Founders - #54 The Epic Life of Cornelius Vanderbilt

Episode Date: January 8, 2019

What I learned by reading The First Tycoon: The Epic Life of Cornelius Vanderbilt by TJ Stiles. ----His life spanned from the days of George Washington to John D. Rockefeller [0:01]$1 out of $20 in circulation [4:35]an overview of his life [5:35] the environment Vanderbilt was raised in [14:10] love of competition / dislike of school / first jobs [18:00] action for actions sake [22:00]an entrepreneur from the beginning [23:06] expansion fueled by aggressiveness, action, and constraints [30:00] partnering with the rich and powerful Thomas Gibbons [35:00]the solo founder [46:34]starting up with an eye on getting acquired [50:00] frugality wins [56:20]entrepreneurs vs large companies [1:03:45] more frugality and decentralized company structure [1:12:00] the size of his ambition was difficult for others to comprehend [1:19:25] ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

His life spanned a period of breathtaking changes, from the days of George Washington to those of John D. Rockefeller. He began his career in a rural, agricultural, essentially colonial society in which the term businessman was unknown. He ended it in a corporate industrial economy. Neither the admirers nor the critics of his later years had witnessed his role during the tumultuous era of the early republic and the antebellum period. They could not see that Vanderbilt had spent most of his career as a radical force. From his beginnings as a teenage boatman before the War of 1812, he had led the rise of competition as a virtue in American culture. He had disrupted the remnants of the 18th century patricians, shaken the conservative merchant elite, and destroyed monopolies at every step. His infuriated opponents had not shared his enthusiasm for competition.

Rather, the wealthy establishment in that young and limited economy saw his attacks as destructive. In 1859, one had written that he has always proved himself the enemy of every American maritime enterprise, and the New York Times condemned Vanderbilt for pursuing competition for competition's sake. Those on the other end of the spectrum had celebrated the way he had expanded transportation, slashed fares, and punished opponents who relied on government monopolies or subsidies. To Jacksonian Democrats who championed laissez-faire as an egalitarian creed, he had epitomized the entrepreneur as champion of the people, the businessman as revolutionary. And that was an excerpt from the first chapter of the book that I want to talk to you about

today, which is the first tycoon, the epic life of Cornelius Vanderbilt. Before I jump into the rest of the book, if this is your first time listening to Founders, the premise of this podcast, the concept of this podcast is very straightforward. Every week I read a biography of an entrepreneur, somebody that's built a company, and I pull out interesting parts. These are basically my notes, the parts that I highlighted, notes I left myself, not meant to be a summary, not meant to be a review of the book, just things I learned that I thought were interesting that I figured I'd share with you. So before I jump back into the book, though, as long-time listeners know, once we get going, I'm not going to interrupt our time

with any ads. So I do have one ask of you, though. If you are interested in supporting this podcast, I just ask that you join my email list. You can go to foundersnotes.co. And what founders notes are, they're basically my personal podcast notes. When founders appear on podcasts, I take note of their key ideas and I email them to you every Sunday. So if you want to support this podcast, join that email list. You can go to foundersnotes.co or you can just look for the link directly in show notes on your podcast player. Actually, if you can do that now, I'm talking. Enter in your email and that's literally all you have to do. It's the best way for you to know what other entrepreneurs are thinking. So there's a lot of useful information in there that would be helpful in your own work.

Okay, so I'm going to start at the very beginning and just work my way chronologically through my notes. And this book is a monster. It won the Pulitzer Prize and as most books that win the Pulitzer Prize, it's probably a little longer than it needs to be. So it's like a 20 or 25 hour read. And for the point of our time together today, I'm going to focus on this time that they were just described. The time that he was, let's see, what's the way they put it? That he'd spent most of his career as a radical force. And I love that term that he had epit's see what's the way they put it uh that he'd spent most of his career as a radical force and i love that that term that he had epitomized the entrepreneur as a champion of

the people as a revolutionary so um i'm gonna focus on uh like i normally do his early life and then his how he started his company um and then you know his philosophies on business which is very much uh intertwined with his personality. This is common in the other biographies I've read and other founders have studied, but maybe most profound, no, pronounced. It might be hard to separate the way he thinks about business with how he kind of approached his life is basically what I'm trying to tell you. Okay, so we're going to go, before I get into his early life, I just wanted to tell you a little bit about his personality. And then this is just a crazy stat that appears right on the first page.

And it says, this is at the time of his death. And it says, his fortune towered over the American economy to a degree difficult to imagine, even at the time. If he had been able to sell all his assets at full market value at the moment of his death, he would have taken one out of every $20 in circulation, including cash and demand deposits. So that kind of gives you an idea of how dominant he was at his time. Like the book says, he was basically the first tycoon. And throwing back to what they were saying at what I just shared with you in the introduction, remember he began his career when there wasn't really any, like the idea of a corporation was kind of an unknown, like abstraction at the time.

Even the idea of a businessman was rather unknown. It was just a series of most people worked for themselves, and they did so under their own name. Okay, so this is some personality and overview of his life. So it says, More fascinating than the fortune was the man behind it. His strength of will was famous indeed. Vanderbilt had first amassed wealth as a competitor in the steamboat business,

cutting fares against established lines until he forced his rivals to pay him to go away. that um you know he's definitely spread out into other businesses which i'll also get into but this is how he started out and built money because he did not come from a rich family by any means and he was largely i mean i think he went to school for about three months which which i'll get to as well so it's um oh okay so i'm actually going to read this paragraph but i'm not going to talk about what, what they're referencing. I just want, this is a good paragraph to tell you to kind of preview what next week's podcast is going to be about. So it says his adventure in Nicaragua had been in part a matter of personal bucketeering as he explored the passage through the rainforest, piloted a riverboat through the rapids of the San Juan river and decisively intervened in a war against an international criminal

who had seized control of the country. His early life was filled with fistfights, high-speed steamboat duels, engine explosions, and his later days were marked by daredevil harness races and high-stake confrontations. So next week I'm going to discuss the later life of Cornelius Vanderbilt, but I want to intertwine it with what they're talking about. This guy here who they're referencing in this book, an international criminal who seized control of the country.

And I'm just going to tell you the subtitle of the book that I'm going to cover next week. It says, How Cornelius Vanderbilt Invaded a Country to Overthrow America's Most Famous Military Adventurer. So that's just a little sneak peek. Okay. Vanderbilt was an empire builder, the first great corporate tycoon in American history. Even before the United States became a truly industrial country, he learned to use the tools of corporate capitalism to amass wealth and power on a scale previously unknown, creating enterprises of unprecedented size. So it continues a little bit more. It says Vanderbilt is but the precursor of a class of men who will wield within the state a power created by it, but too great for its control. So what they're basically saying there is he amassed so much wealth it was kind of ungovernable and think about the size of the

government the united states government at this time we're talking in the he started his career in the 1700s so this this section of the book uh ranges from 1794 to 1847 um and there's even instances in the book where he's doing negotiations. This is much later on, let's say he's around 40 years old this time. He's doing negotiations with some companies and they didn't understand who they were going up against, where his personal wealth would be greater than the market capitalization and all the resources of the actual company, the actual company had. So there's talking about, Hey,

he's kind of like, you know, the blueprint. And if you remember the podcast, I did a long time ago, it was like a over a year ago on, on John D Rockefeller, their lives kind of intersect at the end of court, the end of Vanderbilt's career coincides with like the rise of Rockefeller's

career, but he was very much a blueprint for them and somebody they kind of studied. So it says this guy that's writing this is talking about the one that this guy named, he's a writer named Adams. So he's the one that's saying Vanderbilt is the precursor to the class of entrepreneurs that are coming next. So it says Adams, that's the guy that's writing, did not mean a family dynasty, but a line of corporate chiefs who would overshadow democratic government itself. Rockefeller, Carnegie, Gold, Morgan,

all were just beginning their careers when Vanderbilt was at his height. They respected and followed his example, though they would be hard pressed to match it. Few laws had constrained him. That's what I was just referencing earlier. Few governments had exceeded his influence. And this is just a note I left myself, which is what a quote.

He played a leading part in the creation of a new entity, the giant corporation that would dominate the American economy in the decades after his death. So to us living in modern, you know, modern times, like we're very familiar with the giant global corporation. There was no such thing before Vanderbilt. I mean, from an American's perspective I know there was other examples like the the other examples like the Dutch East India company which was founded about a hundred years before like the time that we're in in this book okay so just some other random quotes his guiding principle was to mind my own business so that's direct quote from. And this continues talking about his

influence, kind of setting up the events that happened in the book before we get into his early life. So it says, probably no other individual made an equal impact over such an extended period on America's economy and society. Over the course of his 66-year career, he stood on the forefront of change, a modernizer from beginning to end. So it talks about some of his contributions. He vastly improved and expanded the nation's transportation infrastructure, contributing to a transformation of the very geography of the United States. He embraced new technologies and new forms of business organizations and used them to compete so successfully that he forced his rivals

to follow his example or give up far ahead of many of his peers he grasped one of the great changes in american culture the abstraction of economic reality i found this part particularly interesting as the connection faded between the tangible world and the new devices of business, such as paper currency, corporations, and securities. With those devices, he helped to create the corporate economy that would define the United States into the 21st century. Even as he demonstrated the creative power of a market economy, he also exacerbated problems that would never be fully solved. And this is stuff that people still talk about today,

which is a huge disparity in wealth between the rich and the poor, the concentration of great power in private hands, the fraud and self-serving deception that thrives in an unregulated environment. One person cannot move the national economy single-handedly, but no one else kept his hand on the lever for so long or pushed so hard. So I don't know if I finished my thought from a few minutes ago, but to us living in modern times, it's really hard to grasp the idea that there was no such thing as a corporation at this time, at least in American society.

No such thing as, you know, they didn't have fiat currency. In fact, the book goes into great detail, something called The Bank War, which is really fascinating. If you don't know about it, I'd recommend reading the Wikipedia page, but it's about the fight that the President Andrew Jackson had with the banks at the time. I forgot the exact guy that he was fighting against, the person running the bank. But basically, Andrew Jackson thought that it was immoral because these things were abstractions. They didn't really exist. And he thought that currency should be commodities, gold, silver, and the like.

So it's just something that's really hard for me to understand. I guess my point, I'm rambling here, is that we take a lot of this stuff just for granted because we were born into a world where they already exist. And what I find so fascinating about studying history is that, you know, people, they didn't always exist. And to go back and study the birth of the corporation, which is kind of what this entire book is about, kind of, it just, it causes my mind to be a little bit more malleable and understand, you know, that Steve Jobs quote that everything around us has been created by people no smarter than you. And once you learn that you can build other things that other people can use and interact with kind of changes your, your view of life. And so that's kind of what I'm trying to say here is definitely spending time reading about this time, his time

period is just so it changes my view of life. Okay. So they're talking about, he, he kept his hand on the lever for so long. No one kept his hand on the lever for so long. No one else kept it on the lever for so long or pushed so hard. Okay, so we're going to get into the environment that Cornelius was raised in. So it says, ambition and inventiveness, practicality and toughness, the mixture of virtues that emerged from the marriage of these two people, this is describing his parents, lifted them out of poverty in which they had begun their lives together. So his mom especially becomes, his dad's a businessman as well on a much, much smaller scale. But he looked up to his mom and even later in life, he kept counsel with his mom. It's like

an advisor. She's a very shrewd woman and we we're going to get into that. So it says, these are the mixture of the virtues. So they needed to be in ambition. They needed to be inventive, practical, and tough. And they lifted themselves out of poverty. They created a household where the marketplace strode in the door and shaped their lives. It's very different. They started farming for profit, which is very rare at the time. And then what was also different, and I think I'm going to read it here and highlight, was the frequency in which they would engage in business. So some other people, a lot of other farmers, maybe they would sell their surplus once or twice a year. The Vanderbilts, his mom and dad, what they're talking about here is the household

where the marketplace strode in the door and shaped their lives. They transacted much more frequently than anybody else around them. So it says, in the Vanderbilt house, daily life was filled with buying and selling, borrowing and lending, earnings and debt. The desire of riches is their ruling passion, a French observer wrote of Americans at this time, and indeed their only passion. He could have easily been describing Phoebe and Cornelius Vanderbilt, Cornelius, his dad in a sense. But where would their passion take them? The future they could envision was in keeping with past generation of Vanderbilts. A set of possibilities confined within the water's edge that wrapped around them,

a farm, a boat, perhaps a tavern, perhaps more land. So that's basically the scope of his parents' ambition. The thin dispersal of people in a rural landscape dispersed opportunity as well, but unlike most country folk, the Vanderbilts lived within sight of the place of the most densely concentrated possibilities in North America, the city of New York. So it's funny. I bought the used version of this book, and somebody left a note. And it says, Randy, enjoy the great memories of New York. Jim, your baseball Buddy, Christmas 2015.

Arguably, this could also serve as a biography of New York. Very much the city, the development of the city is very much intertwined with Cornelius Vanderbilt at the time. So what they're talking about here is that they lived on what is today present-day Staten Island. And so from their land, they had one boat, they had a tavern, they had a house, et cetera, but they could see New York. And New York City, in this case, is Manhattan proper, which is just booms throughout the life of – the early life of Cornelius. And he starts seeing that, and I'm going to get into that now. I think I'm going to get into that now. I think I'm going to get into that now.

But we're going to see that, you know, they were definitely pulled to the allure of making it in the big city. He was, at least, I should say. All right, so this is a little bit about his early life, his love of competition, his dislike of school, and some of his first jobs. So it says, a thin line separates destiny from coincidence. A child's passion may begin a lifelong obsession. For Cornelio, so they're going to call him Cornelio to differentiate between him and his dad, which is Cornelius.

For Cornelio, the defining moment was a race. Cornelio's earliest memory, the beginning of his self-image, was a competition and victory. So it talks about a horse race that he had with another child. I think he's about six years old at the time.

So it says, a taste for competition may have been the natural result of growing up in a household filled with children. Certainly, he never lacked confidence. He quickly grew tall and athletic, capable of immense labors and endurance.

Farm life has always tended to erode the line between childhood and adulthood. Cornille lived a life of work and responsibility, hoeing and milking, piling and shoveling. He went to school briefly for a mere three months and he would, this is going to be something, this sentence is going to be sound really familiar because it pops up on almost all of the entrepreneurs that we cover. And he would recall it as an agonizing process of rote memorization, drill and punishment. So he doesn't last long at school. He has an older brother. His older brother dies as a teenager. And so he has to start working and taking his brother's place at just 11 years old. And this is set to tell you, to give you an idea of where we are in history. It's during the

presidency of Thomas Jefferson. So it says, the 11-year-old boy began to work alongside his father in the, this is a word I had to look up. It just means like a small sailboat, which is what the family had at the time. So I'm just going to use the word boat instead of a word I can't pronounce, some French word. Taking the place of his dead brother, he learned to man the tiller, to raise and set the sails, and to tack the wind. So he starts sailing. Remember, he builds his first fortune on the sea and then expands from there.

One morning, the story goes, the boy awoke to a day he had been looking forward to. His father had promised him a reward for a particularly exhausting chore of hoeing a potato field. Cornel would take his friend Owen in the boat to New York and spend the day. Cornille gathered Owen and ran down to the shore where his father stood beside a sack of hay he had contracted to deliver to the city. So his dad made money from transportation as well. Now, Cornille, there's the boat for you, Vanderbilt recalled his father saying. I've pitched on more than half the hay.

You and Owen can pitch on the rest and take it up and unload it to the wharf as usual, and you can play on the way. So he's basically made him hoe this entire potato field with dangling the carrot in front of him. Like, hey, you can use the boat. You can take your friend out. Oh, by the way, you're also going to be working on that when you're doing that. He tossed his son a few pennies and then left him to do the work. A boy can get fun out of most anything, Vanderbilt later grumbled, and we got some fun out of that.

But I remember we were just as tired that night as if we had been working. But what does the story mean? That the 11-year-old was trustworthy enough to make a delivery across seven miles of open water to what was now the biggest city in the country? That he resented his father's total control over his life? Probably something in both those explanations sealed the tale's place in Cornel's memory. But observed across the chasm of two centuries, the story seems to demonstrate how the nearness of New York overshadowed this family, filling their lives with commerce, turning even a boy's play into a chance for profit. It is a story that could not be told about the more distant reaches of rural America. So basically, he's very lucky to be born where he was. Let's see.

Okay, so this is just the note I left myself. He was inspired by action. And now they're describing the young Corneal. He was moved by pride in action for action's sake. That trait drew him to New York's waterfront with all of its furious activity, the strutting captains and mates and the insolent pilots and the packs of free-living sailors. These were men whose lives were all action. As he talked with ship's officers along South Street, he began to dream of possibilities beyond those of Staten Island.

So it kind of reminds me of something I repeat ad nauseum on the podcast, something that's always stuck with me. When I read Nolan Bushnell, the founder of Atari, he hired a young Steve Jobs to work at Atari, and he said Steve had one speed, and that was go. Same could be said about Vanderbilt. In fact, he comes close to dying multiple times throughout his life. And it's not like the injuries or even the sickness that disturbs him so much,

but the periods of inactivity that he's forced into to recuperate. Okay, so it says, the note I left myself about this story is he was an entrepreneur from the beginning. This story reveals something important. At the very beginning of his working life, he sought to be his own master. Through all of his later achievements, Vanderbilt recalled, I didn't feel as much real satisfaction as I did on that bright May morning 60 years before when I stepped onto my own boat, hoisted my own sail, and put my hand on my own tiller. So he wanted what his dad had. He wanted his own boat. And he scrimped and saved.

He's frugal, which we're going to talk about a lot on this podcast. And he saves enough very early to buy his own boat. Now, here's the thing. Most people, most young men at the time, he's basically a kid at this time, young man, teenager, whatever phrase you want to put on it. So most are going to say, hey, you know, I'm going to buy this boat and we're going to go out and have a good time. That was not his primary goal. Yet in those daily handfuls of silver shillings, he discovered his hunger for money, an ache that would mingle with his pride and longing for control to shape his life

at every turn. The author is touching on something that he touches on a million times in the book, which is Vanderbilt. To work himself in a position where no one else could tell him what to do, so he had absolute complete control over what he did during the day and how he lived his life, was something like that's a fundamental trait despite his youth there was nothing childish about the trade he had entered corneal faced bare-knuckled competition literally bare-knuckled on the harbor's waterfront he would find few boundaries to define a fair fight. And if no other means of beating a rival would do, then a beating it would be. So again, what I was just saying a few minutes ago about,

think about how tiny the government is at this time. For the most part, it didn't have a huge influence in the day-to-day lives of its citizens. I mean, there's even a part I'm going to talk about where Cornelius plays a role in one of the fundamental Supreme Court decisions of all time, and where there was very little federal government, to the point where the states basically thought of themselves as sovereign. That changes during Cornelius' lifetime.

Okay, so this says beating would be this is gonna happen several times as well where he becomes yeah he's doing physical labor right since he's very very young man and he grows into you know he gets to be about six foot tall 200 pounds of nothing but muscle so he says he approved and the reason I bring that up is because at the time it talks about in the area where they're in the average person was like five seven five eight so he towered over them he was much more muscular and a lot of he solved a lot of his disputes with

beatings he approached his work with the eye of a strategist rather than waiting for a full load, now he's talking about even at a young age, he was really smart about business. Rather than waiting for a full load before sailing, as most boatmen did, so at this time, they're getting paid to transport not only people, but goods as well. So as most boatmen did, he ran on a schedule. His life was regulated by self-imposed rules other words he was very very disciplined among other things he determined to spend every uh to spend less every week than he earned there's the frugality that's going to be a fundamental pillar of his empire as he accumulated

his modest portion of the boat's earnings over the course of 1810, 1811, and 1812, he purchased shares in other boats whose profits he did not share with his parents. So what happened was, because he was a miner at the time, he had his own boat, but he had to give a percentage, his mom made him give her a percentage of his profit, even though he ran everything himself. So he's like, okay, well, I want to make more money, so how can I do that? Again, he's very cunning at a very, very young age. So what does he do? He's like, okay, well, I'm doing it on the sly. I'm going to buy shares in other boats because I'm now understanding the business I'm in. And guess what, mom and dad, you don't get to reap in those profits. This small act says as much about the boy as any anecdote he had become an investor

or put it another way a capitalist okay so he's a couple years past he's making money and money and he's looking to rise. And this is just the initial scale of his ambition, which up until almost his death, never stops expanding. Vanderbilt could have remained on Staten Island, enjoying the fresh sea air at a fraction of the cost of living, but he was looking to rise. Vanderbilt moved to New York. This move was in and of itself an entrepreneurial act. It was in the city that information moved most quickly. Through word of mouth or the many newspapers that published prices of important goods, news, or ship arrivals and departures, prices of stocks and commodities, etc. It was in the city where the exchanges were located where auctions of goods

were held where informal curbside trades of bonds and shares went on each day it was in the city where one acquired a reputation and reputation was the axle of this informal personal economy vanderbilt could hardly avoid noticing that despite the innovations and energy of his fellow artisans that's what they considered themselves at the time because remember they're not large companies it's basically uh like they're just saying that you had a you had a personal brand a personal business and your business was heavily traded the currency of that day was like your reputation most of New York's wealthiest citizens were general merchants so he took notice of hey I want to be rich.

How are the people that are rich, how are they making their money? Well, in this time and place, they're general merchants. Even banks and security markets largely remained merchant clubs. When the federal government needed to sell millions of dollars worth of bonds to fund the war, for example, it turned to two ship-owning international merchants. These names will probably sound familiar to you. I'll probably get around to reading books about these guys too.

Stephen Gerard of Philadelphia and John Jacob Astor of New York, who brokered the sale and took bonds for themselves. Vanderbilt would never forget that the richest men traded in cargos. Okay. So this is expansion fueled by aggressiveness, action, and constraints. And we're still not even out of the first chapter. So this is, this book, even though it's really, really long, it's so dense with the amount of information, a lot of which I'm obviously going to eliminate for the purpose of our podcast. But it is interesting. I'd recommend reading it not necessarily just to understand the history of entrepreneurship,

but really the history of industry at this time, which I omitted a lot of that because I want to focus on Cornelius, but it is fascinating just to read about in general if you have extra time. So what's happening at this case at this time? He didn't stop at just one boat He starts making investments in other boats

And then starts buying other boats So what is he doing? He's expanding and he has his own little fleet going on Okay so it says In his small fleet Vanderbilt swept down on coastal and riverside communities Around New York Seeking out new customers and cargos

So it's heavily There's a lot of monopolies at the time, which he's going to set himself up as like a monopoly buster, which is really funny considering he goes down in history as probably the greatest monopolist of all time. So, but he very early and succinctly realized, hey, there's people need to be moved everywhere and everybody's fighting over the same harbor because all these goods are flowing into new york let me go into these like auxiliary areas and see if i can pick up and basically uh create new markets which is what he does he raised the head of a cluster of rival schooners which um i don't i don't even know what that word means but they're basically

the people that's what they're calling the people that are using boats to gather like seafood. So in this case, he goes and he's going ahead of rivals to the Virginia oyster grounds. So he's pulling up oysters to fill his hole with New York's favorite food. So he's going to Virginia, grabbing oysters, bringing them back to New York. So I guess I need to make this part here because it might not be obvious at this point. He makes the vast majority of his money in transportation,

but he'll make money anyway. He doesn't care. He'll start selling oysters. He starts loaning money. He starts investing in real estate, buying stocks. We're going to see here he starts buying fish. If there's an opportunity, he's going to jump on it. So then he began to sail up the Delaware river where he bought shad. I had to look up this word. Shad is a type of fish

by the slippery thousands. Then he sailed up to New Jersey where he learned to hire horsemen to spread the word that he had fish to sell. In New York Harbor, he paid boatmen to sail out to meet incoming ships to peddle food or liquor, and while he haggled on South Street over cargos of fish, produce, and goods. So not only is he making money off the transportation of these goods, but he starts buying the goods himself and reselling them for a profit. As he struggled into the lowest tier of merchants,

he conducted his business with elbows-out aggressiveness. So we're a couple pages into the book and what has been said multiple times uh frugality uh aggressiveness um and action and those three traits are just over and over and over again the author's gonna kind of um bury this into our head or pound this into our head rather. Okay. So now he's going to give a description a little bit of what's going on at the time and why there's so much opportunity. Americans had long been comfortable with the commercial marketplace, but for centuries, many had lived in rural isolation or labored under British commercial restrictions.

Now they encountered a new world with the promise of new better and more it says new commercial institutions and merchant houses open for business in 1815 alone the number of american banks rose from 208 to 246 and the value of their circulating notes increased from 46 million to 68 million that year marked the start of vanderbilt's as well, as he both rode and added to the rising tide. As a decidedly minor boat-owning merchant, he could not share in the lucrative trans-oceanic trade. His very limitations then forced him to seek out opportunities. So that we always talk about this, how constraints can actually drive creativity. So he starts tying together distant marketplaces

and introducing trade in places that had been wilderness when it came to commerce. Okay, so this is actually really interesting because he was very much a loner, very much somebody that wanted complete control, never would, he would um would he would he would reject business deals where he had partnered with other people except in this case he'd partner with other people but with the stipulation that he had control so he winds up very shrewdly he's 23 years

old at the time and he partners with somebody that's very rich and powerful and this is the gibbon thomas gibbons which is uh you might have heard that name from the Supreme Court case I was just referencing, which is Gibbon versus Ogden, which is famous to this day. So it says, the 23-year-old Cornelius Vanderbilt had no way of knowing he was making the most important decision of his life. Then again, not even Thomas Gibbons, who saw a good deal, could foresee how far-reaching their collaboration would prove to be, how it would help unlock the potential of the steam engine recast the constitution and contribute to the remaking of american society so there's important things in those sentences the steam engine is the

the the most dramatic technological breakthrough of the time which we're going to get to in a minute thomas gibbons owns some of these or buys them rather recast the constitution meaning the because of the war that they're going to have with steamboats in New York City, it leads to the Supreme Court decision, which basically says that the United States is one common market, which again is not how it was interpreted by the population at the time. So this is huge, which then sets the foundation for them to expand and for Vanderbilt to continue to expand his empire. Okay, so it says,

Gibbons had his hard eye fixed on his enemies, unaware that his struggle would inexplicably link his own name to Vanderbilt's for the rest of time, meaning that the Supreme Court case is infamous. Even as an impulse, Vanderbilt's for the rest of time, meaning that the Supreme Court case is infamous. Even as an impulse, Vanderbilt's snap decision to take orders from Gibbons must have mystified his friends and associates, for the sailor was nothing if not commanding. Vanderbilt was proud, of course, and filled with the desire for riches. So what they're talking about there is

Gibbons approaches Vanderbbilt because he has a good reputation at this time and says hey i i need help i need somebody to run my steamboat business and this is the one time in history in his entire life that vanderbilt actually has an employment contract the rest of the time he works for himself and so but why he's running gibbons empire he's building his own too the guy guy never rested, apparently. His sense of physical power, too, should not be underestimated. He was a big man who lived by strength, straining daily against the winds and current. Remember, he's a sailor up until this point.

There was no such thing as motorized transport. His combative manner, which had been hardened in a fringe of society marked by rough independence, where confrontation was the stuff of daily life. He sneered with that contempt for weakness that comes naturally to a man who has beaten and cowed other men. He clearly saw the advantages of the connection he made, meaning the partnership with Gibbons. He recognized that few men in the entire nation commanded greater resources than Thomas Gibbons. Even more important, Vanderbilt and his contemporaries understood that the steam engine, or to put it more broadly, motorized transportation, was the most dramatic technological breakthrough since the advent of the printing press. So it's

funny, you know, I'm personally interested in technology businesses. I cover a lot of them on the podcast because, you know, they're at the forefront of the technological breakthroughs at the time. They're building companies that literally could not have existed maybe 10 years ago, five years ago. Kim Vanderbilt is doing the exact same thing of his day, except their technology is motorized transport, which starts with steam engines and then continues at railroads. I always, now this direct quote from Vanderbilt, and there's not a lot of direct quotes from him because he didn't write letters and he didn't, he was illiterate. And he didn't like have a diary or anything. I always thought Thomas Gibbons, a very strong minded man, the strongest I ever knew, he later said. i don't believe any human being could control him he was a man that could not be led he could just have been easily have

been describing himself so i let me pause there i didn't i don't know if he was illiterate he would write phonetically so there's some of his writings when he's doing business deals where like it doesn't look that he he he i mean he didn't have any proper education. So I'm sure he could read because he did contracts and stuff. I just don't know, like, how well. Okay. So he's saying, hey, I respect Thomas because he's strong-minded and he doesn't let anybody else control him. That's something that was very important to Vanderbilt.

So he says what they do is, this is happening when they make their arrangement when Vanderbilt's 23. Gibbons says, hey, I just needed you to do this for a couple of days. It winds up turning into multiple years. So now Vanderbilt's 26 and he's learning a lot from Gibbons because Gibbons was rich by the time he met Vanderbilt.

And so now working with Gibbons, he gets access to a world that he didn't know existed and he enrolled in earnest and studied this world. And so the few days that Gibbons had asked for multiplied into a year and then two and then another. Vanderbilt's service, rather than compressing him into another lackey, stretched his stature and business knowledge.

And with knowledge came ambition. That same year, he built the Thorn. So this is just a ship. And began construction of his own little steamboat as a speculative venture. When Gibbons could not find a buyer for the mouse, which is another steam, another boat that Gibbons owned, Vanderbilt decided to take it himself and sell it at a profit so so you see what i mean here like uh so he's running his own sailboat business uh i don't know if they call sailboats but that's

what they look like to me um and he's got an entire fleet running being varying passengers and and goods uh then he's running uh gib' steamboat business. Then he's building his own steamboats. And then he's buying and selling other boats. So again, he just looked for opportunity and it didn't matter if he wasn't in that business. If he thought he could make money and he knew what he was doing, he would do that. Let's see. Okay, so this just one sentence talks about the importance of the Supreme Court case. I'm not gonna spend too much time in the book,

even though they go on length, but the end result is, it aimed to create not a nation state, but a national market, an arena in which goods and credit moved without hindrance across straight lines. Again, this is something we were born into, something we take for granted,

was not the case when Vanderbilt was born. Okay, so I'm skipping way ahead in the timeline, not way ahead, but a few years, just because what I found most fascinating, and I think most of my notes when I went back to review before I started recording the podcast was a lot about his personality, which I found fascinating. So this is an example of one of his traits, which is a strong contempt for empty authority. So it says, to Vanderbilt's consternation, the legislators, that's a, the names of the boats aren't too important, but he, a lot of this is direct competition. So he's going through direct competition with this boat called a legislator. And he's piloting a boat called the Thistle.

So he said to Vanderbilt's consternation, the legislator's captain soon began to beat the Thistle with alarming frequency. So they'd race. Not only would they compete on price, but they'd compete on how fast they could get. They're launching from a lot of the same ports. So their beginning destination and the end destination is the same. And they would race to see who gets there it's like a kind of like a product feature on september 3rd vanderbilt won the race to new york as the thistle churned up to the pier that was used by both vessels he ordered his deckhands to tie up in the middle leaving no room for the enraged fisher um so the

harbor master runs out he ran out on the dock and and ordered Vanderbilt to haul ahead in order to accommodate the legislator. With characteristic contempt for empty authority, Vanderbilt refused to do so. Vanderbilt continued to block out Fisher whenever he could, snorting at the threat of a $250 fine. The battle was all that mattered. So we see that highly competitive spirit that we talked about when he was six years old never leaves him. More about his personality.

Vanderbilt disdained the delicacy of cultured men. So there's a huge war going on, like a cultural war at the time between aristocats, old money families, and these new self-made people like Vanderbilt. So he thinks they're soft, basically. Vanderbilt disdained the delicacy of cultured men. He was the most commercial creature of a society that was throwing away the traditional social bonds. A self-made man where the founders themselves mostly had been old patricians. And it means the founders of, this is about 50 years after the founding of the United States. Oh, okay.

So what's interesting to me, so Gibbons was a real pain in the butt to deal with for everybody else besides Vanderbilt, and Vanderbilt was the same thing for everybody else. But it looked like they were both highly ambitious people that they were destined to clash, and they never did. And it's almost like they had a father-son relationship, I would say, because Vanderbilt respected the mind and the shrewdness of Gibbons and what I came away with

after reading the book is like I think Gibbons thought of Cornelius more like a son than Gibbons own son and so this is Cornelius talking about Gibbons' son, who's around his same age. I do not know that William Gibbons ever started a project which his father did not originate. Rough-edged, hard-muscled, and self-made, Vanderbilt couldn't quite bring himself to hate William, but he seemed to suspect that this rich boy lacked the drive, even the mental machinery, to cope with the age of commerce. So he just had the unfortunate personality traits to be born at a time when you couldn't just get by on your family's name, that you were now going to have very, very real competition to these multi-generation, almost monopolistic practices that were kind of entrenched at the time.

And this whole, he's describing William Gibbons, so the firstborn son of Thomas Gibbons. He kind of experiences the same thing later in life with his own son, who he was pretty hard on. Basically, he called him a blockhead, he's useless uh you know i'm not obviously advocating to do this um but cornelius his hard and rough manner also applied to to his family and he was he wanted to build a dynasty and an empire and he wanted his oldest son to to you know kind of like a monarchy pass it down to the oldest son. But his son was not like him at all.

So it says, oh, and this is probably the – if you never knew anything about Cornelius Vanderbilt and you just knew this one sentence, I think it's the best description of him. So they call him the Commodore, which is like the term reserved for like the highest ranking of the Navy, I think, at the time, even though he wasn't in the Navy. So when you see the word Commodore, they're just talking about Vanderbilt. Usually it's referred to later in

his life. They usually use the word Commodore instead of Cornelius. But here's the sentence. The Commodore was determined to have his own way, always, to a greater extent than any man I ever saw. It was his most prominent characteristic. So this is the note I left myself as the solo founder. This idea I always talk about, it's like, if you look at a lot of common, how would you put it? Like startup advice nowadays, they're like, oh, you should have a co-founder. and yet what i noticed is like all the books that we've studied like there's really not they might start out with co-founders but they don't last very long there's it's not usually run

by a group i guess that the lone example i could think of uh i'm just looking at some of the books that i've covered in the past that are happen to be on the table i have the hp way right here i guess dan and dan and uh bill so bill hewitt and actually dan dave packard i guess this is the example i could think of but there's not many of them and cornelius definitely did not want partners at least equal partners um okay so uh before i read this, I need to give you some details. Thomas Gibbons has died at this point. So it says, In the years since Thomas Gibbons' death, Vanderbilt's aggressiveness, his will to dominate, had grown fierce to the point of danger for those around him. Vanderbilt launched the first steamboat that was entirely his, the Citizen,

a speedy 106-foot, 145-ton sidewheeler. Cornelius also bought shares in the New Brunswick Coal Mining Company, a hint that he was interested in new sources of energy for steamboats, again demonstrating his ease with the complexities of the new economy. So began Vanderbilt's career as an independent steamboat entrepreneur. So remember, he was still an entrepreneur before this, but it was like the sailboats, not steamboats. So this took place after Gibbons dies. But the stress he now faced was unmistakable. It is not too much to say that Thomas Gibbons had been a second father to him, complete with father-son conflict.

No matter how many businesses Vanderbilt had kept going for himself, he had remained with Gibbons' house, which gave him both shelter and a sense of purpose. Now the old man was dead, the house was closed up. Vanderbilt would have to find his own way forward, to use what he learned from Gibbons to shape his on his to shape his enterprises to develop his own vision of the future and in his solitary steamboat steamboat he sailed off to fight the economic war that's happening at this time in Cornelius's life. I feel that it had to, like he had such a respect for Gibbons. I feel that Gibbons might have been the only person that Cornelius actually thought could compete with him and might actually, like he might actually lose to. And I don't think it's coincidence that he waits till after Gibbons dies to start engaging in this all-out economic war,

like a Sherman-esque march to the sea, using mike ovitz's term from last week's podcast um something to note before i go into this section where we're going to see his his modus operandi his mo his mo as clear as day how he builds his wealth uh vanderbilt that is is to understand when he was running gibbons steamboat business they were fighting an old uh old money family called the livingstons but the Livingstons were not like as shrewd and smart and cunning like Gibbons and Vanderbilt was. It was an unfair fight. They went up destroying the Livingstons monopoly and basically just running them out of business.

Well, not all old money families were like that. So now Vanderbilt is fighting with this family called Stevens, which not only knew a lot about engineering for steamboats, but they also wanted to create this new thing called the railroad. And so we're going to see how he convinces... So Cornelius, what he would do is he'd go into a new territory that was occupied by somebody else. He'd go start competing with them right away. And he would cut prices to the point where he would basically bribe you to,

you're either going to continue to lose money or you're going to buy them out. So this is an example of that. And the No Life Myself was strategy, starting with an eye on getting acquired and then going out and taking that money to build out new territory so um he's running this thing called the dispatch line that vanderbilt uh is using to compete with this with uh stevens the stevens family so it says uh i'm gonna skip over this whole war though at just uh at just about the time the dispatch line disappeared the standing assumption had always been that the stevens brothers bribed vanderbilt it was said they brought him they bought him off here and made him rich the payoff was motivated by fear the man claimed vanderbilt fought him so hard that he left here with a

reputation that scared people if the stevens brothers did bribe him, then he proved himself a tricky god indeed. He never intended for the dispatch line to last. So he starts again. He starts up with the ion getting acquired, which is very different from how most people think about business at this time. He knew all along that the railroad, when complete, would destroy rivals who depended on stagecoaches. So they're talking about the different lines of transportation. So sometimes you'd have different companies that would transport people and goods by sea.

Once they got to land, then you had different, sometimes they were vertically integrated where one family would own, which you're seeing which Vanderbilt wants to do, he wanted to own the transportation up the entire stack. He wanted to use his boats, get on his stagecoaches, get on his railroads, everything else. So what the Stevens realized was, and Cornelius saw in advance,

was once they finish their railroad, nobody's going to travel on stagecoaches. Stagecoaches are like horse-drawn carriages. It's bumpy, it's slow, it's expensive. And so he wants to make some money before this happens. So he said hardly had he launched his line, then he began to plan a full-scale assault on an entirely different route. And so this is the funny part. Like, I guess, well, it's kind of funny.

It's interesting in the sense that he was very, it shows how cunning he is. So he starts dispatch line right um but at the time he's doing this where everybody's focused on like why you're focused on it's like almost like a sleight of hand while you're focused on dispatch line he's going out and scouting far away um routes that no one's using yet and so now he's gonna he's gonna set up his dispatch line he knows that they're gonna eventually buy him out because he's eating into their profits and he's gonna use that money to then set out a new route that no one else had been using at the time so since he carefully scouted the passage and spotted a strategic spot for a new landing on june 8th 1829 when the

dispatch line had just started he signed a 10-year lease for all docking privileges. So he's building up this entire new, basically, marina. He's going to own the docking privileges. He's going to own the route, everything else. In early 1830, with the dispatch line's fair war still raging, Vanderbilt began his retreat from New Jersey. He and Sophia packed, that's his wife packed up Bologna Hall this is a hotel he owned so he this is what I meant so you you'd go on a long journey you'd get off the docks and right at the end of the docks where his boats brought you on the shore like oh you need a place to stay go to Bologna Hall and loaded uh so he loaded up uh all their

belongings their horses and their children it, The disappearance of the dispatch line then should be no mystery, bribe or no bribe. Nor was his brief fair war his last contact with the Stevens brothers. He would encounter them again, and next time it would end in bloodshed. A few pages later, same thing happens in this new spot. So now we're seeing a clear trend. This is his M.O.

Cornelius had received an influx of capital from his competitors. The pair had desperately wanted him to go away and eagerly accepted the deal he offered. They agreed to buy the boat along with the rights to his pier and wharfs for the inflated price of $30,000, which is an astounding sum at the time. So he does this trick over and over and over again. Okay. This was interesting. Made me think of, this is almost like another Vanderbilt and he was not a very social person, but he has this uneasy friendship. And this is might as well be just another vanderbilt because what he is doing to other people gets done to him and and as such i think builds respect that vanderbilt had for this

guy so uh the guy's name is drew and his name is daniel drew vanderbilt soon realized that he faced a worthy foe in drew you have no business in this trade, Vanderbilt told him. You don't understand it and you can't succeed. But Drew understood it all too well. He didn't need to make a profit. He simply had to make his opponent suffer to the point that he was willing to make a deal. The same tactics that Vanderbilt had employed against all these other guys that I just told you about. It was the beginning of a long and peculiar friendship. For the first time in Vanderbilt's life, he had been forced to pay for what was already his, and he couldn't help but admiring the man who had done it to him.

Over the course of their lives, these starkly contrasting businessmen would mix partnership and rivalry in a bewilderingly dance of mutual respect and self-interest. Okay, so here's another way that Vanderbilt expands his empire. Remember, cornerstone of his empire is frugality. So he'd always spend, ever since he was a kid, spend less than he earns, keep his expenses at the absolute minimum. I told you on the other podcast with Rockefeller, he was definitely like this. I don't know if Rockefeller learned it from him or he was just like this all his life, but it's a huge strategic.

If you have the discipline to whittle out the expenses and to just be extremely frugal in your business, even when you're making tons and tons of money that is an advantage that that can't be overstated because it's so counter to human nature and so this is another example frugality wins so um you know around this time there's all in cornelius's life there's tons of financial panics and every time he comes out richer than before so it says bankruptcy shadowed vanderbilt as well though though this was not entirely a bad thing it's not his own bankruptcy he had lent money to his fellow businessmen drawing on reserves created by his cash-based steamboat trade bankruptcies brought him collateral so what they mean there is he'd

lend you money but he said okay, okay, I need collateral. I need your boats. I need your leases to these routes or these piers and real estate. And what happens in a boom? They're over levered. They pop and suddenly, oh, I got all this money for a lot less than it would be on the market price.

Okay, so everybody has problems. There's this huge accident, and then this shows his resolve. More about his personality and a brush with death. These are all the notes I left myself. If he had been disposed to dwell, he might have stood gloomily at all that had happened in the previous two years. So keep in mind, I'm skipping over vast parts of the book. The death of his father, his defeat defeat by drew meaning drew made him pay his humiliation at the racetrack he would um collect resources and try to run him against other rich

people's resources by temperament this is this is a great description of him too by temperament and necessity however he was given not to reflection but to movement um the boat had exploded in his face and he had gone ahead his brother had barely survived So it's talking about I'm not I gotta give you context here One of his boats that he owned but his brother piloted for him Had exploded and this was common at the time. A lot of people were dying from from These are new technology. She's could be expected. So steamboats would get overwhelmed

and the engine would explode and basically it'd be like a an unbelievable amount of pressure that would turn like the engine into shrapnel and then sink the boats um so it says you know his brother his dad dies he has all these troubles he himself had narrowly overcome a deadly fever but he had gone ahead he saw no point in mulling over dangers when a world of competition demanded that he seize the next opportunity like one of his boats caught in the currents of hell's gate he had to drive forward or be wrecked fortunately for vanderbilt whose entire business was transportation transportation was precisely the next opportunity where the next opportunity appeared. The first rattling, chuffing, clanking trains of steam-drawn railway cars

captured the public imagination. So he's going to expand here into the newest technology. Now it's not just steamboats, but now it's steam-powered railroads. So he goes up to take a ride on one of the first railroads, and he almost dies. So he's in the car. I'm just going to skip over to get to the accident. Without warning, an axle broke in the lead car. With only two axles per car, the result was catastrophic.

The lead car jumped off the tracks, sitting in the one behind it. Vanderbilt saw its roof and walls suddenly spin. His car pitched down the embankment then tumbled and bounced heavily on its side as the locomotive dragged it farther before the engineer could stop the train. Vanderbilt found himself at the bottom of the embankment. His clothes had been shredded and his knees oozed blood where the skin had been torn off. He took a breath and stopped at the knifing pain where his ribs had pierced his lungs, then suffered even greater agony when he convulsively coughed, blood filling his mouth. His body felt crushed, his back broken. As Vanderbilt lay at the bottom of the ditch unable to move

one thought overwhelmed all others he was going to die so um he narrowly survives they uh he dispatches a man a messenger to go get his own personal doctor and i'm just going to include this part because I thought it was funny. So the note I left myself was LOL. So it said, the doctor had treated Vanderbilt's intermittent fever in the year before, the one he almost died from, but he did not look forward

to seeing this difficult patient again. He found Vanderbilt to be an overbearing man under the best of circumstances. And this is his doctor describing, this is the part I laughed at. He would never take any direction from anyone. And then there was the flatulence, a great trouble he would muse and apparently constitutional as others of his family had it. So he had the bubble guts all the time. So not only was he

painful to deal with, but when you're in the presence, he's going to fart all over you. All right. Now here's what happens. He gets stuck into a, he has to recuperate. So a man of action becomes a man of inaction, has to be laid in bed for a few, for I think a few months. But this he takes as a, gives him even more purpose when he heals. And so we're going to talk about that. Close encounters with death have a reputation for transforming lives, for starting dramatic new departures. Vanderbilt's near extension concentrated his existing qualities,

his decisiveness, his will to dominate, his ability to rapidly assess a chaotic situation. Indeed, it could be argued that this gruesome accident had nothing to do with the transformation that he would undergo in the next decade from obscure captain to fearsome commodore whose name alone would terrify hardened businessmen but as he lay there impatiently in that cottage over the next four weeks slowly healing the incident took on iconic significance for him this is now direct quote from him if i died in jersey in 18 in 1833 the world would not have known that i had lived I just want to read this other paragraph too because it gives you more context at this point in history and how it was looked at. He says, the two great waves now crashed into one another. The individualistic, anti-aristocratic, competitive impulses

fostered by the revolution, meaning the American Revolution, and the instinct to organize, develop, and bring order to the chaos of the marketplace. So these are two competing forces. The first impulse was both radical and traditional, combining a suspicion of the wealthy elite with an outlook shaped by the world of small farms, stores, and workshops where factories were few and self-employment was the standard. So how crazy is that? internet should be doing the exact opposite of what it's doing now where uh the amount of entrepreneurs and the the rate of starting new businesses in america if you didn't know the data

would you probably not believe this is it's a 40-year low so we're starting to see like larger more concentrated powers win out um you see this even like uh when when businesses like tech businesses gain a lot of power. I just read recently that Reed Hastings, the founder and CEO of Netflix, wants to get to the point where he can pay engineers at his company a million dollars a year. Well, he's got 137 million paying subscribers

all over the world. And what... So he's accumulating vast centralizing resources, right? And when you centralize resources, you can afford to manipulate, maybe that's, you can influence the labor market. And how many people are going to risk starting a new company when you could just go work for a big company at a million dollars a year and so cornelius feels he this is basically the difference between entrepreneurs and large companies and he is you know part of the the anti the individualistic anti-aristocratic um group and now he is fighting against the second part which i'm going to say here which is uh the second was both commercially advanced and highly conservative as wealthy men, both organized banks and corporations, and tried to tamp down competition.

And they would do that through regulatory capture. They would basically own the politicians and they would want the politicians to structure legislation in a way where it looked like they were being regulated, but it actually created barriers to entry and kind of solidified their position. Okay. Okay, so the reason I brought that up is because it's funny how Cornelius is using this as a marketing tactic. So he's doing all these fights and these battles against larger companies, right? And so he decides, hey, I'm going to appeal to the public and I'm going to market myself and brand myself as an individual fighting monopolies and it works. And so this is something he pays for an advertisement in the New York Evening Post.

And this is the ad. It says, having established a line of steamboats on the North River for the conveyance of passengers between New York and Albany, called the People's Line, in opposition to the great triangular monopoly composed of the North River Steamboat Company, the Hudson River Steamboat Company, and the Troy Steamboat Company, so these are his three competitors have teamed up to try to fight him, I deem it proper to say a few words by the way of appeal to the generous public, which I feel persuaded will sustain a single individual in an attempt to resist the overbearing encroachments of a gigantic combination. Competition in all things promotes the public convenience. And though the step I've taken may prove advantageous to the public, yet to me, it may be far otherwise. So what he's saying there is like, listen, I'm going to compete with them because the competition is better for you. And I'm an

individual fighting against three giant companies. So I need you, if given the choice of how to spend your money, spend it with me. Because if not, like it's going to be advantageous to you, but I may fail doing this. It's actually really like, it's, I personally empathetic with this view. So my own personal life, if I can spend money with individual entrepreneurs because I consider myself an evangelist for entrepreneurship, I will. So I'd rather go to a local restaurant or a local establishment than a large company if I can,

assuming all things equal and the product or service quality is the same. Because I do think it's important to have this diversification and I like supporting people building businesses. I want to see more of that in the world. And the best way to see more of that in the world is to speak with my dollars. So I like this. The problem I don't like is he's not really truthful. He's not anti-monopolistic. He's anti-other people monopolies. But he builds one himself. So that's the part where it kind of rings a little hollow to me,

and I don't, he loses me there, you know? And so it says, and the people loved it, the drama, the slap in the face of the monopolies, and especially the low prices. So this is the, and this is, here's the problem, is what I mean how you know he didn't mean it because he sells out. Vanderbilt pressed the war into November.

He added the union to the line. So he's adding all these other routes. He offered overnight service. He ran ads in Albany newspapers headlined People's Line for New York, not Monopoly. He battled on until fingertips of ice began to poke down the Hudson and until finally the freeze clasped the hands shut down the river. So it's a shutdown because you can't do any transportation when the river's frozen. Now what happens, though? In the spring, steamboats began to churn again to Albany and again charge $3 per person, so now the price is back up.

The war was over. Vanderbilt had withdrawn. The public, which had cheered Vanderbilt's boat at every dock and landing, must have been mystified. Where had he gone? The answer would not come for another five years when a careful investigation by the New York Herald revealed that Vanderbilt had fought not for principle but for revenge. On those terms, he had won an astounding victory. He had forced the odious monopoly to pay Vanderbilt the astronomical fee of $100,000 to leave the line to Albany,

plus an annual payment of $5,000 to stay away. That's an insane amount of money at the time. And so things change. You can go from being anti-something to being that something. And they're talking about, at at the time he's known for being well here i'll just i'll just read this line from the new new evening post so the the press is talking about vanderbilt he is the greatest practical anti-monopolist in the country see how like the press the public and the press can be um tricked or misled into believing

something is true when it's the exact opposite he was wise to stress the word practical in the case of cornelius vanderbilt circumstances made the idealist when launching a high-speed raid raid on a fortified established enemy he would very easily and naturally imagine his battles in the political terms of the day. It suited him to denounce his foe as an aristocratic monopoly, to sail under the banner of free trade and equal rights, which is a tagline. He clearly believed it, but circumstances would change, which means he just becomes that.

More examples here. There's a panic and credit dries up. So he's, again, frugal, doesn't spend his money. And he starts lending out huge sums, $8,000 to this person, $15,000 to this, $35,000 to this. It revealed the demand for credit on one hand, because there's bank runs, and the captain's prosperity on the other. For this was merely a sideline, a way to keep his surplus cash busy, earning 6% or 7%. Yet he was careful in his agreements, demanding valuable real estate as collateral. So he just keeps, every time these people over-leverage themselves, he doesn't. He has no debt and uh when inevitably they are forced they they stop paying he just takes their collateral uh okay so actually here let me um let me just this paragraph actually describes how he organized his business which

i think it should be should be copied by the way vanderbilt slithered unseen through the financial fire meaning he just wasn't touched by it he had no speculative embarrassments no debts pledged against consignments of anything true the stocks he owned may have lost some of their market value their dividends may have been suspended and their promissory notes he may have held might have gone unpaid but he demanded premium real estate as collateral his property consisted largely of state-of-the-art steamboats, and his was a business that remained in demand. So basically, he has a barbell strategy here

where he's not really diversified in assets in the sense that he has equity in businesses that produce and throw off large sets of cash and then a lot of cash, and then uses that cash to then lend out and is backed that loan by collateral. Instead, he had an abundance of the most valuable item in a deflationary panic, cold, hard cash. So that's the description. The next paragraph I thought was interesting how he actually sets up his businesses.

He's basically a collection of many decentralized businesses all under one massive company. And each boat could be considered as like an individual business in and of itself, and then it doesn't take much to run them, right? So it's like, the nature of a maritime business fortuitously gave the enterprise a neatly compartmentalized structure with each captain managing the personnel and daily affairs of his boat so he's got a president of his company and the company is the boat the rest of the operation details could be handled by a single agent in each point port so he has these

beautiful beautifully decentralized cash flow positive businesses that just keep running no matter what. Okay. Here's more about his personality. And again, I just, the benefits of frugality, I don't understand why large companies don't, they, they, they abandoned this. Like as if the history of business is not, you know, small company turns large, large company rests on its laurels, right. And, uh, starts spending money, money on stuff that doesn't, that's not important. And then eventually gets overtaken by small, like smaller company repeat over and over and over again. So like he was just, he somehow he had the discipline to, to, um, to avoid this fate. Um, so this is somebody he he hires just the clerk and the clerk is talking about him the new clerk found him to be very strong with great powers of endurance a man who

exuded raw energy his personal appearance was very neat he was very abstin abstinence i had to look up that word it means you don't you don't gorge yourself he ate very little being a light eater and never drank to any extent, not even at his meals. Taking liquor only as medicine. His only vice was smoking. He had always had a cigar in his mouth, either lit or unlit. That iron self-control proved to be as important to his success as his ruthlessness. Never did he let his emotions or ambitions get the best of him.

He never had debt and never bought anything on credit. He was economical almost to extremes. So economical is another word for frugal. Frugality was one of Vanderbilt's most potent weapons as he hammered his opponents in this year of desperation. So it talked about even when he dropped prices to compete with them in hopes that they would buy him out, he would still, because he was so frugal and kept an eye on expenses, he'd still be able to make money at, let's say they're each charging a dollar a fare. Even at that rate, which maybe the previous rate was $3 or $4, he could still make a profit or at least break even while the other companies that were fat and greedy couldn't. So again, in that sense, time is on his side. He's just going to sit there at a dollar per fare and eventually he's going to bleed you dry until you say, okay, I'll buy you out. So it's super important. I don't understand

why it's not emphasized more in people not only managing businesses, but starting businesses. And this, oh, oh okay so i just skipped like 20 pages while i was talking to you and i just tripped over this paragraph which i didn't even know so it's frugality in all things he was better capitalized than his opponents which enabled him to absorb losses but he could also make money even in a fair war thanks to his ability to control costs and then he not only, then he also used technology to lower expenses, which is super smart. In part, this was a technical advantage. The Lexington, this is his huge state-of-the-art boat he built at the time. The Lexington's engine and hull design had saved

an estimated 50% in fuel expenses, by far the largest operating cost. And all his boats later, all his later boats follow this plan so it's built into the actual structure of the business i was listening to a podcast and taking notes for founders notes on the person that i think his name is wade he uh he's the founder of zap or co-founder of zapier which is a business that i've used for a while kind of just connects like uh different apps that you use and sends data through each one. So a few things I learned while listening to the podcast was fascinating. First of all, Zapier only raised a million dollars, and they're doing over $35 million in annual recurring revenue.

So they're growing. They're very capital efficient, and they're growing very well. But he makes this point where Zapier is a completely distributed company, and he feels that that is a huge advantage for his company because even though he's based in San Francisco and he's friends with the world and his retention rate so last year like 94 of the people that that started the year at zapier finished a year because they're making good money remotely and they get to live where they want and they get to spend time with their family so in a sense he's doing exactly the same thing 150 years later that vanderbilt was doing he's building into the foundation of his business this huge structural structural advantage that his competitors aren't.

And over time, that advantage is going to compound. Okay. Okay. I'm just going to read this one sentence. This is a description of what Vanderbilt's doing to him. Vanderbilt, he warned, is gnawing at our very vitals. So it talks about like, he's writing, so this is the person he's competing with, and he's writing to his partners. He's like, to the astonishment of everybody, he has not lost

money, and it is supposed that he has made it. We have made every effort in our power to induce Vanderbilt to withdraw from the line, but to this day, it has been entirely unsuccessful. He is a very hard and troublesome customer. His great wealth and tact in the management renders him the most formidable opponent that could come in opposition. That's kind of describing what they're doing at Zapier as well. Okay, I actually skipped over something. I got to go back because this is important. It has to do with the size of his ambition was very difficult for others to comprehend. And a way to describe this is he's, this is happening, well, I'll get to that in a minute, actually. So he's having a conversation with somebody else that they're running a series of rail lines.

And the rail lines that Cornelius has identified to be the most valuable, the ones, the fastest route between New York and Boston at the time. But they're in communications because they don't have any steamboat presence. So they're like, hey, maybe we should partner with this guy, right? And they completely don't understand. They even think the idea of partnering with him is silly because they don't understand how ambitious he actually is, that he doesn't want to partner with you.

He wants to own everything. And you're going to see this um with this conversation so this guy's name is mcneil the conversation displayed vanderbilt's vanderbilt's peculiar combination of willy wiliness and directness of intense personal dislikes and sly concealment of his intentions that's another thing he uh he he engaged in information asymmetry like an asymmetric informational war. He would always collect information. He'd have spies, all this other stuff, but then he kept all what he wanted to do very close to his vest.

It also included one revealing exchange that McNeil mistakenly dismissed as mere bravado. Frustrated, so they're in the room and they're negotiating and he's getting mad. He's saying, frustrated with Vanderbilt's refusal to commit himself, he asked at one point, what do you think would be your interest to offer? Meaning the railroad. If I own the road, Vanderbilt answered, I'd know how to make it profitable. Oh, McNeil exclaimed sarcastically,

I suppose you'd own the boats too. Remember, he's saying the sarcastic, he's like, who the hell would own the boats? Vanderbilt would own the boats. Yes, Vanderbilt replied and said nothing more about it. McNeil paid no attention. He could not take seriously the idea of one man buying control of a railroad. And it's called the Stonington. The Stonington was some 50 miles long, worth millions in fixed capital. It was also embarrassed by debt, as he put it, and in the hands of its creditors.

So they're not even running the business correctly, the creditors of the Philadelphia banks. Vanderbilt, as master of his railroad, that idea was ridiculous. So something I need to tell you at this time, Vanderbilt's very, very wealthy at this time. We've skipped all the way up until he's, I think he's in his 40s at this point. So the book describes in detail, but I also went to do my own additional research. And here's a summary of what we're talking about here. How does he get his hands on what he wants? He's explicitly telling McNeil, yeah, just on both. So he starts doing deals on competing railroad lines. So he cuts fares on competing railroad lines,

drives down the stock price of the company McNeil's in, and then starts buying up the stock and takes over the company. Seven years after this conversation. So he's very slow and methodical in planning it. But this idea that's so ridiculous, that Vanderbilt would be the master of his railroad, how would he do that? Like, no, that's not going to happen. He actually does do that. Again, his just ambition was hard for people to even comprehend at the time. And this is the point where I'm just going to read this last part here, because now we're going to get up until...

Well, let me just read it. Even his ambiguity, his stubborn, irreducible ambiguity mirrored these trickster times, meaning the times of the free market in New York. The eternal ambivalence of the free market. He who drove down fairs and improved service, yet demanded bribes to abandon competition, who praised free trade, yet enforced his own monopoly.

So what they're saying there is this guy's hard to pick down. Like he's not, he's like water. He's just taking the shape of the environment that he's placed in. He was reputed to be worth some millions. Almost everyone, I've skipped way ahead in the story, by the way, so now he owns the railway that he said he was going to own. Almost everyone who traveled between New York and Boston took a Vanderbilt boat or a Vanderbilt train.

So he's monopolized. Remember, he's a great anti-monopolist until he becomes what he was using to rail against. An observer on December 31st, and this is what's so fascinating to me because we barely touched on what he's most well known for. This is where I focused the entire part of the podcast because it's so interesting to me but the author makes a very succinct point here an observer on december 31st 1847 would have found it absurd to think that this all would one day be half forgotten that obituary writers would dismiss in a few sentences these 50 years of fist fights and supreme court cases steamboat, and stock market machinations. But already forces were in motion that would upend the population of the continent,

launch the nation towards civil war, and unleash an ambition in Vanderbilt greater than anyone could have imagined. So I'm going to stop at 1847 in this book. That just ended us at the very last day of 1847. Next week, it's going to be a little different than our normal because I've kind of laid the foundation to who Cornelius was as a person, so you have an understanding. But this book is just too crazy not to share with you.

And again, the subtitle is how cornelius vanderbilt invaded a country to overthrow america's most famous military adventure this book picks up an eight it starts in 1848 and it's going to intertwine the life of cornelius vanderbilt with maybe his probably arguably his his most how would I put this, like his greatest enemy? I mean, the guy had a litany of great enemies. But, yeah, I would say probably his greatest enemy. At least enough that the enemy was so profound and the war they had so crazy that you could write an entire book on it.

So that's what next week's. And I'll put it on – I'll put it so you can see what book it is as well, like where I normally do where you can just go to Amazon.com, forward slash shop, forward slash founders podcast. You can see every book that I've read so far for the podcast in one spot, which is kind of cool if you scroll through and you can see all the covers at the same time, but also you'll see the one that I'm going to do the week in advance in case you want to read it this week before the next podcast comes

out. Oh, something else. If you made it this far in this podcast and to the end of other founders podcasts, that's probably a good sign that you actually want more. And the Misfit feed is a way to get more podcasts from me that are not available anywhere else. As you just saw, I delivered this entire podcast ad-free. So for the people that reach the end, I think this is the only time I'm going to start talking about this, kind of like a hidden feature that you have to get to the end of podcasts

to even know about. Or maybe I'll bury it also in the show notes for the people to actually go through those. So the Misfit feed is basically my private podcast feed. Right now, if you sign up, the link is in the show notes and it's at founderspodcast.com. You'll immediately unlock 18 podcasts that are available nowhere else right now. Actually, this week I just covered. So what I was saying before is I was gonna do an extra podcast every week for the people that subscribe to the Mississippi Feed. Now I'm doing even more than that. I did two this past week.

Another one's coming out tomorrow as well. I did, it's kind of like my own personal audio journal for like repository of information I think is useful, all centered around building companies, managing companies to work, all that kind of stuff. So sometimes it's books. I just did one for them, for the people already subscribed. And if you want to get access to this, just sign up now. But I just covered this book that's fascinating because it's written by a guy that worked with Steve Jobs for 10 years. And it's all about the way Steve Jobs thought about product and company design. And it's called Insanely Simple, the obsession that drives Apple's success. So sometimes it's books I put on that

feed. Sometimes it's essays I read. Just anything that I find, like I'm constantly scouring information, just like I pull out useful information from these books. I do the same thing from all kinds of different sources. And that's just a way for me to kind of experiment and not just follow like one format. I kind of follow one format on Founders Podcast, which is good because you guys like it. But I also like want to work on conveying information. Like what if I can just convey an important point in a few minutes instead of an hour and a half? When you're dealing with the life of somebody, it makes most sense to like do it in one cohesive you know podcast but

there's a lot of just useful ideas that i find and i'm gonna try to like i don't know how i'm gonna do like i'm i don't have anything written down i'm going off the top obviously it's like i normally do but what i'm trying to say is like it's gonna be much more that feed's gonna be much more personal because it's gonna be completely unstructured the say is like it's going to be much more – that feed is going to be much more personal because it's going to be completely unstructured. The only common theme it's going to have is that the information that appears on it is something I found valuable and I want to share it with you. But it's going to allow me to experiment with the actual medium of podcasting, which is something that's important to me because we're in the very, very early days and still unexplored. So if you want to like a more personal podcast with me and you're going to hear from me way more frequently than just once a week, I'd become a misfit. You can sign up below. I don't know. I would sign up below. Try it out

for a month. I mean, you can cancel anytime you want. If you do, if you feel you're not getting value from it, please do cancel. I just don't think, I think you will be way more valuable. So yeah, that's, that's something I'm going to, I think, and I think I'm just going to, like I said, I'm going to hide my, my ideas and my thoughts for the Misfit Feed at the end, because if you make it to the end of podcasts, you know, I only make it to the end of podcasts of the podcast I really like. So it kind of like is more in line with, I want people that really like founders to be on the Misfit feed because like it's not,

I'm not saying it's not meant for the wider audience because that's not true either. It's just, I don't know. I want some barriers to entry as weird as it is for me to say that. I want people to subscribe to that feed to subscribe and listen to it. I don't want you to pay for something you're not going to use. I guess that's what I'm saying. So in any case, if you enjoy this podcast, please tell a friend. I would very much

appreciate it. I've been getting messages on Twitter, David Center one, if you want to reach me by the way, and you can see if you get a founder's podcast, my Twitter's linked there. And I've been asking not only people, a lot of people have been DMing me and stuff, but what I'm interesting is I usually want to know how you found out about the podcast and I've been asking not only people, a lot of people have been DMing me and stuff, but what I'm interesting is, I usually want to know how you found out about the podcast, and I'm getting a lot more listeners that are hearing it from friends, and I think that is the very best way,

because that's how usually I find most of my podcasts, but I feel like that's a good indicator that I'm doing a good job for you guys, because so much that you're getting value that you would tell somebody that you like about it, so's the greatest compliment i guess is one is my point all right well i've spoken enough i will talk to you next monday and if you're on the misfit feed i'll be talking to you several times this week bye