Assignment: Vanderbilt was a capitalist that created monopolies.

After you have read his

biography, create write a report that 1) describes Vanderbilts actions and what positive
and negative things he brought to business, 2) describe his work ethic , 3) discusses what
you believe his values were, 4) discusses whether you believe he was legally and morally
right or wrong 5) and describe what you believed the cartoon is trying to tell the reader.
Support your opinion with facts from the article and your own prior knowledge! Be
prepared to present your paper or poster to the class.

Cornelius Vanderbilt - Americas Richest Man

Cornelius Vanderbilt was a classic Market Entrepreneur. He was a key figure in breaking the
steamboat monopoly granted to Robert Fulton and Robert Livingston in the waters around New
York City; in the transatlantic steamship business.

National Heritage Academies 6t h Grade Industrial Revolution

1
He managed to dominate the east coast to west coast steamship business and was the builder of
the New York Central system which, in effect, replaced the Erie Canal. (A market entrepreneur
is someone who tries to succeed by creating and marketing a superior product at a low cost.)

When Vanderbilt died he was the richest man in America ($105m). His legacy was that he had
created a high quality, quadrupled railroad track that played a key role in the development of the
Midwestern United States, that he was business visionary, and operated within the law.

Vanderbilt was born on May 27, 1794 on Staten Island, New York. His father was a farmer who
would sail his produce to the New York market across the harbor.

He entered business at the age of 16 in 1810 when he was paid $100.00 by his Mother to clear
and plant an 8-acre field. Instead of spending his money on new clothes or a good time,
Vanderbilt used the $100 to buy a small two-masted (sailing) flat-bottomed vessel and used it to
carry freight and passengers between Manhattan and Staten Island. (Vanderbilt had a minor
accident just after he bought his boat and it almost sank. This was his only accident as an owner
of boats. As an owner, he never fell victim to fire, explosion, or shipwreck, which was
somewhat unusual during those dangerous times.)

Vanderbilt was called "Cornele, the boatman" and he catered primarily to people commuting to
work because he quickly built a reputation for reliability and fearlessness. He would undertake
any job -- even in stormy weather -- and he consistently charged lower rates than his
competitors.

During the War of 1812 Vanderbilts reputation for reliability resulted in his being awarded an
Army contract to supply six posts around New York Bay, in addition to his regular business. He
also made additional money by bringing food down to New York City from the farms along the
Hudson. (The British blockaded New York City during the War.) He carefully saved his profits
which allowed him to invest in two other boats as a partner. At a young age, Vanderbilt
understood how to use his money to make more money.

After the War in 1815, Vanderbilt went into the coastal trade carrying oysters, watermelons,
whale oil, shad and many other items between Chesapeake Bay and New York. In his spare time,
he sold beer, cider, and provisions to ships anchored in the harbor. By 1818 (age 24) he had
saved $9,000 and owned interests in several other boats. (Today, $9,000 is equal to $90,000.)

Vanderbilt's business style was established early in life. He was very hard working, fiercely
competitive, willing to cut prices to get business; reliable to repeat customers, and frugal.

Vanderbilt's Steamboat Period

In 1807 Robert Fulton piloted his steamboat Clermont up the Hudson River from New York to
Albany against the current at the blazing speed of 4 miles per hour. Fulton was a classic example
of a political entrepreneur. He and his partner Robert R.. Livingston were able to get a
National Heritage Academies 6th Grade Industrial Revolution
2
government granted monopoly on all steamboat traffic in New York for 30 years because they
were willing to invest the money to start up the business. Fulton and Livingston's monopoly
practically bankrupted small merchants like Vanderbilt who could not compete with the invasion
of the steam ships.

Vanderbilt responded by selling his sailing vessels and went to work for Thomas Gibbons who
owned a small steamboat. Once he learned how to operate the steamboat, he persuaded Gibbons
to build a steamboat that Vanderbilt himself designed, called the Bellona. Then Vanderbilt
began ferrying passengers from New Jersey to Manhattan in violation of the monopoly. He was
breaking the law! The Fultons monopoly charged $4 a ride, but Vanderbilt charged $1 (At that
price he lost money) but made up his losses by raising the price of food and drink in the
steamboats bar. At one point, he went 60 straight days evading New York City police who were
trying to arrest him for violating the monopoly.

In the 1824 the Supreme Court declared that the Fulton-Livingston monopoly was illegal as it
violated the U.S. Constitutions commerce clause - state governments could not grant
monopolies. With the Supreme Court ruling, suddenly entrepreneurs' private property rights were
ensured and investors were now willing to try the new steam technology in the hopes of gaining
a competitive edge.

The collapse of Fultons monopoly resulted in: 1) immediate drop in prices for freight and
passengers; 2) new people entered into the business; 3) introduction of new technology
specifically, tubular boilers and the use of anthracite coal (plentiful in nearby Pennsylvania) for
fuel rather than wood.

In 1829 (age 35) Vanderbilt had saved $30,000 and went into the steamboat business for himself.
He was creative and put trips together where people got on a steamboat, rode in a carriage, then
got back on a steam boat to finish their trip, all at a cut-rate price. Vanderbilt nearly created a
rate war, but his competitors decided to buy him out rather than try to beat his competitive
pricing. This happened time and time again. By the mid 1840s Vanderbilt operated a fleet of
more than 100 steamboats, employed more men than any other business in the country, and was
worth several million dollars.

Vanderbilt's Steamship Line via Nicaragua to California

The discovery of gold in California in 1848 set off a stampede of adventurers heading for
California from the East Coast. At first California-bound adventurers went by Clipper Ship
around Cape Horn. The Clippers were built for speed long, narrow amidships, with very tall
masts and large sails. They could make the journey from NYC in 90 days compared to an
average of 159 days for a conventional sailing vessel. However, they were designed for speed
and not for cargo, so passage on one was very expensive. Consequently, New York steamship
operators organized a route via Panama using steamships two weeks to Panama, a weeks
portage across the Isthmus to the Pacific, and then two more weeks aboard a second steamship to
San Francisco (35 days).

National Heritage Academies 6th Grade Industrial Revolution

3
Vanderbilt thought of a better solution, which was Nicaragua. Why not shorten the route to
California by using Lake Nicaragua and the San Juan River?

In 1851, after paying the Nicaraguan government $10,000 for a charter to cross the country,
Vanderbilt personally piloted a small steamboat up the San Juan River to test the route (which
many locals said couldnt be done). He had the river cleared of obstacles, placed a steamboat on
Lake Nicaragua, and built a road from the west shore of the lake to San Juan del Sur, a port he
paid to have constructed on the Pacific coast.

Vanderbilts route was 600 miles and 12 days shorter to California, and much cheaper. He
immediately slashed the fare of $600 to $400. His two competitors were subsidized by the U.S.
government to the tune of $500,000 to carry the mail to California. Vanderbilt not only cut fares,
he offered to carry the mail for free! Eventually the fare dropped to $150 and Vanderbilt still
made money.

Vanderbilt's Steamship Line Across the Atlantic

In 1855 Commodore Vanderbilt entered the steamship business on the Atlantic, and as was his
practice, Vanderbilt cut fares for both passengers and mail. He focused on 2nd and 3rd class
passenger to get a volume business. Vanderbilt spent $600,000 building the Vanderbilt, the
largest vessel floating on the Atlantic Ocean at that time. It was very fast and set the speed record
at 9 days 1 hour from America to the Isle of Wight, England.

Vanderbilt's The Railroad Period

From 1862 to 1864 Vanderbilt sold or leased most of his vessels to the Union government at a
good profit during the Civil War. He had become interested in railroads in 1857 and soon
realized that they were the wave of the future. He purchased and put together companies to buy
out several New York based railroads. In 1866 Vanderbilt even built a wooden truss bridge 2000
feet long over the Hudson River at Albany to expand the lines of the Hudson and Harlem
railroads. These vital railroads were the only ones to provide service to Manhattan.

More maneuvers got him control of the vital New York Central and when combined with the
Hudson River railroad the value of the combined lines was some $90,000,000. New York
Central stock paid a consistent 8% dividend under the Vanderbilt.

In contrast to many other railroads of the era, the NYC was truly managed by its stockholders.
Vanderbilt steadily increased his share of the stock.
In 1868 Vanderbilt became convinced that he had to extend his system all the way to Chicago to
be competitive with the other major railroad lines. In is efforts to get control, the infamous
robber Baron Jay Gould tricked Vanderbilt into spending $1.5 million on Goulds nearly
bankrupt Erie Railroad

National Heritage Academies 6th Grade Industrial Revolution

4
Vanderbilt was much more successful in gaining control of the lines he needed to Chicago the
Lake Shore, and the Michigan Southern and Northern Indiana railroads. By the summer of 1869
he controlled a consolidated railroad system from New York City to Chicago.

Vanderbilt made major improvements throughout his consolidated system including a new and
much larger freight yard on the West Side of Manhattan. He steadily upgraded the right-of-ways,
the track, and the rolling stock of his railroads. He installed steel rails on the most heavily
traveled routes. Finally, in 1874, in what many thought a foolish and "impractical, but turned
out to be a visionary action, Vanderbilt quadrupled tracked (2 lines for passenger, 2 lines for
freight) for the New York Central from Albany to Buffalo. This vastly improved the productivity
of the core of his railroad system and made the system enormously profitable.

The Railroad phase of Vanderbilts career exhibits the same qualities of his early career and his
steamboat period, hard working, fiercely competitive, willing to cut prices to get business,
reliable to repeat customers, frugal, a skilled business strategist and the ability to master the
details of a new business (which shows exceptional insight) and to act boldly when necessary.
Also, the sheer size of the NYC showed that he picked skilled managers to run his railroad
managers to run his railroad properties. On the debit side, Vanderbilt was not an "Empire
Builder". He built very little new railroad mileage and the "vision" of a great system linking New
York with Chicago occurred very late in his career.

Vanderbilt and Gould are seated.

National Heritage Academies 6th Grade Industrial Revolution
5