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American financier and railroad builder Jay Gould (1836-1892) began as an unprincipled stock manipulator and became one of the most acute businessmen in America's age of industrial capitalism. He operated in an era when speculative capital could play a constructive role.

Jay Gould, christened Jayson, was born in Roxbury, N.Y., on May 27, 1836, a farmer's son. He obtained some education in a local academy and also learned surveying. Between the ages of 18 and 21 he helped prepare maps of New York's southern counties. By 21, with a stake of $5,000, he and a partner opened a leather tannery in northern Pennsylvania.

Gould then moved to New York City, where he set up as a leather merchant in 1860. Before long, however, he found his forte in Wall Street, ostensibly as a stockbroker but really as a speculator. In that period of unregulated finance Gould quickly mastered the intricacies of corporate management and of security trading and manipulation. He traded in the securities of his own companies, manipulating banks he was associated with to finance his speculations and corrupting legislators and judges. From 1867 to 1872 he was a power and a terror in Wall Street.

Erie War

In 1867 Gould was already on the board of directors of the Erie Railroad, which was in financial difficulties. He set out to control it, push its expansion westward as far as Chicago, and defeat Cornelius Vanderbilt's efforts to acquire this potential competitor. Gould was the behind-the-scenes strategist (using Daniel Drew and James Fisk as his fronts) in the "Erie war" with Vanderbilt in 1868. To check Vanderbilt, Gould issued 100,000 shares of new Erie stock by illegally converting debentures and then went to Albany, where, with the Erie's money, he bribed legislators to legalize the conversion. Vanderbilt discovered he had met his match and settled with Gould, receiving $1 million as a sweetener and leaving the Erie to Gould.

Gould launched the Erie on an expansion campaign that vastly increased its capital debt. Meanwhile, he traded in Erie stock, sold it short, and made a killing before the road went bankrupt in 1875.

Buying Gold to Sell Wheat

As part of the Erie's move westward, Gould obtained control of the Wabash, a wheat-carrying railroad. To improve the fortunes of the Wabash, Gould hit on the scheme of pushing up the price of gold, thus weakening the dollar, and thereby encouraging foreign merchants to buy more wheat.

Using Fisk's brokerage house as a cover, in the summer of 1869 Gould began buying gold secretly in the free market - hoping the U.S. Treasury would not sell - and ran the price up from 135 to 160, where it was on the "Black Friday" of Sept. 24, 1869. By that time Gould had created a short interest in gold of $200 million with only a fraction of that amount available to the short sellers. Then the U.S. Treasury, realizing it had been duped by Gould, sold gold, and the price dropped to 140 and then to 133. A panic hit Wall Street, depressing all stocks. Gould had speculated not only in gold but in stocks and lost a fortune. However, in 1871-1872 he made another.

Well-heeled again, Gould moved his operations westward into the Wabash, the Texas and Pacific, the Missouri Pacific, and the Union Pacific railroads. His operations in the last two exemplify his methods. He bought their securities when they were low during the depression of 1873, obtaining control of both; he also acquired securities of independent lines and feeder lines he wished to add the two trunk systems. Then he forced up the prices of the two amplified major companies. When the stock market recovered during 1879-1884, he sold, making a large fortune out of capital gains.

Manipulator Turned Businessman

Gould was pushed out of the Wabash and the Union Pacific in the early 1880s. He then turned his complete attention to the Missouri Pacific (of which he had gained control in 1879) and built it into a great power. He acquired feeder lines and independent companies; he used stock market profits and capital gains for financing; and he waged a relentless war on competitors, breaking up traffic pools and forcing rates down sharply. His biographer Julius Grodinsky wrote that Gould was "transformed from a trader into a business leader of national proportions." From 1879 to 1882 Gould added 2,500 miles to the road, making a capital addition of about $50 million. And between 1885 and 1889 he reentered the Wabash and the Texas and Pacific railroads, reorganized them, and tied them into his Missouri Pacific system.

At the same time Gould strengthened the other two elements in the triad that constituted his estate. One was the Manhattan Elevated Railroad of New York, which he created as a monopoly of Manhattan's rapid transit system. The second was the Western Union Telegraph Company. Gould had bought the unimportant American Union Telegraph in 1879, consolidated it with the Western Union in 1881, and 7 years later added the influential telegraph network of the Baltimore and Ohio Railroad. By the end of the 1880s Western Union, now the parent company, had no real competitor in the two important businesses of railroad telegraphy and the transmission of Associated Press stories to member newspapers. It was one of the most profitable companies in the country. Gould died in New York on Dec. 2, 1892, leaving the management of his properties to his son George Jay Gould.

Further Reading

An excellent biography and railroad history of the period is Julius Grodinsky, Jay Gould: His Business Career, 1867-1892 (1957). A lively study of the family is Edwin P. Hoyt, The Goulds: A Social History (1969). The story of the "Erie war" is in Charles F. Adams, Jr., and Henry Adams, Chapters of Erie (1871). For a broad understanding of the era that made the emergence of industrial capitalists like Gould possible, see Louis M. Hacker, The World of Andrew Carnegie, 1865-1901 (1968). Gustavus Meyers, History of the Great American Fortunes (1907), portrays Gould as the "robber baron" par excellence.

For more information on Jay Gould, visit Britannica.com.

(1836-1892), railroad financier. Christened Jason, Jay Gould was born on a farm near Roxbury, New York. He taught himself the rudiments of surveying, and by the age of twenty-one, the undersized, quick-witted youth had prepared several county maps, written a local history, and saved five thousand dollars. Between 1856 and 1860 Gould operated a tannery but gave it up to join a Wall Street brokerage house. Following the panic of 1857 he had made modest and profitable investments in several short railroads.

In 1867 Daniel Drew, treasurer and longtime director of the Erie Railroad, added Gould and James Fisk to the Erie board of directors. When Cornelius Vanderbilt, of the New York Central, sought to buy control of the Erie a spectacular battle ensued. Gould, Fisk, and Drew promptly issued thousands of shares of new, watered stock. When the angry Vanderbilt obtained an arrest warrant for the three, they ferried company headquarters to Jersey City, and Gould rushed to Albany where a pliable New York legislature authorized the stock issue. Eventually peace was made with Vanderbilt, but that gentleman was reported to have muttered that his trouble with the Erie "has learned me it never pays to kick a skunk." Later in the fall of 1869 Gould and Fisk conspired with the brother-in-law of President Ulysses S. Grant to corner the gold market, causing the panic of "Black Friday," September 24, 1869. Gould continued to loot the Erie until his departure in 1872. His role in the Erie War and the attempted gold corner gave him a reputation as the prime financial predator of the age.

Possessing a fortune, Gould turned to western railroads. In the twenty years after 1872 he was a director of seventeen major lines and the president of five. He purchased much Union Pacific stock and controlled that road until 1878. At first Gould improved the management of the Union Pacific but later blackmailed the company by threatening to have the Gould-controlled Kansas Pacific build a nuisance line to Utah. During the 1880s Gould controlled about half the mileage southwest of St. Louis and Kansas City and tried unsuccessfully to expand his western holdings into a transcontinental rail empire to the Atlantic Coast. He also owned the New York World for a time and held major investments in New York City's elevated railways and several large telegraph companies, including Western Union. In his last years Gould suffered from tuberculosis and died of that disease at the age of fifty-seven, leaving a fortune of $77 million to his six children.

Gould was a man of many faults and virtues. He was cold and unscrupulous but courteous and unassuming, and in his private life, devoted to his family, flowers, and books. He could not be trusted but nonetheless helped build more efficient regional rail systems. He was a wrecker of values but a railway leader who helped achieve major rate reductions. Gould remains the prototype robber baron of the late nineteenth century, although his defects probably have been exaggerated because he was never comfortable with the press.

Bibliography:

Robert L. Frey, ed., Railroads in the Nineteenth Century (1988); Maury Klein, The Life and Legend of Jay Gould (1988).

Author:

John F. Stover

See also Railroads; Robber Barons.

1836–92, American speculator, b. Delaware co., N.Y. A country-store clerk and surveyor's assistant, he rose to control half the railroad mileage in the Southwest, New York City's elevated railroads, and the Western Union Telegraph Company. With savings of $5,000 at 21 he became a speculator, particularly in small railroads. After some years he became a director of the Erie RR. Aided by James Fisk and Daniel Drew, he defeated Cornelius Vanderbilt for control of this road and manipulated its stocks in his own interest and that of his group, including “Boss” Tweed. The Gould-Fisk scheme to corner gold in 1869 caused the Black Friday panic. Public protest forced the Gould group out of the Erie, ending with Gould's expulsion in 1872. He then bought into the Union Pacific and other western roads. He gained control of four lines that made up the Gould system. For years his name was a symbol of autocratic business practice, and he was widely disliked. After his death his estate and interests were managed by his son, George Jay Gould.

Bibliography

See biographies by M. Klein (1986) and E. J. Renahan, Jr. (2005); C. F. and H. Adams, Chapters of Erie (1871); R. O'Connor, Gould's Millions (1962); E. P. Hoyt, Jr., Goulds (1969).

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