24 Aug Cornelius Vanderbilt

The story of Cornelius Vanderbilt, one of the earliest American entrepreneurial successes, is a tale of intense lifelong competition. Starting with his first job as an 11-year-old ferry boat attendant, Cornelius built a shipping and railroad empire that exceeded anything the world had seen before. Because of his ruthless tactics, Vanderbilt generated controversy, criticism, and admiration in equal measure, and was the wealthiest person in America at the time of his death.

Vanderbilt was born in 1794 in Staten Island, New York, to a middle-class lifestyle on his father’s earnings from a small farm and ferry boat business. In the days before there were bridges, the waters around Manhattan were dotted with numerous small-time ferry boats that hustled for passengers and cargo.

Cornelius left school early and began working to help his family. Vanderbilt chose the ferry boat business over the family’s farm and thrived on the job. At 16, he borrowed and leveraged $100 from his parents to purchase a small ferryboat of his own. He soon paid back the loan and bought another boat, hiring an employee to operate it. Having someone else do all the work seemed like a really good idea!

During the War of 1812, military personnel and cargo constantly required transportation; Vanderbilt decided to go all-in while business was hot and purchased several more ships for his fleet. His small but impressive operation soon attracted the attention of a larger company, and he was offered a job managing the flagship steamboat of a commercial fleet owned by transportation magnate Thomas Gibbons. 

Recognizing that steamboats were the shipping technology of the future, Vanderbilt sold his ferry boats and went to work for Gibbons. He learned the steamboat shipping business and built substantial personal savings.

Vanderbilt also learned how cut-throat business competition could be. Gibbons was embroiled in a bitter war with a rival company that had been granted a legal monopoly, and some biographers credit this early experience with shaping Vanderbilt’s ruthless approach to business dealings. Gibbons and Vanderbilt employed every tactic they could, legal and illegal, to compete with the rival company. They even launched litigation that eventually wound up in the U.S. Supreme Court.

Soon after Gibbons’ death, Vanderbilt had saved up around $30,000 in start-up capital, enough in those days to buy a small fleet of quality transport vessels. Although Gibbons’ heirs offered to double his salary, Vanderbilt’s entrepreneurial instincts told him he could make far more money building his fortune on the steel of owning his own steamship line rather than harboring on the sand of working for others.

Vanderbilt began his enterprise by offering ferry service up the Hudson River, a moderately busy route on which there was already competition. Because of his experiences, he decided to play hardball and he cut his rates so severely that the other ferry services were priced out of the route. Once there was no competition, Vanderbilt raised his rates and profited from the increased revenue and passenger volume. Vanderbilt could soon afford to buy more boats, so he expanded service to Albany, again slashing his rates to drive off competitors. This time, however, his competitors decided to buy him off. They pooled their resources and paid a lump sum of $100,000, plus annuities of $5,000, for Vanderbilt to leave the route!

Vanderbilt expanded, plowing most of his profits into ferry services from New York to Boston, Providence, Connecticut, and other hubs. After 10 years in business, Vanderbilt operated a fleet of over 100 steamships. By being the best competitor and driving out the competition, Vanderbilt became the dominant ferry operator along the country’s busiest seaboard. Now his sights turned inland after noting that many of his passengers used railroad services on debarkation. He saw a strong market fit and he was going to take advantage!

Vanderbilt began investing in passenger railroad lines and was able to play one against the other. It wasn’t long before he become president of a railroad that ran between New York, Providence, and Boston. Vanderbilt had become a multimillionaire, and many in the industry referred to him as “The Commodore” in recognition of the sizable fleet he controlled.

When the California Gold Rush erupted in 1849, the fastest way to the West Coast was by sailing to Panama, making a short journey overland, and catching a boat to Northern California. While the iron was hot and thousands of gold prospectors lined up for the trip, Vanderbilt devised a shorter route with a land crossing at Nicaragua. This made the journey two days faster and cheaper, and Vanderbilt generated $1 million per year on this route alone for the next decade.

During the 1850s and 1860s, Vanderbilt invested heavily in railroads, gaining control of three New York-based railroads. This was when Vanderbilt’s son recommended an expansion of their railroad interests across the Midwest and West. Railroad companies that served Chicago were merged with rail lines in Michigan, creating a network that ran from the East Coast to the Midwest’s biggest cities. Once again, Vanderbilt had struck while the iron was hot and was providing exactly what the market wanted.

In his later years, the 73-year-old Cornelius Vanderbilt married his second wife, and she encouraged her husband to become more philanthropic. Vanderbilt’s single largest donation, the single largest charitable donation in American history to that point, was a $1 million endowment to the Central University of the Methodist Episcopal Church, South, a college in Nashville, Tennessee. Soon after, the college was renamed Vanderbilt University.

Vanderbilt passed away at 82 with estimates of his net worth between $105 to $205 billion in today’s dollars, making him one of the top 10 wealthiest people in modern history. He was a formidable enemy to his competitors, but the most giving and compassionate person to his friends, family, and society.

Our next amazing entrepreneur was 14 years old when Vanderbilt passed away, and he was also going to turn the transportation industry on its head. In fact, Henry Ford would grow up to change the world completely.