Cornelius Vanderbilt: The First Tycoon [Outliers]

**Shane Parrish** (0:02)
Gentlemen, you have undertaken to cheat me. I won't sue for the laws too slow. I'll ruin you. Yours truly, Cornelius Vanderbilt. And that quote is the embodiment of the man we're going to talk about today, Cornelius Vanderbilt.
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He began as a teenage ferry captain battling storms in New York Harbor for pennies. From these humble beginnings, he clawed his way to become America's most feared and admired magnet. Cornelius Vanderbilt didn't just dominate one industry, he conquered three, ferries, steamships and railroads. Rivals called him ruthless, passengers called him unstoppable. But Vanderbilt didn't just build businesses, he rewrote the rules, laying the foundation for the modern corporation. This is his story. If you think today's tycoons are tough, wait till you meet The Commodore. Most of the research for this episode came from reading The First Tycoon by TJ. Stiles and Tycoon's War by Stephen Dando-Collins. Remember to stick around at the end of the show for my reflections and afterthoughts as well as the lessons you can learn from Vanderbilt. If you want to read my highlights from Tycoon's War or The First Tycoon, you can sign up below fs.blog/membership. Just look in the description for this podcast, you can find a link. It's time to listen and learn. This podcast is for entertainment and informational purposes only.
It's January 4, 1877 A winter wind cuts through New York City where a crowd gathers outside the Church of Strangers. Inside, elites await the reading of Cornelius Vanderbilt's will, rumored to be worth $100 million dollars, one twentieth of all US currency. His legendary willpower and ruthless business tactics had forced rivals to pay him to go away. Now, the entire city wants to see how the man who once dominated ferries, steamboats and railroads chose to dispense his vast fortune. His early life was filled with fistfights, high-speed steamboat duels, engine explosions and numerous near-death experiences. His latter days with daredevil harness races and high-stakes financial confrontations that even extended to the international scene. By the time of his death, virtually every American had paid tribute to his treasury. They had passed through his Grand Central Depot on 42nd Street, crossed the bridges over the sunken tracks along 4th Avenue, or traveled one of the countless ferries, steamboats or railroads he had controlled during his 60-year career. Vanderbilt was the precursor to a class of men who would wield power within the state so great that it would rival the state itself. Rockefeller, Carnegie, Mellon, Gould, Morgan, all were just beginning their careers when Vanderbilt stood at his zenith. They studied him and they followed his example, though few would match his impact. His admirers called him the finest example of the common man rising through hard work and ability. His critics, on the other hand, called him ruthless, an unelected king who never pretended to rule for his people. But Vanderbilt's significance was more complex, more contradictory than either of his admirers or critics fully grasped. His life spanned from the days of George Washington to those of John D. Rockefeller, from a rural, agricultural, essentially colonial society in which the term businessman was unknown to a corporate industrial economy that would define America's future. Vanderbilt didn't just experience that changing time period and watch as the American economy rose around him. He was possibly the largest force at the time responsible for the building of it. He was the trailblazer in the corporate world and reimagined what a corporation could do. Now, to truly understand the Commodore and that world, we must go back to the beginning, to Staten Island, May 27th, 1794, when Phoebe Vanderbilt gave birth to her fourth child, naming him Cornelius, after his father, though they called the boy Cornel.
The Vanderbilts descended from Jean-Arsene Vanderbilt, who had come to the New World to farm generations earlier. On Stanton Island, most of the original Dutch settlers led an inward-looking, rural life. Americans of British descent often viewed them with distaste. As one traveler observed in the 1790s, nothing can exceed the state of indolence and ignorance in which these Dutchmen are described to live. Many of them are supposed to live and die without having been five miles from their own houses. But there was one distinctive feature of the rural Dutch that would profoundly shape young Cornelius Vanderbilt. They farmed for profit. While many English-speaking farmers in the region devoted much of their efforts to subsidence, Dutch farming was market-oriented and derived its distinct characteristics from Dutch tradition. The rural Dutch shared the commercial consciousness of their urban brethren. They clattered their wagons into Albany, New Brunswick, and New York to sell their produce with a savvy that became their custom. When a cobbler refused to return a man's shoes until he made full payment, the frustrated customer wrote in his diary, He is too Dutch by half. Young Cornelius was born into this tradition of commerce. His parents created a household where far earlier than in remote communities, the marketplace strode right through the door every day. While farmers living up the Hudson may make just one delivery of crops to riverside merchants in an entire year at harvest time, the Vanderbilt house pulsed constantly with buying and selling, borrowing and lending, earnings and debt. Cornelius' father had built or bought a proroguer, a specialized two-masted vessel deployed by the Dutch for trading, and began ferrying neighbours and their produce along the bay in Manhattan. Phoebe, Cornelius' mother, was equally entrepreneurial. She was not only the family oracle, one 19th century writer declared, she was the oracle of the neighbourhood, whose advice was sought in all sorts of dilemmas and whose judgment had weight. Court records show she lent money at commercial rates of interest and once even foreclosed on a widow's mortgage. The widow being her own daughter. Unlike most farmers, they actually lived within sight of New York City, where from their Stanton Island home, they could literally see the mass of ships in the harbour bringing goods and ideas from around the world. The United States that Cornelius was born into was a very young nation. Keep in mind that when Vanderbilt was born, George Washington was still early in his second term of the presidency. Only five cities held more than 10,000 residents at this time, and the percentage of the nation's four million citizens who lived in towns of at least 2,500 people languished in the single digits and would linger there for decades to come. Most Americans lived scattered along the Atlantic Coast, with only the bravest pioneers venturing west to the Appalachians. By his early teens, Vanderbilt was totally drawn to the water, leaving the fields behind. Accounts on this vary, but by the age of 16, he was running his own ferry that was either owned by his parents or one that he purchased with a loan from them, promising to help pay the family's $1,000 mortgage. His plan to do so? Operate the boat as a ferry between Stanton Island and the growing Manhattan. The teenager launched himself into this venture with intensity, charging a shilling each way, 12.5 cents that accumulated with glacial slowness in a vessel that seated just 20 passengers. Vanderbilt discovered in those daily handfuls of silver a hunger for money that would shape his life from then on. What distinguished his small ferry service from the competition was predictability. While other boatmen waited until their crafts filled to their capacity, the teenage entrepreneur introduced something uncommon to the New York harbor, a schedule. His ferry departed at fixed times regardless of the passenger count, a self-imposed discipline that transformed water transit from casual to reliable service, earning him loyalty and repeat business. This was an extension of how he lived his life, with one contemporary at the time saying his life was regulated by self-imposed rules, with a fixedness of purpose as invariable as the sun in its circuit. That reliability for service extended to the winter months as well. When ice choked the harbor, he was often the only ferryman willing to make the crossing. He studied the tides, winds and currents relentlessly and mastered the natural forces that other boatmen merely accommodated. In simple terms, he worked harder. During the blinding storms, when sleet and snow crashed across the bay, pearl street merchants would seek out the gangly team, trusting him alone to deliver urgent messages to vessels anchored in the harbor, earning Vanderbilt additional income. Not only was he reliable, in these months he was often the only option for passengers. And although there was no recorded earnings from this time, presumably he could charge a premium for his services. In fair weather, it was a different story and he competed aggressively on price, undercutting established operators as a rule. If other ferrymen charged 18 cents, Vanderbilt would charge 12 If they dropped to 10, he'd go to 8 This approach, price competition to the point of driving out rivals, would become his signature strategy throughout his career, regardless of scale or industry. It's worth pausing here for a second to talk about this. Isidro Sharpe, the founder of the Four Seasons, said something that has long struck with me. He said, excellence is the capacity to take pain. One of the things that sets Vanderbilt and other outliers apart is their willingness to tolerate pain. Most people have no capacity to endure pain, financial or psychological. And if you can, you can gain a real advantage. It hurt Vanderbilt to cut prices, but it hurt his competitors more and he knew it. It hurt Vanderbilt to run his service when he couldn't see or the weather was bad, but he knew it hurt his competitors so much they wouldn't even operate. It's hard to compete with someone who can tolerate more pain than you.