During the 19th century, some of the most well-known American Businessmen were paving their path to becoming the most important and powerful money changers in the nation. Business titans such as Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, and J.P Morgan took turns controlling the country’s economy, increasing their personal affluence, and privately hoarding the wealth of a nation. It cannot be overstated how important their influence and power were inside of the United States and abroad, so we will uncover the history of the United States' main characters and go into some details of their business deals, mindsets, relationships, strategies, and lives that allowed them to flourish and have a tremendous impact on our society today.

Vanderbilt

One of the first and richest men in America, Cornelius Vanderbilt, was born into a poverty-stricken community in Staten Island New York in 1794. He quickly joined his father in helping manage and operate shipping freights in the busy New York Harbor that transported materials and passengers around the local waters Eventually after saving enough money and taking a loan of 100$, Vanderbilt was able to buy partial ownership into a ship that moved natural resources and passengers from Staten Island to Manhattan and continually saved and reinvested his money back into his business.

(Picture of Cornelius Vanderbilt between 1844 and 1860)

When Vanderbilt was 19, he married his cousin and they had 13 kids together. (Renehan, Edward J., Jr. 2009. Commodore: The Life of Cornelius Vanderbilt). Once Vanderbilt was married, he slowly increased his fleet size from his profits and gained notoriety from his effective and ruthless business management. While still owning his own business, he was hired to manage a fleet by a wealthy business owner, named Thomas Gibbons, who ran a shipping company in New York.

During Vanderbilt's employment under Gibbons, he was going through a court case against a government monopoly granted by the New York State Legislature to Robert Livingston and Robert Fulton, the inventors of the steamboat who were wealthy and had influential political connections in important government positions. Robert Livingston was a founding father of the United States and served in important political positions himself. The monopoly granted Livingston exclusive rights to the Hudson River. At the time of the court case, Livingston’s heirs controlled the business and granted a charter to a man named Aaron Ogden to use the passage for his shipments. As a result of a personal and professional vendetta Gibbons had against Ogden, he opened a shipping company with the goal of dismantling Ogden’s business. To do this, Gibbons brought the landmark court case Gibbons Vs Ogden to the Supreme Court of the United States (Stiles, T.J. 2009, pg. 37).

The court ruled in Gibbons’ favor, eliminating the monopoly and allowing far more competition on the Hudson. During the process Vanderbilt gained important legal and business experience that would develop him into an unforgiving and demanding entrepreneur (Stiles, T.J. 2009, pg. 47). Vanderbilt understood the power of transportation and supply chains, well before it was a concept that was taught in schools and he planned on taking advantage of that knowledge by growing a network and giving value to the wealthy businessmen around him.

Once Gibbons died, Vanderbilt branched out of his circle to flourish as a steam-boat entrepreneur who slowly extended his capacity, increased the size of his fleet, and began transporting materials to regions around the East coast. It was during this run of acquiring steamboat companies that Vanderbilt got his nickname, ‘the commodore’, from those who worked around him (Vanderbilt, Arthur T. 1989. Fortune's Children). In addition, while he was increasing the size of his maritime fleet, he also began taking profits and acquiring ownership in various railroad companies in the area, including the publicly traded New York, Providence, and Boston Railroad, prevalently known as the Stonington, which is still in operation today. In order to take over the company, Vanderbilt was able to drive down the price of the stock by offering Stonington’s competitors better rates on shipment to different ports and across railroads and in 1847 managed to become President of the company after purchasing a large number of shares (Stiles, T.J. 2009, pg. 119).

(C. Vanderbilt, Hudson River steamer owned by Cornelius Vanderbilt (oil on canvas by James and John Bard)

During the process of Vanderbilt’s acquiring the railroad business, the industry was flourishing as a whole. The importance of railroads for transportation became a vital part of the 19th-century economy, so by default, the owners of the most popular railroads were able to earn tremendous profit. With this profit, he made large purchases of real estate in Manhattan and Staten Island to begin residential and industrial development. Now a famous business magnate, Vanderbilt took over the Staten Island Ferry, which is still operational today.

Furthermore, the 1849 California Gold rush spurred further economic activity toward Vanderbilt’s business ventures. While the gold rush was occurring, Vanderbilt was able to expand his business by undercutting the costs of his competitor's railroad business, reinvesting his profits from his other industries, and buying out his opponent’s companies. In addition, Vanderbilt sold his shares in the Stonington and relinquished his presidency to peruse increasing the size of his seagoing and steam-powered supply chain armada. To accomplish this, in the 1850s he became on the Board of Directors of multiple railways including the Harlem, Hartford, and New Haven Railway and the Central Railway of New Jersey. With this control, Vanderbilt was able to establish a fleet of ships and trains that would travel from coast to coast that could deliver goods from each side of the country to destinations all over the world, while pocketing enormous amounts of wealth in the process.

(Merchant ships fill San Francisco Bay, 1850–51)

The Civil War was another important event for Vanderbilts career from the reputation, influence, and wealth gained from donating his ship and providing use of his railroads to the Union Military, and receiving the Congressional Gold Medal. Vanderbilt would work closely with Secretary of War Edwin Stanton and President Abraham Lincoln to help during the war, giving Vanderbilt significant notoriety in the North among Money Changers, industry leaders, and politicians.

(USS Vanderbilt in port during Civil War. U.S. Naval Historical Center Photograph.)

Toward the end of the Civil War, after serving on the Board of Directors on multiple railways for over a decade he realized the next generation of transportation wouldn’t be on ships but would be built with railroads that would travel across the country. Vanderbilt was able to envision a future that made common use of his infrastructure and had to work up significant conviction in his idea to accomplish this vision. Therefore, Vanderbilt began his entrepreneurship in railroads to transport passengers and cargo with steam and coal-powered locomotives when he began to gain enough control of the stock to become the largest owner of the Harlem Rail Line in 1863 and was elected to President shortly after. While having control of Harlem, Vanderbilt successfully took an unprofitable and failing business and turned it into a perpetual money-making machine with the goal of taking over surrounding railroads in the area. Vanderbilt would become known for this, that is, buying unprofitable businesses for cheap, restructuring their operations, and creating a well-oiled system to make him money.

(New York and Harlem Railroad drawn on the New York Central system as of 1918)

 He began his strategy by taking over the Hudson River Railroad in 1864, the New York Central Railroad in 1867, the Lake Shore and Michigan Southern Railway, and the Canada Southern Railway in 1869 and in 1870. He combined the New York Central and Hudson Railways and created a gigantic conglomerate that controlled transportation in the region (Stiles, T.J. 2009). Vanderbilt decided as Part of the merger to create the Grand Central Depot, which at the time was the largest building in New York, and later became the Grand Central Terminal.

(Grand Central Terminal below the MetLife Building in New York City, New York in 2012)

In 1866, Vanderbilt attempted to price gouge clients who needed to use his railways as a means of transportation to the east coast. In response to his clients refusing to pay the requested sum, Vanderbilt displayed his power and wealth when he shut down the Albany Bridge, which was the only railway going into New York in the country. His competitor’s railway companies and clients lost out on millions of dollars worth of materials being shipped, while Vanderbilt watched them skirmish like lost ants, waiting for his moment to capitalize.

(The original bridge in 1866)

To try and raise funds, the competitors and suppliers sold their public shares at discounts, triggering a widespread fear of the company’s strength and causing the price of the stock to drastically decrease. Finally, Vanderbilts plan had come to fruition when he was able to buy up the company’s stock for pennies on the dollar, take ownership of his competitors and charge whatever rates he wanted to the survivors. One of the companies he took over was the New York Central railroad, which officially gave Vanderbilt the largest rail line company in the country, with no close second. Not only did Vanderbilt establish a cash-flowing business, he steadily increased his assets by increasing his overall wealth through each buyout. These companies had machines, working capital, and important infrastructure that Vanderbilt could buy at auction because of his meaningless and malicious business tactics. Furthermore, Vanderbilt could now control the price clients had to pay for the transportation of goods and everyday citizens who choose to use the trains for transportation, allowing him to set the price above market rate because of the lack of competition resulting in increased wealth and power. 

One stain of Vanderbilts successful business career was his public rivalry with Jay Gould and James Fisk, owners and Directors of the Erie Railway, which Vanderbilt attempted to corner. Threatened by Vanderbilt, Gould and Fisk began printing shares rapidly to ensure the value of the stocks would remain low. With the money Vanderbilt was using to buy the worthless stocks, Gould and Fisk were take Vanderbilt's wealth while ensuring his ownership level remained low. To gain notoriety Gould and Fish flaunted their stunt to the public to embarrass Vanderbilt throughout his career and continued to be a nuisance on numerous other occasions, although never gaining on him professionally.

Jay Gould and James Fisk are more famous for their involvement in the Black Friday gold panic in 1869, Gould and Fisk partnered with a man named Abel Corbin, who was married to President Ulysses S. Grant’s sister. Gould and Fisk used this relationship to gain a close relationship with Grant with the ultimate plan of buying up gold and raising the prices through manipulation and insider information. Their plan was successful when they convinced the president to halt the weekly auction for gold-backed government debt. However, Grant became aware of Fisk and Gould’s plan and instructed Corbin to sell his gold position before he reopened the auctions which rapidly drove the price of gold down, resulting in the plan ultimately failing and all of the parties involved were garnished of any legacy. Although, Fisk, Gould, Corbin, and Grant all avoided prosecution for their obvious and rampant manipulation.

(Photograph of the blackboard in the New York Gold Room, September 24, 1869, showing the collapse of the price of gold.)

However, this small event did not face the powers of Vanderbilt, and now that the commodore had an enormous grasp on the United States economy that allowed him to garner relationships with much important business and political figures throughout the world. In addition, Vanderbilt understood the popular railroads were becoming overbuilt, and he would be able to buy businesses for a discount because as supply increases, price decreases. Furthermore, the transportation of new and priceless goods was necessary to keep the business profitable. While on the search to find the cargo and expand the business he wanted to take advantage of the newly emerging energy source of oil that would need to be shipped across the country as cargo on his railroads. In the United States, Petroleum use began in the early 1800s with native Americans using it on a small scale for heat and energy. The discoveries were mostly accidental, as drillers were most often looking for salt or water, and getting petroleum as a byproduct of their exploration.

(Natural oil seeps such as this in the McKittrick area of California)

 The widespread use of oil began in 1859 with the discovery of a 70-foot-deep pit full to the brim with oil in Pennsylvania, called Drakes Well, named after the driller, Edwin Drake, who discovered it. This began an oil rush into Pennsylvania and sparked the beginning of the investment, drilling, and innovation that led to the United States becoming the largest oil-producing country in the world until the end of the 20th century. The investment and innovation into oil production led to petroleum allowing businesses, citizens, and governments to use the natural resource for heat, light, energy, and other important necessities for everyday life.  This sparked further drilling into areas of the country where petroleum was literally seeping from the earth and otherwise being ignored.

(At the Drake Well Museum in August 2006 in Titusville, Pennsylvania. Replica building)

Vanderbilt planned on taking advantage of the new industrial uses of oil by being the main method of transportation for the resource across the country. To do this, Vanderbilt began his search for a supplier of oil in Cleveland, because of the large supply of Petroleum, where he stumbled upon a struggling, ambitious and young entrepreneur that was looking for a break to grow his oil business by supplying energy to the national economy, John D. Rockefeller.

John D. Rockefeller

Rockefeller had started Standard Oil in 1870 after working numerous odd jobs throughout his childhood, where he moved often and eventually found a landing spot in Cleveland. During the Civil War, Rockefeller was in the early stages of developing his business skills and entrepreneurial attitude when he partnered with Maurice Clark to start a produce business. The business was extremely successful because of the Union army’s constant demand for food and supplies, so they were extremely profitable. Toward the end of the civil war, Rockefeller and Clark began experimenting with the new commercial use of oil and started a business that focused on the drilling and refining of petroleum in Cleveland.

(Portrait of 56-year-old John D. Rockefeller)

Rockefeller's early success can largely be attributed to his innovative methods of using the waste products of other oil refineries and using them to create other useful products. Burton Fulsom states in The Myth of the Robber Barons that “Rockefeller used the gasoline to fuel the refinery, and sold the rest as lubricating oil, petroleum jelly and paraffin wax, and other by-products. Tar was used for paving, naphtha shipped to gas plants” (Folsom 2003, "Chapter 5: John D. Rockefeller and the Oil Industry"). However, Rockefeller was only part owner of this company with Clarke, eventually, Rockefeller’s brother got involved with the business and they started Rockefeller, Andrews & Flagler in 1867.

In the beginning years, Rockefeller was struggling to find traction in the new exploding business and his company was on the brink of bankruptcy. However, Vanderbilt was in search of an oil refinery in Cleveland and viewed Rockefellers' new company as a potential new business relationship that could be mutually beneficial in the coming years. Vanderbilt invited Rockefeller to New York in 1868 where he missed his scheduled train ride which fell of the tracks and killed everyone on board. Falling into his religion even more and believing fate was at play, Rockefeller made the trip to New York shortly after to meet with the Commodore who controlled 40% of the railroads in the United States at this point. At the meeting, Rockefeller received the exclusive benefit of using Vanderbilts rail lines at severely discounted shipping rates that would allow Rockefeller to keep his costs low, which promoted users of oil to increase their purchases of oil from Rockefeller, as opposed to his competitors. In return, Rockefeller would have to provide 60 train carts full of barrels daily, a large ask at the time of the emerging industry.

This significant agreement promoted Rockefeller to become extremely profitable after he was able to use similar tactics to Vanderbilt that took unprofitable businesses, increased their production, and gained investors by his selling his cheap products. At the time, the main form of oil used for electrical generation was whale oil, which is harvested from the fat of whales in the ocean, making it extremely expensive.

By the end of 1868 Rockefeller’s company was the largest petroleum refiner in the world (Hawke, David Freeman. 1980). His main product was kerosine which is created from heating up Petroleum. Kerosine provided a stable and cheap alternative to whale oil that could be used across the United States if only Rockefeller could increase his personal production, political influence, and economic reach.

Rockefeller now had a tremendous deal with the commodore, the nation’s richest man. However, the young oil bull had his sights on larger goals than having to pay to use Vanderbilt's rail lines for producing and refining oil. With dreams of becoming the richest business magnate in the country, Rockefeller restructured his company into Standard Oil in 1870, with the goal of spreading his refining process, quality products, and low costs that turned petroleum into a stable kerosine and other useful products. As an intuitive salesman, Rockefeller was able to gather large investments from rich investors and politicians to build infrastructure and markets across the country which allowed him to become a household name for the production and refining of oil in every corner of the United States. Rockefeller was able to achieve his self-perceived destiny of supreme wealth and power with his new company, strategic design, and powerful investors while destroying small and medium-sized businesses across the entire country in the process.

(Share of the Standard Oil Company, issued May 1, 1878. Hielscher, Udo. 1987)

Subsequent to the creation of Standard Oil, Rockefeller began forming his monopoly by creating secret cartels, such as the South Improvement Company, that consisted of the wealthiest railroad owners, oilmen, and politicians that allowed for kickbacks and rebates for transporting Rockefeller’s oil. Once this news became public, the press immediately jumped on the illegal activities before they even took place and the South Improvement Company never partook in those deals. What’s amazing is how the quality of media has substantially deteriorated from how we get ripped out by the wealthy to which actor and actress just got married.

(Fear of monopolies, or trusts, is shown in this critique of Rockefeller's Standard Oil Company.)

Once Standard Oil was established as the most profitable refinery in the US, Rockefeller began directing the consolidation of numerous oil companies in the region to horizontally integrate the production of petroleum by taking over inefficient companies that could implement his strategies and quickly turn them around to become money trees. In one infamous instance, known as “The Cleveland Conquest” Standard Oil consolidated 22 out of the 26 oil companies in the city in less than four months in 1872.

As Rockefeller’s business grew, the Money Changer needed more railroads to ship his oil and the deal with Vanderbilt was not cutting it. Seeking new business opportunities, Rockefeller reached out to one of the largest railroad companies in the country, the Pennsylvania Railroad, run by Thomas Scott. Creating a deal with Scott would ensure that Rockefeller could increase his production to rake in massive profits and repeat the process of buying out his competitors and become the king of petroleum. In the meeting with Scott and Rockefeller, Scott brought along a young protégé that would craft the business deal with Rockefeller, his name was Andrew Carnegie.

The deal was made and Rockefeller was able to use Vanderbilt and Scott, owners of the two largest railroads in the country, to transport his beloved product. Eventually, Rockefeller garnered so much money, economic power, and political influence inside the United States that Vanderbilt and Scott, normally rivals, decided to partner to combat Rockefeller by making him pay market rates for their services and buy competing oil refineries. Ultimately, their plan was unsuccessful, as Rockefeller’s grasp on the United States economy was too far gone for them to control and the Money Changer continued to buy out dozens of refineries and drilling sites at a time.

Once Rockefeller consolidated other oil drills and refining companies, he wanted to innovate the idea of transporting oil throughout the country. Currently, all oil fields relied on railroads to move their product to different regions. However, Rockefeller envisioned pipelines that could be created to stretch hundreds of miles to reduce the need for paying railroads or dealing with their owners’ personalities. He successfully managed to create interlocking networks of oil pipelines that distributed oil throughout the Midwest. With this addition to his business, Rockefeller was able to cut out the railroads, which acted as a middle man and took a large portion of the revenue that he could be reinvesting or taking as profit, but suddenly the demand for petroleum-based products fell drastically.

PANIC OF 1873

The innovation of the steam-powered railroad train coupled with the commercial usage of refined petroleum caused hundreds of small businesses and entrepreneurs to try and create their own businesses and expand their industries. From 1868 to 1873 over 33,000 miles of new track were laid throughout the United States. This largely occurred from new companies emerging that needed capital to start their business, so business owners would market their stock to the public to raise funds from investors around the country and world, or issue debt. In addition, the federal government offered numerous land grants, where the property would be given away for free to construct railroads, adding to the hysteria. This combination led to a large speculative bubble forming in the markets through the infrastructure that was created and the money raised from the selling of socks. However, this wasn’t the only cause of the Panic.

(A bank run on the Fourth National Bank No. 20 Nassau Street, New York City, from Frank Leslie's Illustrated Newspaper, 4 October 1873)

The next major impact that caused the United States and most of Europe to enter a depression was the Coinage Act of 1873 which ended the ability for holders of silver bullion to have it coined into legal tender. One of the major factors that played into the passage of the Coinage Act was the conclusion of the Habsburg Empire in Germany using silver as legal tender in 1871. This caused the international demand for the United States mined silver bullion to lose value because of the immediate drop in demand and the halting of mining companies followed because they would no longer be profitable. Unemployment started to take over society because money was now harder to borrow and the worldwide demand for railroads, petroleum, and silver dropped rapidly. The decrease in the overall money supply makes it more difficult for people to acquire loans because interest rates will be increased from the lower supply of money.

(The standard silver dollar was abolished by the Coinage Act of 1873)

The straw that broke the camel’s back and sent the United States into a country-wide depression was the failure of the bank, Jay Cooke and Company. This was the same bank that we discussed in earlier sections that became famous after being a major provider for the Union effort during the civil war by selling hundreds of millions of dollars worth of government bonds to the public for the United States with creative marketing tactics. After his success at selling bonds, Jay Cooke was too ambitious with his investment in railroads and invested more money than he could afford to lose. Not only that, Cooke was taking the money of his depositors, who had no idea what he was doing with it, and using it to overextend himself into a risky investment at the tail end of a bull run.

The effects of the Panic were long-lasting and deep throughout the entire United States and many historians believe it to be the first nationwide depression in the young nation’s economy. The Failure of Jay Cook’s bank led to more banks shutting down, railroad construction being halted and stock prices dropping significantly. The markets were so uncertain, that the New York Stock Exchange had to be closed for 10 consecutive days. Even after it reopened, the failure of the economy continued to persist. In addition, 18,000 businesses failed between 1873 and 1875 causing unemployment to peak in 1878 at 8.25% (Lord Keynes. 26 January 2012). Low wages and unemployment drove the lower and middle classes to go on nationwide strikes, fighting against the railroad industry which they believed was responsible. In response, railroad companies were burned down and hired militias would stand outside of buildings waiting for the protesters, and opening fire if they presumed, they were a threat. Throughout this time though one force remained stable, Standard Oil. Although the demand for oil dropped, Rockefeller’s company always remained profitable as oil was becoming more of a staple of everyday life, manufacturing, and transportation.

(New York police violently attacking unemployed workers in Tompkins Square Park, 1874)

The Depression of 1873 ended in the United States by 1879 and led to a large political shift that saw southern democrats take the majority in the House and despise Ulysses S. Grant for his monetary politics while in office. In addition, Cornelius Vanderbilt passed away in 1877, leaving an enormous fortune to his son William who had helped his father throughout his business ventures. A rational hypothesis may be that the depression negatively impacted the business practices of Rockefeller and Vanderbilt. However, crashes in the markets are opportunities for wealthy business owners to buy up businesses at discount in an auction, rather than have to pay full price. Meanwhile, these are the people loaning out money that now have the benefit of the United States government's increased interest rates, thereby increasing their return. Although consumers suffered because of a lack of a job, commodity production, and uncertainty in the markets; business owners like Rockefeller seize these opportunities to grow their wealth and influence.

(Black Friday, 9 May 1873, Vienna Stock Exchange)

By the end of the 1870s and entering into the 1880s, Rockefellers Standard Oil was unaffected and continued to reap profits year after year. They had achieved 90% of the United States oil production and refinery, by creating over 300 petroleum-based products from oil including “Tar to paint to petroleum jelly to chewing gum” (Segall 2001, pp. 48–49). In addition, he had created an entire network of pipelines, oil refineries, railroads, corrupt politicians, submissive business people, new technology, and a weak society to strip the lower and middle classes, small business owners, and uneducated citizens of their wealth, while simultaneously providing energy to the entire country, one barrel at a time, all by the time Rockefeller reached the age of 33.

As crazy as the idea is, yes someone can be doing something beneficial for society while still being corrupt. The ideas aren’t mutually exclusive. In fact, in this case, it may not even be true that both are occurring. If Rockefeller would allow market competition, the innovation could have occurred much quicker than the power being centralized. In addition, Rockefeller monopolized the industry by undercutting profits, selling below cost, and creating secret deals that have negative downstream effects on society. Just because something is cheap does not mean that society would not have benefited more if the small business owners maintained their operations or if Rockefeller contributed to public goods by having open-source technology for innovative ideas that would have benefited society as a whole. It’s important we start to realize this point and begin to think about how working for the benefit of a productive and efficient human society is better for you as an individual, as opposed to working strictly for your personal financial or supremacy needs.

In the 1880s international Money Changers got a taste for oil when the first wells were being drilled and began distributing their product to different parts of the world. One of those instances occurred when the Paris Rothschilds helped finance Robert Noel, a Russian businessman that created the country’s first oil pipeline and an oil tanker that was able to provide cheap energy to the region (Chernow 1998, p. 246). The growth of the oil industry continued throughout the world as more and more products, services and technology required it for cheap and efficient energy, while others made complete products from the natural resource.

State laws at the time made it difficult for companies to incorporate and open businesses in multiple regions, therefore Rockefeller had to create 41 companies that were all incorporated in different states to ensure he was legally allowed to do business there. In response to the regulations, Rockefeller maneuvered around state laws by creating the Standard Oil Trust in 1882, which would encompass the 41 companies and would be run by nine trustees with Rockefeller at the helm (Segall 2001, p. 61).

(Standard Oil Refinery No. 1 in Cleveland, Ohio, 1897)

With all of these new companies, Rockefeller was able to greatly increase the size of his operations, economic and political influence, and societal control. At the height of the company, Standard Oil operated “20,000 domestic wells, 4,000 miles of pipeline, 5,000 tank cars, and over 100,000 employees” (Chernow 1998, p. 249). Some of the refineries Rockefeller bought out were improved and used in business, while other small businesses would be bought out and closed to ensure Rockefeller would be the only supplier. Other small businesses had to close because they couldn’t compete on the prices Rockefeller offered for his products because they were not getting the same deal flow from Vanderbilt and Scott or the rebates.

Toward the end of the 19th century, government officials, mostly led by New York governor and future president Theodore Roosevelt, began to realize the harm monopolies were having on the economy and created government agencies and laws that would fight against the powerful Money Changers and give the government more power than should be allowed. A difficult tug of war to say the least. For instance, the Interstate Commerce Commission was created in1887 with the goal of charging equal rates to customers of railroads. Furthermore, the Sherman Antitrust act of 1890, which was originally created to control the Unionization efforts of Americans, was crafted to fight against the most powerful American companies in the country.

(U.S. President Theodore Roosevelt depicted as the infant Hercules grappling with Standard Oil in a 1906 Puck magazine cartoon by Frank A. Nankivell)

In response, Rockefeller felt the need to diversify his holdings into the newly emerging commercial business of Iron Ore production. In the 1890s Rockefeller began his journey into drilling for and producing Iron Ore, which was growing in popularity because of its immense strength. With new entrepreneurs focused on harvesting the natural resource, it made the product cheap for consumers like me and you. However, Rockefeller would face fierce competition, but this time it wouldn’t be from the government, it would be from Thomas Scott’s young protégé who developed into a business magnate himself, focused on the iron ore and steel industry, Andrew Carnegie.

ANDREW CARNEGIE

Carnegie was born into a relatively poor family in Scotland and was educated by studying various Scottish political leaders, social influencers, and philosophers. As a result of his family experiencing hardship and difficulty finding work, Carnegie’s migrated to the United States his Andrew was 12 years old. In 1849, the future steel entrepreneur obtained a job working as a courier for a telegraph company. Carnegie practiced with the telegraph in his free time and quickly became an expert at working the device. Noticing his work ethic, he was rapidly promoted to become an operator of the Telegraph, earning a gracious salary for his age. Carnegie was an innate businessman and reinvested his salary into his increasing his human capital by learning and growing his physical capital by buying assets. When Carnegie turned 18, he obtained a vital position at the Pennsylvania Railroad Company, one of the largest railroads in the country, to become a secretary and telegraph operator for Thomas Scott.

(Andrew Carnegie. Wikimedia Commons)

Once again, Carnegie quickly got promoted to work with Scott on important deals that would grow the Pennsylvania Railroad Company and became so close Scott acted as a mentor for Carnegie, teaching him everything he knew about business. One of the most significant missions Scott assigned to Carnegie was the construction of the Eads bridge that would cross the Mississippi River. This achievement would be monumental as the longest bridge up to this point in history and finally link the east and west through the railroad. With this new infrastructure, railroads could carry passengers and cargo across the country with an ease that has never been experienced before.

When Carnegie accepted the role, he had no idea how to complete such a massive assignment, as he never had experience building bridges before, let alone an overpass so large and complicated it had never been accomplished before. At the time around a quarter of the bridges built at the time collapsed, but Scott entrusted Carnegie with this task while building a competent and hardworking team around him. Carnegie needed to come up with a new method of construction that could withstand the currents of the Mississippi river while carrying tons of pounds at the same time. Carnegie needed steel.

At the time, the commercial use of steel was extremely underutilized because of the difficulty mass production posed to small business owners. Steel mills did exist; however, they were on a small scale that only utilized to serve the needs of tools and small items in nearby towns and cities. Carnegie could not afford to utilize the small mills of the time and had to invest in an idea that could generate tons of steel in minutes. After Carnegie spent months surveying different processes and visiting different mills, he decided to utilize a process created by Henry Bessemer that involves an open furnace burning iron ore to create an inexpensive method for commercializing steel. With this method, Carnegie's new steel mill would be the heart-pumping steel to the location of the bridge construction to ensure there would be enough resources to create a durable, mile-long floating road.

(Bessemer converter)

Although the bridge was in the process of completion, Carnegie’s business went through various financial struggles because of the massive financial costs associated with the number of resources and labor required to achieve such a massive feat. At one point, the production of the bridge had to be halted because the company went extremely over budget and Carnegie was unable to pay back loans. However, before too long he was able to earn the additional financing required to finish the process. After four years of hard labor, financial struggle, and death in construction; the bridge was finally complete.

In order to gain the public’s trust in the completion of construction, on the day the bridge opened Carnegie decided to have a parade over the road with the public being led by an elephant. At the time people believed elephants would not cross a structure if the animal believed it was insecure. The day came and the elephant successfully crossed the bridge, leading to headlines in newspapers across the country that sparked trust in Carnegie’s new steel product that could be created from iron ore, but more importantly, incredible demand arose to replace all of the old infrastructures that were made of wood and brick with the more powerful steel. The first task was with an already established industry with well-known clients, the railroads. Carnegie was able to partner with Thomas Scott, who quickly became Carnegie’s principal client.

(Eads Bridge from Laclede's Landing)

Not only did railroads want the steel, but tools, machines, buildings, ships, and a multitude of other industrial resources required steel to become more productive. Carnegie needed to build his own steel plant to accommodate these requests and with the help of Thomas Scott, he quickly and successfully secured the investment dollars from fellow businessmen and the public to develop his first steel mill that would span over 100 acres. When the mill was completed, it had the capacity to produce around a million pounds of steel every two days. However, in 1873 the panic hit, and the railroad's demand to replace their tracks with steel fell drastically, stock prices fell and society suffered. Also, during the panic, railroads that previously offered Rockefeller Oil rebates for transporting his oil, like Thomas Scott’s Pennsylvania railroad, teamed up against Rockefeller. In response, Rockefeller elected to refrain from providing any oil on the rail lines, causing their revenue to drop and their businesses throughout the Panic of 1873.

In 1881 Carnegie’s mentor, Thomas Scott, passed away, leaving Carnegie with a sour taste in his mouth in regards to Rockefeller, because of the business failure Scott would be remembered for in his final days. In addition, Carnegie attributed the demand contraction of steel to Rockefeller’s selfish scheme of displaying his power. Therefore, Carnegie turns his attention to another potential customer of his precious resource. Carnegie had previously created a steel mill capable of creating over a million pounds of steel every two days, but what was that material going to be used for?

Well, when the panic hit, large migration occurred from rural America and international immigration to urban areas in search of work in the new factories propping up across the country. Cities like Chicago, Pittsburg, and New York boomed in population after the Panic and the end of the civil war with lower and middle classes citizens that were desperate to provide their families with food on the table. Therefore, Carnegie came up with an idea to help the overpopulated cities and increased the size of plants. Instead of creating houses, buildings and offices horizontally, Carnegie decided to raise buildings in the sky with the use of steel as the only material strong enough to act as a secure spine, binding the entire structure together.

("Home Insurance Building" First Skyscraper in the World Chicago, IL)

Over the next few years, tens of thousands of skyscrapers were created in major cities across the United States using Carnegie Steel as the main frame holding the entire structure together, leading to immense wealth pouring into Carnegie's accounts. However, Carnegie’s wealth still paled in comparison to Rockefeller's, so Carnegie wanted more.

Seeking to extend his reach in his production of Iron Ore, starting in 1883 Carnegie went on a spree of buying out his competitor's businesses including; the Homestead Steel Works, J. Edgar Thomson Steel Works, Pittsburgh Bessemer Steel Works, the Lucy Furnaces, the Union Iron Mills, the Union Mill (Wilson, Walker & County), the Keystone Bridge Works, the Hartman Steel Works, the Frick Coke Company, and the Scotia ore mines all with the intent of consolidating the assets into the Carnegie Steel Company in 1892. In addition, by 1889 the United States was the largest producer of steel in the world, exceeding the previous leader of Britain. ("Andrew Carnegie | Biography & Facts". Encyclopedia Britannica. Retrieved August 23, 2017).

To accomplish this feat, Carnegie had to take on another business partner that could implement the same ruthless strategies Rockefeller was using to grow his financial empire. Carnegie made a very controversial decision and hired Henry Frick. Frick was known by the world as a ruthless businessman that took to physical violence in many instances to accomplish his goals. Frick was a self-made millionaire who made his money from working in the coal business, but Carnegie wanted his ruthless attributes to be applied to his business as well.

To accomplish such massive wealth, Carnegie could not do it alone, and he had the assistance of market manipulation from small groups of businessmen and favorable tariffs from government officials that would be leaked in legal documents that came out during court proceedings involving Henry Frick, which illustrated how Carnegie’s company was raking in millions of dollars per year from bribing numerous members of the US Congress (Nasaw, pp. 10653–57).

Carnegie continued his reign by dominating the steel industry until 1901 when he sold all of his steel enterprises, which were valued at over 300,000,000$ and he owned over 75% of that sum. The large sum wasn’t paid all at once but paid through 50-year gold bonds that would pay 5% interest every year. With this money, Carnegie created numerous buildings, and libraries and provided donations to other causes he believed in, which cemented his legacy into history forever. But who had the money to buy the largest steel company in the world? Well, it was an established financer and one of the wealthiest, most powerful individuals in the world, John Pierpont Morgan.

(The main campus in Pittsburgh as seen from the 36th floor of the Cathedral of Learning at the University of Pittsburgh, August 2015.)

JP MORGAN

          John Pierpont Morgan was born in 1837 into a privileged situation in which his father was an established banker. Pierpont began his career in New York on Wall Street and was immediately passionate and knowledgeable about the financial industry in the emerging economy of the United States. As important as this time was for the motivated businessman, JP Morgan had higher goals than working for companies on Wall Street, he wanted unimaginable power, control, and wealth. In 1861 Morgan started a financial company named J. Pierpont Morgan and Company. Then when the civil war broke out during the same year, Pierpont paid 300$ to have a substitute take his place in this Union Army and instead financially speculated on Union bonds which fluctuated in price based on the outcomes of miserable battles fought by men that ended with massive death. Morgan was profiting off the struggle over slavery, the United States separating, and the death of millions of Americans by using his financial company to speculate, while having a stand-in fight in his battle.  

(J. P. Morgan photo from Images of American Political History, public domain.)

JP Morgan’s father had strong ties with players in the financial industry that worked in London and on Wall Street. Therefore, Pierpont had immediate connections with the economic elite throughout different continents and all over the world. Junius Morgan, Pierpont’s dad, privately asked Anthony Drexel to partner with and mentor the young business savant. Drexel was an important businessman who had created Drexel and Co. which will come into play later as there was an important controversy that will come with the company as recently as 1990. Drexel and Morgan ultimately merged their companies into a singular financial company, and it went through a variety of different name changes, but after Drexel’s death in 1895, Pierpont renamed his organization to the name we know today, J.P Morgan and Company after becoming one of the largest financial companies in the world.

Pierpont had a demanding, brutal and relentless philosophy with his company that involved him consolidating and merging weaker opponents or businesses with less wealth. Because of his father’s relationships with business savants across the globe, Pierpont had established relationships coming into the financial industry and throughout his accumulation of wealth and power. The Morgan family was one to be reckoned with, many people describe his grip as an octopus with several tentacles that would clutch onto his prey and squeeze them until he was victorious. Because of his widespread popularity and success, Pierpont was able to sway affluent investors and amazing inventors to put their money and labor toward projects and ideas that would ultimately end up taking over the world.

J.P was a prominent figure in the financial realm, particularly for his ability to invest in and acquire successful companies along with merging unsuccessful companies to turn them into fruitful ventures. Morgan had a simple focus: acquire as many firms vertically and horizontally in a sector of the economy until he controls the entire supply line and everyone they distribute to. Then, move on to the next sector.  Morgan initially focused on markets that have intellectual property laws that are enforced by the government, making it easy to monopolize an industry with government support. Morgan was successful in this venture because of his ability to influence political figures to write self-serving laws, find powerful investors to provide funding, and execution of his plan with a ruthless demeanor while rationalizing that it benefits the country as a whole will add money to the investor’s pockets.

One example of Morgan taking advantage of the patent and copyright laws involved was when Alexander Graham Bell created the telephone and successfully monopolized the entire industry with deals and approval from the United States government. During an ambitious project of creating phone lines from the east coast to the west coast, they created a subsidiary of the Bell Company called the American Telephone and Telegram Company, better known today as AT&T. Alexander Graham Bell and his company transferred a massive amount of their assets to AT&T to fund this imaginative project. Who was the company and person responsible for holding and deciding where the funds would be spent in this monopoly? J.P Morgan and his company.

(AT&T Corporation (now AT&T Inc.) corporate headquarters in Dallas, Texas)

When Thomas Edison invented the light bulb and gathered multiple patents that allowed him to monopolize the industry, he created numerous businesses in the lighting industry. However, after financial support and pressure from J.P Morgan’s bank and the Vanderbilt family, Edison merged his company into a new corporation called General Electric. GE went on to be listed as a public company on the New York Stock Exchange with a large portion of the shares, voting power, and dividends being owned and paid to the prime investors. 

(General Electric Building at 570 Lexington Avenue, New York)

After J.P Morgan monopolized the largest industries with patents from some of the country's brightest individuals, he began his focus on industries that everyone used. At the time, the railroad industry and steam engine were taking over the entire country's economy. These new innovations were allowing people and resources to travel faster and farther than ever before. At the time, railroads provided the second most jobs in the United States. The railroad industry, as an asset valued in market capitalization, took up the majority of value on the New York Stock Exchange in the United States. In the mid-1800s, the railway system was fragmented between a number of owners in different regions of the United States that were in fierce competition to produce the fastest, cheapest, and most efficient infrastructure and experience and the industry was growing rapidly, by 1880, there were nearly 18000 freight trains and over 22000 passenger trains manufactured and operational on the rails.

 JP Morgan, seeing the battles between them, took advantage of the hostility with his wealth by buying out some of the largest railroad owners in the United States and eventually made his competitors bow to his company because they couldn’t compete with price or speed because of the massive control Morgan had around the industry, he was able to lower the prices to a point where the smaller companies were no longer profitable and had to make a choice to shut down their doors for good, or sell their company to Morgan and salvage their life’s work. At the height of his monopoly around the railroad industry 7 companies owned 2/3rds of the train carts and railways across the United States, with JP Morgan’s company alone owning the biggest portion.

After a significant economic depression in 1893, Morgan’s railroad company defaulted on its loans and went into bankruptcy. This bankruptcy wiped out the bond holder’s money that was invested in his company and their money disappeared. This economic depression was called the Panic of 1893 and was a reoccurring issue in the 19th century in the American economy. Though, this panic had particular importance in our lives and would have lasting effects on markets, government, and industry. While the panic of 1893 is happening, and Morgan is getting away with no repercussions for monopolizing the market, which comes with increased prices, centralization, control, and influence from the owner of the monopoly, the United States treasury is running out of gold because of the massive bank runs that are happening across the country. The bank runs were caused by a combination of factors that were regularly plaguing the United States economic system throughout the 1800s. Bad loans were made, manipulation of the market by American investors, little to no regulation, fluctuations in prices of international imports that we relied on, and underperformance in crop performance for farmers all played an important role.

(The curb outside the New York Stock Exchange's building)

However, perhaps the most devastating impact was the overexpansion of American industry which led to more supply than was demanded. Monopolies continued cornering markets that ultimately lead to bankruptcies when the companies failed to make profits and defaulted on bonds which lost American citizens' life savings. Railroad companies were building thousands of commercial and passenger railroad cars and tens of thousands of miles of track that were going unused, miners were harvesting silver that’s value was being artificially inflated by government policy because of the massive oversupply. 

These railroad and silver companies that were continually losing money were not only being invested in by everyday people like you and me, but banks, trusts, and financial companies invest in these failing companies and therefore leading to the banks, trusts, and financial companies losing money, which ultimately means that the money you invested or deposited into the banks is now gone. During the panic, over 15000 companies failed in addition to 500 banks. The money that was invested or deposited into those companies by the American people, disappeared into thin air.

As a result of these failing companies and banks, people literally ran to the banks and wanted to trade in their dollars that were losing value and were in dwindling supply for gold and silver which has intrinsic value. When this bank runs happened, the US treasury’s gold supply was quickly dwindling. But then, someone with an immense amount of power decided to intervene. Who was it? You guessed it, John Pierpont Morgan, the one who monopolized the railroad industry and overexpanded, was a huge cause of the depression that he wanted to now solve.

(Cartoon of J. P. Morgan seizing control of banks. Tucker, Abigail. October 9, 2008)

At first J.P Morgan offered a plan to the white house that would allow them to buy gold from his business friends that he cultivated relationships throughout the years, however, Grover Cleveland, the president at the time, refused the idea and instead relied on the more standard practice for the federal government at the time to raise money which was issuing bonds (debt). In 1893, when Pierpont figured out that Cleveland had refused the idea, he traveled across the east coast from his home in New York to Washington D.C and demanded a meeting with the President of the United States. After initially being denied to have the meeting, he persisted with his demanding and unforgiving tone until he was eventually able to see President Cleveland and his cabinet. In the meeting, Cleveland became aware that their gold reserves have dropped from their normal number of over 100,000,000$ to 9,000,000$. This news sparked immediate concern and Pierpont could sense it in the room. He yelled out, “I know of a deal right now from a European investor that would send the United States government into bankruptcy by this afternoon”.

Even more startled, President Grover Cleveland turned in his chair, patiently and apprehensively and locked eyes with Pierpont. After a short pause, the President of the United States asked, “Have you anything to suggest, Mr. Morgan?”

Did he ever, Morgan come up with a plan to create a syndicate, which is when different people or entities that have common interests come together and form one group, in the financial realm it usually means to buy or sell a security. Who did Morgan create a syndicate with? The Rothschild family. The deal was that Morgan and the Rothschilds would sell the US. Treasury 3.5 million ounces of gold in return for a 30-year bond. Those 3.5 million ounces of gold as of this writing is worth 6,651,750,000$. The deal was completed through an outdated law that would allow Cleveland to sign the bill without the authorization of Congress. JP Morgan and the Rothschild family would effectively own the United States government for the next 30 years under this deal. The deal would end up restoring confidence in the United States government’s ability to pay back its loans and deposits, although stirring controversy in the American political scene because of the intertwining of Wall Street and the White House, which goes to show you that regardless of the political party, politicians will do whatever they believe will get them re-elected.

This brings us to when Andrew Carnegie sold U.S Steel to John Pierpont Morgan for a personal gain of around 270,000,000$ (not adjusted for inflation) in 1901, creating U.S Steel which was the first company with over 1,000,000,000$ in market capitalization. With this company Morgan was able to create mutually beneficial deals between U.S Steel and Standard Oil that functioned as a formal exchange of Standard’s Iron assets for U. S Steel stock and allowed Rockefeller and his son William to be on U.S Steel’s Board of Directors, giving them more power and control.

Later, After J.P Morgan successfully managed to take over the finance, railroad, and steel industry. He turned his focus to international shipping. International shipping was and still is a huge part of international trade among nations. It was even more crucial then because they didn’t have commercial airplanes that were designed to carry products. The industry was harsh, volatile, and unforgiving because of the reliance on nature and government regulation. However, this didn’t scare Morgan away.

He created the International Mercantile Marine Company, which was a trust designed to own a variety of businesses related to cruise liner manufacturing and shipping for both supplies and the public. The venture ultimately failed after one of its ships, the Titanic, sank on its voyage from New York to Britain. After the titanic, the cash flow of the company failed and once again Morgan defaulted on loans to investors and lost their savings. The company was converted into United States Lines and was saved after the United States' entry into World War I where they got huge contracts with the U.S., British, and French Military and governments, with Morgan, ultimately losing nothing on the deal.

(Titanic departing Southampton on 10 April 1912)

Also in 1900, Nikola Tesla was able to gain his initial funding for the research and construction of his trans-Atlantic wireless communication system, known as Wardenclyffe from Morgan. However, when Tesla asked for additional funding from Morgan the project was abandoned in 1906 with Morgan citing a breach of contract (Seifer, Marc J. 2006. "Nikola Tesla: The Lost Wizard").

(1904 image of Wardenclyffe Tower)

J.P Morgan’s and all of the other Money Changers stories continue, but we will have to wait until the next sections to learn about their impact on the Spanish-American War and the Panic of 1907, where Morgan single-handedly saved the entire United States economy from collapse