Wednesday, July 23, 2014

The First Tycoon: The Epic Life of Cornelius Vanderbilt - Book Review

The First Tycoon is the definitive biography on Cornelius "Commodore" Vanderbilt. It took T.J. Stiles 7 years to research and write this biography and he did a incredible job. He found material not covered in other biographies and also put to rest rumors that seem to be far fetched from other authors.  The Commodore lived a long life he was born May 27, 1794 and died on January 4, 1877 at the age of 82 years old. It was especially long when you consider during his generation most people lived to be 40 years old. T.J. Stiles does a great job shaping the story of not only Vanderbilt but America, politics, and capitalism. 

Building a Dynasty:
When most people think of The Commodore they think of his vast railroad empire because it was the railroad empire he created during the last quarter of his life. Majority of Vanderbilt's life was rising from a boatman to Captain and then builder of the nation's largest fleet of steamships. His transportation revolution changed the world like the modern day internet in he made transportation cheap to the masses and changed the way people communicated and traveled. Vanderbilt propelled the Gold Rush making an alternative sea route and bringing the gold from California back to New York. This helped build New York into the financial center of the world over London. Vanderbilt was the first to really understand how to play politics and how a corporation could be set up to represent individuals. The modern corporation and financial engineering all started with Vanderbilt and his ideas how to maneuver himself on to different boards and takeover companies and run them for the shareholders. Vanderbilt didn't take salaries he got paid through dividends and when he took over a company he had skin in the game! His final stage in life was moving from the sea to land through railroads the biggest industry of the day. In the crises of 1863 he used a stock market corner to become president of the Harlem Railroad. The railroad which was losing money and considered to be worthless Vanderbilt built it into a valuable company. He was on boards of many railroads including the New York. After battles in the following years which Vanderbilt won he bought control of the Hudson River (1864), New Your Central Railroad (1867), Lake Shore and Michigan Southern (1869), and Canada Southern. Making one of the first giant corporations in America he combined the New York Central and Hudson River Railroad together. Vanderbilt also made a historical monument with the Grand Central Depot in 1869 today its been remodeled and moved and is known as the Grand Central Terminal but Vanderbilt's statue reminds out front.  As every dynasty is created and passed on the Vanderbilt children basically squandered the fortune in future generations. The Company was eventually sold off into the market. 

Vanderbilt during a Crisis: 
During his time of reaching the richest man in the nation he had to deal with many different crisis. There were stock market and economical crises but also the Civil War. His battle with Jay Gould and Big Jim Fisk is fascinating. Known as the Erie War over the company Erie Railway. This is when the term "watering down stock" came from and is a great story in itself. He also single handily played huge roles in the panics of 1863, 1869, and 1873. In 1863 he took advantage of the Harlem Short taking control in the railroad. In 1869 after pushing the markets to thier brink, Vanderbilt stepped in with his confidence and his cash to save the market. Jay Gould and Jim Fisk also created black Friday, September 24, 1869 when they tried to corner the gold market on the New York Gold Exchange. The Panic of 1873 as T.J. Stiles points out Vanderbilt new the situation was asset inflation a speculative bubble in railroads it most resembles the housing bubble of 2008. Vanderbilt was wary of over-expansion by the railroads in the West. He also was skeptical of loose credit and economic weakness abroad. The Civil War was a huge crisis and Vanderbilt donated his fastest, largest and best ship to the Union to help defeat the South. Later he donated to launch Vanderbilt University which cost the same as his donation to the Union during the war. 

The lessons learned from Cornelius Vanderbilt:

Before Vanderbilt the value of a company was considered limited to its underlying assets. Companies were split into $100 shares equalling the total amount of physical goods of the company. The money expected by investors for investing in the company came from dividends, not a rising share price. Vanderbilt had the foresight to understand earnings and the worth of a company outside just its physical objects of value. 

When running his transportation business Vanderbilt didn't care how he got paid. It didn't matter if it was gold, silver, or paper. The only thing important to Vanderbilt was a producing productive asset. An productive asset will allows be able to raise capital. 

Vanderbilt understood how the modern economy worked how issuing bonds or stock raising capital at key times can be used to gain an advantage and amass huge wealth. 

Understanding doing what is best for ones-self is doing what is best for the country. This is a key lesson bettering your own situation gives opportunity to others through success. It allows you to give back with means you have created. 

I rate this book 5 of 5 and recommend highly!




  1. Its funny how times change in that in his day, investors got dividends and that was the reward. You wouldn't think of selling for profit.
    Wall Street has really convinced retail that they should go for shares... and more commissions because you need to be buying and selling and causing turnover in your account. Personally I'm getting tired of being told "if you want income just sell a few shares."

    1. Yea I was just replying to DivHut about how hard it is owning companies that don't pay dividends. Commissions on trading are cheap today but turning over a portfolio doesn't mean you are making more money. I think its hard for some people to realize that. Thanks for stopping by Pulling.


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