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Gould, Jay - Overview, Personal Life, Career Details, Chronology: Jay Gould, Social and Economic Impact

railroad business erie york

(1836-1892)
Entreprenuer

Overview

Jay Gould worked his way from poverty to great wealth in nineteenth-century America by exploiting the worst aspects of laissez-faire capitalism, a doctrine that maintains the economy should be allowed to operate with minimal government interference. He came to prominence at a time when the U.S. business community was largely unformed and virtually unregulated. Bold, cunning, and often unethical in his dealings, Gould developed a reputation as one of the most notorious of the socalled “robber barons,” a derogatory term used to describe the businessmen of his era who were prepared to do just about anything in the quest for personal wealth and power.

Personal Life

A native of Roxbury, New York, Jay Gould was born May 27, 1836, on a small farm operated by his parents, John Burr Gould and Mary (More) Gould. Life for the family was difficult, and from an early age Gould resisted the idea of following his father into a profession that he found neither lucrative nor attractive. Thus, at the age of 13, he began working at a series of menial jobs, including stints as a clerk and as a blacksmith.

Despite his lack of formal education, Gould achieved a measure of success rather quickly by drawing upon his tremendous personal energy and burning desire to make something of himself. By the age of 18, he had become a land surveyor in New York, Ohio, and Michigan, earning a great deal of money in the process and spending little. Within three years, he had saved $5000, a rather large sum for such a young man in mid-nineteenth-century America. Gould then invested in a leather tannery in Pennsylvania, thus launching his career as a speculator.

Gould eventually grew tired of the leather business and left Pennsylvania for New York City. There he met Helen Day Miller, the daughter of a local businessman. The couple married on January 22, 1863, when Gould was 27. Despite his growing reputation for ruthlessness in business affairs, Gould was deeply devoted to his wife and the four children they eventually had together. In fact, throughout the rest of his life he rarely took time off from work except to be with his family and occasionally indulge in his hobbies of reading and gardening.

Gould was only in his forties when his health began to deteriorate. He died of tuberculosis at the age of 57 on December 2, 1892, leaving behind $77 million (which represented the bulk of his estate) for his eldest son, George, to manage. Within 25 years, however, George Gould had lost all the money in bad business deals.

Career Details

Gould’s first foray into the world of business came in 1858, when he was a mere 22 years old. His method of handling the Pennsylvania leather tannery he invested in with his partner, Zadock Pratt, foreshadowed many of his future strategies. Moving quickly to seize control of the firm, he brought in outside investors who bought out Pratt. Gould then began using the company’s money to speculate on other business ventures (an illegal practice), which immediately earned him the distrust of his new partners. When one of them committed suicide in 1859, chaos erupted and Gould used the opportunity to take over the tannery, touching off a battle for control that eventually ended up in court. While the case dragged on, Gould used the delay to strip the company of many of its assets.

In 1860 Gould abruptly abandoned the tannery business (by that time, his money was largely invested elsewhere) and began speculating heavily on small railroad companies. He established himself as a major player in 1867 by becoming a director of the Erie Railroad, one of the largest on the East coast. In doing so, he assumed the role of insider rather than just an investor. This made it easier to gain access to information that allowed him to control more and more of the Erie Railroad.

At one point, in an effort to stop fellow speculator Cornelius Vanderbilt from taking over the company, Gould illegally issued 100,000 new shares of stock. This diluted Vanderbilt’s stake of ownership in the railroad and made it far more difficult for him to gain a controlling interest. Gould and two of his partners earned millions of dollars as a result of the scheme, but their dubious methods landed them in trouble with the law and forced them to flee to New Jersey with the company records.

Gould then headed to Albany, New York, where he bribed state legislators to pass a law that could be applied retroactively to make what he had done to thwart Vanderbilt’s attempted takeover completely legal. After reaching a financial settlement with Vanderbilt, Gould found himself back at the helm of the Erie Railroad, which by that time was burdened with heavy debts.

Once again, Gould resorted to underhanded means to enhance his own position. He bribed politicians to gain favorable treatment and spread false rumors to drive up the price of existing railroad stocks so that he could sell his holdings and post a quick profit. He also persisted in fraudulently issuing new shares of stock. Finally, the board of directors of the Erie Railroad grew weary of Gould’s manipulations and ousted him in 1872. While he left the company in much worse shape that it had been when he first appeared on the scene, he had seen his personal fortune increase substantially.

Gould then turned his attention to the rapidly expanding rail systems serving the American West. In 1874, he became a director of the Union Pacific Railroad and soon took control of their operations. By issuing false claims about the company’s prospects, Gould drove up the value of its stock and earned an enormous profit when he sold his shares in 1879. He then used part of the money to buy up a number of other smaller railroad companies operating in the region. As of 1881, his holdings included more rail mileage than anyone else in the United States.

By that time, Gould had already begun to expand into other areas. In 1879, for example, he bought the New York World newspaper, which he did not hesitate to use to advance his own agenda. In its pages, he cast doubt first on the financial well-being of the Western Union Telegraph Company and then on the Manhattan Elevated Rail Company. When their stock prices tumbled, Gould acted quickly to acquire both companies.

Though he experienced various ups and downs in business throughout the 1880s, including a brush with bankruptcy around the middle of the decade, Gould always managed to rebound and make up for any losses he had sustained. By 1890, he had rebuilt his railroad empire and presided over a number of other firms.

Chronology: Jay Gould

1836: Born.

1858: Invested in leather tannery in northern Pennsylvania.

1860: Began speculating on small railroad companies.

1867: Became director of Erie Railroad.

1872: Ousted by Erie Railroad board of directors.

1874: Became a director of Union Pacific Railroad.

1879: Purchased New York World newspaper.

1881: Controlled more rail mileage than anyone else in the United States.

1892: Died.

Social and Economic Impact

The opportunistic tactics and sometimes criminal abuses of Gould and his fellow speculators during the late nineteenth century eventually prompted the United States government to become involved in overseeing and regulating big business. Until then, challenges to such illegal behaviors were rare. The rules of business were mostly self-imposed, and court action was agonizingly slow. In short, it took the blatantly outrageous activities of someone like Gould to underscore the need for government intervention to prevent any one person or groups of people from dominating a particular business and wielding excessive economic power.

Gould, Stephen Jay - MNEMONICS [next] [back] Gould, Alice Bache (1868–1953) - History of Columbus

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over 2 years ago

Truly an inspiring man! fascinated by his will power. Check out my article on Jay Gould http://www.szamon.com/2015/05/12/5-things-you-can-learn-from-jay-goulds-life-from-rags-to-riches/