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 www.capitalideasonline.com Page - 1 Gouldian moments 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 www.capitalideasonline.com Page - 2 Gouldian moments 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. www.capitalideasonline.com Page - 3 Gouldian moments 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.