How Jay Gould Built Wall Street's Biggest Fortune

1. 0:00 – 6:43

   Jay Gould's Reputation and the Book's Premise

   1. DSDavid Senra0:00

      Jay Gould took time off from counting his money to have lunch at Delmonico's, the fanciest restaurant in town. While he was eating, a lawyer walked over to his table and punched him in the face. A series of spectacular financial triumphs had made Gould fabulously rich. Now at age 36, he was the most notorious businessman in the country. Like others who tried to claw back money from Gould, the lawyer was getting nowhere in court. The laws were too weak, enforcement too lax, and the judges too crooked. Gould had them in his pocket. This book seeks to explain Jay Gould and his underappreciated and aggressively maligned role in the country's transformative economic expansion of the 19th century. But it's just as much an exploration of Wall Street during its Wild West era after the Civil War when, by the rough means on display at Delmonico's, the seeds of our current financial system were planted. Cornelius Vanderbilt, John D. Rockefeller, and Andrew Carnegie are not the focus of this book because they made their money in industry, not in finance. Vanderbilt toiled in steamships and railroads, Rockefeller in oil, and Carnegie in steel. Only the lesser-known figure of Jay Gould, as rich as any of them, was foremost a creature of Wall Street. To the extent Jay Gould is remembered, it's for Black Friday, the day he blew up the gold market and paralyzed the financial system. Lawyers swamped him with lawsuits. Prosecutors hit him with subpoenas, and Congress hauled him in for hearings. This was as far as things got. Arrested three times, Jay Gould never spent a day in jail. Frustrated opponents turned to vigilante justice. One victim tossed Gould down a stairway. Another one pulled a gun on him. His peers were more charitable. Vanderbilt told a newspaper that Gould was the smartest man in America. Rockefeller, when asked who he thought had the best head for business, answered Jay Gould. They recognized Gould as a master of his craft. No one disputed that he was an extraordinary problem solver, an unparalleled negotiator, an expert communicator, a lightning-fast thinker, and a masterful tactician with a staggering memory. He complemented his natural endowments with nerves of iron and a work ethic, even as a teenager, so strong that it damaged his health, and quite possibly shortened his life. With his mix of brains and single-mindedness, he was suited to make the most of the moment. But why does he matter? There's an easy answer. While he made his money on Wall Street, he did as much as anyone through his work with the railroads to build the country. Railroads changed America in the 19th century, much as automobiles changed the country in the 20th century, and the internet has changed the 21st century, and Gould knew how to play the game. That was an excerpt from the absolutely fantastic book that I read this week, and the one I'm gonna talk to you about today, which is American Rascal: How Jay Gould Built Wall Street's Biggest Fortune, and it was written by Greg Steinmetz. Okay, so I gotta start by reading the inside flaps of this book, the inside cover of this book, 'cause it's absolutely fantas- it gives you an absolutely fantastic overview of the life and career of Jay Gould. And this is what it says. "He was richer than Rockefeller and so bare-knuckled that even Wall Street had to start making rules. Had he put his name on a university or a concert hall, he would undoubtedly be a household name today. The son of a poor farmer whose early life was marked by tragedy, Jay Gould saw money as a means to give his family a better life, even if to do so, he had to pull a fast one on everyone else. After entering Wall Street at the age of 24, he quickly became notorious when in an attempt to corner the market on gold, he paralyzed the economy and nearly toppled President Ulysses S. Grant. The Black Friday market collapse of 1869 remains among the darkest days in Wall Street history. Through clever financial maneuvers, he gained control over one of every six miles of the country's rapidly expanding network for railroad tracks, coming close to creating the first truly transcona- transcontinental railroad and making himself one of the richest men in America." Just gonna interrupt this real quick. He winds up dying from tuberculosis at 52 years old. I, I think he had six kids. He was so rich, so I use this calculator that's available online that'll, that'll try to tell you the value of a dollar in the past in like today's terms. It only goes back to, I think, 1913. Jay died 21 years earlier in, uh, 1892. When he died, he left his firstborn son $15 million, and ev- all the rest of his kids, I think the five other kids, $10 million. Having $15 million back in 1913, so the value would be even more in 1892, it'd be like giving your firstborn son, uh, about a half, almost $500 million, and then giving your other five kids $300 million. Imagine how much more wealth he would likely build if he actually lived to the same age as like a Rockefeller or a Vanderbilt. His illness actually took away maybe another two decades of him constantly building to his wealth. So it's just un- it's just a staggering amount of money. So back to this, it says, "It made him one of the richest men in America." This is one of my favorite paragraphs to give you just a description of why we should spend so much time. This is my second podcast on, on Jay, and I'll go into more details on that in a minute, but why we should spend so much time just studying just his very unique life and career. So it says, "American Rascal shows the complex and quirky character of the 19th century's greatest robber baron. He was at once praised for his brilliance by Rockefeller and Vanderbilt, and condemned for forever destroying the American business values by Mark Twain. He lived a colorful life, trading jokes with Thomas Edison, figuring in Thomas Nast's best sketches, paying Boss, Boss Tweed's bail, and commuting to work in a 200-foot yacht. He thrived in an expanding industrial economy in which authorities tolerated inside trader and stock price manipulation because they believed regulation would stifle progress. But by taking these practices to new levels, he showed that unbridled capitalism was, in fact, dangerous for the American economy. This eye-opening history explores how Gould's audacious exploration or exploitation," excuse me, "of economic freedom triggered the first public demands for financial reform." A call that still resonates today. So I'm gonna go into his early life to give you an idea of how the circumstances and the tragedy that he had to endure when he was young, uh, really turned him into this, this concept that you and I have talked about over and over again. It's this PSD, which stands for poor, smart, determined. And after you're done listening to this, if you have not already listened to the very first episode I did on Jay Gould, it's episode 258 based on this fantastic book called The Dark Genius of Wall Street. There's going to be some overlap in the conversation you and I have today with that episode, but I do think of them as a two-part series, meaning that you sh- if you're interested in Jay, you should listen to both of them.

2. 6:43 – 13:46

   Childhood Tragedy and a Relentless Teenager

   1. DSDavid Senra6:43

      And so to me, there's three traits that influence Jay's early life the most. That's poverty, early deaths, and alcoholism. And so it says, "On a January morning when Jay was four, his sisters were in school and their teacher dismissed them early. Mary," Jay's mother, "was sick and wanted to see her children. Jay went with the girls to Mary's room. He pulled himself up to her bed and kissed her lips. They were cold. Mary was dead at age 35, a victim of typhoid fever." And this is one of the most chilling sentences in this entire book. "Jay later said that the only thing he remembered about his mother were her cold lips." It is interesting to think about what, what's imprinted on us when we're really small, when we're, we're really young children, that affects the rest of our lives. This book doesn't talk about it as much, but in The Dark Genius of Wall Street, it talks about that Jay had very few habits outside of family and work. One of his habits, and one of his hobbies rather, was that he loved growing flowers. The beautiful home that he had in, on Fifth Avenue in, in Manhattan later in life had a fairly large garden. He winds up buying this massive estate. I think s- I think it's, uh, in upstate New York, somewh- side outside of Manhattan, that, and then he winds up building this, this massive greenhouse. And he would spend a ton of his free time, the time that he's not working, growing new kinds of flowers. And the reason that stuck out to me is because his mother spent an unbelievable amount of time developing her garden before she passed away. So then after his mother dies, his father remarries a number of times. It says, "Family tragedy did not end there. John Gould immediately remarried. His new wife died less than a year later. He married a third time. The woman died within two years. Jay's sister, Nancy, who was only 11 years old, also fell ill, ill and died. That made four deaths in four years." So imagine going through that. You're eight years old. Your mother died. Your sister died. Your two new stepmoms are dead. And to make it worse, his father winds up being an alcoholic. It gets even worse than that. So he locks him in the cellar, gets so drunk, forgets that he's in there. So Jay's older sisters are like, "Well, where's, like, where's Jay? What happened to him?" And his father couldn't remember that he put his son in there. Much later, when his sisters finally found him in the cellar and let him out, he was just in, he was, uh, in tears, completely crying. But even in an environment like this, we see that his traits, his personality traits he had, they developed young, and they stuck with him throughout his entire life. He had an unbelievable work ethic and an incredibly long attention span. Uh, later on, he meets, like, a young Thomas Edison, 'cause he's gonna wind up buying Thomas Edison's, one of Thomas Edison's first inventions, which is a way to send multiple, uh, messages a- across telegraph lines. And Thomas Edison thought Jay was just one of the weirdest people he ever met. Said one time in their meeting, Jay pulls out, like, a map. This is much later in the book, too. Uh, pulls out a map and s- uh, talks without stopping for three hours about his plans to expand his railroad. And I think at the time, Thomas Edison's like, you know, this is way before he was famous. He's like in his mid-20s. He's like, "What is going on with this guy?" So we see a little bit of that here. Uh, Jay worked on math problems as long as it took to get an answer. He read whatever he could get his hands on. Jay was often nowhere to be found. He was off hiding somewhere with his books. Jay left home when he was 13, explaining that the local school was too easy. He goes to try to get, gain admit, admittance into a school that cost money, money he doesn't have. So it says, "To pay, to pay his tuition and board at his new school, he taught himself basic accounting and kept the books for a blacksmith." Two years later, so I think Jay, at this point in the story, is somewhere around 16, he would wake up at 3:00 in the morning to study by firelight. His area of interest was surveying, so land surveying. This comes, this is actually really important to one of his first successful businesses. He's gonna start a tannery, and it's actually his knowledge of surveying that gives him an advantage in that field. So r- uh, keep, keep this in mind for later. He hated the drudgery of farming and believed surveying was his way out. I actually went into more detail on this. If you haven't listened to episode 266, which is the, on the second time I read Henry Ford's autobiography, Henry Ford, a young Henry Ford hated the drudgery of farming, and he thought that machinery and mechanics was his way out. And in Jay's, uh, case, he learned surveying. And so as a m- as a result of learning these skills, he planned to travel around the county that he lives in and actually create a map, use his surveying skills to create a map of the county he lives in, then travel around the county and selling those maps. And this idea works, and this is where he makes, you know, to him, the first real money of his life. So it says, "With that, Jay was in business. He, uh, walked the roads of Ulster County," where he's living, "and surveyed the whole thing. He sold the maps himself. He earned a few hundred dollars. 'That was the first money I made in business,' he said. He soon had a modest but thriving business. His shortcoming was his inability to slow down." Again, he's still young. He's a teenager. He's gonna be like this his entire life. Uh, "While other farm children mended fences and threshed hay, he filled his teenage years with deadlines, sales calls, and per- and personnel decisions. He was consumed by work. He ate poorly and slept little. He collapsed into bed with chills and stomach pains. The doctor diagnosed typhoid fever." So this is the first of many, uh, illnesses that he had throughout his life. Uh, I think he had typhoid fever, fever twice. He had some kind of, like, uh, bowel, like, infection and bowel disease I think would reoccur as well, and then of course winds up getting tuberculosis later on and, and dying from that. And so there's gonna be a few times when he's still ti- a teenager that he's relegated to bed. We see that he's absolutely relentless. So he's bedridden, and it says, "Not that he was idle. He took the time to finish another piece of work. He wrote a history of his home county of Delaware. He sent it to a printer shop in Philadelphia that happened to burn down. From his notes, he rewrote the 426-page book." And this is what a young Jay Gould is writing to his friend. You know, this, again, this is like, I think 17, 18-year-old, uh, no, he's actually 18 years old at this point in the story. "As you know," he said to a friend, "I'm not in the habit of backing out of what I undertake, and I shall write night and day until it is completed." So in addition to his relentlessness and his determination, we see that he has a lot of self-belief even at, at a very early age. He toyed with the idea of college. He visited Rutgers, Yale, Harvard, and Brown. He concluded college was, was an expensive indulgence. "Why bother with college when he could teach himself from books?" He said. He had told a friend earlier in this that he, that he knew that it was his destiny to become rich. We see more of his self-belief here in this letter he's writing to his friend. "I am determined to use all my best energies to accomplish this life's highest possibilities." So this is really interesting, something that you and I have talked about over and over again. If you do the best job possible and the opportunity is right in front of you, it's going to unlock an opportunity in the future that you cannot possibly predict. He is doing the best job surveying as possible. This is going to lead him to meeting Zadock Pratt. Zadock Pratt is one of the richest and most successful businessmen in the Northeast at this point. That meeting is later on is going to start, have them start a tannery business together, even though Pratt is, I think, 45 years older than Jay Gould. That, in turn, is going to lead Jay to realize that there's actually more money in the markets for the leather goods that the tannery's producing than the actual manufacturing of the leather goods himself, which then gives him the idea, "Hey, I should stop what I'm doing here and go learn the secret magic of stocks and bonds on Wall Street."

3. 13:46 – 21:02

   Zadock Pratt and the Tannery Partnership

   1. DSDavid Senra13:46

      So before we get there, I need to introduce you to Zadock Pratt. He is a character, and you'll see what I mean here. Uh, everybody knew Zadock Pratt. Pratt was an inspiration. He was born in 1790, and he began his career traveling to town to town as a saddle maker. Then he ran a country store. He worked 14-hour days, saved money by sleeping under the counter at night. He had his first big commercial success selling oars to the military for the War of 1812. When he was doing that is when he discovered a perfect location for a tannery. From that mo- from the moment he signed the deed for this new piece of land, his fortune was secure. Why is that? Uh, because leather was a big business. The country needed shoes, boots, machine belts, leather breeches, et cetera. And this part of the country where Zadock sets up shop, he winds up owning, like, I don't know, 35, 40 of these tanneries, so he makes a lot of money doing this. But, uh, he had an advantage. He was in the right place at the right s- uh, time with the right set of skills. The tanneries need this thing called tannic acid. Tannic acid is found in tree bark, uh, and the tree that produces the most tannic acid is hemlock. And it just so happens that no place in America had more hemlock than the Catskills, which is where Zadock Pratt is living. This is very much a rough, almost like frontier-like, uh, industry. There's one sentence I have to read to you here that you're gonna need to remember for later when they, when Jay literally has a shootout. That's not hyperbolic. They literally go to war over the ownership of this tannery. So it says, "The tanners themselves were rough drinking men." Remember that part about drinking, too, which gives, uh... He, Jay thought he had a, a massive advantage in life because he was sober. He talks about that over and over again. Uh, let's go back to Pratt first. If Pratt had a business card, it might have said something like data scientist. He doubled his leather output by experimenting with different boiling times, tannin concentrations, and hide size while recording every data point in a book. He ran for Congress. He never missed a day on the House floor. He was eccentric. He liked playing soldier. With real gunpowder, he reenacted famous battles. Uh, Pratt had a weakness: pride. Calling his little tanning community Prattsville was defensible. There were plenty of villages named after their founders. Nor was it unusual when he started a bank and called it Prattsville National. It got strange with the banknotes. For his bank, Pratt used a self-portrait. That's like you and I owning a bank, being able to, to distribute our own cur- currency, and instead of putting, like, George Washington or Ben Franklin on it, we put our own face [laughs] up. He's was... This actually, I think, leads to part of why a younger, somebody way younger, less experienced, and had way less access to wealth actually winds up beating him, uh, in this competition 'cause Jay gets the, the upper hand, which we'll go into in one second. Uh, the idea of being prideful, though, and that as a weakness, uh, continues on the next page. He commissioned a stonecutter to sculpt his likeness, l- his likeness on the rocks overlooking Prattsville. They call this the Catskills version of Mount Rushmore. Again, instead of putting other people's faces on there, he puts his own again. He commissioned, uh, an author to ghostwrite his autobiography. In the autobiography, we learn that Pratt was the best marksman, the fastest runner, and the strongest horseman around. We discover that lesser men have neither the skill nor the stomach for big business, thus it was Pratt's obligation to assume the burden himself. So that gives you a background into Jay's very first business partner. They wind up building a relationship. Jay's like, "Hey, I wanna build a tannery." And, uh, he asked Pratt to, to, to back him. And so Jay's gonna do all the work. Pratt is actually going to, uh, invest $120,000 into this business. And so the same work ethic and attention to detail that Jay had when he was a teenager, now he's applying it to his business. The business does fantastically well. This goes on for a few years, but then, uh, slowly but surely, he's like, "Oh." This is where he realizes where the real money in his industry was actually being made. Uh, so it says, "He had half interest in a profitable tanning operation. He was just 22 years old. He could see the day when he would be rich just like he had predicted, but he still felt unsatisfied. He had not forgotten the mansions in Manhattan. He wasn't sure what the people along Fifth Avenue did to afford such luxuries, but he knew it wasn't tanning cow hides." And it's just remarkable how, how many times in these stories that you and I cover we see something like this. A few years earlier, he had, had taken his first visit to, to Manhattan, couldn't believe the amount of wealth. Walked around, uh, Fifth Avenue and was like, "Can you believe the, like, the houses here? It's just amazing." A few years after that, he winds up living on, and he winds up buying a place on Fifth Avenue and living there for many decades. And something he also found in Manhattan was this thing called the swamp. The swamp was where they actually traded, like, commodities like, uh, leather goods. And he, and where Jay's like, "Wait a minute." He does this actually really smart. Let me make sure I have this in here. Actually, you know what? What I'm thinking of is a quote, I just found it. It's actually from, uh, the previous book I covered back on 258, Dark Genius of Wall Street. So I'm gonna read that to you in one second. It's gonna describe what's happening here in the book as well. So it says, "He had noticed that leather prices were as mercurial as land prices, and that powerful and sometimes hidden forces drove prices." This idea of hidden forces driving prices of stocks, usually in, in case of Jay, up and down, um, is something that's repeated throughout the book. "It occurred to Jay that he could make even more money by understanding the forces that move prices and then trading on that knowledge. He had taught himself bookkeeping. He had taught himself surveying. Now he would teach him everything about leather, about how leather was bought and sold." And so that's when he starts spending more time down in the swamp. He's gonna wind up meeting people that, that become really important to him buying out, uh, Pratt later on. But I just wanna go over why he w- why he found this appealing, right? You always, I'm always curious like, "Okay, why did you choose that career over something else?" And he said, "What a place," he thought. "No crews to supervise, no steaming vats of boiling hides, no broking s- broken steam engines, engines, no odor so vile that it made the eyes water. The swamp was money-making distilled to its essence." That's how he's gonna think about Wall Street. "In the swamp, the value came not from making things, but by making decisions. Brains and information won the day. This was the place for him." And so around this time, he writes his father a letter about what he's learning. Remember, he's away from home. And so this is actually from the Dark, an excerpt from The Dark Genius of Wall Street, and the note I left myself when I read it the first time, uh, that I think will explain this, this, why this paragraph is so important. It says, "Good question to ask yourself. Who would you rather be?" And so Jay says, "I've come to realize that it is the merchants who command the true power in this industry." He means the people in the swamp, not the manufacturers. "The tanner appears to take the greatest share of capital, but merely processes that capital, his expenses being extensive." He's describing where he's at right now. That's exactly what he's doing. He's the tanner. I'm bringing a lot of revenue, but I got a ton of expenses. "His risks are real and his labor heavy." He's gotta manage a lot more people. "The shippers deal with the next largest sums, but again, they have extensive expenses and much work to do. The brokers, meanwhile, take what seems the smallest share, but is in fact the largest. Theirs is nearly pure profit made on the backs of the shipper and the tanner, never their hands dirtied." So he's like, "Oh, I'm on the wrong side of this transaction. I would much rather be, instead of being the tanner myself, I wanna be the brokers." And then he's gonna take that idea and extend it. He's like, "Okay, well, I'm not just gonna trade leather. Like, let me go learn about stocks and bonds. That, that market is way larger than this one."

4. 21:02 – 29:11

   The Buyout Fight, Focus, and the Rockefeller Parallel

   1. DSDavid Senra21:02

      So there is an entire crazy story about the shootout that happens after him and Pratt break up, and Jay has a falling out with his new partners, and th- they literally have to, like, shoot around it. I'm gonna pull out, like, one... I'm not gonna like... I covered it in way more detail on episode 258, but there is an idea behind it that I think is really, uh, valuable for you and I to discuss. But before I get there, this is, so I'm in trouble right now. Sometimes this happens from time to time when I find a new book and I cannot stop reading it, and I cannot put it down. Um, my friend Eric Jorgensen, who wrote The Almanac of Naval, which I think I covered on episode 191. That book is absolutely excellent. There's a ton of ideas in that book that I'm using as I build Founders. But anyways, I discovered this new book. I thought I had, I had, like, a good idea of all the books on Charlie Munger and Warren Buffett. Uh, I discovered a new book from my friend Eric about this, and it says... it's called All I Want to Know Is Where I'm Going to Die So I'll Never Go There: Buffett and Munger: A Study in Simplicity and Uncommon Common Sense. I started reading last night. I don't, I think I'm gonna be up late again tonight reading it, and I'm glad I started reading it because Charlie Munger specifically, and Warren Buffett to, uh, also, but really Munger is the one, the way he talks about this sticks out in my mind. He talks about the dangers of multitasking. It's almost a form of arrogance to think that you can do multiple different things at one time, that you can compete with other smart, driven people that are not multitasking. So what does this mean? W- there's about to be this giant fight between two partners, right? You have on one side, Jay Gould, 40 years younger, way less experience, way less money than Zadock Pratt. But while Zadock Pratt is, you know, partially retired from business, he's got a million different business things to think about. He's doing these battles in the field. He's got kids. He's got family. He's got all these other interests. He's got his bank. Jay just has one thing, the tannery. So he thinks about it night and day. So I was rereading, I was reading the, the Charlie Munger, uh, the book I just referenced, and Char- when Charlie's talking about, you know, it's very arrogant to think that you're gonna be able to compete with other smart and driven people, and you're, that, he's essentially, like, saying, "Don't multitask. Me and Warren, we focus on what's in front of us. We're not trying to do 50 different things at one time." And he feels like this next generation that's like, oh, multitasking constantly is just gonna have way less, uh, way worse results than him and Warren did. And so when I was reading that, and that's not the first time I've been exposed to that idea by Munger, but I read that and then I read this part of the book where I'm at, I'm like, "Oh, that's a great illustration of this." Jay should not have won this battle with a much more experienced and successful entrepreneur, but that entrepreneur is distracted. Jay's only thinking about this. So again, I think s- focus and extreme, extreme focus is a superpower that is, in my opinion, almost going extinct in our modern world. And then after I read this to you, I'm gonna tie this in with a story from a young John D. Rockefeller. All right, so it says they're fighting over this. It says, "Pratt proposed buying, uh, Jay out for $10,000. The figure was laughable," 'cause, uh, at this point, Pratt had already put up 120,000. The business is, is successful, but it goes up and down with the market of, you know, hides. And so right now it's in a lull. And so Pratt's like, "No, no, you know, we, we're gonna, w- we can resolve this disagreement. I'll just buy you out for $10,000." And so it says, uh, "When the economy recovered, leather prices would recover. Jay told Pratt to stuff it. He would take $60,000 for his stake and not a penny less. Pratt turned Jay's logic back to him. If Jay really thought that half-" ... uh, share was worth $60,000. Pratt would be willing to sell his own half share to Jay for that amount. This is important, right? So forget the 10. He's like, "Okay. Yeah, okay. I'm not gonna buy it out for 10,000. You're saying it's worth 120,000, and that your half is worth 60? Okay, cool. Give me 60." Why would Pratt do that? Pratt did that because he's like, "I know you, you don't have that money. Like, I'm gonna be able to buy you out for 60. You can't buy me out for 60." This is gonna relate to the exact same thing. It's spooky how there's so many, uh, similar experiences. Wait till I, I read you this part about Rockefeller in a minute from a different book. So it says if, if Jay thought his share was worth 60, Pratt would be willing to sell his share to Jay for that amount. Confident that Jay could not con- conjure up the money, Pratt gave him 10 days to decide. And what does Jay do? Jay doesn't just sit around. He goes down to the swamp, and he had built relationships with a bunch of these traders. These people have a ton of money, and he goes, "Hey, we have an op- you have an opportunity. You know the value of hides, right? We have an opportunity to, to buy out our partner for $60,000." And so he winds up doing this deal with Leupp, this guy named Charles Leupp. He's gonna wind up going psychotic. He would, like, see visions. He'd be having dinner and think there was, like, elephants in the room, and he winds up unfortunately shooting himself right in front of his daughter. That, that story's in the book. I'm not gonna cover it here. So it says, uh, Jay took Leupp's money and paid Pratt. A few years earlier, Jay had known nothing about tanning, manufacturing, and trading hides. Zadock Pratt, on the other hand, was a seasoned veteran. He was one of the richest men in New York. But Pratt's pockets, not Jay Gould's, were the ones picked that day. Pratt had invested 120,000 of cash in the tannery. Gould had invested nothing but his labor. When the market recovered, Jay Gould, not Zadock Pratt, stood to clean up. Okay, so now I'm gonna put this d- book down for one second. I'm gonna pick up another book. There's an absolutely fantastic book written by Ryan Holiday. It's called Conspiracy. I covered this book way back on episode 31. I actually should reread it because it gives you, it really gives you an insight into how Peter Thiel thinks. And I hate recommending episodes that far back because I'd only made 31 podcasts at that point. I didn't know, you know, I didn't have as much practice as I do now. But if you can kind of go back and, um, and listen to that episode. I'd also buy the book. I own, when I really like a book, I own the physical copy of Conspiracy, I own the Kindle version, and the Audible version. But I want to pull out, this is Ryan Holiday writing about this anecdote that comes from Rockefeller, I think is, like, 25 in this story. Yeah, he's 25 years old. Let me read the whole thing. It is exactly, to me, the, the parallel is striking to this point in Rockefeller's life, what I'm about to read to you, where, where we are in the, the American Rascal book. It's remarkable. There's a story. Now, this is Ryan Holiday writing. "There's a story about a young John D. Rockefeller who found himself stuck with bullying, corrupt business partners. He wants to break with them, but he can't because they control the votes. They are squeezing his business to death. They abuse him. They talk about forcing him out. What is he to do? Quietly, Rockefeller lines up financing from another oil man and waits." See the parallel? "Finally, there's a confrontation. One of them tries to threaten him. 'You really wanna break it up?' 'Yes.' He calls their bluff. They go along knowing that the firm's assets will have to go to auction. They're sure they'll win. Rockefeller doesn't have that kind of money. He bids. They bid. He bids. They bid. Rockefeller wins the auction. A few weeks later, the papers announce his new partnership, revealing who had backed his bid, and the news that Rockefeller is, at 25 years old, an owner of one of the largest refineries in the world." This is like a, like a ruthless, relentless quote from Rockefeller here. On, on that day, his partners, quote, "Woke up and saw for the first time that my mind had not been idle while they were talking so big and loud," he would say later. They were shocked. They'd seen their empire dismantled and taken from them by the young man they had dismissed. Rockefeller had wanted it more. And so when I get to this part in the book, I think of Jay Gould, I think of Rockefeller, and I think of Charlie Munger saying, "Do not multitask." So I'm fast-forwarding way ahead in the story after this battle, this literal battle for Jay's tannery with some of his new partners. What I wanna point out is an important part that, that Jay was, uh, like a teetotaler. Like, he, he saw the, what alcohol did to his father, and he didn't want anything to do with it. The other side in the war for the tannery was drunk. They were actually paid in whiskey. Jay paid his soldiers in cash, and he made sure they were sober. And so later on, Jay talks about, like, he thought that gave him an advantage, and he said Jay was the son of an alcoholic, and he was an advocate, advocate for sobriety, I mean. This would not be the last time that he preached sobriety. This is something repeated over and over and over again. It's really important to understanding, uh, again, the, the story of the father is embedded in the son. That's an idea you and I cover over and over again. Uh,

5. 29:11 – 31:54

   Entering Wall Street and Learning Through Diligence

   1. DSDavid Senra29:11

      Jay was convinced the big money wasn't in the wilds of Pennsylvania. It was on a narrow street in New York. And so this is where he makes the, the best decision of his life. He's like, "I'm getting out of this business, and I'm going into the business that he winds up being maybe arguably the best in the world at." Uh, "I am trying to start myself in the smoky world of stocks and bonds," he said. "There are magician skills to be learned on Wall Street, and I mean to learn them." He's 24 years old. And so I just wanna tell you a little bit about how he approaches. He's gonna set himself up as a stockbroker and a private investor. And I'm actually going to quote from one of my favorite books, a, a book I need to reread frankly soon and make another podcast on. It is Ogilvy on Advertising, written by David Ogilvy. It was originally episode 82 of Founders. And if you haven't studied up on Ogilvy, I'd recommend you do. Um, I actually discovered him because Warren Buffett, uh, calls Ogilvy multiple times, I think, in his, in, uh, Buffett shareholder letters. He said David Ogilvy was a genius. And so that line was my first introduction to Ogilvy, and then I tried to read every book on him. But Ogilvy has this thing that he would, he would repeat throughout his career, and he says, "The good ones know more." And I think Buffett would agree with that because when, you know, people would say, "Hey, Buffett, like, how do I become like you?" He's like, "Read 500 pages a day." And so we're gonna see that Gould and Ogilvy and Buffett had this in common. Gonna read from Ogilvy on Advertising real quick before I get into the beginning of how Jay prepared, uh, for his early career. On Wall Street, David says, "Set yourself up to becoming the best-informed person in the agency on the account to which you are assigned." Ogilvy buil- made his fortune by building one of the most valuable, uh, advertising agencies in the world, an advertising agency that is still in existence many years after he died. So he's giving advice for young people that wanna do it. They're essentially saying, "Hey, David Ogilvy, how do I become you," right? This is what he did, and what Buffett did, and what Jay Gould did, b- nearly almost everybody that you and I have studied. "Set yourself up to become the best-informed person in the agency on the account to which you are assigned. If, for example, it is a gasoline account, read books on oil geology and the production of petroleum products. Read the trade journals in the field. Spend Saturday mornings in service stations talking to motorists. Visit your clients' refineries and research laboratories. At the end of the first year, you will know more about the oil business than your boss, and you'll be ready to succeed him." And so that's the paragraph that popped to my mind when I got to this pa- paragraph. "Jay G- Gould did not invest on hunches. He dug deep to discover whatever was noble, separating the nonsensical from the plausible. This, in and itself, didn't make Gould special. Most investors would claim they did the same. The difference was Gould's diligence. He was more methodical, more voracious in search of insights, and more patient with minutiae. These qualities served him well in the, in the h- hard labor of surveying and tanning. They served him better in the brain labor of Wall Street."

6. 31:54 – 36:18

   The Rutland and Washington Railroad Win and a Found Purpose

   1. DSDavid Senra31:54

      And so one of his first big breaks comes a few years later. He's gonna be 28 years old when he gets out of this investment. He realizes that, um, the, the book started talking about, you know, railroads w- so as w- just as important as the internet is today, or automobiles were in the century p- previous. And so he's gonna make obviously a lot of money in building up and also trading on railroads. He realizes there's this, like, small little Rutland and Washington rail line, and they had one way to make money, and they, they would ho- haul stone from quarries in Vermont. And so the volume of stones taken out of the quarry, thus needing to be transported on railroads, went down. It would, like, really drop the price of the railroad bonds. And if you bought the bonds when they were cheap, you can convert it to stock, and if you convert enough stock, you can actually take control of the railroad. That's exactly what Jay did, and then he s- decides, "Hey, um, I'm gonna control it, and then I'll just run it." And so he actually makes himself president of this railroad. Jay's a weird, um, person to kinda classify because in some degree he was an operator, but he was also an investor, and he would go back and forth between those two and sometimes do them, uh, those different jobs at the same time. And this is a perfect example of that, 'cause he starts out as an investor, and he's like, "Oh, no, I'll, I'll just operate it." And so then he spends a long time, uh, away from his family. He's constantly traveling. He'd just come back to New York, I think, on the weekends. And he starts building this up, trying to increase the value through his labor, and then he's eventually going to sell and have, like, the first big hit of his life. So it says he invested in, in his railroad track. He cut costs and pitch, and pitched customers on the railroad services. He also pinched pennies. And so he does this for 18 months, but he realizes, "Hey, uh, there's an opportunity cost here. There is a, a ceiling on how valuable this railroad could be, so I need to get out now and find a better opportunity." This is eventually gonna lead him to going to war with Cornelius Vanderbilt. So it says, uh, "The Rutland and Washington had western Vermont to itself. Once it reached New York, it ran into a challenge that Gould battled the rest of his career: too many railroads and not enough freight. That convinced him that this railroad was not a keeper. 18 months after buying it, he got out, earning a bundle. His $5,000 investment, an investment that others on Wall Street thought was a loser, brought him $100,000, which would be equal to $2.5 million in today's dollars, and he is 28 years old." And so for the rest of his life, he's gonna have other businesses. He's gonna do a million trades. Uh, he's gonna get involved in telegraph industry, but the rest of his life, he thought railroads was the, the greatest outlet for his, what he re- realized was, like, he, he had essentially un- uncontrollable ambition or, like, basically un- there's no limit to his ambition. So he winds up realizing that, you know, he's got this, this burning desire, this drive inside of him, so he winds up writing a letter to his friend where he comes to turn, turn, where it says he confronts his ambition and his drive to succeed. And he says, "Now that I'm in this place, it is a puzzlement to me how I endured before. Everything prior seems to have been boxing in the dark, scrapping without reason. Now I have my railroad..." Or excuse me. "Now I have my road to walk and my reason for walking it. Now the pieces fit, and this thing ambition is no longer blind, but divine, a true and noble and necessary path. I see things very, very clearly. I feel inspired with an artist's conception. Divine inspiration I cannot say, but my road is laid out before me in the plainest of ways." And so at 28, he does not know that he only has 24 years left, that he's gonna die at 52, but he does know that he's found his life's work, the one that he's going to dedicate a- almost every waking hour to from now until he dies. I do wanna touch on aspects outside of his, uh, work just real quick. His hobbies were essentially, like, y- family. He spent a lot of time at home. He, him and his wife were a homebody. Spent a lot of time with, uh, his kids when he wasn't working. I obviously told you about he w- had a love for flowers and then reading. And I think the book goes later on into, like, his, he, he stuck to a pretty strict schedule, uh, every day. So it says, "He and Allie, his wife, preferred simplicity and domestic pleasures. They were not social. Jay stuck to business and minimized his interactions outside the office." Around this time, his father dies, and this is what he says. "His hard-drinking father, John, died. Jay rarely spoke about his father. Maybe it was out of anger over the alcoholism or the childhood punishments, uh, including being locked in the cellar," which I told you about earlier. "When asked about his father, Jay fell back on trite expressions, as if to say more would prove overwhelming. He would say, 'He walked a hard road. He drank from a bitter cup.'"

7. 36:18 – 41:24

   The Erie Railroad War Against Vanderbilt

   1. DSDavid Senra36:18

      So then the next few chapters go into great detail about this war for the Erie Railroad that goes on between Jay Gould, Daniel Drew, Jim Fisk, Cornelius Vanderbilt. It is unbelievably complex. I think most people still don't understand it to this day, but this one sentence I think Really highlights why Jay was unusual. And it says, "This, this story," meaning the, the, the war for the Erie Railroad, uh, "The story of how Jay seized Erie shows his brilliance as a financial strategist, his deep understanding of law, a surprising grasp of human nature, and a mastery of political reality." And so the one thing that jumps out when... Now that I've read about this multiple times, I still don't understand it completely, but the lesson I take away from it, more important than the actual, like, tactics they used, was that if he had a goal in mind, which in his case is le- "I need to control the Erie Railroad," like Rockefeller before him, or I guess at the same time, because they were operating at the same time, there would be... He wouldn't just attack it from one angle. It's almost like they look at the problems and what they're trying to do from, like, 360 degrees, and they're just relentless by poking any kind of weakness that they feel will get them what they want. And so even though I can't really understand everything that he does, I think the value I get in from understanding is like, oh, he... The way I think about the pr- uh, the goals I wanna accomplish and the problems I wanna solve, it's unbelievably pedestrian compared to the way Jay or Rockefeller approached their own goals. And so what I hope to do is learn from their examples. Like, whatever goal you have, spend an unbelievable amount of time analyzing all the different ways, the, the possible ways that you can actually achieve what, and, and make a reality what you want to make real. And so what's happening, there's a bunch of board members, and they're all fighting against each other for control. Cornelius Vanderbilt, uh, his idea is like, "Hey, I'm just gonna buy up..." He, he does a, he bribes a judge to make sure that they cannot issue more stocks. And so Vanderbilt thinks that the share count is fixed as a result of this injunction, so he's just buying up more and more. When they s- mention that, that Jay had a deep understanding of law and a mastery of political reality, one of the reasons they said is because his close reading of the law realizes that this injunction only stops the board, the Erie board, from issuing more stock, but it doesn't stop the Erie executive committee from issuing more stock. And so I wanna read this part to you, and I just wanna really pull out, like, how confident Jay was in his ability. At this point, he's in, he's in his 30s, has a little bit of money, but he's literally going up against, intentionally, the richest and most well-known and successful businessman of his day in, in Vanderbilt. Vanderbilt's, you know, 30, what, 40 years older maybe. And so it says, uh, "Jay noticed that Barnard's injuction, injunction," that's the judge that Vanderbilt paid off, "uh, against new share issuance, uh, enjoined the Erie board and only the board. What if another entity, say Erie's executive committee, issued the stock instead of the board? Jay's lawyers liked the idea, and they followed up by finding a judge who signed an order ex- expressly empowering the executive committee to issue shares." Why is that important? Vanderbilt believed that the share count was f- was fixed, so he kept buying, and Vanderbilt didn't know that the stocks he's buying were issued by his enemies, right? The other people on the board. And so that money went, they wind up taking him for, like, $7 million. That goes on for a lot. Remember, this is, like, m- I'm telling you stuff that happens over multiple chapters. "Vanderbilt became suspicious when he noticed that his buying wasn't affecting the share price. The prices should have skyrocketed. Then it hit him. Erie had thumbed its nose at the judge's order and issued more shares. Vanderbilt stopped buying. If the supplies of shares was infinite, there was no point." So Jay Gould, Jim Fisk, and Daniel Drew, they're over the... They're, they couldn't believe this, like, "This is amazing." They don't realize that Vanderbilt always has a countermove. "The executive committee had reason to celebrate. They had just tricked America's richest man into giving the treasury $7 million. As they toasted, a messenger came with news. Judge Barnard had cited them for contempt. The sheriff was on his way to Erie headquarters to put them in handcuffs." And so this is when Jay and his partners have to actually escape. It was hilarious at the time. Like, if you had to be on the lam from New York authorities, you could just go to New Jersey, and there was no extradition requirement between the two states. I go over this entire story in, uh, episode 258, The Dark Genius of Wall Street. But there's, like, this standoff between both sides, between Vanderbilt and Jay, and they go to Albany that... Like, there's so many, there's, like, a bunch of, uh, like, the, the state legislature in New York. There's a bunch of, like, bribe- like, open bribery, bribery that occurs on both sides. But eventually, Vanderbilt makes them give him back every single dollar. And it was in the interest of Jay, and Daniel, and Jim to, to settle, uh, with Vanderbilt because I read this book called Tycoon's War. The subtitle of the book is How Cornelius Vanderbilt Invaded a Country to Overflow, Overthrow America's Most Famous Military Adventurer. The story's remarkable. It's unbelievable. It's episode 55. I'm actually gonna reread the book soon. But the, the reason that you didn't wanna cross Vanderbilt is because he didn't believe in, like, just using the law. Like, he would use that if he had to, but he literally would pay. If you, if you crossed him in business, he would try to have you killed. That's ac- that happens in this book where when they were hiding in, in New Jersey, Vanderbilt went and put a bounty on Daniel Drew's head. So that is not a person that you wanna be taking $7 million from.

8. 41:24 – 44:30

   Black Friday Litigation and Good Versus Bad Railroads

   1. DSDavid Senra41:24

      And so then the book spends several chapters going into detail about what Jay is most notorious for. He tried to corner, unsuccessfully, the, uh, the gold market. These actions result in this gigantic financial collapse. And so I go into more detail on episode 258. Again, I think of this as, like, a two-part series, so I don't wanna just make the same podcast again. There's more detail in episode 258, but I do wanna pull out something that was interesting. A- this is after dealing with all the fallout. This is something that was new to me where Jay, like, a, a tactic that Jay would use. And so it says, "The biggest winner was Jay's lawyer. He defended Jay in more than 100 cases. Following Jay's order to stall, his lawyer dragged out the proceedings. It took a decade to clear the docket. 'There isn't any secret,' Jay once said. 'I avoid bad luck by being patient. Whenever I'm obliged to get into a fight, I always wait and let the other fellow get tired first.'" And the reason that was interesting to me is because that's a litigation after he tried to corner the gold market. The litigation that took place, uh, for his tannery, that, where they had that shootout, that lasted, like, another five, I think five to 10 years as well. And by the time that he winds up settling with his partner, winds up selling his interest in the tannery for, you know, a nominal fee- He had 10 years of, five to 10 years of wealth accumulation, so by the time that came due, he was already so wealthy that it was just an insignificant amount. And so we see him using the same tactic here maybe a decade later. He's like, "I avoid bad luck by being patient. Whenever I'm obliged to get into a fight, I always wait and let the other fellow get tired first." And so there's a series of booms and busts and a lot of speculations in railroad stocks throughout this book. Goes on for mu- multiple decades. A lot of this was drawn because European investors thought they just heard American railroad and thought, "Oh, this is, like, a sure bet." But what I found so interesting about this paragraph i- it really is talking about the difference between good and bad businesses, and the, this definitely still applies to this day. Contrary to what stockbrokers told them, it turned out that not all American railroads were winners, and it actually mattered whether tracks terminated in New York City or Jersey City. It mattered whether a railroad had mountains of debt. It mattered if the railroad was run by a builder like Cornelius Vanderbilt or a speculative director bent on manipulating the stock price, robbing the corporate treasury, and awarding corporate contracts to himself and his friends. So that's, uh, the large h- history of the railroad industry is that second, the, the latter there. It's like, oh, th- they're really not trying to build a great product or a great service or a great railroad. They're speculative directors, and they're just r- essentially raiding their own stock price. In fact, if you want to learn about the greatest, what is arguably the greatest, uh, railroad builder in American history, it's this guy named James J. Hill. I actually covered the book, his biography, back on episode number 96. It's called James J. Hill: Empire Builder of the Northwest. I found that book because, un- that's another book I found from Warren Buffett sh- and Charlie Munger. They talked about, they always talk about, like, you know, operators throughout history that they admire, uh, and the books they read about them. And so, uh, he was, he was actually, I think, the only person that ever built a profitable railroad without going bankrupt.

9. 44:30 – 47:08

   The Lord Gordon-Gordon Affair

   1. DSDavid Senra44:30

      And so eventually Jay's actually going to leave, some would say get kicked out, of the Erie Railroad. Before he gets kicked out, though, or before he leaves, I think this is in the 1870s. I gotta read something because there's this thing called the Lord Gordon-Gordon affair, and it's actually a mistake that Jay makes. He's trying to gain control of the Erie, and he winds up getting taken advantage of by a scam artist. And so the book talks about it, but I actually think the entry on Jay Gould's Wikipedia page under Lord Gordon-Gordon, it's only two paragraphs, and somebody sent me a message. They're like, "Oh, this would make an amazing movie." So let me [laughs] this is why they said that. So it says, "In 1873, uh, Jay Gould attempted to take control of the Erie Railroad by recruiting foreign investments from Lord Gordon-Gordon, who was supposedly a cousin of wealthy, uh, who, the wealthy Campbell clan who was buying land for immigrants. Jay bribed Gordon-Gordon with a million dollars in stock." So this says a million dollars in stock. I've also read in other books that it said it was 500,000, but still a lot of money. Uh, "He bribed Gordon-Gordon with a million dollars in stock, but Gordon-Gordon was an imposter and cashed the stock immediately. Uh, Jay Gould sued him, and the case went to trial in March, uh, 1873. In court, Gordon-Gordon gave the names of the Europeans whom he claimed to represent, and he was granted bail while the references were checked. He immediately fled to Canada, where he convinced authorities that the charges were false." This is now the second paragraph, and this is wild. "Having failed to convince Canadian authorities to hand over Gordon-Gordon, Jay Gould attempted to kidnap Gordon-Gordon with the helps of his associates and a future member of Congress." Uh, future members of Congress. So you got Lauren Fletcher, John Gif- Giffellian, and Eugene Wilson, all future members of Congress [laughs] are, are trying to kidnap this guy. "The group captured him successfully, but they were stopped and arrested by the Mounted Police," this is in Canada, "before they could return to the US. Canadian authorities put them in prison and refused them bail, and this led to an international incident between the United States and Canada. Governor of Minnesota Horace Austin demanded their return when he learned that they had been denied bail, and he put the local militia on full readiness, and thousands of Minnesotans volunteered for an invasion of Canada. After negotiations, the Canadian authorities released them on bail. Gordon-Gordon was eventually ordered to be deported but committed suicide before the order could be carried out." So when the author starts the book saying, "Hey, this is really a book about Jay, but it's also about the Wild, Wild West period of Wall Street," that is just two paragraphs in, uh, you know, one of a million different machinations and ideas and trades that Jay experienced throughout his entire life. In many cases, these books, when you're reading about, uh, the, like, business history in the 1800s and early 1900s, it's just, it's stranger than fiction.

10. 47:08 – 49:08

    The Cattle Trick and Adapting to the Game

    1. DSDavid Senra47:08

       And then they spend more time into why even when Vanderbilt called Jay the smartest person in America, he didn't like him. And a lot of people didn't like Jay, and a lot of reason they didn't like Jay is 'cause they actually lost to him. So it says, "It was well-known that Jay had outfoxed the Commodore," Commodore Vanderbilt, and it talks about, like, the fights they have with the Erie, but then it says this hilarious sentence. "There was also a little episode with the cows." And so the author does a great job in one paragraph summarizing this war, this rate war that is going on between the railroad that, that Jay Gould, um, is currently in control of and the one that Vanderbilt was in st- in, uh, in control of. But the reason I think about this is because sometimes you can get, like, myopic and really focused on, like, where you're going or, or where you wanna go, where Jay always actually reacted... The, the lesson I'm taking from this is, like, Jay always reacted to the game on the field. He was in the middle of a rate war, right? He was trying to bleed the Commodore. So instead of continuing the rate war, he actually reacts to a change in the game which presented an opportunity for profit. And I think, to me, because he couldn't have predicted this change, like, he, it shows, uh, the level of intelligence that he had. So it says, "There was a little episode with the cows. Back when Jay ran the Erie Railroad, Vanderbilt slashed New York Central's rates and offered to move cattle across New York State for the token amount of a dollar a carload." So before that, they were both trying to gain business from the other by constantly reducing rates and trying to bleed the other person, okay? "Erie was pinched for cash. Vanderbilt was certain the move would bury the railroad and take Jay Gould down with it. Instead, Jay and Fisk," that was his partner... Uh, who also gets murdered by, uh, his ex-lover's new lover. Uh, there's more of that in episode 258. But it says, uh, "Instead, Jay Gould and, uh, and Fisk made a profit by buying cows in Chicago and shipping them to market at Vanderbilt's bargain rates. When the old Commodore found out that he was carrying the cattle of his enemies at great expense to himself, he nearly lost it."

11. 49:08 – 54:07

    Edison, the Telegraph, and Gould's Peculiarities

    1. DSDavid Senra49:08

       So a 21-year-old Thomas Edison happened to be at the gold exchange the day that Jay Gould tried to corner the gold market. He's actually at the telegraph. Uh, he was a telegraph operator. Um, what they would do is they would transmit the change in price over the telegraph. And so he sees, like, this, this massive, uh, financial scandal and panic happen. I think in the other book I read, The Dark Genius of Wall Street, he's, like, hanging out on a telephone pole just observing, you know, what a, uh, one of the most insane days in finance history. And he's, he's observing as a, like a, almost like a disinterested spectator because he was so poor, he didn't have any money to invest. And so Edison and Jay Gould's, uh, paths are actually gonna cross many years later when Edison was 27 years old. It says, "Edison was 27 years old. The light bulb, the phonograph, and the movie camera, camera were years away. For now, he had to invent a way to pay his mortgage." And so at this point in Edison's career, he's just a freelance inventor. The inventor, the invention that he is working on is actually the quadruplex. This is the one that Jay's going to, uh, purchase from him. But I really wanna get into, like, Edison's perspective on Jay Gould. I thought that was interesting. Before I get there, something you and I have talked about over and over again, a good way to discover future opportunities is you can actually discover opportunities in industries adjacent to your own. Up until this point, Jay has been focused on the railroad industry. So it says, "Jay was keenly interested in the telegraph business now. Telegraphs went hand in hand with railroading. Telegraph companies strung their lines alongside the railroad tracks." And so he starts looking into, uh, the monopoly of the, the, the telegraph monopoly of the day, Western Union, and Jay cannot believe how much money they make. "Western Union was a money machine. Uh, Jay Gould coveted it. 'I'd rather be the president of Western Union than the president of the United States,' he said. However, it was simply, Western Union was simply too big and powerful, but maybe he could shake it down. Core to this scheme was Edison's latest invention." And so the quadruplex allows you to send, uh, up to four messages at once. So essentially just increases the amount of communications that existing lines could have. And so he's going to buy this invention and the patents from it, start a company, and then eve- eventually build that up with the sole purpose of getting bought out by Western Union, which he was successful in doing so. But the part I found most interesting is over, like, the next three or four pages, it's Edison just telling us, like, what it was like to know and interact with Jay Gould. Uh, so it says, "Edison and Gould shared some traits. Both thought about little besides their obsessions, inventions for Edison and money for Gould. Both worked all the time. Both had spent their childhoods reading anything that came their way. As an employee of Gould's, Edison came to appreciate what Jim Fisk had later, had called previously Gould's peculiarities. During one encounter, Gould unfurled maps and talked about rail lines. Gould spoke for three hours before exhausting himself. Edison found Gould strange and unsettling. 'Gould had a peculiar eye,' Edison later wrote. 'There was a strain of insanity somewhere.' Edison offered another assessment. 'He certainly had one trait that all men must have who want to succeed. He collected every kind of information and statistics about his schemes and had all the data,' Edison said. He excused Jay Gould's greed." This is what Edison said about that. "His conscience seemed to be atrophied, but that may be due to the fact that he was contending with men who never had any to be atrophied to begin with." In that other book, The Dark Genius of Wall Street, or it might have been the Thomas Edison biography that I covered on episode 267, he called the wars between the robber barons strange financial warfare. Something else that I found interesting was something that Jay was working on for a long time, in fact, he was still working on it when he died, was this idea of building and controlling the w- the country's first transcontinental railroad. And I thought it was interesting how he compared what he wanted to do with what he saw Rockefeller doing in oil. Uh, "Jay Gould was aware of how Rockefeller was using coercion to grab every oil refinery he could. Jay longed to lead a similar process in railroads. Consolo-" he said, "Consolidation will prove both essential and inevitable. What was needed was unchallenged market domination." And then this story is just unbelievable, how to turn a $500 kidnapping into $500,000. "A storm struck New York and disabled Gould's private telegraph. The blackout forced Gould to contract with the messenger service to deliver his trading orders by hand." This is insane. "A cabal of crafty traders seized the moment. They grabbed one of the messengers and dressed one of their own to take his place to gather information on Jay's trades. For four days, they saw Jay's every order for Western Union shares. Guessing he was trying to take it over, they bought all the Western Union stock they could and paid the kidnapped messenger $500 to stay in a hotel and keep quiet. The schemers bought Western Union at 80 and sold it at 120, pocketing $500,000."

12. 54:07 – 56:22

    Daily Routine, Family Life, and the Transcontinental Dream

    1. DSDavid Senra54:07

       And so then the book talks about how he spent most of his time, his schedule the last decade of his life, and it said, "He was a homebody whose routine left no time for diversion. He woke up at 7:30, ate breakfast at 8:00, wrote letters until 9:30. He had lunch at noon. He ate very little. He drank lots of coffee. He stayed downtown until 4:30 when he came home for dinner to have dinner with his family. After dinner, he headed to the Fifth Avenue Hotel to talk markets with stockbrokers who traded there after hours. Then he read in his library until it was time for bed at 11:00. He spent Sunday in the office as if it were a regular day. When he was at home and needed air, he pruned his flowers." And so he said, "I have the disadvantage of not being social. My tastes lie in a different direction. When business hours are over, I go home and spend the remainder of my day with my wife, my children, and my books. Every man has a natural inclination of his own. Mine are domestic. They are not calculated to make me particularly popular on Wall Street, and I cannot help that." And one of the really sad parts about Jay's life is not only he was married for, I think, 24, 26 years. His wife un- unfortunately dies. I think she has two strokes, and she dies young, a few years before he dies young. And yet even though he's in diminished health, he's still chasing after this lifelong dream he had. So it says, "He declared that he'd combine the Union Pacific Railroad with his other railroads to create the seamless transcono- transcontinental system that had been his dream. When the press asked why at his age he'd want to do something so challenging, he said he couldn't help it. The vision of an end-to-end rail link between the East Coast and California was too beautiful to let go. Although he had once left the Union Pacific out of necessity, he never stopped loving it. 'There's nothing strange or mysterious about it,' he said. 'I knew it very well when I was a child, and I have merely returned to my first love. I think we will have good times in the future.'" And unfortunately, his health forbid that. "His dreams for the Union Pacific were better suited for a young man than one who knew that his time was up. In his feeble state, it took all his strength to get out of bed. The railroad drifted in the absence of leadership." And so he winds up passing away at 52 years old from tuberculosis and leaving behind his six children.

13. 56:22 – 58:52

    Judging Gould's Legacy and Closing Notes

    1. DSDavid Senra56:22

       And then the book closes with why it's so hard to nail down what Jay Gould's legacy should be. "In a 1986 biography, University of Rhode Island Professor Maury Klein suggested Gould be judged by his entirety rather than on his business activity alone. His record as an upstanding family man should be figured into the equation. Wharton Professor Julius Gradinsky, who in 1957 completed the first serious analysis of Jay Gould, took pains to credit Gould's contributions. His aggressive track building lowered freight rates. His success as a railroad investor attracted speculative capital into a vital industry when other sources fled the field. But after examining every transaction of his career, poring over every scrap of correspondence, considering every accusation of victims, and compiling spreadsheets to measure his investments, Gradinsky couldn't pull the trigger on a definitive judgment about his subject. His conclusion was unsatisfying. 'He had his virtues, and he had his faults,' he wrote. 'The worst thing about these fellows is that they're so good and, in their work at least, so intelligent, you can't hate them properly.' That's the thing about Gould. He lied, he cheated, he stole, but he was so good at what he did, so intelligent in the execution, and such a clean, kind, and industrious family man that try as you might, you can't hate him properly." And that is where I'll leave it. There's so many more stories in the book. Highly recommend reading it. If you buy the book using the link that's in the show notes in your podcast player, you'll be supporting the podcast at the same time. And if you want more Founders, highly recommend you signing up for Founders Premium. I'm no longer doing these short daily, uh, episodes anymore, but instead I'm doing long-form AMA Ask Me Anything questions. So subscribers to Founders Premium actually are able to ask me questions directly, and then I record my answers in these form of these long-form AMA episodes. I published my first AMA episode probably about a week ago with answers to questions like, "Hey, if I could only read five books for my life over and over again, what would they be? Who are the best strategists out of the people that I've read about? Why is the show growing so much?" And if I had any insight into growing a podcast, if I'm gonna start a new podcast interviewing founders, and practice habits. I'm gonna be doing two of these a month. I'm gonna probably record the new, the next one probably tomorrow. So if you're interested in listening to them and then contributing by asking questions, you can subscribe with the link that's in the show notes on your podcast player. It is also available at founderspodcast.com. That is 285 books down, 1,000 to go, and I'll talk to you again soon.

Episode duration: 58:52