Gouldian moments

In a great book “Stock Market Operators”, the author, George Redmond, writes about Jay Gould. The whole book makes for fascinating reading.

“The everlasting monument of one of the most forceful, courageous, and daring stock market operators is the so-called “Gould System” of railroads. Jay Gould, at the time of his death, passed on as a heritage, a well organized system of railroads, won in a series of “battles of titans” on the floor of the New York Stock Exchange. Perhaps some of the methods used by Gould and his contemporaries can never be repeated in Stock Exchange history, because of ever-changing conditions, both in Stock Exchange dealings and in publicity, but no matter what those methods may have been, the fact that Gould left a well organized system of railroads and a fortune of $75,000,000 to his heirs, all of which was created by amazing fertility of mind and force of character, must command the respect of the world.

Gould started with nothing save the good blood back of him. His father was a farmer, but a descendant of Abraham Gould, a lieutenant-colonel in the Continental army, so that we find the name of Gould in the foundations of American history. Jay Gould was born at Stratton’s Falls, Delaware County, N.Y. in 1836. There is no question, from the remarks of Gould himself in later life, but that his early years were those of the farm drudgery that usually befell the lot of a farmer’s boy. But we find that master mind, which was later to become one of the big forces of the financial world, reaching out beyond his small horizon, and fifteen, at he was working in a tinsmith’s shop; at sixteen he was a partner in the business.

It is evident that, during this time, an inherent love of mathematics began to creep to the surface, finding its outlet in a taste for civil engineering and surveying. He devoured all the books available on the subject and, having secured a good groundwork, started out vigorously on the practical end of the profession. Gould’s first place in this business was as an assistant to a surveyor in Ulster County for “$20 a month and found.” There is no doubt that Gould had application, and, while a surveyor, wrote histories of Ulster, Sullivan, and Greene Counties. The sale of his books and maps brought him in about $5,000. With this stake, he joined Zadock Pratt in establishing a tannery in Pennsylvania. In 1859, Gould bought out Pratt’s interest and turned over the tannery at a substantial profit.

In 1862, he married the daughter of Daniel G. Miller and it is at this point, through his father-in-law, that Gould’s interest in railroads and railroad affairs becomes a direct one. Daniel G. Miller was largely interested in the Rensselaer & Saratoga Railroad, which connected Troy and Saratoga. The road was then practically bankrupt, when Gould stepped in and put it on a basis where he netted three quarters of a million dollars, his first profits

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from railroad operations.

In his rehabilitation of the Rensselaer & Saratoga and later the Rutland & Washington, running from Troy to Rutland, Vermont, he displayed unusual acumen, not only in developing the earning power of the roads he took hold of, but in making advantageous consolidations and alliances, the seed of the idea that was later to blossom into the “Gould System” of railroads, for Gould unquestionably was a creator. He took hold of the things that other men had failed with and made them useful to the community.

In 1867, we find Gould established as a railroad operator and his success in his early ventures leading him into broader fields. He became attracted to Erie and then began that battle of the giants, which will never be forgotten in financial history – the war between Gould and Vanderbilt.

Gould had already laid the foundations of his fortune. It was here that Gould allied himself with Daniel Drew, a moneylender, and “Jim” Fisk. Vanderbilt then owned the New York Central and saw that if Erie got into the hands of any single interest that could rebuild it, it would prove a dangerous competitor to him. There is no doubt that Vanderbilt and Gould saw the possibilities of Erie very clearly, but Vanderbilt saw them first. Erie was then dominated by Daniel Drew and in 1866, Vanderbilt had bought enough stock to secure control. Drew, Gould, and James Fisk, Jr., who had risen from a peddler in Vermont to a Wall Street broker, determined to wrest control of Erie away from Vanderbilt and in the battle between these giants, Erie went through a period of spectacular price movements, that made it one of the greatest trading issues ever listed on the New York Stock Exchange.

The battle was fought for three years and there were drawn into it, not only some of the largest financial interests in the country, but banks, judges, and legislatures. The titanic struggle of Gould and his associates with Vanderbilt is one of the most fascinating pages in American financial history. It was fought chiefly on the floor of the New York Stock Exchange and made Gould the greatest market operator of his time.

If Gould were a giant mentally, he was physically the opposite. He was about five feet, six inches high, with a slender figure and seemed to be marked by an excessive timidity. His complexion was swarthy and trimmed black whiskers concealed a substantial portion of his face. His eyes, however, were dark and peculiarly piercing, evidencing the forceful character that lay back of them, while the high forehead suggested the giant mind. His voice was low and insinuating. He dressed usually in black and a heavy gold watch chain adorned his vest. Eye glasses swung from a silk cord around his neck and one noted the little touch of personal vanity in the diamond

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or ruby set cuff studs.

Gould, in his struggle for Erie, had made money, and was still ambitious. He and his associates in 1869 attempted a corner in gold and although the corner was broken, Gould is estimated to have made $11,000,000 on the attempt. The breaking of the gold corner precipitated a panic in Wall Street affairs, known as “Black Friday,” on September 24, 1869, when the prices of securities crashed and at which time, it is stated that Gould stepped in to pick up the bargains. It will be remembered that Gould was then an adept at scenting bargains in railroads and that at heart, as shown from his earlier experiences in the railroads of New York State, he was a constructionist. He had, it is estimated, at the time of the “Black Friday” panic, between $25,000,000 and $30,000,000. With this he went into Union Pacific, to be later disposed of to Harriman in 1890 at a substantial profit. He also acquired Missouri Pacific and with his interest in Wabash, Kansas Pacific, St Louis, Iron Mountain & Southern, St Louis& Southwestern, and Texas Pacific is to be found the beginning of famous the “Gould System.”

It looked for a time as though the Gould interests were going to gobble up the entire railroad system of the United States and his acquisition of the western railroads was not to go unchallenged. In 1887, the Pacific Railway Commission held a thorough investigation in New York, Boston, and San Francisco. The New York Times of April 27, 1887, commenting on Mr Gould’s position in the railroad world, said that it seemed most improbable that Jay Gould had been a railroad magnate of the first class for little more than half a decade. It pointed out that in 1879 he owned only the nucleus of the then big system he controlled and that, through purchase and construction, Gould then owned 6,000 miles of rail. One gets a substantial picture of Gould from the article:

“He has traveled many times over every mile of his railroads. There is an immensity of interest in such a trip when made for the first time, or even the second or third, but it has been made so often by Mr Gould that he has thoroughly absorbed all the pleasure to be obtained from it, except that which smacks of dollars and power. His trips occupy about three weeks from the time his special car, the “Convoy,” leaves St Louis until it returns to that hot and dusty city of pageants and conventions.

When word is flashed to St Louis that Me Gould is on his way, every official on the system packs his head full of information, and there is unwonted activity from Omaha to Galveston and from Fort Worth to San Antonio. All of the system’s executive force was selected either by Mr Gould or by trusted officials in whom he had implicit faith, and the heads of divisions who work for Jay Gould could not work harder for anybody else, although in some instances their bank accounts do not show it.

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He is a strong advocate of method. The day’s work is laid out in the morning and almost before the train starts in the morning he has settled how many stops can be made during the day and where the night can be spent. He dines and sleeps on board his car from the start to the finish of a three weeks’ trip. At night the “Convoy” is run to the quietest part of the yard, as the owner objects to more noise than he can avoid at night, though he can apparently stand as much as anyone else in daylight. His car is always a curiosity along the line, and people come from far and near to look at it as it stands in the evening in a secluded spot, secure in its loneliness. In some parts of the country through which his roads run, he is quite as much of a curiosity in the eyes of the country folk as a circus, and were he to stand on the platform after the manner of James G. Blaine, would attract quite as big a crowd as that gentle man. He is never apparently anxious to achieve notoriety in that way, and is quite as modest in his demeanor while on one of his tours as he is in his office or his Fifth Avenue mansion. In the latter, as a few newspaper reporters know, he is more unassuming and far more polite than a majority of his thousand dollar employees.

As a further insight into Mr Gould’s personality, thePhiladelphia Press once told a story of his first yachting experience, in which Gould was forced to put on a pair of overalls in order to protect broadcloth trousers from paint which had become baked and chalky. The overalls had been obtained by a friend of his by the name of Cruger from a storekeeper in Peekskill. When the party returned to Peekskill, Gould, without a word to Cruger, resold the overalls to the storekeeper. Cruger determined to play a practical joke on Gould and knowing that he had to keep a business engagement, involving quite a sum of money, staged a grounding of the boat within 50 feet of the Ossining railroad station, where Mr Could was to catch his train.”

An eye-witness tells the rest of the story, showing the tremendous amount of determination in the composure of the saturnine little man:

“Already the train was in sight, two miles away, and whatever was to be done had to be done quickly. As I have said, there was plenty of grit in the embryo railroad king, and quick as a wink he was out of his sable clothes and standing before us, clad only in his aggressively scarlet undergarments. Holding his precious broadcloth suit above his head, he stepped into the water, which, shallow as it was, reached to the armpits of the little gentleman. Then he started for the shore, his short, thin legs working back and forth in a most comical fashion as he strove to quicken his pace. The station platform was crowded with people, and very soon the strange figure approaching them was descried. A peal of laughter from 500 throats rolled over the water to us, the ladies hiding their blushes behind parasols and fans. The men shouted with laughter. Finally the wader reached

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the base on the stone wall, and for a moment covered with confusion – and but little else – stood upon the rock, one scarlet leg uplifted, looking for all the world like a flamingo on the shore of a Florida bayou, while the air was split with shrieks of laughter, in which we now unreservedly joined. Then came the climax of the joke, which nearly paralyzed the unfortunate victim.

“Haul on your sheets, boys, and up with the board!” was Cruger’s order. As the yacht gathered headway and swept by within ten feet of the astonished Mr Gould, we laughingly bade him goodbye, advising a warm mustard bath when he got home.

Then his quick mind took in the full force of the practical joke we had worked upon him and his dark face was a study for a painter. But the train had already reached the station, taken on its passengers and the wheels were beginning to turn again for its run to the city. As Gould scrambled up the wall, his glossy black suit still pressed affectionately to his bosom, the “All aboard!” had sounded and the cars were moving. Every window was filled with laughing faces as he raced over the sand and stones and was dragged by two brakemen on the rear platform, panting and dripping. The last glimpse we caught of him was as the train entered the prison tunnel. Then, supported on either side by the railroad men, he was making frantic plunges in his efforts to thrust his streaming legs into his trousers as the platform reeled and rocked beneath him.”

Mr Gould created wealth rather than gained money by speculation. It was his purpose to turn failure to success, to make dollars grow rather than to attempt to get the dollar of the other fellow. He had faith in the future as he had faith in himself and following his success in the railroads, turned his attention to the telegraph company. Under Gould, the American Telegraph Co. laid an Atlantic cable and broke down the monopoly, forcing the amal- gamation with the Western Union Telegraph Co. with Gould as the chief stockholder.

He also acquired control of the Elevated Railway in New York City, rebuilding as formerly, run down properties into well paying organizations.

Gould died in 1892, leaving some $75,000,000 to six children. Single handed, Jay Gould carved his way to fame as a constructionist and as a market operator of exceptional ability. Like the broken steel that goes into the melting pot to regain its lost temper, so Jay Gould took the broken railroads and remade them into trans- portation systems that form big links in the carrier systems of the United States today.

There will probably never arise anyone who will dispute his tide as “the greatest operator in railroad securities

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in the financial history of the United States.”

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