Jay Gould

• Born: May 27, 1836
• Birthplace: Roxbury, New York
• Died: December 2, 1892
• Place of death: New York, New York

American railroad magnate and stock speculator

Gould rose from a modest background to become a major railroad owner and stock market speculator. His sharp business practices were widely criticized and contributed significantly to the growth of the “robber baron” image of American businessmen.

Sources of wealth: Railroads; investments

Bequeathal of wealth: Relatives

Early Life

Jay Gould, who was christened Jason Gould by his parents, was born on a small farm in upstate New York. His parents also ran a small country store. Gould considered his youth an impoverished one and recalled it in his later years as bleak. He attended a local school, and while working as a clerk in his father’s store, he taught himself mathematics and the rudiments of surveying. He arranged to attend Hobart Academy by agreeing to live with a nearby blacksmith in return for doing the bookkeeping for the blacksmith’s business. Between the ages of eighteen and twenty-one, he conducted surveys of several regions in New York, Ohio, and Michigan. By the time he was twenty-one, he had saved about $5,000 and sought to establish a business of his own.

First Ventures

Gould’s first major business undertaking was a tannery he established near Lehigh, Pennsylvania, in 1856. His partner in this business was Zadock Pratt, a New York farmer and businessman with experience in the tanning industry. Pratt apparently supplied most of the capital, while Gould was to manage the tannery. When Pratt became dissatisfied with Gould’s performance in the business, Gould bought out Pratt’s interest in partnership with two New York City leather merchants, Charles M. Leupp and David Lee. These new partners, however, soon fell out over Gould’s plans for expansion and speculation. Leupp committed suicide in 1859, and Gould and Lee fought in court for several years over control of the firm before Gould finally sold out his interest in 1868. In 1859, Gould entered into a partnership with three other men to deal in hides and leather in New York City.

After this firm broke up, Gould bought $50,000 worth of bonds of the Rutland and Washington Railroad, a New England line that had never prospered, from D. M. Wilson, one of his former partners. Convinced the line was a losing proposition, Wilson sold his bonds to Gould for ten cents on the dollar. Gould eventually took control of the railroad. He later merged Rutland and Washington with a New York line, the Rensselaer and Saratoga, and eventually sold his interest in the line for a considerable profit. Gould said that when he got into the railroad business, he “left everything else.” Although this remark was not entirely truthful, owning and operating railroads and speculating in railroad securities would be Gould’s major occupation for the remainder of his life.

Mature Wealth

In the 1860’s, Gould became a stock trader in New York City, devoting special attention to railroad securities. His worth at this time was estimated to be around $80,000. Still, at this point he was a relatively minor figure in the New York business world. His rise to prominence began when he was elected to the board of directors of the Erie Railroad in the fall of 1867. James Fisk was elected to the board at the same time; Daniel Drew was the treasurer and controller of the Erie. Together, Gould, Fisk, and Drew desired to take complete control of the Erie and to block attempts by Cornelius Vanderbilt to gain control and merge Erie with his New York Central railroad system. Gould and his fellow conspirators issued a huge amount of new Erie stock, without any legal authorization to do so. They then made numerous bribes to New York politicians and judges to get retroactive approval for these stock offerings. With his own holdings in the Erie devalued because of these new stock issues, Vanderbilt eventually gave up his efforts to take control of the railroad and sold his holdings. After Gould had obtained virtually total control of the Erie, he expanded the company and took on excessive debt. This forced the company into bankruptcy in 1875, but by that point, Gould had made much money from speculating in the line’s stock.

In 1869, Gould took control of the Wabash Railroad, a midwestern “granger” line that hauled considerable quantities of farm commodities. Gould believed that if he could push up the price of gold, this would weaken the U.S. dollar; favorable exchange rates would lead foreign merchants to buy more American grain, thus increasing the amount of freight on the Wabash. Therefore, he attempted to corner the market on gold in the United States in the summer and fall of 1869. When the U.S. Treasury realized what Gould was doing, it began selling gold from the government’s holdings, driving the price downward. A panic hit Wall Street on September 24, 1869, or “Black Friday.” Gould had speculated in both gold and Wall Street stocks, and he lost a great deal of money in this panic.

Due to a downturn in business during the Panic of 1873, about half of the railroads in the United States went into bankruptcy over the next few years. Gould and Vanderbilt, working on their own and often at odds with one another, bought controlling interests in many of these lines. Gould bought much stock in the Missouri Pacific and Union Pacific Railroads when stock prices were low, and a few years later when prices rebounded he sold out and reaped great profits. It was estimated that he made $10 million from his sale of Union Pacific stock alone. By the mid-1870’s, Gould’s fortune was thought to be in the range of $30 to $50 million.

At one point in his career, Gould controlled about half of the total railroad mileage in the Southwest, with his control of the Missouri Pacific, the Texas and Pacific, the St. Louis Southwestern Railway, and a short line known as the International and Great Northern Railroad. In 1881, he bought partial control of the elevated street railway system in New York City, and by 1888 he controlled virtually all of it. While railroads were his major business focus, Gould also owned the New York World newspaper from 1879 until 1883. In 1879, he bought American Union Telegraph Company, merging it into Western Union Telegraph Company in 1881; by the end of the 1880’s, Western Union dominated the American telegraph industry.

Gould made relatively small gifts to various charities throughout his lifetime. In his later years, his daughter Helen oversaw the dispersal of such gifts. Gould never sought to impress or placate the public through large philanthropic gestures, and in fact he was often criticized by opponents in the press for gifts that were perceived as too small for a man of his wealth, or purely hypocritical given his reputation for ruthlessness in business.

After a long battle with tuberculosis which gradually weakened him, Gould died in 1892. His estate was estimated at more than $70 million. His wife had predeceased him, so his fortune was left to his children, each to receive an equal one-sixth share after certain special bequests were made.

Legacy

Gould rose from modest beginnings to become a major figure in the railroad industry and in stock trading in the United States. However, he was widely scorned as a sharp operator who manipulated the stock prices of the companies he controlled with no concern for the long-term health of the companies or the dividends paid to investors. When he died, the obituaries in many major American newspapers were openly critical. The New York Herald opined that Gould’s wealth “had been purchased at too high a price.”

In an era known for the excesses of the wealthy leaders of big business, Gould became one of the most hated of the “robber barons.” However, business historian Maury Klein has argued that Gould should be considered one of the two or three most important figures in the development of the American economy in the late nineteenth century.

Bibliography

Adams, Charles Francis, Jr., and Henry Adams. Chapters of Erie, and Other Essays. New York: H. Holt, 1886. A densely argued book, and certainly not without its biases, but considered a classic in its exposure of the machinations involved in the “war” over control of the Erie Railroad.

Geisst, Charles R. Monopolies in America: Empire Builders and Their Enemies from Jay Gould to Bill Gates. New York: Oxford University Press, 2000. Valuable for placing Gould in the context of other American businessmen who have been perceived as monopolists. Geisst focuses primarily on the public’s reaction to such figures.

Grodinsky, Julius. Jay Gould: His Business Career, 1867-1892. Philadelphia: University of Pennsylvania Press, 1957. Focuses on Gould’s career from his connection with the Erie Railroad until his death. Compares Gould with other major figures involved in the railroad industry.

Josephson, Matthew. The Robber Barons: The Great American Capitalists, 1861-1901. New York: Harcourt Brace Jovanovich, 1934. Reprint. San Diego: Harcourt Brace Jovanovich, 1961. Josephson was one of the first authors to popularize the term “robber baron,” and he considered Gould to be one of the best examples of this type of businessman.

Klein, Maury. The Life and Legend of Jay Gould. Baltimore: Johns Hopkins University Press, 1986. The standard biography of Gould, well written, detailed, fully annotated. Klein is a major historian of American business, particularly the American railroad industry.