Jay Gould was the kind of person whom Americans of the 19th-century loved to hate. At first glance, this is perplexing, since Gould was the archetypical self-made man, a sort of Horatio Alger character incarnate. From humble beginnings as the son of a New York farm couple, he rose to become Wall Street’s speculator par excellence and to preside over vast transportation and communications empires. When he died in 1892, he left an estate valued at $72 million. Yet during his lifetime and ever since, he has been reviled, a villain for the ages. Critics have run through drums of ink perpetuating his infamous legacy. His contemporary and rival in the railroad industry, the Brahmin Charles Francis Adams, wrote of Gould in his Chapters of Erie “that he had not a conception of a moral principle.” Historian Matthew Josephson immortalized Gould and a generation of speculators, dubbing them “the robber barons.” Even in death critics granted Gould no quarter. An obituary in a New York newspaper said that in Gould, “the degrading passion of avarice was united with an intellectual capacity which enabled him to gratify the passion by larger processes than most avaricious men are competent for; but it was avarice, nevertheless, as rapacious, as unscrupulous, as remorseless as when exercised in ways which all men agree to call ignoble.”
How did Gould come to have such a sorry reputation? In part, the answer lay in his personality. Gould was a private, secretive man, an unfathomable enigma to friend and foe alike. Socially, he was a recluse who usually ignored the horde of newsmen probing for a glimpse into his life. This gaunt, aloof figure of few words made his contemporaries uneasy, and Gould did little to allay their suspicions. But most of the distaste for Gould stemmed from two highly publicized incidents in the 1860’s, when he was just beginning to amass a fortune through speculation. These were the “Erie War” and his attempt to corner the nation’s gold market.
The Erie War and the gold corner incident were two legendary episodes of opera bouffe in American financial history that might have seemed more funny at the time had they not had the potential for disastrous consequences. In the Erie War, Gould cast his lot with two other notorious speculators, James Fisk, Jr. and Daniel Drew, in a struggle against Cornelius Vanderbilt for control of New York’s Erie Railroad. As officers of the company, the trio duped Vanderbilt by flooding the market with thousands of unauthorized shares, foiling his takeover gambit. After violating a court order prohibiting further sales of Erie securities, they were forced to flee New York City with the police hot on their trail. Undaunted, Gould slipped into Albany and prevailed on the state legislature to aid him in the battle by dispensing large sums of money in return for a favorable law. Gould and company won the war, but the affair did little good for the Erie whose financial situation was so tenuous that the railway company became known as “the Scarlet Lady of Wall Street.”
Gould’s gold corner attempt was of more import, if less entertaining. Relying on information purchased from a relative of President Grant that purportedly the Treasury would not sell government gold on the market, Gould nearly succeeded in buying up the existing supply. Although he failed when the government hastily began selling its reserves, he set off a panic resulting in the collapse of a number of brokerage houses and banks. Many investors suffered because of these speculative ventures, and the Street and the New York press never forgave Gould for his actions.
Had these events been the major accomplishments of his lifetime, history would have been justified in writing off Jay Gould as a mean speculator. But as this major revisionary biography by Maury Klein reveals, Gould’s speculative interests quickly gave way to a desire to acquire and operate some of the nation’s major enterprises. For most of his career, Gould was an innovative entrepreneur who played an important role in the nation’s economic growth, especially in railroad development.
Professor Klein, our generation’s foremost historian of 19th-century American railroad development, offers insights into aspects of Gould’s career that have gone unnoticed by earlier scholars. He has had the patience to unscramble and make sense of the maze of consolidations, mergers, receiverships, pooling arrangements, and other business maneuvers that were so commonplace in the railroad industry. Relying on previously untapped primary sources, including newly discovered Gould correspondence, Klein has uncovered the managerial, as opposed to the speculative, side of Jay Gould. When it came to running railroads, Gould was something of a genius. From the mid 1870’s until his death, he had a hand in developing some of the major lines of the West, including the Union Pacific and Missouri Pacific. Among his contemporaries in the railroad business, he was respected as an innovator in the field.
Traditional wisdom has it that Gould’s interest in railroads was purely exploitive, that he was more interested in making money by trading securities than by running businesses. For instance, when Gould acquired the Union Pacific in 1874, critics believed the transcontinental railroad would suffer a fate similar to the Erie’s. Instead Gould transformed a troubled railroad into a profitable line. Realizing that a railroad’s success depended on the freight tonnage and numbers of passengers it moved, he developed subsidiary industries and agriculture in uninhabited areas of the West. The coal fueling Union Pacific engines and heating homes in the East came from mines that Gould promoted. When Gould finally sold the Union Pacific, largely because he was dissatisfied with the method of repaying government subsidies dating back to the early 1860’s, the road was in better financial condition than when he purchased it.
Gould also was among the first to recognize that railroads could not survive by merely catering to local markets. Rather than viewing individual lines as autonomous entities, he saw them as parts in a wider railway network. Gould had a knack for purchasing near-bankrupt lines at bargain prices then integrating them into larger systems, usually before his competitors had any inkling of his designs. He could also be ruthless in disposing of companies not fitting his plans. Klein’s account of how Gould created the Missouri Pacific system, a network that for a time monopolized traffic in the Southwest, is a classic example of his talent for consolidation.
By the time of his death, many of the nation’s railroads were in financial trouble, a malaise that Gould and other managers seemed powerless to remedy. Competing railroad developers had erred by laying many more miles of track than the traffic justified. Parallel roads fought for limited business by cutting rates to the point where no line profited. Companies made pooling arrangements to fix rates, but these legally unenforceable agreements were violated with impunity. Other factors beyond the industry’s control, like agricultural failures and downswings in the business cycle, brought additional problems. By century’s end, many lines were hopelessly mired in debt from which no degree of genius could free them. Gould’s competitiveness played a role in creating this dilemma, but he shoulders no greater blame than other major developers of the period.
Other ventures, mainly in transportation and communications, also attracted Gould’s attention. At various points in his career, he owned a steamship line, telegraph companies, and even New York City’s elevated railway system. He was an able administrator of these businesses. As Klein notes, Gould submerged himself in financial affairs, spending inordinate amounts of time traveling around the country to inspect his lines and attending to mundane details. His work habits helped drive him to an early grave at age 56. Gould’s other obsession was his family, an admirable trait that even the critical New York press grudgingly recognized. He was content spending his leisure hours at home and rarely circulated among New York’s social elite.
Klein’s biography meshes nicely with recent American historiography, most notably scholarship inspired by Alfred D. Chandler, Jr., which recognizes the business acumen of late 19th-century industrialists rather than viewing them through the eyes of Progressive Era muckrakers. Still, some might question whether Klein has gone too far in rehabilitating the reputation of Jay Gould. It is undeniable that Gould was a capitalist at a time when capitalists were given to extremes. Klein mentions Gould’s shortcomings, but aside from the Erie War and the gold corner attempt, he does not dwell on the negative aspects of his career. Little space is devoted to the labor problems in the Gould companies, for example, a curious omission since this was an explosive period in worker-management relations. Part of the author’s mission was to present Gould as a sympathetic character, to debunk the findings of those whom Klein refers to as “hack biographers,” but he may have carried this too far. For instance, his first-name reference to Gould throughout the book may strike some as an unusually familiar way to refer to a man whose own business associates and subordinates probably never dared address him as “Jay.” Klein would not be the first biographer to double as cheerleader, but it would be unfortunate if some less than objective passages lead readers to question the legitimacy of his otherwise sound conclusions.
The tendency toward overzealousness aside, this is a landmark study of the life and times of a major figure in American business history. Whether the development of industrial capitalism in the 19th-century United States excites or disturbs you, this book offers important insights into the growth and nature of American business during that period. Incidentally, while a biography of almost 600 pages cannot with any degree of fairness be called a preview, this volume whets the appetite for what promises to be the definitive history of the Union Pacific Railroad which Professor Klein is now preparing. As for Jay Gould, one shouldn’t expect to see his image appearing on stamps or on the currency he so coveted any time in the future, but nearly 100 years after his death, we finally can see he was not quite the rogue we once imagined.