American History Revised (45 page)

William H. Vanderbilt had inherited 97 percent of the world’s greatest fortune.

1880
William H. Vanderbilt sold $50 million of his New York Central stock and reinvested the money in government bonds. That very day, he spent the rest of the afternoon scrutinizing a janitor’s
luncheon bills and disallowed a charge of forty cents.

“I am the richest man in the world,” he said. He started spending money in a big way. He built two $3-million mansions on Fifth Avenue in New York, one for himself and his wife, the other for two of his daughters. He took frequent trips to Paris, coming back laden with paintings and artifacts for his new palace. He treated French artists better than his janitor: whenever he would have a picture painted to order, he would offer a higher price than was asked, telling the surprised artist that he wanted him to do the very best he could.

While accumulating a $1.5-million art collection for his palace nearing completion, his wife expressed reservations about leaving their own home at Fifth Avenue and 40th Street. “We don’t need a better home, and I hate to think of leaving this home where we have lived so comfortable,” she told a friend. “I have told William that if he wants a finer place for his pictures, to build a wing to which he could go whenever he felt inclined; this is too good a house to leave. I will never feel at home in the new place. I remember the first picture we ever bought. We paid ninety dollars for it, and we were afraid to let our friends know how extravagant we had been. I have the picture yet, and there is more pleasure to me in looking at it than all the Meissoniers and other great pictures in the house.”

Other multimillionaires agreed the big house was a waste of money. One day two gentlemen from Pittsburgh were visiting New York and were cruising up Fifth Avenue in their carriage when they came to the Vanderbilt mansions. “I suppose these are really the best residences in the city,” surmised Henry Clay Frick.

“I think they are so considered,” agreed his companion, Andrew Mellon.

“I wonder how much the upkeep of the one on that corner would be?” wondered Frick, pointing to the father’s house. “Say $300,000 a year? I should think that would cover it.”

“It might,” conceded Mellon.

“That would be six percent on five million, or five percent on six, say a thousand dollars a day,” calculated Frick. “That is all I shall ever want.”

1885
When General Ulysses Grant became president, he was advised to take a “leave of absence” from the Army so he could be sure to receive his Civil War pension. Grant would have none of it: only by resigning could he create a vacancy and allow General William T. Sherman to move up the army hierarchy and take his place.

Seventeen years later, forced into bankruptcy after investing in a Wall Street swindle, Grant was destitute. He had no pension to draw on. (Ex-presidents didn’t get a pension in those days, and he got no
Army pension because he had “resigned,” not “retired.”) Sherman and other friends lobbied Congress for Grant’s reinstatement on the regular Army retired list, which would allow Grant to collect his former salary without blocking the career advancement of another general. They got their bill through the Senate, only to be turned down by the southern representatives in the House. “Thus,” the
New York Times
editorialized, “four Confederate brigadiers, eleven colonels, one lieutenant colonel, one major, five captains, two lieutenants, and twelve enlisted men did to Grant what they couldn’t do in the field.”

Taking advantage of growing public sympathy for Grant, now dying of cancer, Sherman and his friends made one desperate last effort. On the morning of March 4, 1885, when Grover Cleveland was to be inaugurated as president at noontime, Samuel J. Randall, the Democratic Speaker of the House, tried to get his colleagues to focus on the Grant issue and forget all the various appropriations bills on the table. At around 11:45 he finally got them to vote, and the Grant bill passed easily. Ulysses Grant could now relax; he had his pension.

The only problem was the Senate also had to vote, and time was running out—only fifteen minutes left. Most senators were off in the Capitol rotunda, getting ready to march in the inaugural procession. Randall ordered them to come back to their seats. In the meantime, he had one of the Senate clerks turn back the Senate clock—which had just run past noon. The senators voted, President Chester Arthur ordered a congratulatory telegram to be sent to Grant, and the senators finally arrived at the swearing-in of Grover Cleveland, twenty minutes late.

“Where have you guys been?”

1887
His was the most amazing achievement in the history of American wealth, far more so than Bill Gates or Warren Buffett today. A few people have inherited $100 million, and a lot of people have made $100 million, but no man has done both—except for one man. Most remarkable of all, he made even more money than his father. “Any fool can make a fortune,” he said. “It takes a man of brains to hold on to it after it is made.” (A sentiment subsequently echoed by Andrew Carnegie: “Even a fool can make a million dollars, but it takes a sage to keep it.”)

Asked why he didn’t buy himself a yacht even though he spent $200,000 a year, he offered this keen insight on money: “No yachts for me!” he said. “No yachts for me, no sir! They are easy to buy, but they are hard to sell.”

This Midas, of course, was William H. Vanderbilt, son of the world’s richest man, Cornelius Vanderbilt. After inheriting $100 million out of his father’s $104 million
fortune in 1877, he had to contend with some very unhappy brothers and sisters. The result was “the will trial of the century”—which he won conclusively. This gentle man, no great genius or domineering buccaneer, proved his father’s judgment to be correct: in just eight years he added more than $110 million to the family fortune. He, too, died the world’s richest man.

Believing that the burden of such a fortune was too great for one man to bear (indeed, he literally died of overwork), William Vanderbilt divided his fortune among seven of his eight children. His will attracted international attention. Observed the
New York Sun:

The apples did not stay ripe long. William Vanderbilt’s children and grandchildren embarked on a high-velocity spending spree that dissipated even the Vanderbilt fortune. By 1923 the family fortune had been chopped up into nineteen parts. Out of seventy-four Americans with annual incomes higher than $1 million, only two were heirs of William Henry Vanderbilt, and only one ranked in the top ten.
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Further decline was still to come. In 1973, 120 heirs met at Vanderbilt University for a family reunion, only to discover there was not a single millionaire left among them.

1904
In the early 1900s he was widely considered a crackpot. His two previous business ventures had gone bankrupt. Third time around, he had a nearly impossible time raising money for his latest, “best” new venture. “Come on, Henry, you’ve failed twice,” many investors told
him. “Why don’t you forget it and just get yourself a job?”

But Henry persevered, and started the Ford Motor Company with an initial capital investment of $28,000 to pay for twelve workmen and a tiny 250-by-50-foot assembly plant. Over the next forty years, how much additional capital was invested in the company?

None. Thanks to the amazing speed of the assembly line,
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the Ford Motor Company was profitable from day one and financed its growth entirely from operations. Parts makers sold their components to Henry Ford on thirty-to-ninety-day credit; because Henry Ford could assemble a car in just ninety-three minutes and sell it in a few days, he was able to build his company on supplier credit.

1908
America’s first billion-dollar fortune was amassed by Howard Hughes in the 1950s through his acquisition of Trans-World Airlines and RKO Pictures, his buildup of Hughes Aircraft into a major military electronics contractor, his real-estate development in Las Vegas, and his sole ownership of the Hughes Tool Company, which he had inherited from his father.