Gould's railroads

Gould bought all four western legs while rivals sold theirs off. The Pennsylvania was divesting its western connections, and railroad executives prided themselves on low debt, cautious extension and conserved cash. Gould went after all four western legs at once, and by 1883 he was dominant owner or controlling shareholder of dozens of railroads.

His reasoning: "If I own all of them, I will be in much more powerful position." Charles Morris argues the old rules of good management stopped working once railroads became a contest of strategic position.

Founders▶ 29:39

Gould won a price war by cornering the cattle market, not matching cuts. Vanderbilt's New York Central cut cattle shipping to a penny a head to hurt Gould's Erie. Vanderbilt laughed as his trains filled with steers until he found Gould had cornered the cattle market and was profiting from his shipping losses.

Gould was in his early 30s and a virtual unknown, against the richest man in America, and still came out with the Erie. He kept reading the whole board instead of answering price with price.

Founders▶ 27:51

Gould consolidated through finance and secrecy, treating pools as cover for the weak. Like Carnegie and Rockefeller, he saw pools as refuges for the weak, useful mainly to mask his intentions. He offered fair prices to roads that joined his network and attacked holdouts in the securities market.

Railroads were the first large investor-financed, publicly traded corporations, and Gould found the leverage points where a few purchases made him master of a whole enterprise, often through secret ownership. Competitors who thought they had a truce found him acting through unnamed railroads. He did most of the strategy and analysis himself, where Morgan relied on senior partners.

Founders▶ 43:30