Central Pacific Railroad Company - The associates: four capitalists who created California

ENTERPRISE

The

Associates

Four Capitalists Who Created California

Richard Rayner

Atlas & Co.

W. W. Norton & Company

New York London

for Paivi, Harry,
and Charlie

Beneath the surface of business affairs lies the drama of human affairs. In the Atlas & Co.W. W. Norton Enterprise series, distinguished writers tell the stories of the dynamic innovators and the compelling ideas that create new institutions, new ways of doing business and creating wealth, even new societies. Intended for both business professionals and the general reader, these are books whose insights come from the realm of business but inform the world we live in today.

Contents

I n 1893, the American tycoon Collis Huntington sailed to London. English shareholders in one of his companies, the Southern Pacific, were showing signs of revolt, complaining about a lack of dividends and plotting a move against the board that he controlled.

By then, Huntington was in his early seventies and one of the richest men in the world, worth about $100 million in 1880s dollars. Depending on how you measure it, thats between $2 billion and $20 billion in todays terms. He controlled enough track to connect the North and South Poles. He had crossed America, traveling every inch of the way on steel he owned. His other assets included steamship lines, timber mills, shipyards, coal mines, and millions of acres of land in California. Recently he had orchestrated the downfall of Leland Stanford, one of his longtime business partners. If defeating enemies was a pleasure to be relished, and Huntington certainly did relish it, then entombing the prospects of a colleague who had turned into a rival was so much the sweeter. Unlike Stanford, Huntington hated fame and almost courted unpopularity. He was cold and crafty, hard. There was something almost heroic in his preparedness to be disliked.

This imposing man was more than six feet tall, with a massive frame and blue-gray eyes that could turn steely. He habitually wore a black frock coat and a black tie. A gold watch chain stretched across his belly. A thin gold ring adorned his left pinkie. He was bald and his full beard was white. His back was humped and rounded, as if to bear great responsibility and great abuse. Still, he had the health and energies of a much younger man. He liked to boast of his familys longevity: He expected to live to be a hundred, he would say. For some he was almost the devil incarnate. The railroadsthe way they were run and the power they hadwere by then regarded as corrupt, cruel, implacable, and fiendish, in stark contrast to the gratitude and excitement with which theyd been greeted thirty years before. Not that Huntington cared. By his admission he didnt much mind whether he was honest or not.

For years hed lived by a simple rule: his way, or no way at all. He was a great persuader, and a great fixer and intimidator too, and on this occasion he bamboozled the London stockholders with his plans, some real, others mere fictions proposed with equal conviction. He spoke of bridges, subway systems, more steamship lines and railroads; he warned that patience and yet further investment were necessary. All the while he assured them that the ultimate return would be great. He blew smoke, and he was good at it. This was a man who had bent the United States Congress to his will not once, but countless times. His investors, rather than pulling out or continuing to challenge his board, gave him a resounding vote of confidence.

Rebellion crushed, mission accomplished, Huntington and his second, much younger wifehis trophy wife, who had introduced him in his declining years to the sort of extravagance she saw as the due entitlement of his disproportionate wealthcrossed the English Channel to do some shopping in France. Shopping in this case meant not the armloads of purchases that might be made during an afternoons stroll down the Champs-Elyses but the acquisition of entire museums and the contents of various chteaux. In Paris, journalists flocked to prod at this Yankee Medici. They smiled at his enthusiasm for, and apparent ignorance concerning, the masterpieces he had bought. They asked how he had enjoyed Offenbachs Contes dHoffman , knowing that the previous night he had been snoozing and snoring in his box at the opera.

Huntington merely smiled, immune to their condescension. After all, the American press really roughed him up. The San Francisco Examiner (owned by his enemy William Randolph Hearst) pictured him with his hands in the pockets of the average citizen, a design of dollar bills decorating the brocade vest that stretched across his paunch. Collis Huntington was a hard and cheery man with no more soul than a shark, the Examiner said.

A French reporter asked Huntington if he had seen the recently completed Eiffel Tower, at 985 feet tall surely the worlds most prodigious feat of engineering. A frown passed across Huntingtons face. The question seemed to irritate him. He replied that, yes, he had seen the Eiffel Tower.

I wasnt impressed, he said.

The French reporters were silent.

American engineers could easily build such a structure, Huntington said, and make it a mile high if they wanted to.

But why would they want to? he asked.

Thirty years before, in 1860, the idea of a railroad that would span the American continent had still seemed a fantasy, a pipe dream. Yet by 1869 just such a road had been built, and he, one of the men behind it, knew that this, not some French bauble, was the engineering wonder of the industrial age. He knew, moreover, the force that had driven those tracks. Certainly it hadnt been the quest to make something merely spectacular and beautiful.

Your Eiffel tower is all very well, Huntington told the French reporters. But wheres the money in it?

THE COMING OF the iron horse, the building of the first transcontinental railroad: Its a legendary story, a central part of the American Wests creation myth, and its been told many different ways: as a kind of triumph of will, guts, and the American can-do spirit over unimaginable difficulty and danger; as a tragedy, involving the virtual extermination of Native American cultures and the vast herds of buffalo that sustained them; as a race, between the Irish navvies of the Union Pacific, laying track from the east, and the Chinese coolies of the Central Pacific, advancing from the west. All these versions have some validity. But really its a story about cash, about rapacity. The railroad was builtbuilt, as opposed to dreamed of and talked aboutby men who cared only about money and were absolutely ruthless about money. The lust for riches propelled the railroad over the mountains, through the deserts, across the plains. Money is the only way it could have happened. This adventure, and it certainly is an adventure, is about business. In California a group of storekeepers bent laws, broke rivals, and bribed governments to emerge as billionaires. They didnt care about the railroad as such. They wanted to line their own pockets, to do business. Their names? Collis Huntington, Leland Stanford, Mark Hopkins, and Charles Crocker. History knows them as the Big Four, or more pleasingly, the Associates, a name with something simultaneously secret, powerful, and sinister about it. Their vision, their genius? They saw the value of an opportunity that others spurned, seized that opportunity, controlled it, rode it to unruly fulfillment, then maintained and maximized it over decades with a subtlety and stamina that boggle the mind. The building of the railroad, the creation of a state, and the invention of big business as we now understand it were merely the necessary by-products of a process by which these four men became as fabulously wealthy as anybody in American history. Later they sanctioned murder and were able to paint themselves as civilization-changing philanthropists, but only because by then theyd bought enough newspapermen and historians to make such a recasting of events even remotely plausible.