#258 Jay Gould Dark Genius of Wall Street

Summary Notes


In "The Dark Genius of Wall Street," Edward J. Renahan, Jr. paints a complex portrait of Jay Gould, often vilified as a ruthless Robber Baron, yet revealed as Wall Street's most original creative genius. Despite being reviled as the era's greatest villain, Gould was a financial and business strategist par excellence, reshaping industries and manipulating markets with innovative methods, some later banned by the SEC. His strategic brilliance in corporate finance set precedents followed by investment bankers and governments alike. Gould's aggressive tactics and mastery of railroad and telegraph systems earned him a fortune and the title of the smartest man in America, yet also made him the most hated. His obsession with wealth and power was matched by his work ethic and love for his family, contrasting with his public persona. Ultimately, his vision for a transcontinental railroad and his secretive nature make him a pivotal, if controversial, figure in American industrial history.

Summary Notes

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  • Harris, Jay's attorney, prepares an elaborate legal defense against the injunction.
  • Jay, still a young boy, asks if there's anything to prevent construction before the injunction.
  • Harris admits there's no immediate obstacle to construction.
  • Jay seizes the opportunity to act within the letter of the law.
  • He quickly mobilizes labor and resources to complete the road before the injunction is granted.

"Was there anything Jay asked to stop the company from going ahead with construction before the enemies of the road were granted their injunction?" "So when Harris says, no, there's not, that's where Jay senses his opportunity."

Jay's question reveals his early understanding of legal loopholes and his quick thinking to exploit the situation to his advantage.

Industriousness and Entrepreneurial Spirit

  • Jay is involved in multiple ventures from a young age, including creating maps and building roads.
  • He saves a significant amount of money early on.
  • Jay takes on various jobs, including working in a general store.
  • His extensive reading and quick learning impress those around him.

"Not only is he building map or creating maps and selling them, he's building roads." "He winds up saving like a couple thousand dollars at a very young age."

These quotes highlight Jay's diverse entrepreneurial activities and his ability to accumulate wealth and experience at a young age.

Awareness of Mortality and Urgency

  • Jay's experiences with death in his family instill in him a sense of life's brevity.
  • He is driven by the urgency to act and accomplish while he can.
  • Jay's philosophy of maximizing time influences his work ethic and decision-making.

"Time is flying fast, he said." "Again and again he came to speak of the shortness of life and the necessity of doing while there was yet time."

The quotes reflect Jay's acute awareness of mortality and his consequent drive to make the most of his time.

Strategic Partnerships and Business Acumen

  • Jay partners with Zaddik Pratt, a wealthy and influential businessman.
  • Despite being declined funding, Jay impresses Pratt and is kept in mind for future opportunities.
  • Jay's knowledge of surveying opens doors to new business ventures.

"Jay first encountered Pratt, who was 46 years older than him, during the summer of 1852, when Jay was working on the map of Ulster county." "Pratt declined to fund that project, but pronounced himself impressed by Jay and promised he would keep him in mind for future tasks."

Jay's encounter with Pratt demonstrates his ability to form strategic relationships and his foresight in acquiring valuable skills like surveying.

Business Expansion and the Tannery Partnership

  • Jay persuades Pratt to enter a 50/50 partnership in a tannery business.
  • Jay's role is to manage the day-to-day operations, leveraging Pratt's expertise and capital.
  • Jay's aggressive and expansionist approach to business is evident from a young age.

"Pratt's main contributions to the enterprise were his expertise and his money. While Goad was able to invest his useful energy." "Jay was not yet 21."

Jay's partnership with Pratt at a young age showcases his ambition and strategic thinking in business growth.

Learning the Leather Industry and Strategic Shift

  • Jay learns about the leather industry's market dynamics, particularly the swamp in New York City.
  • He identifies the merchants as the most powerful and profitable players in the industry.
  • Jay decides to shift his focus from production to finance, aiming for a role that yields higher profits with less labor.

"The brokers, meanwhile, take what seem the smallest share, but small share of the revenue, but it is in fact the largest." "Their is nearly pure profit made on the backs of the shipper and the tanner, and they never have to get their hands dirty."

Jay's analysis of the industry's profit distribution leads him to target a more lucrative position within the sector.

Outmaneuvering Pratt and Gaining Independence

  • Jay outsmarts Pratt, who attempts to force him out of the tannery partnership.
  • Jay secures funding to buy out Pratt, leaving Pratt with a significant financial loss.
  • Jay's strategic mind and refusal to be underestimated are highlighted.

"We carried on the business for a while, and then I bought Mr. Pratt out." "Pratt apparently sought to improve his personal profit by ousting his partner at a bargain price."

Jay's succinct summary of buying out Pratt underscores his strategic prowess and ability to turn the tables on an experienced businessman.

The Goldsboro War and Business Resilience

  • Jay faces a hostile takeover attempt by his partner Lee, resulting in a literal armed conflict.
  • Jay's determination and willingness to fight for his business are evident.
  • The prolonged legal battle forces Jay to restart his career, leading him to Wall Street.

"Upon Lee's refusal, Jay moved into action." "The firing now became general on all sides. And the bullets were whistling in every direction."

The description of the Goldsboro War illustrates Jay's aggressive defense of his interests and his resilience in the face of adversity.

Transition to Wall Street and Financial Mastery

  • Jay's dedication to learning the intricacies of Wall Street pays off.
  • He becomes adept at various financial strategies and leverages them towards controlling companies.
  • Jay's focus on railroads is driven by their potential for long-term growth and financial complexity.

"There are magician skills to be learned on Wall street, and I mean to learn them." "Jay continued to study the art of Wall street as practiced by the most seasoned speculators."

Jay's intention to master the "magician skills" of Wall Street and his strategic focus on railroads demonstrate his ambition and foresight in finance.

New York General Railroad Act of 1850

  • The act allowed railroad directors to issue bonds without external authorization.
  • It facilitated the conversion of bonds into common stock and vice versa.
  • Jay saw an opportunity in Wilson's bonds to gain control in the R and W railroad.

"The New York General Railroad act of 1850 allowed directors of railroads to issue bonds on their own authority to finance expansion." This quote explains the empowerment given to railroad directors by the act, which was crucial for financing expansion through bond issuance.

Jay's Realization and Strategic Move

  • Jay understood that acquiring a small percentage of Wilson's bonds could lead to significant control over the R and W railroad.
  • Wilson offered Jay all of his bonds, leading to Jay's first railroad control.

"Jay must have quickly realized that just a small percentage of Wilson's bonds, when converted, would establish a controlling interest in the R and W railroad." Jay's strategic insight into the potential of Wilson's bonds is highlighted, indicating his swift recognition of a controlling opportunity.

Jay's Dedication to R and W Railroad

  • Jay dedicated four to five days a week for a year and a half to improve the R and W railroad.
  • He focused on enhancing infrastructure, traffic, and profitability.
  • Jay was only 27 years old during this time.

"Thereafter, for a solid year and a half, Jay spent four to five days a week working to improve the infrastructure, traffic, and profitability of the R and W railroad." This quote underscores Jay's commitment and the intensive work he put into the R and W railroad, aiming to enhance its overall performance.

Jay's Learning Curve and Leadership

  • Jay acknowledged his lack of knowledge in the railroad business and made efforts to learn it.
  • He took on multiple roles including president, treasurer, and general superintendent.
  • Jay's employee Charles Frost described him as a man of snap judgment and relentless effort.

"I took entire charge of that road. I learned the business, and I was president and treasurer and general superintendent. I kept at my work." Jay's quote reflects his hands-on approach to learning and leading the railroad business, taking on multiple roles to ensure thorough understanding and control.

Jay's Personality and Work Ethic

  • Jay's personality remained consistent from his youth, characterized by persistence, discipline, and relentless pursuit of his goals.
  • His work ethic can be applied universally, regardless of the industry.

"He was a man of snap judgment. Kurt, in his remarks and exacting action, was his hobby, and he was relentless in his efforts to bring about the accomplishments of those things which he set out to do." This quote describes Jay's decisive nature and relentless pursuit of goals, which were key traits throughout his career.

Jay's Family Life

  • Jay valued his family as much as his work, balancing both aspects of his life.
  • He was not an absentee father or husband, spending time with his family whenever he was not working.
  • Jay's dedication to family was evident early in his career.

"He was not an absentee father, an absentee husband. In fact, he was extremely extreme introvert." This quote emphasizes Jay's commitment to his family life alongside his professional endeavors, highlighting the importance he placed on being present for his family.

Jay's Business Strategy and Partnerships

  • Jay rapidly improved the R and W railroad, leading to partnerships with other railroad owners.
  • He believed in the power of consolidation and vertical integration to dominate the market.
  • Jay sold control of the R and W to William T. Hart, a steamboat entrepreneur, and continued to consolidate railroads.

"I believe that consolidation will prove both essential and inevitable for a score or more roads in the coming decade." Jay's quote reveals his foresight and strategy for the railroad industry, predicting the necessity and inevitability of consolidation.

Jay's Advantage and Strategic Vision

  • Jay's fascination with maps and terrain from boyhood played a strategic role in his railroad ventures.
  • He envisioned the consolidation of railroads as a complex puzzle to maximize economy and profit.
  • Jay's understanding of the physical landscape was a competitive advantage.

"The one time surveyor scrutinized his maps with a freshly engaged eye. He studied the small railroads dotting the landscape as one would study the pieces of a complex jigsaw puzzle, pondering which, among the myriad possible combinations, might yield maximum economy and profit." This quote illustrates Jay's strategic use of his mapping skills and his analytical approach to optimizing railroad consolidation for profit.

Jay's Life Purpose and Motivation

  • Jay felt he had found his life's purpose in railroads and was motivated by his family.
  • He articulated a clear vision for his path in life and the impact he wanted to make.

"Now I have my road to walk and my reason for walking it." Jay's quote symbolizes his clarity of purpose and the personal motivation driving his business endeavors, with the 'road' metaphorically representing his career and life journey.

Jay's Work Principles and Team Building

  • Jay did not waste time or money and aimed for significant achievements.
  • He focused on recruiting top talent and believed in learning from real-world experiences.
  • Jay's inner circle was diverse but united by drive, intelligence, and inventiveness.

"We must look at accomplishing big things in big ways." This quote encapsulates Jay's philosophy of aiming high and pursuing substantial accomplishments, setting a tone for his approach to business and team building.

Jay's Relationship with His Father

  • Jay's father, John Burr Gold, faced many challenges and unfulfilled aspirations.
  • Jay sought to honor his father by achieving success that had eluded him.

"I have tried to make it my business to achieve some of the things that were denied him." The quote reveals Jay's desire to fulfill the unrealized dreams of his father, using his actions to pay tribute to his father's struggles.

Jay's Partnership with Cornelius Vanderbilt

  • Jay's relationship with Vanderbilt was complex, alternating between partnership and rivalry.
  • Vanderbilt acknowledged Jay's intelligence but had a personal dislike for him.

"Vanderbilt was annoyed, but also impressed by Jay. Vanderbilt told a reporter that he considered the younger fellow the smartest man in America." This quote demonstrates the dual nature of Jay's relationship with Vanderbilt, combining professional respect with personal animosity.

The Erie War and Jay's Role

  • The Erie War was a complex battle for control of the Erie railroad involving prominent financial figures.
  • Jay and his partner, James Frisk, Jr., emerged as significant players in the event.

"The New York Herald speculated about the possibility of future intrigues among the three lions." This quote reflects the anticipation and speculation surrounding the Erie War and the influential figures involved, including Jay Gold.

Jay and Jim Fisk's Partnership

  • Jay and Jim Fisk had contrasting personalities but shared a capacity for hard work and intelligence.
  • Fisk provided the public relations front for Jay's strategies.

"Fisk most often provided the public face for Jay Gold's machinations." This quote highlights the division of roles within Jay and Fisk's partnership, with Fisk handling the public-facing aspects of their ventures.

Jay's Attempt to Corner the Gold Market

  • Jay aimed to corner the gold market by influencing the Treasury Department's gold movements.
  • He attempted to install allies in key positions and lobbied President Grant's administration.
  • Jay's plan led to the panic of 1869, known as the original Black Friday.

"If one could control, or at least have advanced knowledge of the treasury movements with regard to gold, then one would be in a position to corner the market, reaping a massive return in the process." Jay's quote explains his strategy to gain an unfair advantage in the gold market by controlling or predicting Treasury actions.

Gold's Pool and Lack of Control

  • Gold's pool did not grant him fiduciary authority over member investments.
  • Members of the pool acted independently, buying or selling on their own accord.
  • Defections from Gold's intended strategy were common, undermining the pool's effectiveness.
  • Gold's aggressive tactics alienated his pool members, leading to disloyalty.

"Gold's pool was barely that. The quote unquote members remained independent, giving gold no fiduciary authority over their investments."

This quote explains that Gold's pool was not a cohesive unit, as members operated independently without Gold's financial oversight, which is critical to understanding the lack of control Gold had over the pool's operations.

"Each player was free to buy or sell according to his own clock. So it is not a pool at all."

This quote emphasizes the autonomy of each member in the pool, highlighting that their independent actions meant the pool did not function as a traditional investment pool.

Gold's Missteps and Consequences

  • Gold attempted to counteract opposition by using his influence inappropriately.
  • He used Corbin to send a letter to President Grant, which backfired.
  • Grant realized Corbin's vested interest in gold prices and became enraged.
  • Gold's actions led to a rapid sell-off, causing a bank run and financial chaos for many.

"Gold embarked upon an action that proved lethal to his cause."

This quote signifies the beginning of the end for Gold's strategy, as his actions led to significant negative consequences for his financial position.

"The broker for the assistant federal treasurer...has suddenly become a seller rather than a buyer of gold."

This quote indicates a pivotal moment where Gold's insider, Butterfield, changes his position from buying to selling gold, signaling to Gold that his plan was failing.

Vanderbilt's Advantage and Gold's Reputation

  • Gold's reputation suffered greatly due to his attempted manipulation of the gold market.
  • Vanderbilt capitalized on the situation by gaining control of an important railway.
  • Gold's tarnished reputation persisted long after the events, affecting his legacy.

"Jay's attempted gold corner would cost him dearly in one other way, in addition to market losses."

This quote points out that beyond financial losses, Gold's failed scheme had lasting repercussions on his reputation, which was an important aspect of his public persona.

"Vanderbilt wins again."

The brevity of this quote underscores Vanderbilt's repeated success over Gold, particularly in the context of their business rivalry.

Gold's Business Acumen and Ruthlessness

  • Gold displayed cleverness in business tactics, such as exploiting rate wars for profit.
  • His ruthlessness was evident in his willingness to manipulate stock prices and bribe politicians.
  • Despite ethical questions, Gold's strategies were effective in achieving financial gains.

"Jay has sunk down...nothing left of him but a heap of clothes and a pair of eyes."

This vivid quote describes the figurative defeat of Gold, conveying his diminished state after the fallout of his schemes.

"Jay also routinely played stocks of firms...he would then short its stock and reap hundreds of thousands of dollars as it tumbled."

This quote exemplifies Gold's manipulative tactics, where he used his influence to profit from the misfortunes of companies reliant on his railroad.

Gold's Later Career and Legacy

  • Gold shifted focus to the long-term management of the Union Pacific Railroad.
  • He immersed himself in operational details and sought to improve efficiency and reduce costs.
  • Despite his dedication to business, the public continued to view him as a corporate raider.
  • Gold's true passion for railroads and his vision for a railway system in the West were only recognized by a few.

"From the spring of 1874 onward, for the rest of his life, his primary personal focus was not stock speculation, but the management of the Union Pacific."

This quote signifies a major shift in Gold's career from speculation to dedicated business management, highlighting a different aspect of his capabilities.

"Jay gave interviews for a purpose. His statements on these occasions were often masterpieces of misdirection."

The quote reveals Gold's strategic use of the media to maintain his public image, which played a role in his business dealings and the perception of his character.

Conclusion and Recommendation

  • The podcast host concludes with a recommendation to read the book for a full understanding of Jay Gold's life.
  • The host expresses a personal interest in learning more about Gold through future readings.

"Highly recommend reading the book if you buy the book. This is not going to be the last book I read on J Gold."

This quote serves as an endorsement for the book discussed, suggesting that there is much more to learn about Gold's life and business practices.

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