the ruthlessness of jay gould -- 1/13/20
Today's selection -- from The Bonanza King by Gregory Crouch. Jay Gould (1836-1892) was one of the most ruthless of the so-called robber barons of America's Gilded Age. He gained his wealth through railroad stock manipulation, but it was his acquisition and control of Western Union, which had a near-monopoly on communications in that era, that caused Americans to tremble and view him as a threat to democracy itself:
"A small, frail man with a thick beard and a prominent forehead long since deserted by his hairline, Jay Gould was, without question, the most hated man in America in the summer of 1883 -- and the most feared. A former business partner, since murdered, once described Gould as 'a heap of clothes and a pair of eyes.' Fairly or not, public disgust at all the distortions, dishonesty, double-dealing, and oppressions in the post-Civil War economy had come to rest in his person. Most Americans imagined Jay Gould as a demonic genius pulling the levers of the economy for his private enrichment -- to the detriment of everybody else. ... Like almost every American newspaper beyond Gould's control, the New York Times took after him with a vengeance. The paper spoke for most Americans when it described Gould as 'an unscrupulous gambler who has never yet played without cogged dice' and 'a money grabber ... universally believed to be without heart, conscience, or shame.' 'His touch is death,' muttered ruined Wall Street operator Daniel Drew. ...
"Despite decades of anti-Semitic slurs heaped on his head, Gould didn't have a drop of Jewish blood. His Puritan ancestors had pioneered the New York wilderness. ... Gould worked as a surveyor in the middle 1850s, then ran a tannery and a leather merchandising operation -- which failed. Between 1860 and 1867, ... Jay Gould served an apprenticeship in New York's stock and commodities trading and financial industries, ingurgitating the changing, dynamic conditions of the industrializing economy. He emerged as one of the first Wall Street operators to comprehend how to use the new tools of modern finance, law, and politics as levers with which to control large public corporations, especially railroads. Gould's masterly -- and most would say devious -- use of equity ownership, bonds, short-term or 'floating' debt, proxy voting control, bankruptcy and receivership, contractual flaws, well-connected friends, government oversight and intervention, and litigation baffled, thwarted, and ruined competitors through the next two decades.
"Whereas other big wheels of business cultivated attention, Gould always sought the shadows, vesting his ambitions in secrecy. Few could fathom Gould's stratagems as he rose to control one railroad, then appeared at the helm of another before most of his rivals realized that he'd disappeared from the first. Through the 1870s, Gould consolidated railroad and newspaper interests into a powerful empire. Camouflaged behind the very public railroad dramas, the enlargement of Gould's telegraphic power went largely unremarked. In 1878, Gould sold a telegraph company called Atlantic & Pacific (A&P) to Western Union, by far the industry's dominant power.
"Western Union handled between 80 and 90 percent of the nation's telegraphic traffic. The company charged high rates -- especially in those large regions of the country where it had no competition at all -- paid large dividends, and treated its customers as if it was doing them a favor. Western Union's stock price soared when the company went unchallenged and sank whenever effective competition materialized.
"By September 1880, Gould had built another telegraph operation -- American Union -- into a system large enough to pain Western Union. Most businessmen thought Gould planned to make another killing selling out to Western Union. He did. As 1880 turned to 1881, Gould sold American Union stock high to Western Union. He also acquired large quantities of Western Union stock under the guise of buying shares to cover the huge short position he'd taken betting on a fall in Western Union stock price caused by effective American Union competition. (And, it went without saying, making superb profits in both transactions.) Gould shocked the nation in February 1881 when he emerged with what he'd wanted all along -- control of Western Union and its near-monopoly of the domestic telegraph business of the United States.
"Gould then held sway over an empire built on three interconnected pillars -- railroads, newspapers, and the telegraph. The thought of Jay Gould controlling the nation's telegraphic communications filled rival businessmen with terror. A stock jobber able to tap every wire in America seemed to hold an impregnable position. Competitors grew certain that Gould read their private dispatches, employed code-breakers to unravel their ciphers, and garbled or delayed their communications. Speculators panicked, convinced Gould delayed information flows so he could read news before anyone else. Newspapers lived in particular terror of Gould's clout -- their business depended on stories cabled home by far-flung correspondents.
"By delaying, misrouting, or losing their traffic, Gould could crush them entirely, and they had no option but to pay Western Union's exorbitant rates. Lily-livered newspapers flatly refused to publish anything inimical to Gould's interests. Broadsheets with more editorial courage spoke out in favor of telegraph reform and suddenly stopped receiving timely communications. By the summer of 1883, only a few independent telegraph companies survived, all of them hamstrung by the small size of their networks. Western Union controlled everything else, and atop Western Union lurked the dark specter of Jay Gould. Many Americans came to see Jay Gould's far-reaching influence in politics, the courts, communications, and the press as a threat to democracy itself."