Cornelius Vanderbilt was the first great American industrialist. He was born in New York in 1794, just two years before the Declaration of Independence was signed. He grew up without much formal education, but went to work in the shipping industry. Nicknamed “The Commodore” he successfully built an empire in transportation. Cornelius Vanderbilt: American business leader who made a fortune in the shipping and railroad business in the 1800s. Known as the Commodore, he owned the New York Central Railroad and built New York City’s Grand Central Terminal.
His first ventures in steamships proved profitable, especially because of the demand for shipping that resulted from the California Gold Rush and the Civil War. After the war, he turned his attention to railroads. He bought out competitors and assembled the New York Central Railroad. His Grand Central Depot in New York City is still one of the most impressive railroad stations in the world.
In his later years, he established a pattern of philanthropy that other industrialists would follow. With his fortune, he founded Vanderbilt University in Nashville, Tennessee. Philanthropy: Giving money. For example, Carnegie donated much of his fortune to build libraries around the world.
His grandson eventually used the family money to build one of America’s largest private homes, the Biltmore Estate.
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Vanderbilt’s steamship, which he named after himself.
Oil was not the only commodity in great demand during the Gilded Age. The nation also needed steel.
The railroads needed steel for their rails and cars, the navy needed steel for its new naval fleet, and cities needed steel to build skyscrapers. Every factory in America needed steel for their physical plant and machinery. Andrew Carnegie saw this demand and seized the moment.
Like other industrialists, Andrew Carnegie was not born into wealth. When he was 13, his family came to the United States from Scotland and settled in Allegheny, Pennsylvania, a small town near Pittsburgh. His first job was in a cotton mill, where he earned $1.20 per week. Andrew Carnegie: Industrialist who monopolized the steel industry.
Pittsburg, Pennsylvania: City in western Pennsylvania that was home to America’s steel industry.
His talents were soon recognized and Carnegie found himself promoted to the bookkeeping side of the business. An avid reader, Carnegie spent his Saturdays in the homes of wealthy citizens who were gracious enough to allow him access to their private libraries. After becoming a telegrapher for a short while, he met the head of a railroad company who asked his services as a personal secretary.
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Inside Carnegie’s Homestead Steel Mill near Pittsburg, Pennsylvania.
Carnegie became a tycoon because of shrewd business tactics. Rockefeller often bought other oil companies to eliminate competition. This is a process known as horizontal integration. Carnegie also created a vertical integration. He bought railroad companies and iron mines. If he owned the rails and the mines, he could reduce his costs and produce cheaper steel. Horizontal Integration: A type of monopoly in which one business controls all of one stage of an industry. For example: Carnegie owned all of the steel mills.
Vertical Integration: A type of monopoly in which a business undercuts its competitors by owning a company at each stage of an industry. For example: Carnegie owned mines, ships, railroads, and steel mills.
Henry Clay Frick: Carnegie’s to assistant. An industrialist in his own right, he owned the coke mines used to power the Carnegie steel operation.
Carnegie Steel Company: Andrew Carnegie’s steel business. Later known as U.S. Steel after it was purchased by J.P. Morgan.
Andrew Mellon: American financier. He was so wealthy he bailed out the U.S. government during financial crisis.
Carnegie was a good judge of talent. His assistant, Henry Clay Frick, helped manage the Carnegie Steel Company on its way to success. Carnegie also wanted productive workers. He wanted them to feel that they had a vested interest in company prosperity so he initiated a profit-sharing plan.
All these tactics made the Carnegie Steel Company a multi-million dollar corporation. In 1901, he sold his interests to J.P. Morgan, who paid him 500 million dollars to create U.S. Steel.
The son of a banker and judge, Andrew Mellon showed remarkable talent for investment and banking at an early age. In 1872, his father set him up in a lumber and coal business, which he soon turned into a profitable enterprise. He joined his father’s banking firm, T. Mellon & Sons, in 1880 and two years later had ownership of the bank transferred to him. In 1889, Mellon helped organize the Union Trust Company and Union Savings Bank of Pittsburgh. He also branched into industrial activities: oil, steel, shipbuilding, and construction.
Areas where Mellon’s backing created giant enterprises included aluminum, industrial abrasives, and coke. Mellon financed Charles Martin Hall, whose refinery grew into the Aluminum Company of America (Alcoa). He created an entire industry through his help to Heinrich Koppers, inventor of coke ovens, which transformed industrial waste into usable products such as coal-gas, coal-tar, and sulfur. Mellon also became an early investor in the New York Shipbuilding Corporation.
Mellon was one of the wealthiest people in the United States, the third-highest income-tax payer in the mid-1920s, behind John D. Rockefeller and Henry Ford.
Unlike other industrialists of his time, Andrew Mellon also served in government. He was Secretary of the Treasury throughout the 1920s under presidents Harding, Coolidge and Hoover.
Like Carnegie, Mellon also gave away large sums of his fortune. Carnegie-Mellon University was founded with the two men’s money. Mellon also provided the money to establish the National Gallery of Art in Washington, DC.
J. PIERPONT MORGAN
Not all of the tycoons of the Gilded Age were rags-to-riches stories. J. Pierpont Morgan was born into a family of great wealth. His father had already made a name for himself in the banking industry. With Morgan’s family resources, he enjoyed the finest business education money could buy. J.P. Morgan: American financier who purchased Carnegie Steel. His businesses were the target of antitrust lawsuits.
He did not scratch and claw his way to the top of any corporate ladder. His father arranged for an executive track position at one of New York’s finest banks. Regardless of his family’s advantages, Morgan had a great mind of his own. He set out to conquer the financial world, and conquer it he did.
Morgan’s first business ventures were in banking. By 1860, he had already established his own foreign exchange office. He knew the power of investment. Not content to control just the banking industry, he bought many smaller ventures to make money.
During the Civil War, he paid the legally allowed fee to purchase a substitute soldier and evaded military service. Morgan made handsome profits by providing war materials.
After the war, he set out to corner the nation’s financial markets. When the Panic of 1873 rocked the nation’s economy, Morgan protected himself wisely and emerged in the aftermath as the king of American finance.
Despite his label as a robber baron, Morgan felt his investments benefited America. His railroad dealings helped consolidate many smaller, mismanaged firms, resulting in shorter trips and more dependable service. Two times during financial panics he allowed the federal government to purchase his vast gold supplies to stop the spiral of deflation.
He owned a bridge company and a tubing company. His most renowned purchase was in 1901, when he bought the Carnegie Steel Company for $500 million to create U.S. Steel. Within ten years U.S. Steel was worth over a billion dollars. U.S. Steel: Name given to Carnegie Steel after it was purchased by J.P. Morgan.
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The Homestead steelworks. It was the center of Carnegie Steel and the U.S. Steel after J.P. Morgan purchased the company.
Morgan’s actions marked a shift in thinking among American industrialists. He proved that it was not necessary to be a builder to be successful. Smart investment and efficient consolidation could yield massive profits. Young entrepreneurs shifted their goals to banking in the hopes of mirroring Morgan’s success.
For all his accomplishments, he was harshly criticized. The first decade of the twentieth century brought challenges to Morgan from the government. His Northern Securities Railroad company was deemed illegal under federal antitrust law, the first such action by the national government. He was investigated by Congress for his control of the financial markets. Even U.S. Steel was forced to relinquish its monopoly.
Jaded by the criticism, Morgan moved to Europe, where he lived his final days. He was a favorite target of intellectuals who claimed that such tycoons robbed the poor of their deserved wealth. He was a hero to enterprising financiers across the land who dreamed of following his example. That is, of course, unless they were destroyed by his shrewd, fierce tactics.
By the time of his death, J. P. Morgan owned or partially owned multiple railroads, General Electric, the American Bridge Company, and AT&T. His investment bank survives today in the form of MorganStanley.
JOHN D. ROCKEFELLER
He was America’s first billionaire.
In a pure sense, the goal of any capitalist is to make money. And John D. Rockefeller could serve as the poster child for capitalism. Overcoming humble beginnings, Rockefeller had the vision and the drive to become the richest person in America. John D. Rockefeller: American industrialist who dominating the oil business. He was the richest man in America.
At the turn of the century, when the average worker earned $8 to $10 per week, Rockefeller was worth millions.
Whatever conclusions can be drawn, Rockefeller’s impact on the American economy demands recognition.
Rockefeller was born in 1839 in Moravia, a small town in western New York. His father practiced herbal medicine, professing to cure patients with remedies he had created from plants in the area. John’s mother instilled a devout Baptist faith in the boy, a belief system he took to his grave. After graduating from high school in 1855, his family sent him to a Cleveland business school.
Young John Rockefeller entered the workforce on the bottom rung of the ladder as a clerk in a Cleveland shipping firm. Always thrifty, he saved enough money to start his own business in produce sales. When the Civil War came, the demand for his goods increased dramatically. Rockefeller took advantage of the opportunity and amassed himself a small fortune.
He took advantage of the loophole in the Union draft law by purchasing a substitute to avoid military service. When Edwin Drake discovered oil in 1859 in Titusville, Pennsylvania, Rockefeller saw the future. He slowly sold off his other interests and became convinced that refining oil would bring him great wealth. Titusville, Pennsylvania: Site of the first oil wells in America. Rockefeller got his start refining the oil found here.
Rockefeller introduced techniques that totally reshaped the oil industry. In the mid-19th century, the chief demand was for kerosene. In the refining process, there are many by-products when crude oil is converted to kerosene. What others saw as waste, Rockefeller saw as gold. He sold one byproduct, paraffin to candle makers, and another byproduct, petroleum jelly, to medical supply companies. He even sold off other “waste” as paving materials for roads. He shipped so many goods that railroad companies drooled over the prospect of getting his business.
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John D. Rockefeller at the height of his power and influence. In later years he turned control of his company over to his sons and lieutenants. He became an avid golfer and retired to Florida.
Rockefeller demanded rebates, or discounted rates, from the railroads. In exchange, he offered guaranteed the friendly railroad the right to ship his oil. He used all these methods to reduce the price of oil to his consumers. His profits soared and his competitors were crushed one by one. Rockefeller forced smaller companies to surrender their stock to his control. Rebate: Money paid back as an incentive. For example, railroad companies gave Rockefeller these in exchange for the exclusive right to ship his oil.
Instead of buying his competitors, Rockefeller bought their stock. In this way, he controlled all of the business without consumers knowing who was really benefiting from their patronage. Also, Rockefeller did not have to do the day-to-day work of managing all of the businesses he controlled. However, by eliminating competition, he could guarantee profits.
Trust: A legal business entity that owns other companies. Industrialists used these to avoid taxes, laws restricting business practices, and to hide the integration of the many elements of their empires.
Standard Oil Corporation: John D. Rockefeller’s petroleum business.
This sort of arrangement is called a trust. A trust is a combination of firms formed by legal agreement. Trusts often reduce fair business competition. As a result of Rockefeller’s shrewd business practices, his large corporation, the Standard Oil Corporation, became the largest business in America.
As the new century dawned, Rockefeller’s investments mushroomed. With the advent of the automobile, gasoline replaced kerosene as the number one petroleum product. Rockefeller was a bona fide billionaire. Critics charged that his labor practices were unfair. Employees pointed out that he could have paid his workers a fairer wage and settled for being a half-billionaire.
Before his death in 1937, Rockefeller gave away nearly half of his fortune. Churches, medical foundations, universities, and centers for the arts received hefty sums of oil money. Whether he was driven by good will, conscience, or his devout faith in God is unknown. Regardless, he became a hero to many enterprising Americans.
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William Clark’s mansion on 5th Avenue in New York City. The stretch of road became known as “Millionaires’ Row” because of the numerous mansions build there by the super-rich of the Gilded Age.
Marshall Field of Chicago was the founder of Marshall Field and Company, a major department store chain. His business was renowned for its then-exceptional level of quality and customer service. Eventually, his company merged with Macy’s. Field is also known for some of his philanthropic donations, providing funding for the Field Museum of Natural History and donating land for the campus of the University of Chicago. Marshall Field: American industrialist who dominated the department store industry. His chain of stores was based in Chicago, Illinois.
Leland Stanford was an industrialist and politician who migrated to California from New York at the time of the Gold Rush. He became a successful merchant and wholesaler, and built a business empire. He spent one two-year term as Governor of California after his election in 1861, and later eight years as a senator from the state. As president of Southern Pacific Railroad and, beginning in 1861, Central Pacific, he had tremendous power in the region and a lasting impact on California. He and his wife founded Stanford University. Leland Stanford: Industrialist and politician who made his fortune in California during the Gold Rush. He went on to be president of the Southern Pacific Railroad and Governor of California.
William Clark started his career as a miner and merchant during the heady days of the gold rush. Eventually, he made his way to Butte, Montana, where the built a mining empire based on copper. Known as the “Copper King,” Clark eventually also became a senator, although it was widely known that he had purchased the honor by bribing Montana legislators. William Clark: Industrialist who dominated the copper mining industry. He was known as the “Copper King.”
They built the industrial America that we know today. In that sense, they can rightly be heralded as captain of industry. They certainly demonstrated impressive talent for business, leadership and investment, and many of them gave away large portions of their fortunes to benefit society. Or, should he be demonized as a robber barons who exploited poor immigrant workers, unjustly enriched themselves, and manipulated government to their advantage? Captain of Industry: Nickname for the industrialists of the Gilded Age. It alludes to the fact that they led great enterprises and advanced the quality of life for many Americans.
Robber Baron: Derogatory nickname for the industrialists of the Gilded Age. It refers to the unfair business practices they engaged in and their mistreatment of workers.
What do you think? Where they robber barons or captains of industry?