15 lessons in business from the master and Commodore
Of all the great, self-made tycoons that America has given the world, Cornelius “Commodore” Vanderbilt has claim to be the master of them all.
Born to a poor family on Staten Island in 1794, Vanderbilt left school at 11 to start working for his father, an illiterate seaman. At 16, he bought his first small ferry boat with a $100 loan from his mother. It was the start of an astonishing career: he went on to create the world’s largest shipping empire (earning him his naval nickname), then became the most successful of the 19th-century railroad barons.
When he died on January 4, 1877, aged 82, he was the richest man in the world with a fortune of around $100 million, a sum equivalent to one-ninth of all the American currency then in circulation. According to one calculation, Vanderbilt’s wealth would have been worth $143 billion in 2007 terms, measured by the share of the nation's gross domestic product he had acquired. This makes him the second-wealthiest person in US history, after oilman John D. Rockefeller.
To mark this week’s 225th anniversary of his birth, on May 27, 1794, here are 15 lessons from his remarkable business life. Be warned: not all may be suitable to deploy today.
He was tough, uncompromising and unsentimental. Six-feet tall and physically strong, Vanderbilt was a hard man who earned a formidable reputation for taking care of himself. In his early days, he often got into physical scraps with rivals, frequently knocking them unconscious.
He was extremely hard working. With his first ferry business, he would often sleep on his boat overnight so as to be first in line for picking up the next morning’s business.
He was fiercely competitive: Vanderbilt’s aim was to win, at all costs. He employed any tactic, fair or foul, that helped him emerge victorious. His modus operandi in both the shipping and railway industries was to undercut rivals on price and push them out of business, so he could have a monopoly. His opponents were equally callous and unscrupulous; just not as good at it as him.
He understood the importance of providing a reliable service so as to win the loyalty of customers. Once he established his transportation business by slashing prices, he would then invest to start competing on the basis of comfort and speed. During the California gold rush in 1849, Vanderbilt began a steamship service to San Francisco via Nicaragua. His competitors went via Panama, which took two days longer. This operation netted Vanderbilt more than $1 million per year.
Vanderbilt was a meticulous planner and analyst, and would take time to evaluate any opportunity before entering into a deal or venture. Although he sometimes made mistakes, he was always able to either cut his losses or extract himself.
He cared little for his public image, and never allowed the criticism of others to affect him. He may have been hated and feared by rivals - many labelled him an “ill-educated, unmannered brute” - but he always commanded respect, even from his enemies.
He was shrewd, extremely quick to embrace new technologies and to know when to move on; he abandoned the sailboat for the steamship, then sold them off to invest in railways, always undercutting and overcoming the competition.
He was ruthless and cunning, even in an age of cutthroat capitalism. In the 1860s, he owned the only rail bridge into New York City, the gateway to the country’s largest and busiest port. He ordered it to be closed, blockading the millions of dollars of cargo of rival railroads. Before their stocks become worthless, the rival railroad owners tried to offload their shares, leading to a huge sell-off. When their share prices slumped, Vanderbilt bought them. In days, he had created the largest single railroad company in America.
Manipulating stock prices was as essential to his success as offering low fares and efficient service. The term robber baron was invented for him; in 1859, The New York Times wrote an article comparing him to medieval German nobles who had “swooped down upon the commerce” of the Rhine “and wrung tribute from every passenger that floated by”.
He was extremely careful with his money, living frugally and avoiding debt. Apart from that $100 loan from his mother, he never again borrowed money. He was not accepted by the wealthy class because he did not flaunt his money or his wealth. He was said to be so tight-fisted that if he saw someone approaching who he thought might ask him for a cigar, he would cross the street to avoid the meeting.
He put his money to work making money, investing his profits into his businesses, into buying real estate steamboats, and in making loans to other businessmen. He personally invested millions in building Grand Central Station in New York.
He didn’t talk much. Vanderbilt was a man of few words, letting others do the talking and preferring to listen to what they had to say.
He was also considered a very good judge of character. He embraced individuals of high character and went to war with those he considered dishonest or untrustworthy.
He stayed healthy and took time to relax. He ate sparingly, did not drink alcohol, and was physically active all of his life.
His closest business confidante was his first wife, Sophia, who had a smart business brain herself, and who supported and advised him. The couple had 13 children. A year after Sophia died in 1868, Vanderbilt married a distant cousin named Frank Armstrong Crawford. He was 73. She was 34 years his junior, younger than almost all of his children.
You can read more about the remarkable lives of Cornelius Vanderbilt, John D. Rockefeller and other pioneers of business as part of our collection of original obituaries of 50 Tycoons, available in paperback for £8.99 or £4.99 as an ebook here.