A Young Unknown Beat America's Richest Man by Riding His Penny Cattle Rates

The trains were packed with cattle, and Cornelius Vanderbilt was laughing.

Vanderbilt, in his seventies and the richest man in America, owned the New York Central Railroad, one of the country's largest companies. He was in a rate war over cattle shipping with a rival line tied to Jay Gould, a Wall Street trader still in his early thirties and then a virtual unknown. To steal traffic and hurt the other road, Vanderbilt cut his price to an absurd penny for each animal shipped.

It looked like victory. His cars filled with steers. Then he learned why they were so full.

Gould had quietly bought up the cattle itself. Every penny fare that lost Vanderbilt money made Gould money, because Gould owned the herds riding at that ruinous discount. He was getting rich off his enemy's railroad.

That trick was typical of how Gould fought. He and his partner, Jim Fisk, a fellow trader and railroad operator, were trying to take control of another giant line, the Erie Railroad, away from Vanderbilt. It was not a polite boardroom fight. When Vanderbilt had a business dispute, he did not only file lawsuits. He put a price on Gould's and Fisk's heads and sent hitmen after them, forcing the two younger men to flee New York and run their campaign from a hotel in Jersey City.

Vanderbilt had age, fame, money, and long experience in financial markets. Gould had a quick, flexible mind for seeing the whole board at once. In the end, it was Gould, not Vanderbilt, who emerged with the Erie.

Unlike many Wall Street operators of the 1870s, who played games with railroad stocks but did not want to operate anything, Gould actually wanted to run the Erie. Vanderbilt had tried to crush him with size and fear. Gould answered by turning Vanderbilt's own cheap rates into his own profit.