s intentions comes from Charles F. Deems, a Southern Methodist minister who moved to New York in 1866 and became a frequent guest of the Vanderbilts. (Indeed, in 1870, Vanderbilt provided Deems with $50,000 to open the Church of the Strangers.) In the 1878 trial over Vanderbilt’s will, Deems testified that Vanderbilt “said that he had this in mind during the Rebellion. He spent a million in money in sending a vessel against the Southerners to show his views then, and he wanted to give this money after the war to show them that the men of the North were ready to extend the olive branch.” The Commodore’s contribution of the Vanderbilt had been a donation of $1 million toward the Union war effort. He believed that his contribution of $1 million toward the South’s recovery would balance out the earlier donation neatly.
The Vanderbilt family continued to be great patrons of the school. Vanderbilt’s son William gave an additional $200,000, and these gifts enabled Vanderbilt University to begin operations with a $600,000 endowment—an amount, says Vanderbilt University historian Paul K. Conkin, to enable the school to open in 1877 as “an exceptionally privileged institution, rich beyond any comparable university save the very oldest private colleges in the Northeast,” Johns Hopkins, and Cornell.
Perhaps the most notable philanthropist among Vanderbilt’s descendants was his grandson William K. Vanderbilt (1849–1920), who was a generous contributor to Vanderbilt and Columbia University, as well as a leader in the effort to help poor people obtain homes in Manhattan. Also notable was Cornelius’ great-granddaughter Gertrude Vanderbilt Whitney (1875–1942), a sculptor who married the heir to a streetcar fortune and used the wealth to co-create Manhattan’s Whitney Museum.
The Vanderbilt family eventually ceased to be major philanthropists. The reason is simple: the money dried up. “Within thirty years after the death of Commodore Vanderbilt,” notes family historian Arthur Vanderbilt, “no members of his family were among the richest people in the United States.” Arthur also notes that, in 1973, Vanderbilt University invited 120 descendants of Cornelius Vanderbilt to the school. Not one of them was a millionaire.
In The First Tycoon, T. J. Stiles shows that Cornelius Vanderbilt, while decidedly not a first-tier donor, is a significant figure in American business history whose views and charity ought to be better known. Stiles’ will likely prove to be the definitive biography of this epic entrepreneur.
Contributing editor Martin Morse Wooster is the author of The Great Philanthropists and the Problem of “Donor Intent”.