#258: Jay Gould (Dark Genius of Wall Street)

0:00 He was raised on a farm and milked cows as a boy. He neither drank nor smoked. He was affable To every employee. From the head of the department.

0:09 To the humblest. He enjoyed his wealth quietly. He rarely lost his temper. Self control was one of his most profound attributes. He was a quiet man.

0:20 And when he spoke his words were both few and carefully chosen. He rarely boasted. But once speaking for himself and his fellow capitalists, he said We have made this country rich. We have developed the country.

0:32 We have created the earning power by developing the system. When he died. The press said That he was the world's richest man. It also called him.

0:42 The world's most hated man. The man just described Sounds like John D. Rockefeller. It is not. It's Jay Gold.

0:50 Rockefeller and Gold had much in common. The two were nearly the same age. Their careers span the same period. Gold died at the end of eighteen ninety two. As Rockefeller was preparing to retire from business.

1:03 Their fortunes that year We're about the same. Around a hundred million dollars. When an acquaintance asked Rockefeller Who was the greatest businessman he had known?

1:12 His answer came. Without hesitation. J. Gold, he said. He echoed the sentiment of Cornelius Vanderbilt. who had long ago tangled with J. Gold and lost.

1:23 Vanderbilt. Said gold. Was the smartest man in America. Their judgments must stand. Gold was perhaps the single most unsettling force

1:33 Ever to appear. On the American industrial scene. He thought in continental terms when few contemporaries saw beyond state boundaries. He shook to his heels an industry who Already settled in its ways and set out to realize his dream of a transcontinental railroad.

1:51 Given the obstacles he faced. Gold's achievements were phenomenal. He was an advanced thinker in the field of corporate finance. And he set precedents which were later followed by investment bankers and by state and federal. Governments.

2:06 Among wheelers and dealers of his day. He had no peer. He was obsessed with piling up a fortune. No holds barred. He mastered the details of running a railroad.

2:18 With embarrassing ease. He was a loner. Labels do not imply judgments. But if such were to be made Gold must rank.

2:26 as the less honorable and less trustworthy. But the more brilliant Of the two. For he was indeed The smartest man in America.

2:35 At least in the business world Of his day. That was not an excerpt from the book that I'm gonna talk to you about today. That was actually an excerpt from a book I covered a few podcasts back on episode two fifty four. And it's John D Rockefeller, the founding fathers. Of the Rockefellers written by David Freeman Hawk.

2:51 I wanted to start there because I think it demonstrates how important understanding and studying Jay Gold is is if You are reading a biography of Rockefeller and an entire chapter. Is dedicated To another person.

3:02 And that made me want to read a biography of Jay Gold. And the book that I'm going to talk to you about today is The Dark Genius of Wall Street, The Misunderstood Life of Jay Gold. King of the Robber Barons. And it was written by Edward J. Renahan Junior. And I actually found out about this book because the author is the one that sent it to me. So I wanna jump into what would have been the introduction

3:20 uh to the podcast for this book. And it's uh at the funeral Of J Gold. And actually before I start there, let me go to the very back cover of the book,'cause I thought this this paragraph was very interesting. It talks about the thesis of the author. It's like well there's ton of biographies written about Jay Gold.

3:35 Everyone basically says the same thing. that he's evil, he's unscrupulous. He was the most hated man in his day. And Edwards like Well it's a more complic if you actually dig into the research, it's actually a more complicated than that. So it says though revived for more than a century as Wall Street's greatest villain, Jay Gold was in fact its most original creative genius. Gull was the most astute financial and business strategist of his time.

4:00 And he's also the most widely hated. That goes back to the book I was quoting from at the beginning, where it's like in his day. He had no peer. Back to the back cover, he was the undisputed master of the nation's railroads and telegraph systems at a time when these were the fastest growing new technologies of the age. His failed scheme to corner the gold market. In eightin sixty nine

4:21 cause the Black Friday panic, and it's also a reason why for the rest of his life he lives a w about like no twenty five years after He he he actually caused this financial panic, and that's what gave him this this terrible reputation that still exists to this day. He created new ways of manipulating markets, assembling capital, and swallowing his competitors. Many of these methods are now standard practice. That's another there's that's just the first of many crazy sentences we're gonna find in this book. Uh others were unique to their circumstances and unrepeatable.

4:50 Some were among the first things prohibited by the SEC. When it came into being In the Ninet Thirtys, that would be about forty years. After gold died. And so let's go to his funeral where one of his friends is there, uh, this guy named Jesse.

5:05 And it says Jesse said he found it ironic That Jay Gold was always cast as the demon in any telling of the nation's recent recent financial history. If Jay was a sinner asked Jesse. Exactly who were the saints.

5:18 He ran down a list of the contenders. Starting with Cornelius Vanderbilt. The foul mouth and brutal old Commodore Never claimed to have any agenda other

5:28 than his own enrichment. Was he to be revered? And what of Rockefeller? The avid Competition crushing monopolist.

5:37 Jesse did not see Jay as any more or less criminal than most operators of his era. I cannot say that Jay was in his moral nature. Much better, much worse, or much different than any other shrewd and sharp player of his generation. I've known them all. And I can tell you that he deserves no more n notoriety.

5:57 than those against which and with which he played. If he was exceptional It was as a strategist. He had a certain genius. Time and time again.

6:07 Wall Street never saw him coming. And then it goes right into the heart of the conflict of his reputation that he was both Uh a great CEO. And a ruthless financial manipulator. The case for gold as an as a successful long term CEO is there to be made. The highly imaginative, ruthless, and easy to vilified manipulator of security markets was also

6:27 A detail oriented owner of companies. He was a workaholic. who painstakingly consolidated dying railroads, transformed them into highly profitable megalines. And then did the same thing in maximizing the profitability of the West of the Western Union. skillfully steering all of his businesses

6:45 Through choppy economic season. In the eighteen eighties. And so they're describing At that point in Jay's life he'd be in his forties because he dies at fifty six in eighteen ninety two. And so I'm still in the preface of the book. It actually goes into

7:00 The the way he was reporting in the press. Is not at all accurate. To how he was in person. Um and I'll go into later on, and I didn't realize this when I read this the first time. Much later in the book.

7:11 Jay did that on purpose. His antagonists in business after having been burned by him. provided a lot of information to a hungry press, and they in turn dubbed him. The devil of Wall Street. It was easier and more nurturing to the pride of the wounded.

7:26 To suggest A pact with Satan. Then to admit That Jay was in fact the Michelangelo of Wall Street. A gніus.

7:35 Who crafted financial devices and strategies. And who leverage existing laws In stunningly original ways. And then this sentence really describes why I think it's worth spending time studying him. His success was profound. His productivity was astonishing.

7:50 And his motivations and tactics. Were fascinating. And I just want to pull out one sentence for you. that describes his personality and this is actually repeated a lot. This is the first time uh of many times in the book that you'll read that I read sentences that are just like this. Jay had always believed

8:06 That shrewd aptitude. Should be rewarded. And its absence punished. He despised fools. He was definitely an elitist, but not in the terms of oh did you go to a uh right school

8:19 Did you come from a rich family? It's do you have a brain or not? And so one of his best talents was identify people whose mind far exceeded where they currently were in life and he'd recruit them and they'd work with him in many cases many decades. So his dividing line in life, you could think about it this way. It's like if you're smart, you're with me. If you're not, I don't want anything to do with you.

8:40 Another personality trait that Jay shares with a lot of the people that you and I said in this podcast, he was always Punctual. I just read this fantastic line. in this post on a personal on this guy's personal website. And it reminded me that time is non refundable.

8:55 And he said a week. is two percent of a year. And finally one more thing before I get into his early life and his complicated relationship with his father. Unlike most other self made men, gold never traded on his humble background. He said the fact of my father's poverty is not worth one dime to me.

9:11 And we're only a few pages into the book, but it's already clear. that it with that statement and knowing everything else that you know about him. He just knew he's like okay, my father's poverty, that was his problem, he never resolved, that's fine. I just know that that's not gonna happen to me. So let's go into Jay's father because I think it really sets a tone for his entire life.

9:28 It's gonna weir it is gonna be kinda weird where I'm reading a biography of Jake and I think about the legendary director Francis Fort Coppola, but I'll tie it together and explain why this is so important. Uh, so it says Jull's father was a complicated and tragic figure. So you could think of him right off the rip. I don't have to like bury the lead here. His father's like the anti model. Uh like a cautionary tale for Jay, okay.

9:48 John Burr Gold's tribal memory. passed on by his parents, told him that he came from substantial people. All of these prosperous golds, burns, and all these other uh last names are in his family. Who for generations had loomed so large in Connecticut history. Okay, so what they're talking about is the fact that

10:05 Two or three generations. Above. Jay's father? They were rich and prosperous. Then

10:11 uh the generation above So that'd be Jay's grandfather starts losing everything. And so now in where we are in this point in history Jay's father. is think about how crazy this had to be. You're a poor farmer.

10:22 And yet in your mind when you were raised You're raised on stories about how Wealthy and powerful. your ancestors are. That has to be very difficult thing to deal with mentally. Yet John's own precarious position in life, like that of his father, fell considerably short

10:38 of the height scaled by his formidable ancestors. His lot in life Was not substantial, and hій knew it. And that line in particular his lot in life was not substantial.

10:52 And he knew it. That reminded me back on founders number two forty two. Francis Ford Coppola talks a lot about. In fact, in his biography, a main theme is the fact that Francis's intense drive to not be a failure came from the negativity that he was raised in. In his house. There's two lines in that book. that really stick out. And it says you can always understand the sun

11:13 By the story of his father. The story of the father is embedded in the son. And then Coppola's own description of his father is devastating. He said I'd spent a lifetime. With a frustrated

11:26 and often unemployed man. Who hated anybody. Who was successful. And that line that the story of the father is embedded in the son resonates with the book that I'm holding in my hand. My friend Sam Hinke just sent me a line that describes this phenomenon that appears over and over again on this podcast. And it says all ambitious men

11:46 Want either to please their father. Or to punch them in the god damn face. And in Jay Gold's case it's gonna be clear. One, he knows that he's rare. He is aware that he is rare, he is aware that he's most likely smarter than almost anybody else around him. And so I don't think he ever thought that his the his life was gonna end up like the same way as his father's is, but you also see this in his actions because the minute he can.

12:07 He runs away from the farm. And he's young. He's like I think seventeen at the time. We'll get there in a few minutes. versus a description of his life and why he'd want to run away from this. They're on they're living on a poor farm. His wife uh his m his mother's name is Mary. Mary made all the family's clothes The lion's share of their food came right off their homestead.

12:24 Their furniture was handmade. Tragically she's gonna die. He has to deal with His his sisters die. His mother dies, he's four. When his mom dies.

12:34 And so he doesn't really have a memory of her. Remember this for later. When his when we get to his obsession With Flowers.

12:42 Which a lot of people are gonna find surprising considering how ruthless they said Jay was. But his passions in life, it says it later in the book. Toward the end of the book, but His passions are were money making. Reading? Walking.

12:55 Flowers and the enjoyment of nature. And so he would love to take walks in nature constantly. So his mother dies, he's four. Uh, his father needs a mother because he's got a lot of kids. I don't even know how many. They got like seven or five or something like that. Uh so John marries again that summer.

13:11 And then that wife also dies later on that winter. So now He's five years old. His stepmom. Maybe he remembers her, maybe he doesn't, then his dad marries again. Two years later.

13:23 That woman also dies. And so his older sister later in life is describing this part and she says Jay had seen a great deal of trouble Before he had reached the age of ten. And so you could think of his early life as constant exposure To a life

13:37 That he does not want. And he'll do whatever he can. To avoid it. Uh he was a serious child. This is gonna r there's are so much similarities between Rockefeller and Jay Gold, it's it's not even funny.

13:48 Uh Jay was a serious child, seemingly delicate until challenged, and possessed a somber maturity. That bellied his youth. They said the exact same thing about Rockefeller. He was remarkably focused. Same thing about Rockefeller. I knew him once to work at times for three weeks on a difficult problem. Sarah, this is his sister recalled. He would never accept assistance in working out hard problems. That is the first mention of something that is repeated. Five or ten times throughout the book.

14:14 He would never accept ac assistance in working out hard problems. He would just doggedly pursue them. Part of Jay's tenacity derive from the early realization That he hated farming. It fell to him to perform many of the toughest chores about their homestead. It added up to a simple minded drudgery that Jay described as torture.

14:35 And even at this point in his life, when he's about thirteen years old, he's obsessed with learning. He tries to get his hands on any kind of information he possibly can. And just like he would later in life, he approaches learning. with a like a single minded determination, he was extremely serious. Uh, this is his teacher. one of the teachers that was that knew him when he was fourteen Mister Oliver recalled the fourteen year old Jay as a deliberate student.

14:55 He was not a boy given to play. He was never rude and boisterous, but Didn't shout and didn't jump around. And so there's a series of adjectives that are gonna follow him throughout his life, persistent, deliberate in his study. Disciplined.

15:09 Again, we're gonna see another example that he did not like to ask for help and would just stick with the problem until it was solved. Like his sister Sarah, Oliver noted Jay's stark independents. and penchant for refusing help. If he was sent to the blackboard to work out a sum, He would stay there the entire time.

15:25 Rather than ask for a solution. The depth and the zeal that Jay put into his studies cannot be overstated. Wait till I get to this conversation. That happens about I wanna say twenty years into the future, between him and Thomas Edison, and you'll know exactly what I mean. But at this point, Jay's still a teenager. We see that he picks up his first trade. This is important because

15:46 His first trade is gonna lead to his first business. And having this trade allows him to escape. So his spare in his spare time he continued to pursue mathematics, specifically the sciences, engineering and surveying. He borrowed surveying tools and began to tutor himself in their use. Jay told his sister

16:04 That's surveying represented his ticket out of town. A month before his sixteenth birthday, so I was wrong, I thought he escaped when he was seventeen. He escapes when he's fifteen, about to turn sixteen, he made the move from the farm into the town. He took off With a just a mere five dollars in his pocket. This is something you and I have seen

16:22 Over and over again. Henry Ford escaped the farm and for the city. uh Chungju Young, which is the first thing that I thought of when I got to this part. Uh, that's the founder of Hantai, all the way back on one seven uh on founders one seventeen. I covered his autobiography, which to this day is probably the most inspiring autobiography I've ever read. His story is just crazy, but If you remember that story, or if you read the book or listen to the podcast, he tried escape four times.

16:43 from his his s his father was also a poor farmer. He was in Korea, so he he winds up uh escaping the fourth and final time to Seoul. But there's just something about these poor determined young boys. something inside of them that just tells them I have to get out of here and I have to do it now, even with great risk. And a lot of them wind up leaving. It's not like they're coming they're they're leaving with a a a giant safety net. And in Jay's case, he's got five dollars. But he's now got a trade and he's got a brain. So he gets hired.

17:09 Uh, by this guy named Snyder. Snyder and uh hires Jay and a couple other boys that are surveyors, he's sur hires them to survey and make a map. The importance of maps and understanding terrain are central to understanding why Jay was so successful at what he did and I'll go into a lot more detail later. But in this case,

17:25 Snyder is gonna wind up s hiring him for a job he cannot pay them for. And so watch Jay's response to that. Snyder finally admitted to Jay and Peter uh which is another young surveyor, that he was yet again bankrupt and could not pay them uh pay the money that he owed them. And so Jay and Peter are like, Okay, that's fine. In lieu of their salaries, Jay and Peter took Snyder's rights to the map and then brought in another useful surveyor by the name of Oliver.

17:50 As a third partner. Unlike his partners, Jay did not have any ready cash. So then he hired himself out to his partners at a rate of thirty dollars per month. And at the time, at the same time agreeing to a reduced share of the proceeds from the map. So instead of them splitting it three ways. thirty three, thirty three, thirty three.

18:07 They're gonna both take forty, Jay's gonna get twenty percent. And then his partners are describing Jay at this point in his life, which he he ke he's like this his entire life till he dies. Uh Jay Gold Was all business in those days, as he is now.

18:22 So that's his partner describing him. four decades after the fact why even at mealtimes he was always talking map. He was a worker. And my thought remember the the the book starts out saying Jay was a workaholic.

18:34 Right. He we're seeing the sa the same thing. They were describing him, you know, the fifty, forty year old Jay. The J that was running railroads. But he had those traits even when the opportunity was so much smaller than a trans continental railroad. At one time Jay owns like What is it like one ninth?

18:49 Anywhere from one to uh I've heard read different things, but anywhere from one ninth to one fifteenth. of all the r the miles of railways in the in in the United States. Which is remarkable. Considering where he is right now in the story. Well even at mealtimes he was always taking talking maps. He was a worker and my father used to say, look at

19:06 Look at this gold. Isn't he a driver? Three months later. When they finished the map. The partner settled up. And Джей вак авит фавдар.

19:16 As his share of the proceeds. This is eighteen fifty two. And so his friends at the time and many of these friends he kept for his entire life, which the author also brings up to the point where he's like, Oh, he hated people He was a loner. He's like, Well, you're not paying attention, like He had these these like poor farmer boys.

19:32 uh in many cases never moved away from where uh they grew up. Jay would go back and visit them and they would maintain relationships for his entire life. I think with the the author's doing, which was really beneficial It's just saying, Hey, people are complicated. If you want to paint somebody with a broad brush, you're just uh accepting inaccuracies.

19:49 They may simplify the way you think about them, but it it's a a a very incomplete picture of a human being. But they're talking about even at this time, they're like oh this dude is He's not normal. This is strange. So it says Jay stated to his friend, he's uh at this point sixteen, I think. Jay stated To his friend.

20:06 That it was his belief that happiness consisted not in indulgence. But in self denial. He would routinely shun drink just as he did tobacco. Games. Or the habit of swearing.

20:18 And he would also constantly just like Rockefeller mention at a young age, Rockefeller stopped doing this when he's older, so did Jay. that I'm determined, I am my destiny is to be wealthy. I am determined to use all of my best energies to accomplish this life's highest possibilities, he said. What a line coming from a teenager. I am determined to use all of my best energies to accomplish this life's

20:43 highest possibilities. When he was a teenager, in addition to teaching himself surveying, he also taught him uh learned how to do bookkeeping. So he's going back and forth, just looking for all kinds of opportunities. His father owns like the small like he traded his farm for like this tin store. So says Jay did his father's books, these books revealed

21:00 His father's dismal finances. This added to Jay's worries. Despite all of this, Jay remained optimistic for himself in the long run. And he said so much to his friend Crosby one night. Jay announced suddenly, Crosby. I'm going to be rich. I've seen enough to realize

21:16 What can be accomplished. Ей таю. I am going to be Rich. And his answer to Crosby's follow up question is actually really smart. When Crosby asked by what method

21:27 Would gold become rich? Jay answered, I have no immediate plan. I only see the goal. Plans must be formed along the way. I only see the goal.

21:39 And so his first step is like, Well, I just made five hundred bucks creating a map. There's clearly demand in this area for my surveying skills. Why don't I just do instead of getting hired by Snyder and Snyder going bankrupt and not paying me, why don't I just open my own business? And the way he moves for being he's seventeen it's time, the way he moves for being seventeen is unbelievable. Jay's immediate plan was to undertake his own survey and map of Albany County. Uh he had just turned seventeen and he sent out letters prominent men of the county soliciting their subscriptions. He then hired two assistants whom he instructed in the rudiments of surveying.

22:09 He personally went door to door in every townшіp. Selling advanced orders. For the finished map. He also advertised in the local newspaper to sell even more. And then look what he does here, which is really, really smart.

22:21 He solicited another contemporary, this guy named Simon. Who was the publisher and editor of the local newspaper to help promote the map. A few months earlier, when Simon was seeking to broaden his subscriber base, Jay had sent him five dollars for As a way to contribute to the cause. And then a few months later he asked Simon, he's like uh the supervisors ought to encourage the use of maps in the schools in this county.

22:42 By buying maps, remember that's exactly what he's making and what he's gonna sell. For each of the school districts. And he asked Simon, he says, I want you to give me an editorial to this effect. You must model the editorial over to suit yourself. But it must be as strong as it can be made and come directly from you. And so think about what's happening there. Effectively it is an ad.

23:00 For The product that Jay is making disguised as an editorial. Why is that important? Because one of the things I've uh that stuck out for me from James Dyson's autobiography, I think I covered that back on Founders Two Hundred. was he said something that was fascinating and how he was able to grow He had the uh w uh at the time, Dyson d he was the only he had one product, he was selling vacuums, there was only one country in in England. And yet he was able to grow faster than any other vacuum manufacturer.

23:25 In history. And he talked about that because he relied not on advertising. But on editorials. And he said that one decent editorial Counts for one.

23:35 thousand advertisements. And so that's why he directed his his time and resources and the resources he had then was not a lot. To getting editorials as opposed to just doing ads himself. So while Jay is running this map business and doing everything else, he's like, Okay, he's not the kind of person ever does one thing at a at a time. He's

23:54 The the book was there were so many times in this book. And I mentioned this on the the Rockefeller podcast when they talk about all the like the partnership, the secret partnership between Rockefeller and Gold, and how I had read that chapter twice and still didn't understand it. There's a lot of that in the book because he's just so complex. He's got so many things going at once. and they all kind of like feed into each other. But even as as a young man, he's like, Oh, I'm not just gonna focus on my surveying business.

24:17 I'm gonna build there's all this these these contracts. these lucrative contracts because they're building roads for the first time in this part of the country. And so Jay gets a contract to build A small road. That's link that's linking these two towns. But there's also other people suing to stop the development. And so I wanna read a few paragraphs here because it really gives you insight into how Jay operated.

24:38 So he goes to meet this attorney, this guy named Hamilton Harris. And Harris is telling us his first meeting with Jay. They wind up uh he winds up serving as one of Jay's attorneys for the next like forty years. So the question a hand involved opponents to a particular section of the road who were seeking to gain an injunction injunction stop in construction. Harris had barely started layout his vision for an elaborate legal defense.

24:59 When the small boy piped up with a question. Was there anything Jay asked to stop the company from From going ahead with construction Before the his enemies, uh the enemies of the road were granted their injunction. So they're saying they're gonna get this injunction, they just don't have it yet.

25:16 So when Harris says no, there's not That's where Jay senses his opportunity and this is what he does, as he would so many years so many times later in life. Jay now used the letter of the law. Not the spirit, right? J now used the letter of the law.

25:29 To his complete and utter advantage. The same day. He hired every laborer he could find. The following morning he purchased and hauled a Vast supplies of lumber

25:40 Using the good credit of the Shakersville Road Corporation, that's who he's working in collaboration with, as his collateral. Then he put three teams to work on eight hour shifts. Day and night. So he moved not only just fast, but immediately, and then he said, Hey, we're gonna work every single hour, every single minute of the day.

25:58 And this is the result by the morning of the day that the Rhodes opponents obtained their injunction. The disputed section of highway. was already finished. I have to remind you again, he's like seventeen or eighteen years old when this is happening. That's just remarkable. Not only is he uh building map uh creating maps and selling them, he's building roads, he's taking every opportunity. He winds up saving like a couple thousand dollars.

26:20 Uh at a very young age. But in between all this, he's also taking any job he can get. So he starts working in a general store. And I guess at this time, general stores literally sold everything. Because people go there to order books. And so this is our first introduction to two things that are gonna happen his entire life is that

26:37 Jay's extremely well read. And in a hurry. I think his personal library later in life consists of something like five thousand books. So this teacher's gonna stop in at the store that Jay is working in.

26:47 And he to order textbooks. And so this is his recollection of meeting Jay Gold for the first time. I was pleasantly greeted by this young gentleman who kindly offered to assist me in selecting the textbook in the textbooks I needed. He began suggesting the books he considered best for parti for particular studies. Jay's remarks and criticisms impressed McLauri, that's the teacher. I soon learned that his knowledge of books was not limited to mathematics and the physical sciences uh physical sciences, excuse me. He was fond of literature and scientific studies.

27:18 And he must have spent much time with books, for he had acquired an extensive knowledge. O a wide range of subjects. Around this time. Another one of his sisters dies. Given his early losses as a child, his own close brushes with death, and Polly's demise at his sister, Jay would always remain acutely aware.

27:36 Of the brevity of one's time on earth. Time is flying fast, he said. As a niece who knew him well. Would one day Suggest those four words time is flying fast.

27:48 Удивити в а филін. That seems to have been always in the mind of Jay from his childhood. A feeling Which apparently spurred and drove him. Seldom permitting him pleasure in leisure or relaxation.

28:02 Again and again, this is the d this is the main punchline why I'm telling you this. Again and again he came to speak. Of the shortness of life. And the necessity Of doing

28:12 While there was yet time while there was yet time to do. Okay, so now I want to get to the part where Jay winds up partnering with One of the richest people Around

28:23 At this point. And a person he's eventually going to Which again speaks to what everybody says about him. The fact that he was the smartest person around. He was a genius. He had this like Brilliant strategic mind.

28:36 And so we see that in a smaller dose, many, many years before he gets to Wall Street. And what's fascinating about what's about to happen Is this all opened up from An idea that he had when he was much younger. Where he told his sister he's like surveying me learning how to survey.

28:50 Is my ticket off this farm? And so as he's practicing that trade, building that business, he goes and tries to sell. the maps that his that he's making. And so because that worked in one county, he's like, Oh, if if I can make a map for one county, I can just keep doing this over and over again. This is gonna lead him to meeting this guy named Zaddik Pratt, which I'm gonna get to. I'll give you an overview of w this this guy and why this is so just mind blowing.

29:13 This whole book is mind blowing. The entire life of Jay Gold is mind blowing. Jay first encountered Pratt, who was forty six years older than him. During the summer of eighteen fifty two, when Jay was working on the map of Ulster County. So Jay's like, hey, I'm working on this map. I can do that for this other county that you have either businesses or or your house in. Will you fund it? And says Pratt declined to fund that project, but pronounced himself impressed by Jay.

29:36 And promised he would keep him in mind for future tasks. So that happened in eighteen fifty three. In eighteen fifty six Pratt goes looking for Jay. And he tells Jay that he wants Jay to make a survey of his farm. So Jay does that, but he also does something again that's really smart. He's like, Listen, I'm I'm gonna find

29:54 I'm gonna tempt to my make myself useful in any way possible. To Pratt. And so they're gonna wind up becoming partners. I need to give you background. into Pratt because he's also a crazy person as well. He's unbelievably wealthy. He owned

30:07 So he was a tanner. In fact, he owned the largest tannery in the world. So they use the word tannery over and over again in the book. It's just the manufacturing of leather. And what Pratt did was he had, I don't know, I think like thirty different partners. He'd have all these different partners with all these different people.

30:22 And they would just build Tanneries everywhere. So by the time Jay meets Pratt He has the largest tannery business in the world. Uh he had been served in the United uh in like the House of Representatives.

30:33 He was a banker. In fact, uh well let me read this line'cause this is a fantastic line. Like many people of great accomplishment. Pratt was somewhat eccentric. And possessed a powerful ego.

30:46 What does that mean? Well, when he starts his bank Uh he decides to print his own notes. that were kept on par with the current the local currency, right? Guess who he put on his banknotes? Himself?

30:59 He put pictures in his own face. He owned a bunch of land too. And so uh they had this massive think of Mount Rushmore? But instead of putting, you know, presents or whatever he put his face he had he hired

31:11 He hired uh what are they, I guess carvers? artists maybe to put to carve his face In this this this rock They call it a massive rock outcropping. That was five hundred feet above the valley that they're in.

31:24 So I'm just k trying to give you background to the personality that Jay is about to partner with and deal with. Like the guy's obviously very wealthy, one of the wealthiest people around, owns a ton of land. owns all these different businesses, has all these different partners, has a giant ego. printed his own face on on a on his dollar on dollar bills for for all intents and purposes, and then carved his face into a rock. And so because Jay did good work for him.

31:48 Then Jay when Jay pitches him, he's like, Hey, why don't we do this fifty fifty partnership? And why don't we start another tannery? I'll run it. You have obviously the capital and the the knowledge, but I'll do all the work. And so says Pratt uh con he convinced Pratt on the spot and they formed a fifty fifty partnership.

32:04 Pratt's main contributions to the enterprise were his expertise and his money. While Gold was able to invest his useful energy, Pratt made it clear that the day to day responsibility for the operation was to be Jay's. J's and J's alone. Pratt would be available for consultation and advice. And he would answer all questions as to how to set up and manage the plant and market the finished leather. And this is remarkable to contemplate. Jay was not yet twenty one.

32:28 And so this goes on for two and a half years. I wanna get there's two important parts. I'm gonna tell you how Like you might be like, Well, how did Jay wrestle this business away from Pratt? Like that seems Unbelievable. But before I get there, Pratt introduces

32:40 J. To a different side. of the industry. And that is this market called the swamp. It is in New York City. And Pratt tells Jay

32:50 That the swamp Is to Tanners. Well Wall Street is to financiers. And so Jay is studying the entire industry and he's like Oh wait a minute Who would I rather be? This is just a fantastic question to ask in general. It's like what side of the transaction do I want to be on? And so he's breaking down.

33:06 All the different parties. that make money on the production of Leather. And he realizes, Oh I'm on the I can't stay on this side of the transaction. And this is what he said. Remember, think about how young he is. I think he's like twenty. We fast forward in the story a little bit. So I think he's like twenty-two, twenty-three here.

33:22 I've come to realize that it's the merchants. Gold wrote. Who commanded the true power. in this industry. So he's gonna describe what he means by merchants. The Tanner, which is where he is in this sequence right now, okay?

33:34 The Tanner appears to take the greatest share of capital. But merely processes that capital. Because his expenses are extensive. His risk is real. And his labor is heavy.

33:45 The shippers Deal with the next largest sums of money. But again. They have extensive expenses and a lot of work to do. The brokers. Now this is so important to understand because this is the role he's gonna play for the majority of his career until he starts running the United Pacific Railroad for real.

34:02 Which we'll get to. But this is really think about like I think in my p no, this is. I I shouldn't even I'm not even gonna hedge. This is going to be His greatest skill. So let's go back to this. The brokers, meanwhile. Take what seemed the smallest share.

34:15 But small share of the revenue. But it is in fact the largest. So he's talking about the financiers, right? theirs is nearly pure profit. Made on the backs of the shipper. And the Tanner.

34:28 And they never have to get their hands dirty. And so that is important because Pratt introduces him To the swamp. He is going to wind up going up to the swamp independently when he realizes that Pratt is trying to move against him.

34:42 And so this part of the story is where Pratt tries to get rid of Jay, but instead Jay gets rid of Pratt again. Think about this, how crazy is this? Is this not very eerily similar to what happened in Rockefeller's life. where his first partners, oil partners, like, Hey, we're gonna get rid of Rockefeller, didn't know that he had all these secret machinations that were taking place, right? Rockefeller said, Oh while they were talking big and loud, my mind was moving. We're gonna see Jay does the exact same thing. Except Jay is doing it to much more formidable

35:10 People'cause Rockefeller's partners were a few years older than him, but they had similar levels of experience. Jay is going to outwit somebody that should have known better. So says Zadak Pratt in his later years hardly ever spoke of his partnership with Jay Gold. In his autobiography, Pratt filled page after page with the names of dozens of partners. Nowhere did he mention Jay. Jay himself commented on the dissolution of

35:33 Of their partnership only once during Senate testimony many years later. When he summarized the event in one flat sentence so again. Go back to this idea of J had an economy of speech. He was very quiet.

35:45 Very stealthy, very secretive. He did not like to talk. This is he's gonna summariz this entire thing I'm about to read to you in one sentence. We carried on the business for a while. And then I bought Mr. Pratt. out.

35:56 Yeah. That is understating that, Jay. Come on now. Pratt apparently sought to improve his personal profit by ousting his partner at a bargain price. They were also kind of like fighting. This is two and a half years into their partnership. And Jay's like, Oh well like I understand the business now. He started relying on Pratt less and less.

36:12 And being harder to deal with, which of course Jay is very difficult to deal with. Pratt having the largest interest said to Gold, You must either sell or buy. Thinking it impossible For Jay to buy. And secretly hoping to force J to sell his share. Thereby enriching himself

36:28 At Jay's expense. Pratt. would buy out Jay for ten thousand dollars Or else. Jay would must buy Pratt out.

36:37 For sixty thousand dollars. Pratt added That Jay would only have ten days to decide. And then the author does a great job of describing Pratt's motivations. Pratt had so far sunk a hundred and twenty thousand dollars. into the operation.

36:51 He would have offered to sell at half that amount only. If he were convinced there was no way Jay could come up with the necessary funds. But Pratt. Who should have known better. had underestimated his young collie. You and I have talked about this how many times?

37:06 It's gotta be d dozens of times by now where we see this mistake happen over and over again. There's no benefit to underestimating somebody. It is all Downside and no upside. As Prat is about to discover here.

37:18 In the time allowed, so that's the ten days, Jay had traveled to the New York swamp. So think about it as like the financial market for Tanners, right? Where he struck a deal with this guy named Charles Leop. And Leop's partner, David Lee. Lee Up and Lee own one of the uh Swamp's most prestigious brokerage firms. So that's who he's trying to partner with, okay? So it says yeah, they agreed to acquire a two thirds stake.

37:39 Uh in Pratt and Gold, which is the the name of their company, for a total of sixty thousand dollars. The sixty thousand dollars, which is what the the same price that Pratt named. J Flabbergasted Pratt. when he exercised his option to buy the firm. The deal was finalized and that left Pratt with a sixty thousand dollar loss because remember.

37:58 He had already put in a hundred and twenty grand into the company. And then J just had to come up with sixty, so that's where they came up with the sixty thousand dollar loss. Yeah, it left now, so that left Pratt with a sixty thousand dollar loss, but it left Jay with a one third stake in a thriving tannery. And an alliance with one of the Swamp's most prestigious brokerage firms.

38:17 Given these facts. This is such a fantastic way to tie this and end this story. Given these facts, Pratt's utter silence in later years regarding his partnership with Jay. an enterprise at the end of which Pratt wound up bettered by a man barely out of his teens. begins to make sense.

38:35 And we see Jay's own view of himself, even when he's young, he's about to try to buy out his other partners. And one of his partners is about to shoot himself. This is crazy. So says Jay had a growing penchant for maximizing his advantage And cutting legal corners.

38:50 Hі was agresiv. An expansionist By temperament. So at this time uh his two partners, Lee Up and Lee, are trying to get him to say, Hey, essentially like let's say I'm making these numbers up, but you can produce ten thousand

39:04 units a month, we're only gonna sell eighteen hundred. They're trying to like man there's something else going on in the market at the time that's very complicated. I'm just gonna skip over a part of that. But essentially like hey, hold back, we're not gonna sell all of our production. Jay is not gonna put up with that. He's aggressive and expansionist by temperament. It's something else you can learn from Jake studying Jay Gold. Is that everybody around him he just thought. Than every single person around him, as we'll see.

39:27 Gold argued to his partners diplomatically at first, after several months of tolerating low unit production, that he could and should ship twenty one thousand finished hides during July. August and September. 'Cause he's not concerned with the other stuff that you're worried about. He's like, Hey, I'm making these, I wanna sell them. And they're gonna have this gigantic fight. This is gonna uh wind up they're gonna have a fight at this court case.

39:49 For like seven years, but this is just hilarious. I just want to pull out one paragraph because again, I'm really trying to get like in your mind. Like who Jay was and just the kind of person you're dealing with here. Uh, Lee became so agitated about Jay's insistence on operating the plant at maximum capacity. That's a great analogy or metaphor, rather, of how Jay approached life. Business in general. He's taking it I'm at I'm operating at maximum capacity here.

40:15 I'm not sitting back. I'm on I'm aggressive and I'm going. Uh, so it says he he became so agitated about Jay's insistence on operating the plant at maximum capacity that he offered to buy Jay's share What now We've already been talking for a while.

40:30 You know. What do you think Jay's response is gonna be? Jay flatly rejected before countering that I'll buy you out. So unfortunately in Leop Of Lee Up and Lee.

40:41 starts having like the psychotic break. So it's uh ha like having hallucinations and seeing things that are not there. Like runs into his house one day. kisses both of his daughters on like goodbye.

40:53 Runs into the next room and then Shoots himself. And so because he had this This complicated estate. Mm

40:59 is causing problems in the business that they own together. This is known as the Goldsboro War War. Goldsboro being the name of the tannery that they own together. And so they're trying to like Jay's trying to buy Lee out now that Lee up is dead. Lee is not being truthful.

41:14 As we'll see in neither J So Jay, what he does is like hey, I can't wait for all this I need to find a way to not be reliant on their brokerage. On this brokerage that is now in all kind of court cases and everything because It's unresolved who owns what assets. So he goes.

41:30 They're they're both doing secret machinations against each other. Jay goes and sets himself up as a leather merchant in the swamp and he starts marketing his own tan sides from the tannery that he owns on his own, which used to be what his partners were doing for him. One of the things his partners were doing for him. And so at the same time, his partner Lee, who is older is like hey come have this meeting

41:49 Let's work this out. We can do a deal. And what he does is he he he lures Jay to New York for a few days. And with with the the promise like oh we're gonna meet. Oh we can't meet today. Okay, oh we'll meet tomorrow. Oh can't no, I'm sick. Oh I'll meet you in three days. But in the r in the meantime

42:05 Since he knows Jay's in New York, he goes and tries to take over the Tannery by force. And so when I say like he tries to take over or seize it by force There is so many examples in the book in the book, and if you study uh like American business history in the eighteen hundreds, Th that's not like hyperbolic. Like literally he's going to hide there's about to be a shootout at a tannery. Uh

42:26 that's how things were resolved in many cases. We've gone over this over and over again, whether it's the Vanderbilts, the Rockefellers, Fords They break strikes with violence. Henry Clay Frick did this, Andrew Carnegie did this. And the the what complicates thing is not only do they hire like trained Like detectives and soldiers and mercenaries. But then They'll have like a a shootout and then they'll go to the

42:47 To the courts. Each side owns all all the judges and all the politicians are in their pocket. Wait till you see What Jay talks about. He she's testifying. And he goes into detail later on.

42:59 About he's there like well, how many politicians did you buy? And he says, Like asking me how many politicians I bought is like asking how much freight. My railroads ran on any given day a few years ago. It would just be impossible to tell you. Because it's just a standard part of my business. So I'll just give you an overview of how this ends here.

43:18 Lee's there, he's got he goes into the tannery. Barricades himself. Inside. And they call an army. He's got twenty five Heavily armed men.

43:28 Inside the tannery, they're prepared for a fight. So Jay finds out he goes. And then His first action it says was to consult with his attorney.

43:36 His attorney promptly urged that gold could take back his property by force. So he met he was met at the gates, he so he brings his own army. So J How young is he? He's gotta be what? He's still like maybe twenty five years old when this is happening. It's unbelievable. So Gold brings his own army, meets

43:54 Lee and his army at the gates of the tannery. And Lee says they says Lee threatened his life if he did not leave the premises. Gold then invited Lee to surrender. In order to avoid bloodshed. This is insane.

44:07 And so it says upon Lee's refusal, Jay moved into action. So Lee's got twenty five people, Jay's got fifty. Uh Jay says I divided I divided my fifty men into two companies, one of which I dispatched to the upper end of the building. So he's a flanking'em essentially, while I headed to the other to the other side and and opened a large front door. When Jay burst open the door and ran in, he was immediately saluted with a shower of bullets. Which forced him to retire temporarily before charging a second and a third time. This is insane.

44:35 At last he gained complete entry. The firing now became general on all sides, and the bullets were whistling in every direction. It's amazing how bad an aim they were. Uh Lee gets shot in the finger and I think three other guys get shot, but no one dies. And so after the shootout goes to the courts, Jay and Lee wound up in courts, suits and counter suits went on for seven years. While the tannery languished and lost all value. And the reason that lost all value is because because of all the the the lawsuits, he was incapable of transacting business

45:04 While the lawsuits progressed. Gold was forced to start over both financially and professionally. And so what he did After this, he's like, Okay, where what's my next move? What business am I gonna jump in? You spent time in Manhattan pondering his future. Looking for a toll hold.

45:18 And a new career. And this is where he's like, Okay, I'm going to Wall Street. He's got a great line on that. His dad's back in the picture. drunk all the time. Poor, has to live with one of his sisters.

45:30 And so it says Jay looks at father sadly. Sarah said. That's a sister. What he sees in that broken man. I cannot tell. That gives me Like

45:40 Shivers. The idea Do you would ever Mismanage your life so Poorly.

45:46 That your children describe you as a broken Man. And listen to this writing. Вот Джей са

45:54 Was a specter of futile pride. And broken dreams. from which he would spend the rest of his life in flight. I am trying, Jay said, to start myself in the smoky world. Of stocks and bonds.

46:09 This is one of the best sentences in the entire book. There are magician skills. To be learned on Wall Street. And I mean to learn them. So let's go to when Jay arrives at Wall Street. He's around twenty four, twenty five at the time. Jay spent his first few months on Wall Street.

46:24 Doing small deals. Winning and losing. And learning from his mistakes. He spent long days researching leads. with a monk like dedication.

46:33 We saw that when he was younger. We see that now when he's in his mid twenties, he'll keep that monk like dedication his entire life. He also studied the moves of the sharpest players. Financial instruments might be leveraged to provide either the cash or the credit necessary To make one's desired next step possible.

46:51 And we see that he was not prone. He fixated on the business and his own future. And he appears to have cared little. About the wider world.

47:01 And so there's all these sentences that are spread throughout the book. We see it here as well, with other people just s describing his personality. This is what he was like in his uh mid twenties. He seemed to have approached all things. With a machine like intensity. That some found hard to take. He was a sober fellow.

47:18 Blessed with great personal discipline. A commodity that remained in perpetual short supply for Among the would be miljonaires on the street. So he's meeting a lot of older people that are more experienced. One of these guys is famous in his own right, this name guy named Daniel Drew. Daniel Drew

47:34 And gold will battle. For many, many years just like Drew will battle with uh Vanderbilt. Vanderbilt's like a main character in this book. But I'm only bringing Drew up so we can compare and contrast the way Like how Jay thought about what he was learning.

47:47 as just a means to an end. So says Jay continued to study the art of Wall Street as practiced by the most seasoned speculators. In time he became a master at stock watering, short selling, pooling. Bear raids. Bear traps and other standard tricks of Wall Street. But unlike the Daniel Drews of the world, Jay valued Wall Street speculation and

48:05 As a means towards a greater and more complicated end. He sought In the long run. to take control of companies that he could manage, improve, and merge. It was only a matter of time before he focused his attention.

48:18 on the one sector of the marketplace that offered the greatest range and flexibility of financial instruments and also the greatest promise for long term growth. Railroads. And so one of his first advantages derives from the fact that he had this like monk like dedication

48:34 He studied and read everything. There is something this is not like the sexy part of business by any means, but it's something that you and I have seen over and over again. The most explicit statement of the importance of studying regulations uh came all the way back from the guy that founded Trader Joe's. I read his autobiography. It's called Becoming Trader Joe. I did a podcast on it, it's number one eighty eight.

48:53 And he says in that book, as I learned time and time again. Сексес ін бізнес Often rests on a minute reading of of the regulations that impact your business. And that comes into play. This is how he gets involved in Roads for the very first time as gold new.

49:09 The New York General Railroad Act of eighteen fifty. That must be make for good reading, right? Or f s for fun reading. The New York General Road Act of eighteen fifty. Allow directors of railroads to issue bonds Of their own on their own authority.

49:24 to finance expansion. It also permitted the easy conversion of these same bonds into common stock. And then back again into bonds. Jay must have quickly realized that just a small percentage Of Wilson's bonds.

49:39 Wilson is the guy offering to sell bonds in this RW railroad for like 10 cents on the dollar. Okay. So this is why Jay realized, Oh, I gotta jump on this right now. Jay must have quickly realized that just a small percentage of Wilson's bonds, when converted, Воді стаблиш а контрольний інтест. In the R and W Railroad. Wilson offered Jay all of his bonds at just ten cents on the dollar.

50:01 So this is where we see Jay take control of his first railroad. This is something he's gonna do for the rest of his career. Thereafter, for a solid year and a half. Jay is twenty seven years old at this time. I should bring that to your attention. Thereafter, for a solid year and a half, Jay spent four to five days a week working to improve the infrastructure, traffic, and profitability of the RW. Railroad. And we see this monk like

50:21 Dedication again. What he didn't know about the railroad business was considerable. And so we made a point of learning it. He quot he says, quote, I left everything else and went into railroading. I took entire charge of that road. I learned the business and I was president and treasurer and general superintendent.

50:38 I kept at my work. One of his employees on the roadroad with this guy named Charles Frost. He gives a dis uh us a description of Jay Gold at twenty seven. He was a man of snap judgment Curt in his remarks and exacting. Action

50:52 Was his hobby. And he was relentless in his efforts to bring about the accomplishments of those things which he set out to do. Isn't it remarkable though? We started with the description of J. Gold. He's like fourteen from his teacher.

51:04 Thirteen years later. The same personality over and over again just applied He's applying his talent. And his dedication, his persistence, his his like deliberate study to whatever is in front of him. But he's absolutely relentless. They call machine like.

51:18 Disciplined. Action was his hobby. Relentless in his efforts to bring about the accomplishments of those things which he set out to do. You and I are not building railroads. But we can apply these same traits to whatever it is that we do.

51:31 And so even while he's doing all this, we see the other important he had essentially like two the mo two most important things in his life. Was his work and his family. He was not an absentee father, an absentie husband. In fact, he was an extremely intro extreme introvert. After his day. All if he's not working, he's spending time with his family. He's making sure now he's far away.

51:49 So during the week he has to like he's on Like the round trying to m to to build his fortune still very early. Like he's so he's got a little bit of money, but he's not nearly as wealthy as he' obviously he's going to be. But he's coming home every weekend, he's spending time

52:02 Uh his his wife is now starting to have I think they have one up having like five or six kids. He's around his family. Like he wanted to be with his family when he was not working, is what I'm trying to tell you. Early in his career Jay demonstrated his lifelong dis uh disinclination to separate himself from family. He always returned to his family every weekend.

52:21 And so because he makes these rapid improvements to this R and W, he's able to partner And with another guy that owns other railroads. So There's a lot of highlights I have on this one page. I'm gonna summarize I'm gonna read to you my summary uh what I wrote to myself after I read this part. And'cause I think it like sets up what's about to take place. So it says other people can have the same ideas as you.

52:42 And still won't get the same results as you. If you are more creative and your execution is better. A lot of other people saw the opportunity in railroads and vertically integrated monopolies. And so in eighteen sixty five, Jay sold control of the RW to this guy named William T Hart. У за стімбот он тупенюр.

53:02 Who like other old steamboat entrepreneurs Daniel Drew. And Cornelius Vanderbilt. So the future And was now interested in railroads. So that's an important point.

53:12 Why are all these like what is it taking place? Like what do you know as a steamship operator, right? You're in the business of transporting Goods and people. From one

53:23 Now they're building out railroads it just seems to be any uh a way larger opportunity than steamboats, which So Hart saw this. Daniel Drew saw this. And Vanderbilt saw this as well.

53:33 And so just like Vanderbilt before him. Heart is like oh I have A steamboat business. Let me combine it. with a railroad business. So he took he had taken control over these these names are so hard. Like I'm just gonna it's it's irrelevant what it's named. Do you want me to say Rena Solar and Taratoga. It's just a it's a bigger

53:51 Railway. than the one at this point. that Jay has control of. So he's going to merge. He's gonna sell his interest, they're gonna merge. Jay realized more than a hundred thousand dollars on this one transaction. That seems like a lot of money. There's single transactions that Jay does later in his life that he makes forty million on. It's bananas. Jay realized more than a hundred thousand dollars on this one transaction, his f first truly enormous payday, but he was not done. A week later, he and Hart incorporated

54:14 This other railroad, so they're essentially they're all combining They all have the same playbook, right? They're that's what I meant up, like, yeah, you could see the same opportunity, but like if you're more creative and your execution is better, like you'll yield better results. So they just take a bunch of small railroads And they consolidate them and make them into larger railroads. And this is why Jay tells us exactly'cause he's we see a note that he wrote his partner just to get him heart.

54:35 I believe that consolidation will Proof both essential and inevitable for a score or more roads in the coming decade. He's predicting the future and he's right about that. Far better then mere cooperation Is tight coordination.

54:48 Close vertical integration. Economy of scale. And unchallenged market domination. Whenever possible. So that's Jay's playbook that he's writing when he's in his twenties. That's what Hart's trying to do. That's what Drew, Vanderbilt, Rockefeller

55:02 Morgan All these guys. are doing the same thing at this point in time. And so he's like let's not stop here. What is his advantage ever since boyhood, he had a fascination with maps.

55:12 How crazy does this All these experiences he could not have predicted when he's when he's telling his sister As a teenager, what was he, fifteen, sixteen? Hey. Surveying

55:21 Making maps, studying the terrain, understanding the strategic ports. how to link quarries, forests, and other resources together. W in a transportation network. All of that. He there's no way he could predict it what he's gonna use that skill set ten or twelve years later.

55:37 Which is exactly where we're in at this point. So he's like, Listen, I had a uh fascination with maps. Now the one time surveyor scrutinized his map with a freshly engaged eye. He studied the small railroads dotting the landscape as one would study the pieces of a complex jigsaw puzzle. Pondering which among the myriad possible combinations might yield maximum economy and profit. That is not exclusive to Jay Gold.

56:01 We have studied multiple entrepreneurs on this podcast that were obsessed. with the physical landscape and they use their understanding of the physical landscape to gain an advantage. Is that not what Sam Walton did? He was the only retailer in the South that had his own plane. So he's flying over, he's study traffic but he can get down real low, studies traffic pat patterns. He picked out what, if my memory serves me correct, the first hundred and thirty Walmart locations himself.

56:26 out of his little Cessna plane. It's the same thing that Rockefeller was doing when he set up his first refinery in Ohio. Way before he was d he had the you know, I one now one time he was what, uh refining I think ninety percent. He owned like ninety percent of all the the the refinery market in the United States. Way before that he realized hey, I should set this up so I can actually transport the refined oil.

56:46 By both railroads And by Boom. And now we see Jay Gould. S doing things like taking the same idea and applying it to hey, which railroads give me a strategic advantage if I can

56:56 overtake and consolidate them. That's really cool. It's really cool to me, at least. And what's even like cooler Is the fact that he's like oh I found my life's work.

57:06 This is what I'm going to do. Forever. Oh this is so this is so good. This is Jay's words. This is what makes it like exciting for me. We are at a moment, he wrote, where there is a particular Inevitable future waiting to be made.

57:22 I see things very, very clearly. I feel inspired. With an artist's conception. My road is laid out before me in the plainest of ways. He's talking about his path in life, not his railroad. He felt as if all the wheels had finally been installed in his life.

57:37 Not only did he have professional focus, but also the meaning that his family A wife and child this is so good. Please check out this writing. A wife and child to fight wars. And build castles for.

57:51 Now that I am in this place. It is a puzzlement to me how I endured before. Everything prior seems to have been boxing in the dark. Scraping without reason. Now I have my road to walk.

58:04 And my reason for walking it. So not only do I know what I'm doing with my life, I'm dedicating it to the the consolidation of railroads, right and the building up of railroads, but I'm doing it for my family. I'm going to read that again. Now I have my road to walk and my reason for walking it. Now the pieces fit. And this thing

58:20 Ambition is en this and this thing ambition is no longer blind. But divine. A true And noble. and necessary path. That's the end of his quote. This is a fantastic summation by the author.

58:33 Work and family. Would remain his two hallmarks. Until the end of his days. So I just want to give you an overview of how how he was working at this point at this point in his career. The note of itself is don't waste time or money. Didn't excuse me, didn't waste time or money.

58:48 Did not want to waste his talent on small accomplishments. And recruited only eight players. And again, I know I just mentioned this to you, but a lot of these traits, you and I are not building railroads, but there's these traits just can be universally applied to whatever you do. He had an energetic mind. He suffered neither fools nor small talk. He would not tolerate lengthy

59:06 Meaningless discussions of the weather. He was invariably polite to everyone. Whether the sweeper of the floor or the commander of the fleet. He would nevertheless, though Remove himself promptly from any interaction that seemed without point.

59:20 One got the feeling that he did not believe he had time to waste. Friends, relatives, and business associates noted Jay's economies of action. The way he hoarded his time and his c capacity for focus as much as he did his dollars. And this is what he says about that. We must look at accomplishing big things in big ways. He would tell his assistants.

59:40 Early in his career during a meeting with subordinates. Who exasperated him by bickering about whether a particular move might be too audacious. He insisted Та дап те ба.

59:52 The pro sідur, gentlemen. The pro sідure. We nідna hesitate about dimensions. Jay's abilities as an entrepreneurial talent scout. Selecting the natural leaders From among the naturally led.

1:00:06 The innovators. From among the drones. Would loom large in the making of his fortune. In time he would surround himself with an assortment of lieutenants. Who had little in common

1:00:16 Отер дrive. They're smart. Their inventiveness And their humble origins. He would say that the school of the street

1:00:24 Із the one that teaches the most important lessons. To those who have the capacity for learning them. And so this is what I was talking about earlier, where he's able to identify somebody's like, Oh, this this person has a brain. that is not that is more advanced than their current Like pr where they're at in life.

1:00:40 In time his inner circle Would include a former Vermont peddler An Italian immigrant whose only formal training was as a deckhand. And a one time grocery clerk. So this is where his father dies. Jay is thirty years old and again I wanna go back to what I said that was in that Francis Four Coppola biography.

1:00:57 That you can always understand the son by the story of his father. The story of the father is embedded in the son. By the time John Burr Gold died in eighteen sixty six. Jay could have purchased the old family farm. Plus twenty more like it in cash.

1:01:13 Jay and his father could not have been less alike. My father met many unconquerable challenges. He walked a hard road. The world did not open up for him. As it does for some.

1:01:26 He was haunted. By unfulfilled Aspirations Broken dreams. And empty hopes.

1:01:33 He drank from a bitter cup. And did so more than once. I have tried to make it my business. To achieve some of the things That were denied him.

1:01:44 In that way. Perhaps. I can honor my Father with my actions. That has been my philosophy. That has been my best hope.

1:01:52 We all give or should give. The best that is in us. But what he had inside him Was not enough. He was not blessed.

1:02:02 With the stuff of success. So there's so much detail about Jay's career. If you're interested, I highly recommend reading the book. I wanna skip over some parts and just get to the point where He starts at first being a partner with Cornelius Vanderbilt. And then they have a weird relationship. Vanderbilt's way older.

1:02:20 And a lot richer than he is. They start being partners and then they're enemies and then they'll work together. Uh, Vanderbilt says he's that gold's is the that Jay's the smartest person in America, but he also says he hates his face. So I wanna just pull out something in this this this about this famous historical event. called the Erie War. It's this fight over the Erie Railroad.

1:02:41 And I just wanna like the reason I'm bringing this to your attention is because What Jay's doing, going back to what I said a few minutes ago. It's not like he's the only one that saw this opportunity. There was a bunch of formidable people seeing it's like in today's age. thinking you're the only person that realizes the the advantage of the internet and what it could do to a business. Like that was the railroads in their day. So this is uh more about like why Vanderbilt

1:03:01 Jumped into this Like why he was engaged in this business. Vanderbilt strategy and railroading Uh was El was elemental as it was effective. You buy a railroad.

1:03:11 You put in honest management. You improve its operation. You consolidate it with other roads. when they could be run together economically. You water the stock.

1:03:20 That's something that's all over this book. And then you make it pay dividends. And so it's important to understand going into this. They're not viewing this as like, oh, I'm gonna build up a great business. Jay has that view later on with the Union Pacific. These are just they're businesses in name only. They're financial instruments to be completely milked.

1:03:38 And at this point, Jay is still considered A nobody. But that's not gonna be the case for long. And so he winds up getting on the board on this board of this railroad that's controlled by Vanderbilt. But I want to go to what the press says. The New York Herald speculated about the possibility of the future intrigues among the three lions. So those people that's Vanderbilt

1:03:56 Daniel Drew. who I had mentioned earlier, and this guy named Eldridge, who is Put it supposed to be like Vanderbilt's guy. And so it says only these three in the h in the newspaper's estimate bore watching. The balance of the board.

1:04:08 We're nothing more then quote a batch of nobodies. One of those new board members was Jay Gold. Another was an equally obscure player. by the name of James Frisk Junior.

1:04:20 No one could have guessed that That these two unknowns Would soon be notorious. as the all time greatest tag team. Ever to wrestle Wall Street to its knees.

1:04:32 So I wanna introduce you to Jim Fisk. I need to read a biography of him and you'll see why. He's Jay's partner. For a few years before he gets murdered. And so I want to spend a little bit of time talking about why Jay and Jim were actually good partners. This is an overview of uh how different Fisk was from Gold. Champagne breakfasts.

1:04:49 Exquisite silk suits? And gold canes. Became Fisk's permanent norm. So did a steady procession.

1:04:57 of actresses and cor scrolls This is actually what gets him killed. One of his many love affairs is with this well known actress She winds up falling in love with Fisk's partner and partner like he's got a bunch of partners they're all involved in a million different businesses.

1:05:13 And so they're they wind up fighting over her and they're also fighting in court. on other like business related matters and all kinds of things. Anyways. that is gonna wind up this guy's gonna wind up following Fisk into like a bar or hotel. and shooting'em twice and killing them. This is a few years from now. And so that's described in more detail later on the book, but that's like the brief overview.

1:05:34 This is they worked well together'cause they were in many ways opposites. Jim was loud and self confident. Jay was silent. And indifferent. Jim was bold.

1:05:43 Jay was cautious. Jim said what he thought. Jay kept his mouth shut. Jim like to spend his money. Jay like to keep his.

1:05:52 Jim was generous and open handed. Jay wasn't. But both men had an inexhaustible capacity for work. And both were unusually intelligent. They made a formidable combination.

1:06:05 When they joined forces. So says J was always intense and therefore serious. His whole mind. was centered upon whatever project he happened to have in hand. And this idea that he had intense focus is mentioned many times throughout the book.

1:06:18 Towards the very end, I want to read some sentences before I go back to their partnership. This will give you a great description of who he was as a person. The general impression that Jay Vogue was of a highly focused mind. Tolerating The presence of a body out of mere necessity. His concentration was so intense. That you noticed it.

1:06:37 Alright, so let's go back to this partnership what they're describing. So he's Very serious, his whole mind's centered upon whatever project that he happened to have in hand. He was a stronger character than Jim Fisk because he was more tenacious. But somehow he didn't seem to know that much about people. So that is Jim was like a master at people. Jim Fisk, on the other hand, served as the consummate salesman and promoter.

1:06:57 So at this point Jay and Jim are in this battle with Vanderbilt. They go back and forth a bunch. And so they're hold up, hiding out in New Jersey. It's very complicated. This has to do with the control of the Erie Railroad. And so what what they're describing in the book and why I'm bringing this to your attention is'cause like Jay Gold sets the strategy. And then Jim goes out and and manipulates the media. Commodore Vanderbilt owns New York, he told the reporters. He owns the stock exchanges, the streets, the railroads, and most of the steamboats there belong to him.

1:07:24 As ambitious young men, we saw that there was no chance for us to expand, and so we came over here. to grow up with the country. While Fisk was doing all the talking, it was Jay Gold who had composed talking points. To him goes the credit. For this master stroke of framing the fight against Vanderbilt.

1:07:42 In populist terms. This is just a high minded battle. Against single minded greed. Із ар аґенц монополі. We just know from the Edward Bernade's book that I just covered how the press is routinely manipulated for private interest.

1:07:55 The idea of That they put a populist spin on this war for control of the Erie Railroad as a war against monopoly. Every single one of these guys are monopolists. Like this is absurd. And so let me grab another paragraph from the book, paragraph or two of the book, because it goes into detail again about their partnership. It's just a it's a huge part. of understanding Jay Gold's career.

1:08:15 Jay remained devoted to Fisk, who fulfilled most of the social and public relations obligations of their partnership. Fisk. Most often provided the public face. For Jay Gold's machinations. Jay preferred to let Fisk handle all the late night entertaining.

1:08:31 Fisk was far better than Jay. At Glad Handing. Befriending Carousing with And winning the men of the press.

1:08:39 Jay retreated to his house and his family every evening. with a religious consistency. And so what would he do when he went home? Always devoted to his books, Jay now began to collect, and unlike other such collectors he actually read antique editions. Of his classic works.

1:08:56 His taste ran Towards the natural sciences. He also collected books on botany and spent much of his time with his children working in the garden that he had cultivated. When his sister Sarah visited She guessed this is what I mentioned earlier that keep in your mind.

1:09:10 When his sister Sarah visited, she guessed at the source of Jay's fascination with beautiful flowers. When she recalled As J could not The extensive gardens Their mother

1:09:22 had once maintained Around the old farmhouse. So the book goes into the eerie war. It's extremely complicated and hard to follow. I've said I've read this one these parts multiple times, still can't really figure it out, and this is why. The great Erie Railway stock litigation

1:09:40 Was the most extensive And complicated ever brought before the civil courts of any country. The weapons deployed by both sides in this quarrel. added up to about a hundred and twenty million in capital.

1:09:53 The players contesting for control of the Erie. We're the sharpest to ever walk on Wall Street. And so after this was resolved, that's when Vanderbilt. has that famous quote Van Der Belt was annoyed but also impressed by Jay.

1:10:07 Vanderbilt told a reporter. That he considered the younger fellow The smartest man in America. That is not the last time that Jay is gonna tangle with Van Der Bolt. There's actually a f funny story later in the book I'll tell you about. I gotta get to when Jay The most famous thing that Jay's known for is c cornering the gold market or attempting to corner the gold market unsuccessfully, actually.

1:10:27 And causing the uh a Great Depression, like a financial it's it's the original Black Friday. I know that term is used multiple times, but this is the first time it's used. Okay, so I think a good place to start is to realize, hey, at this time a lot of people were trading gold. Almost all this is on margin. That's what Jay's doing. And then he realizes that's not good enough. I want to be able to actually predict the market and I want to have an unfair advantage. So says the Gold Exchange Bank was a clearinghouse that by eighteen sixty nine averaged seventy million in business every day.

1:10:53 Most of this trade was being transacted on mar transacted on margin, as Jay later explained to a congressional investigating investigative committee. 'Cause this is gonna spawn the panic of eighteen sixty nine. That if a man had a hundred thousand dollars of money and good credit He could transact business of twenty million dollars. twenty million dollars being the total gold available.

1:11:15 In New York City at that time. So as normal, he's studying the market, trying to figure out okay, what's the most influential level lever I can pull. He took notice that the Treasury Department had the power to shape and move the market. He commented

1:11:29 That if one could control or at least have advanced knowledge of the treasury movements with regard to gold, Then one would be in a position to corner the market. Reaping a massive return in the process. He is thirty three years old when this is taking place. So up until what you and I know about Jay at his point in life. What do you think a man like that

1:11:48 He's gonna say, Hey Huh. The Treasury Department Can shape and move the market. I would just have to find a way to get advanced knowledge of the treasury movements with regard to gold.

1:11:57 I should put my guy Who's under my control. in that position. So there's two things happening here. Jay is trying to influence the president. This is uh you uh president Grant at this time. And he w needs to get his guy hired.

1:12:11 as an assistant federal treasure. Okay,'cause remember, Jay saying that knowing what the treasury was doing is in advance is key to this whole thing. This is not gonna work out well for him, by the way. Check this out. He sets up President Grants

1:12:23 Brother in law. So this guy named Corbin. From that moment on Corbin or rather his wife'cause it was in his wife's name, which would be Grant's sister. Would profit fifteen thousand dollars on every dollar rise in the greenback price of gold. So

1:12:38 J wants the price to go up. Gold then sent sent Corbin, which is Grant's brother in law, To Washington. To lobby his brother in law. On the necessity of tightening the gold supply.

1:12:50 Now this lobbying It's sometimes overtly direct. So where gold at one point Grant's like hey, keep gold away from me, he keeps bringing up this This thing over and over again. But he doesn't realize at this point Grant does not know that his brother in law is in on this, okay? When he finds out

1:13:05 That is where everything goes bad for Jay. Before that happens. Jay lobbied successfully for the appointment of Brigidaire General Daniel Butterfield. His new position called for Butterfield to execute all orders. For US treasury transactions in the New York market.

1:13:22 Butterfield, by definition, Would be the second man. After the secretary himself To know of any US Treasury moves.

1:13:31 With regard to gold. The third piece of this is is Jay's pool. This is also gonna lead to one of his download downfalls. He does not have enough assets at this time to do to corner the market himself. So he's got to collect There's I'm gonna skip over all the names. There's a bunch of them. Let's say maybe ten other, you know, wealthy investors.

1:13:48 And saying hey, let's Let's do this together. And his partner Fisk is like, dude, you're crazy. You can't be doing this. Although Fisk remained willing to help his partner in any way he could, at the outset he kept his own money off the table. Eventually he's gonna jump in. And this is why the thing began to look scary to me, he said. Indeed, given the many wild cards in play, it seems surprising that

1:14:08 That the normally careful J Always so intent on controlling every aspect of his deals, decided to go ahead with the plan to corner gold. Why is that point why is why are they bringing that up now? Because his pool, like this this investors These

1:14:22 They are not Like he doesn't have control over them. Gold's pool was barely that The quote unquote members remained independent. Giving gold no fiduciary authority over their investments. And this is the most important part to understand. Each player was free to buy or sell

1:14:37 According to his own clock. So it is not a pool. At all. And so you're gonna see As they're doing like they they keep Defecting.

1:14:43 Sometimes they they sell when Jay wants them to buy, and sometimes the reverse. Sometimes they don't act at all. So this is a again, he's he's too aggressive on Grant. And his pool members are not actually loyal to him the one thing that that saves his ass Is the fact that he had Butterfield in that position. And so let me fast forward to the end where this all falls apart because we're gonna see the mistakes that he makes. In a clumsy attempt to counter this lobby, meaning that his pool members are now moving against him, the increasingly nervous gold

1:15:12 embarked upon an action that proved lethal to his cause. He instructed Corbin to write his brother in law a letter. Arguing Against federal intervention. Then he had the letter hand delivered

1:15:23 By an eerie employee. to the president. In rural Pennsylvania. And so Grant's not a dummy. He's like, Why is A member of

1:15:32 Like I'm like my brother-in-law is trying to track me down. I'm on vacation. I'm in the middle of nowhere. The letter is hand delivered by somebody that works for Jay Gold. What is happening here? All was not right, thinking it odd that his brother in law had sent a courier to find him in the wilderness and deliver a plea for support of gold prices, which is what Jay wanted at this point, Grant had long last realized that Corbyn was an interested party And was long on gold and anxious to influence the president to protect his financial position. He became enraged.

1:16:01 So Grant comes upon his wife, right? Remember that's Corbin's uh sister. In the process of writing a letter. To Corbett's wife. And so Grant is giving his wife a very specific message to convey. To Corbyn's wife.

1:16:14 Tell your husband That my husband which is the president of the United States is very much annoyed By your speculations, you must close them out as quick as you can. So when that letter arrives to Jay's partner

1:16:28 He's like, Uh oh, Grant is saying we need to close this out immediately. Jake. Star stops buying. And then start selling very slowly. Now

1:16:37 A day or this is like uh I think a day or two later, maybe like a week later, I can't remember the exact time frame. There's he starts selling very fast. And this is where his plan fails. And so they're like, Hey, what caused J to speed is exit. First,

1:16:49 Uh the 10th National Bank would no longer be of service. This is somebody they were a financial institution they were using, because federal auditors had arrived on the premises. Word of an impending failure was on the street. Immediately afterward There's about to be a bank run on tenth national is essentially what's happening here. Uh immediately afterward the broker

1:17:06 For the assistant federal treasurer, so that's Butterfield, right? The guy gold put in par place. That guy's broker It s has suddenly become a seller. rather than a buyer of gold. That tips off Jay.

1:17:20 Oh. This is over. I gotta reverse pusition. Immediately. And that is the only thing that saves Jay from hav being almost completely wiped out. He still has a loss, which I'll get into right here.

1:17:31 But not nearly as if he didn't have Butterfield in that spot. Uh nearly a thousand individual investors were bankrupted on the day's activity, fourteen brokerage houses went under, along with several banks. This is J uh Jim Fisk's description of Jay Gold that day. Jay has sunk down right now. There's nothing left of him but a heap of clothes and a pair of eyes. Although at the end of the day he turned a small profit on gold, the week's massive decline in stock prices meant that gold owed significant sums.

1:17:57 on margin calls. Now the author makes the point that the money He's gonna make back. I think in like eighteen months he's like richer than he ever's gonna be. So he just jumps right back at it. But the p this is what the the long lasting effect is.

1:18:10 And it goes back to what Warren Buffett warned. Like he's got this great quote about why you need to protect your reputation at all costs. He's like, It takes twenty years to build a reputation and five minutes to ruin it. If you think about that. You'll do things differently. Well

1:18:23 This attempted cornering of the gold market destroyed Jay's reputation. Reputation to this day. And we're what, hundred and fifty years later? Uh, Jay's attempted gold col gold corner would cost him dearly in one other m way.

1:18:37 In addition to market losses. Oh, this is funny, actually. This isn't his reputation. I'll get there in a minute. Vanderbilt wins again. This guy's just hilarious. He's a terrible person. somebody you don't want to be friends with, somebody you definitely don't want to work with, but he just he pops up in all these like stories. It's amazing. So

1:18:52 This also cost him'cause he's running a railroad. So one of the brokerage houses that failed in the wake of Black Friday. company called Lockwood. Okay. The guy the chairman of Lockwood.

1:19:03 was it's named after him. His name is Le Grand Lockwood. He was also, in addition to being a chairman, Of a brokerage house. He was A treasurer.

1:19:12 On this very important railway that w was of strategic importance to both Jay Gold and Vanderbilt, but they did not have control over it at this point. So that's called the Lakeshore and Michigan Southern Line, okay? Because his brokerage house failed, the

1:19:26 Lockward. Was forced To throw an enormous block of stock. From his railway. Onto the market.

1:19:34 Depression. So it's d considerably depressed in the aftermath of Black Friday. It says with his own affairs in disarray, Jay could not act swiftly. You already know who does though.

1:19:45 Instead It was Vanderbilt who purchased seventy thousand shared. Of Lakeshore at a bargain price. And then took control of the line. Vernuble wins again.

1:19:57 The gold corner was to cost J. Gold even more dearly in the way of a tarnished reputation, which is what I just said. Even to that this is when The precious absolutely destroys him. And he never escapes this. N he didn't escape in life and he didn't on uh and he doesn't escape it in death e either. So Jay does something smart, he licks his wounds, gets right back in there, starts building up his fortune again.

1:20:19 There's a couple of different things that are gonna happen on these next few pages. They really speak to like his not only how clever he is But how ruthless. He could be. And a lot of the stuff, that's why they said like uh at the very beginning

1:20:29 What was that line that some of his acts were among the first things prohibited by the SEC when it came into being in the nineteen thirties, and we're gonna see just out and out corruption for sure. Nothing we'll get there in a minute. This was actually funny. This made me laugh. 'Cause it's also clever on Jay's part. So both railroads are battling Vanderbilt's railroads and Jay's Railroad.

1:20:48 To try to get more cattle shipments. From the West. to flow east over their lines, right? So they make more money. So To attract they have like basically one lever they pull here, they do rate wars over and over again, which you and I've talked about on past podcasts about you know the history of railroads as one as a history of rate

1:21:05 So It's like all right, we right now Vanderbilt It's charging a hundred and twenty five. So J starts to rate war rate war. And he says, if you throw your cattle and you ship it on my line, instead of paying Vanderbilt a hundred and twenty five, you could pay me seventy five. So then Vanderbilt retaliated.

1:21:22 And dropped his to fifty. Gold then retaliated and dropped his to twenty five, only to have Vanderbilt go to a ridiculous One dollar per carload. And this is hilarious. At first, Vanderbilt delighted in reports that while his cars were packed,

1:21:38 The Erie trains ran empty. Only later. Did he learn? That J Uh the Jay Gold and Jim Fisk

1:21:45 Had bought every bit of marketable live stock. Coming into New York. Which they then ship to New York. Via Vanderbilt's Railroad. Realizing enormous profits.

1:21:58 So he's like My car look, I dropped it to a dollar. I'm gonna try to starve them out, I'm gonna win this great war. They're like oh we'll just buy all the livestock. And then thanks thank you, Vanderbilt, for trans transporting our livestock for a dollar, which we'll resell and make a huge profit, which they then ship to New York via Vanderbilt's uh Vanderbilt's railroad, realizing enormous profits. That is clever, dude. When the old Commodore found out that he was carrying the cattle of his enemies at a great cost to himself and great profits to Fisk and Gold,

1:22:26 He barely nearly lost his reason. So that's one thing of being clever. This is him being ruthless. This would obviously be very illegal what he's about to do now. Jay also routinely played stocks of firms. such as the United States Express Company. which is a package and mail delivery service that relied on his railroad for its livelihood. Look what he does here.

1:22:47 He never hesitated as eerie president. To make ominous noises about severing relations or raising the rates for such a dependent organization. He would then short its stock. And reap hundreds of thousands of dollars as it tumbled down. Later.

1:23:01 He would send out a positive word. That would revive the company's prospects on Wall Street along with its stock valuation, at which point Jay would ride the same security back up. And then more on his ruthlessness. This is just what I mentioned earlier that he just considered bribing politician politicians. as a normal part of his job. And he's about to say this to Senate investigators.

1:23:22 It was the custom when men receive nominations to come to me for contributions, Jay said, and I made them. And I consider them that this good paying dividends for the company. In a republican district, I was a strong republican. In a democratic district, I was I was a Democrat.

1:23:38 In politics, I was always an eerie railroad man every time. These transactions were plentiful enough so that Jay claimed not to be able to count them off individually. There has been so much of it, he said, and it had been so extensive that I have no details how to refresh my mind. When I went over a transaction, I completed it, that was the end of it, and then I went on to something else. You might as well go back and ask me how many cars or freight were moved on a particular day. I could not

1:24:04 charge my mind with the details. I can only tell you Well my general rule was And that was my general rule of action. And then right before he gets to his What he considers his greatest accomplishment. This is the Union Pacific.

1:24:18 I had this thought, I just jotted it down. There's not even a highlight, it's just a post-it note on a page because it's just going on from page after page. And I go, at one point at this point, You have to wonder why not apply your genius to something good? Why don't you build apply your genius to building a great product And a great company instead. And so that's indeed what he starts doing uh in like the next chapter or two. Before I get there, I just have to tell you this funny exchange where Vanderbilt admits that he hates Gold's face.

1:24:43 The old Commodore instead said that he disliked gold because of his face. No man could have such a countenance and still be honest, Van Der Bolt said. God almighty has stamped every man's character upon his face. I read Mr Gold like an open book the first time I saw him. I consider

1:24:59 Jay Gold, a damn villain. Gold suggested that perhaps Vanderbilt. At seventy nine was senile. Jay Gold was thirty six. And so everything else that takes

1:25:10 place for the rest of Gold's career and life. is taking place where the entire country hates him. They said you know he's the most hated person. The press is just relentless. At disparaging them, try to make fun of them. Calling him a devil.

1:25:24 And so I had read enough of these reports that His response when I got to this part of the book Really surprised me. And the reason that this surprised me because Jay thought that the press was doing him a favor. And his attitude does

1:25:36 Like make me believe that he definitely had an inner scorecard. as opposed to an outer scorecard. And as I read the these two paragraphs, what also came to mind is what uh John D. Rockefeller realized when he was a young man. working in the commission house.

1:25:50 Uh he said something that was fascinating. He said that Things are not as they appear from the outside. That was like his main lesson he took away from that job. So he says the public heard from Jay only when he and not the public would profit by the utterance. Jay gave interviews for a purpose. His statements on these occasions are

1:26:06 We're often masterpieces of misdirection. I feel like you and I have been talking about misdirection a lot these last few podcasts. Jay also used the press to nurture the popular image that he had emerged with after Black Friday. The darkness Inscrutable. A moral

1:26:21 And ultimately Pitiless. Master of financial markets. One of Gold's like lifelong people that worked with him and was friends with him, would recall Jay repeating Machiavelli's advice from the book The Prince. That it is better to be feared than to be loved.

1:26:37 An explain that his image as an evil Br brilliant wonder kid. was his most valuable possession. He takes it even a step further here. Look look at h the way he thinks. To keep up his reputation.

1:26:50 As a villain. Jay always insisted on anonymity when it came to charitable giving. Jay donated generously to a host of worthy causes throughout the seventies, eighties. and early nineties

1:27:02 But routinely insisted. That his name not be associated with these gifts. Lest one of the key pillars of his publicized character His cold blooded heartlessness. Be undermined.

1:27:16 And so now we finally get to the point where Jay says, Hey, I'm gonna actually run a business for the long term. From the spring of 1874 onward, for the rest of his life, his primary personal focus was not stock speculation, but the management of the Union Pacific as a business. He was the supreme ruler of the UP. Even though he preferred anonymity and officially held no positions other than a s his seats on the board and executive committee. Jay not only strengthened the firm's financial structure,

1:27:43 But also served as its chief strategist, and so Think about what w you and I were just talking about. Hey. You're doing all this st crack. Yeah, you're making a lot of money, but you're you know, kinda just pumping and dumping and You're c committing a lot of enemies.

1:27:54 You're shuffling paper, you're you're making great w wealth, but like why don't you You clearly have a genius. Like why don't you apply that to actually doing something? And this is where he's like he considers like his greatest achievement. And so he starts off applying his same modus operandi, as we've seen him apply over and over again. In taking on all these tasks, Jay necessarily immersed himself. in the minutia of the UP's operation.

1:28:14 Coming to know the UP's road. Resources, strengths. Intimately. Jay would ride the length of the UP's tracks as well as the railroads controlled by his competitors.

1:28:25 As he rode. A stenographer would sit at his side jotting down the Mogul's running thoughts on maintenance initiatives or possible cost economies and recommended improvements. We also see that he decided, Hey, I need to supplement my knowledge of affairs.

1:28:41 of the railroad by finding uh more a player, so he hires this guy named H. H. Clark. Uh H H Clark became G uh Jay's chief operational lieutenant. Clark knew Wall Street not at all. But he understood locomotives and freight forwarding. Intimately.

1:28:56 He and Jay shared two traits. They were both workoліcs. And they both loved books. In the evenings, after Jay's train pulled to rest both the machine and the men driving it, Jay would then walk the lonely western towns.

1:29:09 So the towns, these like tiny little towns that are starting to be serviced by Jay's railroad. And he just he's doing the exact same thing that we saw the founder of UPS do. Back on podcast number one one ninety two. Uh, the founder of U P S was Jim Casey. He started U P S when he's like seventeen years old or something like that, but he would make a point. He's like, Listen, my executives tell me what they think I want to hear. It's like filtered through all this other nonsense. So every time you'd see a brown UPS truck, he'd pull over and start talking directly to the driver. So we're seeing very similar things here.

1:29:37 Because obviously like the railroads are servicing something, not only are they moving freight, but they're moving people and and all these like little frontier towns are po are popping up. So he'd walk these lonely western towns and quiz local UP employees for their views concerning what the company might do better in that particular neighborhood. Our men on the ground so j what Jay's realizing here's exactly what Jim Casey said. Our men on the ground have intelligence we need. They are our agents and if we fail to know their mind we fail to know their minds at our own peril. Throughout his long days back at the UP

1:30:06 uh business office in New York he focused always on core business fundamentals. Memo after memo stressed essential basics of economy. Prices could never rise to the point where they jeopardize the long term interests of our customers, he would say. Expenses had to be monitored. Constantly and closely.

1:30:22 And so then the book goes into detail, like what are the main expenses of a railroad? Their main expenses are capital, because a ton of them are saddled with debt because they've been just used and abused as financial instruments as opposed to businesses. So you have capital costs. Labor and coal. So this is how he's gonna wind up dropping coal expenses by thirty two percent. And he dropped labor by forty eight percent.

1:30:40 Also very, very ruthless. So the UP owned a bunch of coal mines. They had staffed it previously with a bunch of people uh Norwegians and Swedish. And They're going to make a fatal mistake when dealing with Jay Gold. The Norwegians and Swedes talked of solidarity, a sentiment

1:30:56 with which gold, like other capitalists of his day, had no sympathy whatsoever. When these men whom gold already thought were being overpaid at fifty two dollars a month. seemed on the verge of a labor action, so think of it as a strike. Jay reinforced their ranks with Chinese miners at a monthly cost of just thirty two

1:31:14 per head. He's gonna get that down to twenty-seven. So he's gonna reduce his labor costs from fifty-two dollars a month per person down to twenty seven. Uh, when the miners finally did go on strike, Jay Jay just brought in more Chinese. At the same time, Jay issued orders to purchase new Modern machinery. with which to maximize efficiency and also obviously get rid of as many employees as possible, like physical labor and try to re try replace that with technology. And so why is that important? Because Andrew Carney is the first person that put this idea in my mind, but we see he's doing it just around the same time as Jay is.

1:31:45 And even as a young person starting out in the steel industry, he would always invest in technology And have the latest machines and the latest technology, even as the old timers in the industry is like, Oh, you're wasting your money, Andrew, what you're like. you like this is you shouldn't be doing this or whatever the case is. And the the one of the main lessons I took away from reading Andrew Carnegie's biography is that you should inv always invest in technology. The savings compound.

1:32:07 It gives you an advantage over your slower moving competitors and can be the difference between profit and loss. We see Jays doing this in the coal mines. This increased the production in the UP controlled uh mines more than doubled. While the cost per ton dropped a total of sixty five cents to dollar thirty five. So he's paying Before two dollars a ton.

1:32:25 Now he's paying a dollar thirty five. By my calculations, that's a drop in coal expense by thirty two percent. Thus laying a vital cornerstone for UP expansion. So not only is he building up this railroad, but the the other main technology of the day besides railroads is telegraphs telegraph lines are usually run next to railroad tracks. And so that's why you would see s uh some people that invest in railroads would also invest in telegraph lines.

1:32:47 He decides, hey, Western Union has a giant monopoly. It's the largest telegraph company in the United States. He winds up buying controlling interest in a much smaller one. He wanted to see if he could compete. Like the way to think about what's happening is like Well

1:33:01 Does can a better can better technology beat a better network. Turns out. No, and not in this case. So

1:33:09 What he's doing at this point, this is where he his he his life intersects with what I mentioned earlier, Thomas Edison. This is a young Thomas Edison. This is not like super famous Edison. And he has invented a way to send multiple like essentially more messages on the same line. So Gold's gonna buy this technology and he's gonna try to put it onto the the telegraph company that he controls.

1:33:29 But here's the t the telegraph company that gold controls, it's called A and P. At this point they have seven thousand four hundred and sixty miles of wire, okay? So seventy four hundred miles of wire, not that bad. Western Union has a hundred and fifty four thousand miles of wire. So this idea where it's like oh I'm gonna try to compete

1:33:44 against a better network with better technology actually doesn't work. it doesn't matter that he had better technology because the network effects of of Western Union this time had to be overcome. He wasn't merging the two companies later in um with w uh merging his A and P with Western Union. But what I wanna tell you tell you about is that I realise like oh This is what I meant earlier is like he had this monk like

1:34:05 uh dedication to understanding things and he just took it so much further than the average person would or any other person would. And so it's very highly likely that there was not another person That understood the complexities of railroad interchanges and finance. a as much as Jay Goal did. And that was his like his main advantage, right? And when you realize like this interaction that an older Jay Gold have is having with a younger Thomas Edison, it's like oh they're barely the same on the same planet.

1:34:28 Because their interests do not overlap at all. So it says during subsequent interactions, Edison discovered that Jay Gold had no sense of humor. I tried several times to get off what seemed to me a funny story. But he failed to see any humor in them. I was very fond of stories and had a choice lot.

1:34:43 with which I could usually throw a man into convulsions. Jay did not respond. Gold in turn tried to dazzle Edison with a detailed discussion of On the complexities of railroad interchanges and finance, his passion, right? He brandished maps and lectured on for hours.

1:35:02 About his particular passion. All to no effect. The two men barely lived on the same planet. Let's go back to how ruthless he can be. He is building up the UP at the same time he's building up the UP

1:35:14 Part of that is consolidating smaller and and rolling up like these smaller railroads, right? This like standard playbook that a lot of the railroad or railroaders used. Now the weird thing is like some of these he rolled up into UP, some he controlled independently. And so I was texting a friend of mine about this yesterday. And this is how I was like Gold just made this is the what I wrote in text message.

1:35:35 Gold just made forty million in the eighteen seventies. By selling a railroad he owned fifty percent of To another one he operated and threatened. The board of the UP If you

1:35:46 No, this is gonna get real confusing. So this is what he's saying to the board of the UP. He's trying to sell ownership in another road where the handles are more than fifty percent. He goes, If you Which is really we Don't buy this.

1:35:57 I will extend that other line and And compete with you. Which is me. This is clearly a conflict of interest. I cannot believe this happened. And then so that was a text message. This is a note, selling to himself.

1:36:08 Hey board. Buy this other line I own, or I'll compete against you, which is us. Gold's careful collection of rival lines came to a head at the very end of 1879 when he proposed to his fellow UP directors that his Kansas Pacific Denver combination should be merged with the United Pacific. As a stick. He threatened should his fellow UP directors turn down his offer.

1:36:32 He would extend the Kansas Pacific, where it would then link with another railroad called the Central Pacific. And that would gain an independent connection to the West Coast. The UP directors agreed to gold's terms. Gold, who held close to half the Kansas Pacific stock, later estimated that he had person personally netted Forty million dollars on this one transaction.

1:36:55 He was not yet forty four. And this is what the author said about this. This is nothing new to Gold. He did this when he ran the Erie. Gould resumed the trading position he had so often occupied when he ran the Erie. That of representing both buyer and seller. And then this goes back to one, he was obsessed with valuable information.

1:37:13 And he also at the same time desired you To be confused and to believe false information. Main theme in his life. Despite Jay's steadfast and detail oriented management of the Union Pacific, the press and the public continue to view him as nothing more than a supremely talented Corporate rater. Jay said nothing.

1:37:31 To dissuade them. If people believed he was spending all of his hours rigging Wall Street Then they were distracted from his real agenda. The press of Jay's own era presumed that he had no entrepreneurial devotion to the firms which h with which he was concerned

1:37:47 After he died. only a select few of his associates would remember the long trips across the desert and mountains. Jay demanding that he be shown each and every trivial branch and spur. Only they would recall the plothora. Of maps stacked up on tables in Jay's office.

1:38:07 The maps that had so bored Edison. All of these maps. Annotated. In Jay's own hand.

1:38:14 With detailed data. On mineral deposits, grades. Population centers. And the like. Only they

1:38:21 Would remember. His clearly enunciated vision. That the creation of the gold system of railways in the American West. Constituted His most important life's work.

1:38:33 His monument. His contribution And only they would recognize his truth. The simple words Jay spoke. I have been interested in railroads.

1:38:43 Ever since I was a boy. I think a railroad train Is one of the grandest sites. In the world. And that is where I'll leave it.

1:38:53 Highly recommend reading the book. Uh, if you buy the book, I don't th this is not gonna be the last book I read on Jay Gold. I I know in the future I'll I'll pick up another one for sure. If you buy the book using the link that's in the show notes on your podcast player, you'll be supporting the podcast at the same time. That is two hundred and fifty eight.

1:39:10 Books down? One thousand ago. And I'll talk to you again soon.

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