We all, especially those who love history and/or have lived in New York at one point, know Vanderbilt. The name is not just on one of the finest universities in the world (Vanderbilt University in Tennessee), but has completely revolutionized the railroad industry in the United States. One of the greatest legacies that Cornelius Vanderbilt in New York City is the Grand Central Terminal – it still amazes me that he had the vision for an amazing structure and transportation depot during his time during the 19th century.
We all know that he is the first tycoon that amassed an astonishing fortune – but I think what is less known is how he got to be known as the railroad tycoon. And the book shows an amazing and prolific life that he carried – a man of high integrity (most of the times) that transformed not just transportation, but revolutionized corporate governance and shareholder activism, but also one who constantly transformed himself.
Reading about his life and business endeavors was extremely motivating for me – to take a long-term view, take the high road, and be decisive.
Below are key things that are not generally well known.
Vanderbilt was originally steamboat tycoon who completely reallocated his capital to railroad during the last decade of his life.
Maybe some people already know, but this was a surprise for me because I just thought Vanderbilt to be a railroad tycoon. So I expected that he built his career in railroad. It was really surprising when I learned that Vanderbilt reallocated his capital completely away from steamboat to railroad during the last 10 years of his life – this major shift began when he was over 60 years old – the age that most people passed away during his time.
During the time when capital flow was much slower, Vanderbilt was able to achieve this and his great success in railroad made him truly a tycoon and somehow put shadow on his self-made rise-up as a steamboat tycoon – another great success, but much smaller than his success in railroad.
Vanderbilt pioneered modern corporate governance and was a highly effective shareholder activist
Vanderbilt reformed what a corporation is – it was initially a state charter to pool resource for a limited time for large projects. However, he and his effective lobbying allowed corporations to take life on its own – the ownership and day-to-day management were often separated through delegation (revolutionary idea at the time, but Vanderbilt had to rely on his managers given how vast his railroad network was). Stock prices were generally thought to be based on historical cost of construction of its underlying assets – rather than what the future earnings would look like. It is pretty unreal to think that how people thought of valuation was so fundamentally different in the 19th century than now.
He was also an effective shareholder activist and turn-around executive. He often did his own diligence or saw strategic value of failing railroad and used his capital to buy shares in the market to take control and improve the business by renegotiating contracts, reducing corporate wastes, and making operation more lenient – it definitely sounds like the playbook of current activists funds – except Vanderbilt did it all with his own money and his long time associates also played along with him. Vanderbilt and his associates built a reputation for value creation that many others often followed them.
Vanderbilt sought to take the high road – and the reputation he built was critical to his success
Building reputation was critical later on his career – he had a following and he used that following to his advantage in some of the stock market operations (“manipulations”) that he also engaged in (those were legal at the time due to lax or lack of regulations). He could have that following because he had a reputation as someone who can execute on his plans and make many individual investors a lot of money by owning stock of the companies Vanderbilt controlled. It also helped that Vanderbilt donated one of his largest ships as a warship during Civil War – cementing his relationship with President Lincoln and US government.
Vanderbilt jumped into railroad industry very late in his life (after he was older than 60 years old)
It is mesmerizing to think that a rich man was entering into a new industry (although tangentially related) at an age when other people often passed away. He was also moving in a big way – plowing millions of dollars into railroad while pulling out of steamboat.
I think most of the time, we see tycoons who were in the right spot and the right time – they are often already engaged in an industry and then the industry takes off. Vanderbilt was different – he grew up in steamboat, and then shifted to railroad in a massive way – this is capital allocation at its finest.
Only other entrepreneurs that I can think of that have been able to successfully execute on this is probably Elon Musk and Jack Dorsey during our times.
Anyways..
I strongly recommend this book – it is a bit long, but I think every bit was worth it. Hope you get inspired by Vanderbilt story and happy 2021!
Remember – it is NEVER too late!!
Amazon link below:
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