[Illustration:
_Jay Gould_ ]
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CHAPTER LVIII.
JAY GOULD.
HIS BIRTH AND EARLY EDUCATION.—CLERK IN A COUNTRY STORE.—HE INVENTS A MOUSE TRAP.—BECOMES A CIVIL ENGINEER AND SURVEYS DELAWARE COUNTY.—WRITES A BOOK AND SELLS IT.—GETS A PARTNERSHIP IN A PENNSYLVANIA TANNERY AND SOON BUYS HIS PARTNER OUT.—HE COMES TO NEW YORK TO SELL HIS LEATHER, FALLS IN LOVE WITH A LEATHER MERCHANT’S DAUGHTER AND MARRIES HER.—SETTLES IN THE METROPOLIS AND BEGINS TO DEAL IN RAILROADS.—BUYS A BANKRUPT ROAD FROM HIS FATHER-IN-LAW, REORGANIZES IT AND SELLS IT AT A CONSIDERABLE PROFIT.—HENCEFORTH HE MAKES HIS MONEY DEALING IN RAILROADS.—HIS METHOD OF BUYING, REORGANIZING AND SELLING OUT AT A LARGE PROFIT.—HOW HE MANAGED ERIE IN CONNECTION WITH FISK AND DREW.—HIS OPERATIONS ON BLACK FRIDAY.—CHECKMATED BY COMMODORE VANDERBILT AND OBLIGED TO SETTLE.—HE MAKES MILLIONS OUT OF WABASH AND KANSAS & TEXAS.—HIS VENTURE IN UNION PACIFIC.—HIS CONSTRUCTION COMPANIES.—ORGANIZATION OF AMERICAN UNION TELEGRAPH, AND HIS METHOD OF ABSORBING AND GETTING CONTROL OF WESTERN UNION.—THE STRIKE OF THE TELEGRAPHERS AND HIS GREAT ENCOUNTER WITH THE KNIGHTS OF LABOR AND TRADES UNIONISTS.—GOULD’S FIRST YACHTING EXPEDITION.—AN EXCEEDINGLY HUMOROUS STORY OF HIS EARLY EXPERIENCE ON THE WATER.—HIS STATUS AS A FACTOR IN RAILROAD MANAGEMENT.—HIS ACQUISITION OF BALTIMORE & OHIO TELEGRAPH, &C.
If Fenimore Cooper, Sir Walter Scott, Charles Dickens or Dumas, in the height of the popularity of any of these great writers of fiction, had evolved from his inner consciousness a Jay Gould as the hero of a novel, its readers would have found serious fault with the author for attempting to transcend the rational probability allowed to the latitude of fiction. Few novel readers, in fact, would have patiently submitted to such a strain on their credulity prior to the era in the financial development of this country which produced some of the leading characters which Wall Street has brought to the front, as stern realities of every day life, since my advent in the great arena of speculation.
Among these Jay Gould is conspicuous, and of all the self-made men of Wall Street he had probably the most difficulty in making the first thousand dollars of the amazing pile which he now controls.
Jay Gould was born at Stratton Falls, Delaware county, New York, about the year 1836. He was the son of John B. Gould, a farmer, who kept a grocery store. At the age of sixteen young Gould became a clerk in a variety store belonging to Squire Burnham, about two miles from the Falls. Here, in his leisure hours, he assiduously improved the little learning he had received at the village school, by applying himself to the study of book-keeping in the evenings.
It was when he was at this store, according to the most reliable accounts, that he manifested his natural aptitude for making sharp and profitable bargains. His employer, the Squire, had his eye on a piece of land in Albany, which he expected to obtain cheap and so make a profit. He whispered his intention to some friend in the store and his young assistant overheard him. When he went to put his design of purchasing the land in execution he found that young Mr. Gould had been there before him, and had secured the title.
About this time there was a firm which had undertaken to survey the county and make office maps of it, and young Gould was employed to assist them. Having mastered the elementary principles of geometry, and being naturally quick and correct at figures, he soon became a fair expert in common land surveying, and made himself exceedingly useful to his employers. But the idea of not only being his own boss but an employer of other people’s brains and muscles was one of his ruling propensities, and he used every effort to attain this object. In a short time he bought out the firm, wrote a history of the county to accompany the maps and peddled his book among the residents.
This natural inclination to buy out every concern with which he has been connected has been the ruling passion of his life, and still tenaciously adheres to him. Prior to his negotiations with the firm of surveyors, he had invented a mouse trap in his intervals of leisure in the store, and with the proceeds of this and the bargain in the land, out of which he had outwitted his employer, he was enabled to make himself master of the situation with the surveyors. Shortly after this Gould became interested in a Pennsylvania tannery with Zadoc Pratt, who was the capitalist. Through the advice of Israel Corse, the Commission Merchant of the firm, Col. Pratt proposed to dissolve the partnership. Gould induced Charles M. Leupp & Co. to purchase Pratt’s interest for $150,000. The business did not meet the expectations of Leupp, who in a fit of despondency committed suicide. After his death Gould failed to retain possession of the property, which was sold to H. D. H. Snyder, thus terminating Mr. Gould’s career as a Pennsylvania tanner.
On his visits to New York Mr. Gould was attracted by the greater advantages which the Empire City afforded for extending his business, and came here to reside. He had ingratiated himself in the favorable esteem of one of the grocery merchants with whom he had done business. The merchant took him to his house to board and Mr. Gould fell in love with his handsome daughter. It was a mutual affair of the heart, like that of his son George and Miss Edith Kingdon, and a speedy marriage was the result. The results of the happy union seem to have been all that could be desired, and the domestic felicity of Mr. and Mrs. Gould, so far as the public have been able to ascertain, has never suffered the slightest jar or interruption.
The father-in-law owned shares in a railroad which was in a bad financial condition. He employed his new son-in-law to see what he could do to extricate him from a position in which he was likely to become embarrassed, and he wanted to sell his shares. Mr. Gould examined the road, (with the locality of which he had been well acquainted in his boyhood,) saw the favorable possibilities of its future, under good management, and instead of selling his father-in-law’s shares to a stranger, he took them at their market value himself, purchased more, finally obtained control of the entire property, and sold it to a rival company at a large profit.
This, I believe, was Mr. Gould’s first transaction in railroad matters, and from that day to this his great speculative forte has been buying and selling railroads. It was in that kind of business, and not in the stock market, as is popularly supposed, that he made the great bulk of his enormous fortune.
On his entrance to Wall Street he began business alone. Afterwards he formed a partnership with Henry N. Smith and — Martin, the firm taking the name of Smith, Gould & Martin. Martin is now in a lunatic asylum, and Henry N. Smith, who was the chief cause of the failure of Wm. Heath & Co. for a million dollars, is now a poor pensioner on the bounty of his wife. But Mr. Gould still towers aloft, in the full enjoyment and the continued progress of his speculative prosperity, without being dismayed by any competitor, however powerful, and overcoming all obstacles, no matter how gigantic.
As I have noticed pretty fully some of Mr. Gould’s greatest speculative transactions, mostly behind the scenes in the chapter on Black Friday and also in the account of the “Commodore’s Corners,” it will be unnecessary to repeat them here.
There was one clever transaction in the Black Friday affair that should be put on record to the credit of the able management of that great deal. One prominent individual connected therewith was personally responsible for $4,500,000. This was a pretty heavy load at that time even for him to carry, but it did not weigh very heavily upon him for any appreciable length of time. He adroitly managed to shift it over on to the shoulders of that broad-backed, soulless creature called the Erie Corporation, making it responsible by simply signing himself “T. R.,” instead of “J.G.,” the large letters representing the ordinary contraction “Tr.” for Treasurer. By this simple and ingenious device this shrewd gentleman got rid of the burthensome legacy on the negative side, bequeathed to him by the “Black Friday corner.”
There is a story told, with several variations, in regard to a sensational interview between Mr. Gould and Commodore Vanderbilt. The scene is laid in the parlor of the Commodore’s house. It was about the time that the latter was making desperate efforts to get a corner in Erie, and at that particular juncture when, having been defeated in his purpose by the astute policy of the able triumvirate of Erie—Gould, Fisk and Drew—he had applied to the courts as a last resort to get even with them.
They had used the Erie paper mill to the best advantage, in turning out new securities of Erie to supply the Vanderbilt brokers, who vainly imagined that they were getting a corner in the inexhaustible stock. Mr. Vanderbilt was wild when he discovered the ruse and had no remedy but law against the perpetrators of this costly prank. These adroit financiers usually placed the law at defiance, or used it to their own advantage, but this time they were so badly caught in their own net that they had to fly from the State and take refuge at Taylor’s Hotel in Jersey City.
It seems that during their temporary exile beyond the State Gould sought a private interview one night with the Commodore, in the hope of bringing about conciliatory measures.
The Commodore conversed freely for some time, but in the midst of his conversation he seemed to be suddenly seized with a fainting spell, and rolled from his seat unto the carpet, where he lay motionless and apparently breathless.
Mr. Gould’s first impulse was to go to the door and summon aid, but he found it locked and no key in it. This increased his alarm and he became greatly agitated. He shook the prostrate form of the Commodore, but the latter was limp and motionless. Once there was a heavy sigh and a half suffocated breathing, as if it were the last act of respiration. Immediately afterward the Commodore was still and remained in this condition for nearly half an hour. Doubtless this was one of the most anxious half hours that ever Mr. Gould has experienced.
If I were permitted to indulge in the latitude of the ordinary story teller, I might here draw a harassing picture of Mr. Gould’s internal emotions, gloomy prospects in a criminal court and dark forebodings. His prolific brain would naturally be racked to find a plausible explanation in the event of the Commodore’s death, which had occurred while they were the sole occupants of the room; and at that time, in the eyes of the public, they were bitter enemies.
I can imagine that, in the height of his anxiety, he would have been ready to make very easy terms with his great rival, on condition of being relieved from his perilous position. It would have been a great opportunity, if such had been possible, for a third party to have come in as a physician, pronouncing it a case of heart disease. No doubt Mr. Gould would have been willing to pay an enormous fee to be relieved of such an oppressive suspicion.
The object of the Commodore’s feint was evidently to try the courage and soften the heart of Mr. Gould, who never seemed to suspect that it was a mere hoax. His presence of mind, however, was equal to the occasion, as he bore the ordeal with fortitude until the practical joker was pleased to assume his normal condition and usual vivacity. If Mr. Gould had been a man of common excitability he might have acted very foolishly under these trying circumstances, and this doubtless would have pleased his tormentor intensely.
The _modus operandi_ of Mr. Gould, in the purchase and sale of railroads, has been to buy up two or more bad roads, put them together, give the united roads a new name, call it a good, prosperous line, with immense prospects in the immediate future, get a great number of people to believe all this, then make large issues of bonds and sell them at a good price, for the purpose of further improving and enhancing the value of the property. After these preliminaries had been gone through, if profitable purchasers came along, they could have the road at a price that would amply compensate Mr. Gould for all his labor and acute management. If these purchasers should be unable to run the road profitably and were obliged to go into liquidation after a year or two, as frequently happens, then Mr. Gould or his agents would very likely be found on hand at the sale to take back the road at a greatly reduced price. Mr. Gould would then get a fresh opportunity of showing the superiority of his management. He would be able to demonstrate that the road had left his possession in excellent and progressive condition, but through loose management had been run down. He would then set about the work of reorganization again and go through the same role substantially, with slight variations, as before, realizing a handsome profit on each successive reorganization.
It would take too much time, and swell this volume far beyond the space which I have laid out for it, to go minutely into the history of all Mr. Gould’s great enterprises. In fact, it would take a large volume in itself to do justice to the various schemes which have been put under way by him directly and indirectly and carried to a successful issue during his busy life of a quarter of a century in Wall Street. This seems a long time for a man who is still so young, although he is a grandfather, and enjoying the use of his mental faculties more vigorously than ever.
Owing to my own busy life I have only time to sketch the most salient points of Mr. Gould’s prosperous career. Some future historian of Wall Street is destined to make a big “spread” upon him, as the newspaper reporter would say. He will have ample material if he only begins his work soon; but whoever undertakes the job should not forget the maxim of that great veteran of literature, old Dr. Samuel Johnson, about material for biography having a general tendency to become scarce, and, in some instances, eventually to vanish. While the reliable material for Mr. Gould’s biography may be subject to the common fate of growing less, as time advances, there is no danger of utter oblivion in his case. He has impressed his footprints on the sands of time too firmly for that.
I don’t for a moment mean to insinuate the reason for this, which is given by Shakespeare as applicable to similar cases, although some ill-natured and envious people might use the well-known quotation in this connection:
“The evil that men do lives after them, The good is often interred with their bones.”
I have no hesitation in saying that Mr. Gould will leave a large amount of good after him, and, indeed, it seems now as if the Shakespearian adage was to be reversed in his case. The evil that he may have done is likely to be forgotten. He bids fair to outlive most of it, if he only goes on to the end as he has been doing for the past few years. He is now showing a decided disposition to become more of a builder up than a wrecker of values.
Through his great executive ability in railroad management and construction he has been instrumental in making many blades of grass grow where none had grown before, causing the desert to blossom like the rose, assisting thousands who had formerly been poor and almost destitute, pent up either in European hovels or New York tenement houses, to find happy homes in the West and South. He has been a great factor in improving the value of the land, and thus, while he was enriching himself, adding materially to the wealth and prestige of the nation and thereby elevating it in the appreciation of the world at large.
The correspondent of the London _Times_ recently sent over here to write up a description of the country, dwells emphatically on this characteristic of Mr. Gould and other great millionaires and railroad magnates, who contribute so largely to the general prosperity of which they seem to be the indispensable mediums.
It was as the managing power in the Erie Railroad that Mr. Gould laid the broad foundation of his fortune. His speculative connections with Erie are more fully dealt with in the lives of Daniel Drew and Commodore Vanderbilt. The money and influence which he gained, in connection with the Erie corporation, enabled him to extend his operations in the acquisition of railroad property until, through Union Pacific and its various connections, Wabash and a number of Southwestern roads, it seemed probable, at one time, that he was in a fair way of grasping the entire control of the trans-continental business in railroad matters. And this was prior to the time when he obtained his present hold on telegraph facilities.
Some of the able schemes in which Mr. Gould has had credit for playing an important part, and sometimes a role that was considered rather reprehensible, were managed, so far as the outside business was concerned, chiefly by one or more of his wicked partners. In one of the most noteworthy of those projects, namely, the attempt to capture the Albany & Susquehanna Railroad, Mr. Gould seldom or never appeared in person before the public. His partner, James Fisk, Jr., was cast in that role and played it with great ability. With the essential aid of those two shining lights of the New York bar, David Dudley Field and Thomas G. Shearman, the Prince of Erie, (as Jim Fisk was called,) came pretty near snatching possession of 142 miles of a very important railroad, with the control of only 6,500 out of 30,000 shares of the stock, and 3,000 shares of these 6,500 had been illegally obtained, as was eventually decreed by the court.
Mr. Fisk, though the silent member of the Erie firm, had also control of Judge Barnard, of the Supreme Court of the City and County of New York.
The Albany & Susquehanna road would have been a valuable prize for Erie. It runs from the eastern extremity of the New York Central at Albany to a junction with Erie at Binghamton. At that time Erie aspired to be a successful competitor with Central for New England business, and had determined to monopolize the coal trade between that section and Pennsylvania. This connecting link of 142 miles was therefore regarded as a very valuable acquisition by both the large roads. Hence it was worth a desperate effort, and Jim Fisk showed that he had a true appreciation of its value, for he organized a company of New York roughs, placed himself at their head, and being armed with bludgeons and pistols and an injunction from Judge Barnard, obtained from him in New York city—while he was really in Poughkeepsie at the time—went to Albany and took forcible possession of the offices of the railroad. He had the President, Secretary, counsel and receiver of the road arrested and put under $25,000 bonds each. Mr. Fisk went through the farce of an election of Erie candidates for the offices which he had forcibly made vacant in the Albany & Susquehanna, bringing his roughs up to vote as stockholders.
The President of the road, Mr. Joseph H. Ramsey, fought stoutly for his rights and ousted the intruders. He had spent eighteen years building the road, and was naturally attached to it. He also found a Judge to aid him. Justice E. Darwin Smith, of Rochester, eventually rendered a decision in favor of the Ramsey party, with the opinion that “Mr. Fisk’s attempt to carry the election by his contingent of ‘toughs’ was a gross perversion and abuse of the right to vote by proxy, tending to convert corporation meetings into places of disorder, lawlessness and riot.” Costs were decreed to the Ramsey directors, and a reference made to ex-Judge Samuel L. Selden, of the Court of Appeals, who fixed the allowance to be paid by the Fisk board to the Ramsey board at $92,000. It is worthy of note that the Fisk board consisted of the unlucky number of thirteen.
The Erie party appealed, but long before the appeal could be heard the Albany & Susquehanna was leased in perpetuity to the Delaware & Hudson Canal Company, against whom the Erie party was not strong enough to go to law. Thus ended the struggle for this great connecting link.
It is worthy of remark that this was one of the few cases in which, where Mr. Gould made up his mind to obtain the control, possession or ownership of property, he did not succeed.
The methods of acquiring the control and the possession of other people’s property have been raised to the dignity of a fine art by Mr. Gould. This art has been prosecuted, too, through “legitimate” means. He has had the law at his back every time, and been supported in his marvellous acquisitions by the highest Court authority.
The manner in which he managed to get Western Union into his hands affords a very striking illustration of his methods and the great secret of his success.
When first laying his schemes to obtain the control of the telegraph property he got up a construction company to build a telegraph line. This was a company of exceedingly modest pretensions. It had a capital of only $5,000. It built the lines of the Western Union Telegraph Company, with which Mr. Gould paralleled most of the important lines of Western Union, and cut the rates until the older and larger corporation found that its profits were being reduced towards the vanishing point. Then it was glad to make terms with its competitor; a union of interests was the result, and Mr. Gould obtained control of the united concern.
“Impossible,” said Norvin Green, in high dudgeon, when the insidious intentions of Mr. Gould were broached to him a few months before the settlement took place. “It would bankrupt Gould and all his connections to parallel our lines, and to talk of harmony between him and us is the wildest kind of speculation.” The genial Doctor was then master of the situation in Western Union, or imagined himself so at that time, and regarded with contempt the efforts of Gould and his colleagues to bring the company to terms. In a few months afterward the Doctor tamely submitted to play second fiddle to the little man whom he had formerly despised.
The arrangement in reference to the cable companies followed the capture of Western Union. The struggle is still pending for the entire monopoly in the cable business, and it now seems only a question of time when the Bennett-Mackay party will have to succumb, leaving Gould in the supreme control of the news of the world. If this should happen he would become an immense power for either good or evil both in speculation and politics. In fact it would be too great a monopoly to be entrusted to the will of one man. Although it might be judiciously managed, as the cup of his ambition would then be surely full, yet the experiment would be extremely hazardous.
The controlling interest in the Elevated Railroads of this city, recently achieved by Mr. Gould through his business and speculative relations with Mr. Cyrus W. Field, are of too recent date to require any special notice or comment here. Suffice it to say, that I fear my friend Mr. Field has not come out at the big end of the horn, although everything has no doubt been in conformity with the most approved business principles and in strict adherence to the most honorable methods of dealing in railroad securities. It is significant, however, that Mr. Field has preserved a prudent reticence on the subject.
Mr. Gould, from my point of view, has been a public benefactor in the bold and successful stand which he has maintained against strikers. Though Western Union lost over half a million dollars by the strike of the telegraphers, which greatly alarmed the stockholders, yet Mr. Gould held out until the strikers were obliged to give in. He pursued the same policy, with a similar result, in the case of the Knights of Labor. During the strike of the latter I explained my views on the subject in a circular to my customers as follows:
“The Knights of Labor have undertaken to test, upon a large scale, the application of compulsion as a means of enforcing their now enlarged demands. This has necessitated a crisis of a very serious kind. The point to be determined has been, whether capital or labor shall in future determine the terms upon which the invested resources of the nation are to be employed. To the employer, it is a question whether his individual rights as to the control of his property shall be so far overborne, as to not only deprive him of his freedom, but also expose him to interferences seriously impairing the value of his capital. To the employes, it is a question whether, by the force of coercion, they can wrest to their own profit powers and control which, in every civilized community, are secured as the most sacred and inalienable rights of the employer. This issue is so absolutely revolutionary of the normal relations between capital and labor, that it has naturally produced a partial paralysis of business, especially among industries whose operations involve contracts extending into the future. There has been at no time any serious apprehension that such an utterly anarchial movement could succeed, so long as American citizens have a clear perception of their rights and their true interests; but it has been distinctly perceived that this war could not fail to create a divided if not a hostile feeling between the two great classes of society; that it must hold in check, not only a large extent of ordinary business operations but also the undertaking of those new enterprises which contribute to our national progress, and that the commercial markets must be subjected to serious embarrassments. * * * * * From the nature of the case, however, this labor disease must soon end one way or another; and there is not much difficulty in foreseeing what its termination will be. The demands of the Knights and their sympathizers, whether openly expressed or temporarily concealed, are so utterly revolutionary of the inalienable rights of the citizen, and so completely subversive of social order, that the whole community has come to a firm conclusion that these pretensions must be resisted to the last extremity of endurance and authority.”
The manner in which Mr. Gould acquired his great control in some of the Western and Southwestern railroads was pretty fully developed in the recent investigation held in this city, Boston and San Francisco by the Pacific Railway Commissioners. Mr. Gould’s testimony, as reported in the daily papers of May, 1887, probably contains almost as correct and succinct an account of his pooling arrangements and schemes in connection with certain railroads and his methods of making money out of them as can be obtained anywhere. His testimony, on the whole, was exceedingly affable, comprehensive and precisely to the point, and has not been contradicted in any material points by any of the succeeding witnesses that have yet been examined on this widely interesting subject. Its substance was as follows:
[_From the Herald, May 18, 1887._]
A dapper little man in plain pepper and salt (the pepper predominating) business suit entered the Pacific Railway Commissioners’ offices yesterday morning and sat down quietly with his not over shiny silk hat on his knee.
The natty gentleman, unobtrusive possessor of the small dark and brilliant eyes, was the man of millions.
He had lots of information for the Commission, and he gave them more of the inside facts of the early consolidation deals of the Union Pacific than they hoped to get.
It had been expected that Mr. Gould would prove a wily witness, hard to corral and liable to shy over the fence at the slightest provocation, but at the very outset his manner was a complete surprise. He told the Commission that he was suffering from neuralgia, and said that he could not speak very loud in consequence. There were times during his examination that his tone was faint, and it was only loud two or three times, when he became very much interested in some explanation. At all times, however, it was well modulated, and now and again had a musical cadence about it that was very pleasing. He first became interested in Pacific roads in 1873. He bought Union Pacific stock in the market, but it went down to fourteen cents on the dollar. He held about 100,000 shares. He had a consultation with Sidney Dillon, and finally made a proposition to fund the floating debt in bonds, of which he took a million dollars’ worth at above their par value. In 1874 he became a director and served on the executive committee. He continued in the direction during 1874, 1875 and 1876, and went over the road twice a year. He had no interest in the Fisk suit, but knew it was brought. He had no contingent interest whatever in the suit.