Would all Industry Titans of the 19th Century be in Prison Today?
I’ve read several biographies on the industry pioneers and titans from 1850-1920. In almost every case, I’ve concluded that the tactics used would put them in prison today. This is not to condemn or condone their mark on business history. The rules have changed since then, and it changed the game.
The term “Robber Baron” was first used in the 13th century to describe German lords who used any means necessary to protect their legal status and extract money from everyone and anyone. These medieval robber barons robbed merchants, land travelers, stole entire ships, and even kidnapped people for ransom. In addition, they would charge illegal and excessive tolls along the Rhine River for providing nothing in return. This period, years 1250-1273, came to pass from the lack of imperial authority over the land by the Holy Roman Emperor.
The term robber baron would lay dormant for several hundred years. Finally, on February 9, 1859, Henry Raymond, editor of the New York Times, wrote an article using it titled, “Your Money or Your Line” blasting Cornelius Vanderbilt for accepting money from the Pacific Mail Steamship Company in return for not competing against the company. Ironically, the article wasn’t written to chastise Vanderbilt for plundering, but in fact for not acting and breaking up the steamship monopoly.
During this same time, during the mid-19th century, the first of the truly large companies started to form and evolve. In just a decade or two, “robber baron”, would be used in its modern-day use, as T.J. Stiles writes “conjuring up visions of titanic monopolists who crushed competitors, rigged markets, and corrupted government. In their greed and power, legend has it, they held sway over a helpless democracy.”
The mid-19th Century – What a wild time this must have been as several major industries were born and growing: Railroads, Steel, Oil, Banking, Food, Medicine etc. There were no laws. Everything was big, heavy, dirty, manipulative, unsanitary not only in operations but the stock market itself was completely open to insider trading (became illegal in 1932). It was like the wild west of capitalism in all its forms, good and bad.
Cornelius Vanderbilt manipulated markets, corrupted governments, destroyed the environment, facilitated inhuman working conditions for employees, etc. But to be quite honest, so did most of the other industry pioneers from this era. Andrew Carnegie built much of his early wealth capitalizing on insider information, buying into companies where he knew the companies were about to be enriched with large contracts.
These industry titans were ruthless. Even, John Patterson, founder of National Cash Register Company (NCR), whom we highlight in our first book, Intelligent Fanatics Project, used extreme measures to keep his market share.
“NCR had a ‘Competition Department’, led by experienced salesman, to enforce the knockout strategy. Patterson, well versed in incentives, knew that the way to incentivize his Competition Department to get the job done well was not to put them on commission but to pay them a salary. These men were deployed in territories that were seeing competition rise and made sure to use any means to squash the competition. This included going to stores where competitive cash registers were in use and physically inserting objects into them, with the intent on breaking the machine. Patterson also devised a system called the knockout card, which would track each member’s success rate in knocking out competitors.”
These early industry pioneers, whether you want to refer to them as robber barons or not, had free reign for much of the second half of the 19th century. These men grew their companies and industries quickly, often times on the backs of cheap labor in working environments that would be considered inhuman today. The unions of this time period were weak and not as organized as they are today. Carnegie broke the unions several times and every time further reduced wages while increasing the length of the work week. He had full control and monopoly power as did many other titans. Their influence, good and bad, ended with the passage of the Sherman Antitrust Act in 1890. Many of the “monopolies” would continue on unabated for 10-20 more years, but it was really 1890, which marks the end of the robber baron era. This is when the rules were changed.
When the Rules Change, it Changes the Game
On December 21, 1891, the very first basketball game was played in Springfield, Massachusetts. Basketball was invented by Dr. James Naismith, and the game had 13 original rules with two peach baskets as goals. There was only 1 point scored in the first game. Rules were introduced over the next 90 years that would change the game.
Have you heard of Nat Holman? He was a New Yorker and is regarded as the best basketball player of the 1920’s. He was 5’ 11”, 160 pounds, and was a gifted passer. He was dominant and is now in the Basketball Hall of Fame. I wonder how he would do against Lebron James? Of course, the question is ridiculous for a lot of reasons. First the physical gifts, but second Nat and Lebron played different games. When Nat played, there was no three second rule, no 24 second clock, and goal tending was legal. Goodness, Nat was playing when chicken wire was used to mark the edges of the court!
John Jacob Astor (July 17, 1763 – March 29, 1848) was the first multi-millionaire in the United States. He was very close to Thomas Jefferson who helped Astor establish subsidiaries in the United States that would allow him to build up a monopoly in the fur trade. Astor also made a fortune shipping hundreds if not thousands of tons of opium into China and the UK. He poured his profits into NYC real estate. When Astor died in 1848, he was worth $135 billion in today’s dollars. Now, we could sit back and condemn Astor for dealing opium, but opium wasn’t made illegal in the United States until 1914. We could condemn him for dealing in the fur trade. The fur trade in the early 19th century was completely acceptable and necessary. Neither of these pursuits are acceptable today. The rules have changed.
I think most of the industry pioneers from the 19th century would be in prison today, but when they operated there were no rules. This doesn’t mean we can’t learn anything from these titans of yesteryear. They helped change the game of business. John Patterson for example would set a new standard for salesmanship. He was also one of the first manufacturers who pioneered industrial relations. He started his career by treating employees like animals, but then he was one of the first who pivoted and started investing heavily into better working conditions for employees.
Here is an incomplete list of industry pioneers from the 19th century:
We will highlight Gustavus Swift (June 24, 1839 – March 29, 1903), in an upcoming case study to our Members. Gustavus has an incredible story with many valuable lessons. He founded a meat-packing empire in the Midwest during the late nineteenth century.
John Patterson (December 13, 1844 – May 7, 1922), whom we highlight in our first book, Intelligent Fanatics Project. You get this book and our newest book when you become a Member. John Patterson was the founder of the National Cash Register Company and also known as the “Father of Professional Selling”.
John Jacob Aster (July 17, 1763 – March 29, 1848): He is known as the “First multi-millionaire in the United States”. American businessman, merchant, real estate mogul and investor who mainly made his fortune in fur trade and by investing in real estate in or around New York City.
John D. Rockefeller (July 8, 1839 – May 23, 1937): An American oil industry business magnate, industrialist, and philanthropist. He is widely considered the wealthiest American of all time,and the richest person in modern history.
John Pierpont Morgan Sr. (April 17, 1837 – March 31, 1913): An American financier and banker who dominated corporate finance and industrial consolidation in the United States of America in the late 19th and early 20th centuries. In 1892 Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. He also played important roles in the formation of the United States Steel Corporation, International Harvester and AT&T.
Jay Cooke (August 12, 1821 – February 16, 1905): American financier who helped finance the Union war effort during the American Civil War and the postwar development of railroads in the northwestern United States. He is generally acknowledged as the first major investment banker in the United States and creator of the first wire house firm.
Andrew Carnegie (November 25, 1835 – August 11, 1919): Carnegie led the expansion of the American steel industry in the late 19th century and is often identified as one of the richest people (and richest Americans) ever.
Charles Crocker (September 16, 1822 – August 14, 1888): American railroad executive who founded the Central Pacific Railroad, which constructed the westernmost portion of the first transcontinental railroad, and took control with partners of the Southern Pacific Railroad.
James Fisk (April 1, 1835 – January 7, 1872): Known as “Big Jim”, “Diamond Jim”, and “Jubilee Jim” – was an American stockbroker and corporate executive who has been referred to as one of the “robber barons” of the Gilded Age. Though Fisk was admired by the working class of New York and the Erie Railroad, he achieved much ill-fame for his role in Black Friday in 1869, where he and his partner Jay Gould befriended the unsuspecting President Ulysses S. Grant in an attempt to use the President’s good name in a scheme to corner the gold market in New York City. Several years later Fisk was murdered by a disgruntled business associate.
Jay Gould (May 27, 1836 – December 2, 1892): leading American railroad developer and speculator. He has been portrayed as one of the ruthless robber barons of the Gilded Age, whose success at business made him one of the richest men of his era. He was hated and reviled, but some modern historians, such as Walter R. Borneman and Maury Klein, working from primary sources, have attempted to combat his negative portrayal.
Daniel Drew (July 29, 1797 – September 18, 1879): American businessman, steamship and railroad developer, and financier. Summarizing his life, Henry Clews wrote: “Of all the great operators of Wall Street … Daniel Drew furnishes the most remarkable instance of immense and long-continued success, followed by utter failure and hopeless bankruptcy”.
JB Duke (December 23, 1856 – October 10, 1925): was an American tobacco and electric power industrialist best known for the introduction of modern cigarette manufacture and marketing and his involvement with Duke University.
Henry Flagler (January 2, 1830 – May 20, 1913): American industrialist and a founder of Standard Oil, first based in Ohio. He was also a key figure in the development of the Atlantic coast of Florida and founder of what became the Florida East Coast Railway. He is known as the father of St. Augustine, Miami and Palm Beach, Florida.
Henry Clay Frick (December 19, 1849 – December 2, 1919): was an American industrialist, financier, union-buster, and art patron. He founded the H. C. Frick & Company coke manufacturing company, was chairman of the Carnegie Steel Company, and played a major role in the formation of the giant U.S. Steel manufacturing concern.
John Warne Gates (May 18, 1855 – August 9, 2011): also known as “Bet-a-Million” Gates, was an American Gilded Age industrialist, who was a pioneer promoter of barbed wire.
EH Harriman (February 20, 1848 – September 9, 1909): At the time of his death Harriman controlled the Union Pacific, the Southern Pacific, the Saint Joseph and Grand Island, the Illinois Central, the Central of Georgia, the Pacific Mail Steamship Company, and the Wells Fargo Express Company.