Fall of the House of Vanderbilt
August 21, 2014
We are living, we think, in a second Gilded Age, in which the sons and daughters of the obscenely rich frantically search for fame and airtime. Parents are struggling to instill values (see "No Silver Spoon")
And a Russian oligarch thinks nothing about spending $300 million for a yacht with faucets costing $40,000.
But all of this is chump change, compared to the real big spenders—the Vanderbilts of the 19th Century.
Fortune’s Children: The Fall of the House of Vanderbilt, by Arthur T. Vanderbilt II, lays out this sad and sordid history. If you think you had bad parents, just read this book!
Cornelius Vanderbilt (1794-1877) is famous for being the stingiest, most foul-mouthed monopolist of the Robber Baron era. (Okay, under duress he did fund Vanderbilt University, my alma mater, but that was for the pocket change of $1 million.)
Nicknamed “the Commodore” for his fleet of steamships that made his first fortune, Vanderbilt got ahead not only by extreme hard work and risk taking, he made much of his wealth from stifling competition—either by forcing out weaker companies through predatory pricing or by buying out stronger companies.
His second fortune was made in railroads, using the same tactics. In several instances Vanderbilt feigned starting a competing line against another and was paid handsomely to withdraw from that competition. Monopoly rents were the name of the game, then and now.
Vanderbilt, for all his business acumen, knew or cared little for being a father, despite having 13 children. The horror of growing up in that rich dysfunctional family went on for generations. [Click to continue reading.]
Fortune’s Children also reports in detail on the lavish spending that will make any working person weep—considering the millions spent on lavish balls while people languished in the deep depression of the 1890s. (If you are about to argue for trickle-down economics, consider the weakness of this argument; that does not mean redistribution is necessarily better.)
What the book brings out is that most of this lavish spending was done simply to try to impress others. It provided little lasting satisfaction, as told by William Vanderbilt, the heir of Cornelius, who doubled the inheritance and became the richest man in the world:
“[My neighbor] isn’t worth a hundredth part as much as I am, but he has more of the real pleasures of life than I have. His house is as comfortable as mine, even if it didn’t cost so much; his team is about as good as mine; his opera box is next to mine, and he will probably outlive me. And he can trust his friends” (p. 82, emphasis added).
One can’t help remember Adam Smith’s story of the “Poor Man’s Son” in The Theory of Moral Sentiments, who struggled his whole life to amass riches only to discover that in the process he had ruined his life: he had no real peace of mind.
Neither did most of the Vanderbilts, who over the next two generations completely squandered the fortune, building block-long palaces on 5th Avenue in New York and rural fortresses like the Biltmore in North Carolina, not to mention mansions in Newport and yachts that were large enough to be mistaken for military vessels.
All of this makes for great reading—with the delicious heady tinge of schadenfreude that they got what was coming to them.
As we enter a new Gilded Age today, has anything changed? I would say partly. It is now not quite so respectable to be rich and not at least pretend to care about others. Yet people live behind gated walls and may have little real sympathetic feeling for those of lower economic status in their communities.
That is the paradoxical destruction caused by obscene wealth: like obscene poverty, it can lead to isolation and loneliness.
[Photo credit: Marble House, Newport, RI.]
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