The Commodore

He was born poor and became the richest man in America. When he was 40, he owned the largest fleet of steamships in the country. Other owners had huge losses from explosion and shipwreck, his philosophy was to hire the best, keep equipment in perfect shape, and cut costs everyplace else. He never lost a ship and didn’t even have insurance.

Thus, he must have treated his employees fairly and paid them well. Quite the novel idea, eh? He could be trusted – both ways. “His word is his bond when it is freely given. He is equally exact in fulfilling his threats.”

When he was 50, he led a parade of supporters for presidential-hopeful Henry Clay up Broadway, only to have a Tammany henchman — and the leading boxer in New York — named “Yankee” Sullivan grab the reins of his horse. Vanderbilt leapt off the horse and proceeded to beat Sullivan nearly senseless, to the undisguised delight of the crowd.

“Commodore” Vanderbilt went on to control the largest railroad system in the world. After he bought out or eliminated most of the opposition, he kept his low prices the same. That’s right, he didn’t price gouge, didn’t raise prices.

When he dies, newspapers lauded him as a hero (a bit floridly perhaps, by the language of our day.)

The lesson to be learned from the life of Vanderbilt is simple and impressive. Courage in the performance of duty enabled this man to become one of the kings of the earth.

His principle of low rates … was never violated, so that in every way the public were the gainers… . Commodore Vanderbilt never stopped improving, but went on developing, maturing and ripening his system.

The Barron’s article on him concludes with

It is hard to imagine any newspaper writing such words about a businessman today.

Indeed. Vanderbilt, capitalist to the core, treated his employees well and always kept prices low. Maybe that’s why people respected him. Seems positively quaint, doesn’t it, compared with our current day of grasping CEOs with platinum parachutes and investment firms buying companies to plunder, leaving an empty husk.

I’m not sure if what we have even is capitalism any more. It seems more like a plutocracy – or maybe a theftocracy. Plus, so much of it is illusion. Vanderbilt built stuff. Low-priced steamships and railroads provided a real service for everyone. But how does a hedge fund or investment bank leveraged to the eyeballs with CDOs and SIVs make a contribution to anyone but a tiny few? Of course when their greedhead schemes go awry and blow up, it leaves financial carnage that affects the economy at large. Gosh, thanks so much. Then they run off to Daddy Fed to beg for a rate cut.

A few weeks ago, financial blogs started talking about the possibility of a major bank becoming insolvent. Citigroup was the name that kept being mentioned. This subject is now being broached by mainstream media too.

Citi has over 300,000 employees, and you might be startled to learn they had their birth in subprime. Sanford Weil started buying subprime companies in 1986, merged with Citicorp ten years later, and became CEO of the new entity. He’s no longer CEO, but subprime remains a major part of their business, according to the Columbia Journalism Review.

Now, Citi is writing off billions, the current CEO is being sacked, and their financial situation is precarious and getting worse. Imagine if, instead of packaging all those mortgages into now-toxic “investment vehicles” that Citi (and the rest of them) had taken the profits and invested in improving the infrastructure of America. Everyone would have benefited and they probably would have made lots of money too. But instead, there’s going to be a whole lot of pain, as foreclosure rates soar and financial markets wobble under the strain of literally trillions of notational dollars of toxic glop.

I bet the Commodore would have taken that money and built something with it instead.

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  1. […] this to Commodore Vanderbilt who built a huge fleet of steamships and railroads in the 19th century. While other steamship […]

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