In short
Jay Gould’s rise and schemes during the Gilded Age, focusing on stock manipulation, political bribery, and gold-market cornering; how his actions helped spur major U.S. regulation (Interstate Commerce Act, Sherman Antitrust Act).
Guest backgrounds
No guests appear as interview subjects. The episode is hosted by Robert Smith and Jacob Goldstein (Business History). It also references authors and historical figures (e.g., Greg Steinmetz of American Rascal; Ulysses S. Grant; Thomas Edison; Jim Fisk; Cornelius Vanderbilt; Daniel Drew; Joseph Maron; Albert Spire).
Key claims
Gould “skipped the building part” by profiting from money flows; he used loopholes, bribery, and short-selling; he engineered a gold “pump and dump” that triggered a panic/“Black Friday,” then profited while others suffered; his legacy is both legal reform and enduring hatred.
Notable examples
Delmonico’s assault by Joseph Maron (1873); Erie Railroad proxy voting and share “printing” via executive committee loophole; Albany bribery with cash/champagne; $10 million check to tighten liquidity and profit from the resulting panic; gold corner attempt with Grant lobbying and Jim Fisk’s staged hype; Edison’s quadruplex deal and Gould’s Western Union sabotage; mob outside Gould’s office; later railroad consolidation and eventual regulation.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOJay Gould's Infamous Lunch Incident
0:00 to 0:28
Learn about the day Jay Gould was punched in a New York restaurant.
“Did you ever notice how you spend hours shopping online only to pause at checkout because you wonder if you trusted enough to hit buy now?”
Jay Gould's Infamous Lunch Incident
0:32 to 1:52
Learn about the day Jay Gould was punched in a New York restaurant.
“More Americans listen to podcasts, then add supported streaming music from Spotify and Pandora.”
The Legacy of Jay Gould
1:52 to 4:19
Explore the controversial legacy left by Jay Gould as a robber baron.
“Jay Gould was having lunch in Delmonico's near Wall Street.”
Gould's Rise from the Swamp
4:19 to 7:13
Understand how Jay Gould transitioned from leather trading to Wall Street.
“His big legacy, and it was a big one, was that a lot of laws were passed in the United States of America to make sure that no one could ever again do what Jay Gould did.”
Railroad Craze and Jay Gould's Opportunities
7:13 to 8:07
Discover how the railroad industry created opportunities for speculators like Gould.
“Gould moves down to Wall Street, and his timing was really lucky.”
The Erie Railroad Battle
8:07 to 13:33
Analyze the fierce ownership battle over the Erie Railroad involving Gould and others.
“You've got to buy the land and the rails and the labor and the rolling stock.”
The Ethics of Early Stock Trading
13:33 to 14:01
Examine the legality and ethics of stock trading practices during Gould's era.
“And there was nobody to enforce it, right?”
The Rise of Jay Gould and Erie Railroad
14:01 to 16:34
Learn how Jay Gould maneuvered to gain control of the Erie Railroad amidst competition.
“So it's sort of pick your poison, the manipulator or the monopolist.”
Corrupt Politics and Legal Maneuvers
16:35 to 23:46
Explore the corrupt political landscape and Gould's legal strategies to secure his position.
“Judges are also part of the political machine.”
The Cultural Backlash Against Gould
23:47 to 25:38
Understand the societal perceptions and backlash Jay Gould faced as a financier.
“But when Jay Gould becomes president, he actually doesn't do the worst job of running the railroad.”
Show all 20 chapters
The Cultural Backlash Against Gould
25:54 to 26:04
Understand the societal perceptions and backlash Jay Gould faced as a financier.
“From Taco Night into Moon, to sushi in Tokyo, make every bite rewarding with gold from Amex.”
Understanding the Robber Baron Terminology
26:41 to 28:00
Delve into the origins and implications of the term 'robber baron' in historical context.
“You probably know me from NYPD Blue, The Longest Yard, or Spike Lee's Black Klansman.”
Understanding Robber Barons and Rent Seeking
28:00 to 29:20
Learn about the concept of rent seeking and its implications in the context of Jay Gould's actions.
“And then they would charge people who took boats past the castle.”
Jay Gould's Manipulative Strategies
29:20 to 31:15
Explore Jay Gould's clever financial tactics and their impact on the economy.
“It's hard to know what to think of him in an era where everyone's doing bad things and there's all these monopolists and just not good people.”
The Gold Market Scheme
31:15 to 34:15
Discover the audacious plan Jay Gould hatched to manipulate the gold market and its consequences.
“I don't want to, like, I'm not pro-Jay Gould, but you can imagine it being fun as a clever game.”
The Fallout of Gould's Gold Manipulation
34:15 to 38:45
Examine the chaos that ensued from Gould's manipulation of the gold market and its historical significance.
“He managed to get to the president's brother-in-law and offer him a cut of the plan.”
Gould's Lasting Impact on Finance
38:45 to 40:05
Reflect on Jay Gould's legacy and the lessons learned from his controversial practices.
“Gould runs through a back door to escape.”
The Downfall of Jay Gould
42:54 to 45:39
Discussion of Jay Gould's ousting from the Erie Railroad and his subsequent actions.
“Eventually, the rest of the board of the Erie Railroad came for Jay Gould.”
The Rise of a Railroad Tycoon
45:39 to 49:01
Exploration of Gould's transition to owning and running railroads, including his tactics.
“He would come into a market and competitors would immediately be scared.”
Legacy and Controversy
49:01 to 51:26
Analysis of Gould's legacy, including his charitable actions and public perception after death.
“And around this time, Carnegie and Rockefeller are starting to, because they're older, urge the rich to give away their money.”
Transcript
Automatic transcript. May contain errors.0:00Did you ever notice how you spend hours shopping online only to pause at checkout because you wonder if you trusted enough to hit buy now? Agentic Commerce is testing that moment more than ever. That's where PayPal comes in. With 25 years of checkouts, 400 million consumer accounts globally, and the benefit of fraud protection. So no matter where a purchase starts, it ends with trust. Built for payments, growth, and agentic. PayPal Open. Built for all business. Visit paypalopen.com. Run a business and not thinking about podcasting? Think again. More Americans listen to podcasts, then add supported streaming music from Spotify and Pandora.
0:38And as the number one podcaster, iHeart's twice as large as the next two combined. Learn how podcasting can help your business. Call 844-844-iHeart. I'm Nick Turturro. You probably know me from NYPD Blue, The Longest Yard, or Spike Lee's Black Klansman. And on my new podcast, Delivering Happiness with Nick Turturro, I deliver pizza to a new guest. I've shared a slice with everyone, from Seth Rollins. What are you doing with my belt? To Bill Burr. I don't think I've ever met somebody so exactly out of their mind as I am. And now we even have more great guests coming up, including the great John Turturro.
1:12It's called happiness. Delivering happiness. And many, many more. Open your free iHeartRadio app, search Delivering Happiness with Nick Turturro, and listen now.
1:26Pushkit. Too quick? No, it was perfect. Pushkit. Stop. You got it.
1:43I'd like to talk about the 29th of April in 1873. Yes. Beautiful New York day, 61 degrees. I looked it up. Jay Gould was having lunch in Delmonico's near Wall Street. Always Delmonico's. We don't know his order exactly, but at the time, the popular repast at Delmonico's was oysters and vauve-clicquot. Shout out to the widow, Clicquot. Delmonico's at this point, for 50 years, is the place to eat near Wall Street in New York City, really. And it was no surprise to see Jay Gould there because he was a multimillionaire. He was a railroad titan. He was a gold price manipulator. But what happened next made the papers.
2:26A lawyer, Joseph Maron, approaches Jay Gould's table, lifts his arm, and belts him right in the face. Yes, in the nose. Bam. The New York Times wrote about the lawyer, Joseph Maron, as if he were a hero. Why don't you give me this from the Times? Suppose that his example were to be followed by a small proportion of those who experienced a like wrong by the hands of Gould. It is obvious that the flattening of Gould's nose would be an incident of hourly occurrence. They're essentially saying that everyone wanted to punch Jay Gould. We don't know exactly which dirty deal prompted this beating because there were too many of them.
3:05There's this great recent book about Jay Gould called American Rascal. It was written by Greg Steinmetz, and it tells the story and a lot of the stories in this episode. It's a fantastic book. And Steinmetz points out that Gould's business associates had attacked him before. One threw him down a stairwell. Another pulled a gun on him. A lynch mob once assembled outside his office and called for him to be hanged. He was arrested multiple times and dragged before Congress. Of all the robber barons, Jay Gould was the robberiest. Yes, you found it. You found the robberiest baron. Now, there were, of course, other robber barons.
3:45And we think of them almost a little bit fondly now because they all lived long enough to give their money away and fix their reputations. So John D. Rockefeller, which we did a show about. At the center? Yeah. The university? Rockefeller University, Rockefeller Foundation. Cornelius Vanderbilt endowed another excellent university, Vanderbilt. There's a statue of Cornelius outside of Grand Central. Andrew Carnegie, come on. You've been to a library? Yeah, Carnegie Libraries. But Gould died early. when he was still a hated, punchable, near-do-well. His big legacy, and it was a big one, was that a lot of laws were passed in the United States of America to make sure that no one could ever again do what Jay Gould did.
4:30Thanks, Jay Gould. I'm Robert Smith. I'm Jacob Goldstein, and this is Business History, a show about the history of business. Other billionaires at the time, they started companies, they built things, they got rich. Sure, sure, sure. Ghoul realized early on a lesson that drives Wall Street to this day. What if you can skip the building part, you know? Why not just make money from the flow of money itself? And if you combine that with absolutely no moral conscience, you have a villain for the ages. Did he have the mustache? He had a giant beard. It was the age of the beard. That was another Gilded Age thing.
5:07Tell me about Ghoul's beard. It was big and bushy and it stuck way out. I'm kind of jealous. Like maybe it was like a defense thing. Like if you tried to get it in space, the beard would keep you away. Harder to punch his nose when you can barely find it. Jay Gould crawled out of the swamp in 1860. Bring it on a little thick. I do mean there was a literal swamp northeast of Wall Street in Manhattan was this marshy section on the east side. It was known as the swamp and it was where they used to make leather. If you know anything about the leather-making process, it is not pretty. There's rotting cow hides, chemical baths, the stench.
5:45The area had a lot of crime and prostitution. And later on, it became the trading hub for leather goods that were cooked elsewhere. Tanned? Tanned. That's right. And that was Gould's job, which was to trade leather, which was better than the tanning itself, which he had also done in Pennsylvania. Gould was smart, though. He was a smart leather trader. He had grown up on a small farm. I guess everyone did back in those days. Alcoholic father. Also not uncommon. So he was a real striver, and he was always looking for a way out, always looking for an angle. And that's how he left the tanning vats to buy and sell the leather itself.
6:23In the American Rascal book, Steinmetz quotes a letter that Gould sent to his father. Perhaps you could read it. I've come to realize that it is the merchants who command the true power. The brokers take what seems the smallest share, but is in fact the largest. Theirs is nearly pure profit made on the backs of the shippers and the tanners, never their hands dirty. You didn't want to get his hands dirty, at least in the literal sense. Metaphorical dirty hands, no problem. So it was not a big jump for him in the swamp doing this trading to look a few blocks away down to Wall Street and to see another set of people who did not get their hands physically dirty.
7:03Well, it's just like one more level of abstraction, right? If you go from tanning to the business of tanning, what is Wall Street? What is finance? It's the business of business, right? It's one more level of abstraction up where it's just the business of money. Gould moves down to Wall Street, and his timing was really lucky. Number one, the Civil War was about to start, and he was too short to be drafted. He was a little over five feet tall. He was also lucky because he moved to Wall Street just at the beginning of the railroad craze. Aha, I've been waiting for the railroad craze. Which is huge for Wall Street because railroads, and we've talked about this before in other industries, require an immense amount of capital, immense amount of money to start.
7:46I mean, historical at this time, right? Yes. I mean, you know, before the railroads, what did you do? You had ships. And in fact, a lot of finance evolved because of shipping. Joint stock companies, basically the forerunners of, you know, public companies were because of shipping. But the railroads are like a whole order more capital intensive. Sure. You've got to buy the land and the rails and the labor and the rolling stock. Before you can make a single dollar, you have to complete the whole circuit. Yeah. So I get the feeling that before the railroads came to Wall Street, Wall Street was this very small clubby place.
8:23It was gentlemen trading with gentlemen rules, which may explain why there was not a lot of federal regulation of what went on on Wall Street because it was like a private club. And like who cares, right? It's not big enough to hurt anybody else. And if some chump wants to go down there and be the dumb money, let him. Yeah. But with railroads, trading stocks became more of this popular pastime. pastime. People, regular people, would show up to wall and broad streets to gamble on penny stocks outside of the stock exchange. They called them curb brokers. By some estimates, the volume was 10 times outside the stock exchange than it was inside the stock exchange.
9:01Well, didn't it start like under a tree before there was a stock exchange? The buttonwood tree is how it started. At this point, they have a building. But this was the bottom rung of the ladder for Jay Gould, the leather man turned speculator. He bought and sold shares and eventually gets a controlling interest in a small railroad that ran from Rutland, Vermont to Troy, New York. Wait, what? Why would you build a... Like, I don't even know where those places are, respectfully. I'm sure they're great, but like... So I think they were moving rocks or marble or... But here's the thing. You don't ask that question, why build a railroad there?
9:37Uh-huh. You just ask the question, can I build a railroad? because the race was on to connect anything and everything. If you saw two dots on a map and you could get the land or lease the land or find someone to come in to build a railroad on it, absolutely, because this was the start of the bubble. You thought, you know, some rich guy, Cornelius Vanderbilt, is going to buy my tiny railroad someday. And is it the case that these ordinary people going down to Wall Street will basically give you the money to capitalize your railroad from nowhere to nowhere? Yeah, people will buy the stocks because the word railroad is, you know, it's like adding AI to your company name now or adding Bitcoin to your company name or blockchain to your company name, whatever, five years ago.
10:20My money. So Jay Gould has this little railroad, but his first really big play, his breaking bad moment was on something called the Erie Railroad. So this one actually makes sense on paper. The Erie Canal connected the Great Lakes with New York City and the Atlantic and the world. With the Hudson, right? It connected the Great Lakes to the Hudson, which meant you could take anything by boat from the Great Lakes to Europe, to anywhere on the Atlantic. Big deal. So if you call something the Erie Railroad, you think, wow, that's even better than an Erie Canal. It's a railroad that goes from the Great Lakes to New York City.
10:56Small problem, Erie Railroad, a little bit of a stinker. They had built the tracks almost to New York. It was sort of on the other side of the river, 25 miles north of the city. And that's fine, right? Seems not great. Not great. Also, its tracks were six feet apart, which was wider than the tracks of all the other railroads. So that its rolling stock, its railroad cars could not connect up to another railroad. And was that just a mistake? Had they not figured out the standard yet when they built it? Why did that happen? I think they wanted it more stable. There was a debate in the early days.
11:33And they bet wrong. They bet wrong. They bet wrong. It was also plagued by debt and a horrible safety record. But at this point, it's the late 1860s. The actual usefulness of any particular railroad didn't matter. It was all about the shares, not the width of the rails. And Erie was notable and interesting to Gould because two very rich and powerful men were fighting over owning it. So on one side was Daniel Drew. He was the treasurer of the Erie Railroad. That was, I guess, his day job. His real job was speculating on the railroad he was the treasurer of. He was a master stock manipulator, made a fortune doing it on Erie.
12:19And because he controlled the treasury of the Erie Railroad, it was really easy to do. So, for instance, he would buy a bunch of his own stock, of the Erie Railroad stock, and then he would declare a dividend, which is giving money back to the shareholders. So giving money to himself, but also it makes the share price go up and he can sell the shares for a profit. Okay. Uh-huh. Amazing. And then he'd do the same thing, shorting his own stock, betting his stock would go down and then he would announce some bad news. Oh, and it went down. This is like what outside speculators do today and the people running companies hate it, right?
12:58This is the guy running the company is the one doing it. Yeah, he would be the guy on the earnings call if they had earnings calls, right? He has a famous quote about his stock trading philosophy. Why don't you give it to me, Jacob? Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight. You only know what you bought after the sun comes up. I like it. I like it as a metaphor. But also, he's saying if you are not insider trading, you're a schmuck. Why are you trading at all? Yeah. And to be clear, this was legal. Basically, everything was legal at this point?
13:30Almost everything was legal. Definitely no federal law. Some states had regulations. But insider trading was... And there was nobody to enforce it, right? He was a millionaire. He was doing millionaire things. So that's Daniel Drew. On the other side of the ownership battle over Erie Railroad was Cornelius Vanderbilt. He was already a railroad tycoon, and he wanted to buy the Erie Railroad to fix it up and cement his near monopoly over railroads in New York State. Yes. Also legal at the time. Also legal at the time. So it's sort of pick your poison, the manipulator or the monopolist. That's an interesting question.
14:07There's no one with clean hands in this fight. The devil is in and out of the details. And so Jay Gould, ambitious young man who really had a gift for reading the situation and scanning the fine print, he sensed that there would be money to be made when two millionaires are going after a company. So he starts to buy up shares in the Erie Railroad. Sure. And then he spots an interesting fact. A lot of the shares of the railroad were owned by speculators in England. This is how much of a craze railroads were. Speculators in England were just buying up railroad shares. Now, these English investors aren't paying a lot of attention to the stock.
14:48And Jay Gould buys their proxies, which is the right to vote at the shareholders meeting. Well, to be clear, when you buy a share of stock in a company, typically that comes with voting rights for each share. And you're saying he wasn't buying the shares from these people. He was just giving them some presumably smaller amount of money saying, you keep the shares. Just give me the right to vote your shares. And they would often just park that right to vote with some stockbroker somewhere. They didn't care. Interesting to strip that up. Presumably you can't do that now either. I don't think you can do anything anymore.
15:18Jay Gould assembles these. He has his own shares and the proxies. And he votes himself onto the board of directors and to the executive committee. And now he has to make the decision sitting there on the board. Which rich guy does he side with? Cornelius Vanderbilt? Monopolist. But by all accounts, someone who actually knew something about railroads, cared about railroads, and getting people and goods from one place to another? Or does he side with the stock manipulator, Daniel Drew, a guy who wanted to wring every last bit of value out of the near-worthless, eerie railroad? You're pointing us, Robert Smith.
15:58Gould has already done enough hard work in his life. He wants the easy road, and he sides with the manipulator, with Drew. And the battle is on. Now, before we go to this battle, and it's really amusing, One thing we need to remind people of is how corrupt politics was in the 1860s, 1870s. Because, like, obviously, rich guys own politicians in the New York City Council, in the New York State Assembly. This is the age of Boss Tweed, the political machine. Has Tweed come along yet? It's like pre-Tweed, right? Is he like a little baby corrupt? No, Tweed's already there. He's already working in New York City.
16:38Okay. But judges are also elected. Judges are also part of the political machine. And so rich guys would have judges on their payrolls. Cornelius Vanderbilt makes the first move. He gets one of his judges, got a bunch of them, to rule that the number of shares in the Erie Railroad should be capped. They should not be allowed to issue any more shares because he's about to use his enormous wealth to buy up a majority share of the company. He's going to do it the old-fashioned way. He's going to spend money, get the shares, vote everyone out, and merge his companies. But Gould spots a loophole here.
17:13The judge is ruling that he couldn't print any more shares. Only applied to the board of directors, but it said nothing about the executive committee. So the board of directors meets whatever. Every few months, the executive committee is running the show day to day. And Gould and Drew and Gould's crony. That's how you know they're bad guys. They have cronies. It's not his associate. No, no. Gould's crony, Jim Fisk. They're the executive committee. Colleague, his colleague, Jim Fisk. So Jay Gould has his own judge that he's presumably paying on the side who rules that the executive committee can do anything they want.
17:49They can issue convertible bonds and turn them into stocks and essentially print as many shares as they like. And so they do. They literally start printing stock share certificates in the Erie Railroad at a printing house. Vanderbilt is buying shares in the company, spending millions. Unbeknownst to him, tens of thousands of more shares are being printed around the clock. They're just feeding them to Cornelius Vanderbilt. So it's like they're going out like Vanderbilt's giving them money and they're giving him shares. And like back in the back, there's a guy just turned on the crank and more. More shares.
18:29The Google henchman, Jim Fisk, was later quoted as saying about Vanderbilt. Why don't you give this to me? If this printing press don't break down, I'll be damned if I don't give the old hog all he wants of Erie. Meaning I'll keep printing stock certificates as long as Vanderbilt keeps buying. Vanderbilt gets a little bit suspicious. I mean, you would think that the price would be staying the same, right? The price is not going out. There's rumors out there that maybe there's more shares than we think of the company. And then he realizes that some of the shares are signed by Jim Fisk, the henchman.
19:02Oh. Yeah, because he's like, wait a minute. By this point, he has spent$7 million. $7 million trying to buy up a majority of the company. But, of course, the company's shares just keep multiplying. he cannot buy the company. It's so cartoonish, you know? It's such a cartoonish ploy. And you picture Cornelius Vanderbilt with his big mutton chop sideburns going like, dang, damn it, they fooled me again. With just stacks of stock certificates around him. So Vanderbilt is furious. He goes to his judge, the one that issued the initial order, says you can't print certificates. And he gets that judge to issue a contempt of court order.
19:43And Vanderbilt vows to see the executive committee, Jay Gould, put into jail. But again, Jay Gould, and we'll see this all through the story, he's always one step ahead. So smart. While Vanderbilt is going to court, Gould knows he's going to do this. So they start to pack up the headquarters of the Erie Railroad. Boxes of cash and important documents. They're piling them into boxes and they haul them out of the office and toward the Hudson River. Is this true? The New York Herald reported at the time that a police officer spotted the men taking the stuff out of the building and asked, like, what's going on?
20:27And Gould says, oh, we're relocating our company headquarters to New Jersey. Gould and the rest of the executive committee and a large satchel of cash. No. They get on a boat. Did the central have a dollar sign on the side? Exactly right. They get on a boat and establish the new headquarters of the Erie Railroad at the Taylor's Hotel in Jersey City. I want them to be rowing. I want them to be rowing a boat across the Hudson. I mean, it's pretty much real. They are now out of the judge's jurisdiction, but apparently they would still order food from Delmonico's delivered across the river. So Gould now lives in New Jersey and he sneaks back to New York on Sundays to see his family because apparently there was a gentleman's agreement that the marshals would not work on Sundays.
21:14So I read in another book that he would come in after midnight on Saturday and spend the whole day and try and get back to Jersey by Monday morning so he wouldn't be arrested. But Gould, like, can't keep this up. It's just like, I mean, come on. He's a New Yorker. And he thinks, OK, what can I do to get out of this? What if I retroactively make every bad thing I've done legal? Distressingly familiar. Gould goes to Albany, the state capital of New York, and he encourages them to pass a new law legalizing what he has already done. And part of the encouragement. Well, this is like you can print all the stock certificates you want even if a judge says you can't.
21:58Yes. If you're an executive committee, yes. Part of his encouragement for this very specific law is that he shows up with a literal trunk of cash. This is all reported by the New York Herald. And one article details the prices that they were asking for their votes. Jacob? So this is in the newspaper. Yes. This isn't some investigation later. This is just this is just what's happening the way you read about like, oh, some bill died in committee. Literally, it's not even on the front page of the Herald. I had to go back to like page seven. It's not big news. So they write, the prices to be demanded occasioned a great deal of debate.
22:32Some cheap rated fellows suggested$1 ,000 a head, but they were smiled at for their lack of boldness and for their unsophistication. The rate vibrated between$2 ,000 and$3 ,000, and some were unwilling to say anything less than$4 ,000. Good for them. Vanderbilt, of course, sends his men to Albany, too. He was paying$3 ,000 for every no vote. Gould was matching it. Apparently, both men had suites at an Albany hotel filled with cash and champagne and cigars, of course. And the legislators would go back and forth between the different suites to get their offers. Working around the halls with the cigars.
23:10Vanderbilt eventually realizes, of course, Jay Gould is not spending his own money to get himself out of this fix. He's spending the Erie Railroad Treasury. This is actually a lesson, right? Like other people's money, like a classic finance lesson is use other people's money. And Cornelius Vanderbilt gives up at this point. The bill passes. Gould is not on the run anymore because it's legal now. He moves back to New York City and makes a lifelong sworn enemy in Cornelius Vanderbilt. It's a good enemy to have. Jay Gould eventually became president of the Erie Railroad, which is still a bad railroad and even more in debt now.
23:49It's been mismanaged. I'll just say that. But when Jay Gould becomes president, he actually doesn't do the worst job of running the railroad. He builds new bridges. He secures a good coal contract. He increases safety. By now, though, Gould does have that taste for the easy money. So he did have a side business to finance those new bridges, that cool contract. Ah, yes. He would issue new shares in the company, which, of course, he can legally do now. But before he announced it, he would short his own company. He would bet against his own company, knowing that all the new shares would lower the price of it.
24:25Diluting the shareholders. And again, this is legal? Yeah. Great. Yeah. Sure. Why not? Even though a lot of people were doing this, the other manipulators on Wall Street, they started to hate Jay Gould. And maybe it was that he was not from the upper class. You know, he was a leather tanner. Maybe it's because he never went to parties, never socialized. He was a pretty hard worker at cheating his own companies. And it might have been because he didn't look the part. He was a short man, as I mentioned. He had this giant bushy beard and slightly darker skin. One newspaper called him dark as an Israelite.
Read the full transcript
25:04Not so subtle. Not subtle at all. And just to be clear, Jay Gould was not Jewish. He was Episcopalian. But political cartoons depicted him with an exaggerated nose and Old Testament robes. They were starting to do the anti-Semitism on Jay Gould, even though he wasn't Jewish. He was already a pariah on Wall Street. and he decided his next move was going to make him hated not just by his contemporaries in New York, but by the entire nation. He was going to screw with gold. Gold! Goldfinger! Very good. After the break.
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26:29Think podcasting can help your business? Think iHeart. Streaming, radio, and podcasting. Call 844-844-iHeart to get started. That's 844-844-iHeart. I'm Nick Turturro. You probably know me from NYPD Blue, The Longest Yard, or Spike Lee's Black Klansman. But I'm also from Queens, which means I know pizza. And on my new podcast, Delivering Happiness with Nick Turturro, I deliver pizza from Prince Street Pizza to a new guest. You deliver pizza now? Then we sit down for a real conversation. I've shared a slice with everyone, from Seth Rollins. What are you doing with my belt? To Alex Rodriguez. Just to let you people know, we're talking to one of the goats here.
27:07To Bill Burr. I don't think I've ever met somebody so exactly out of their mind as I am. And now, we even have more great guests coming up, including the great John Turturro. It's called happiness. Delivering happiness. Mariano Rivera. and many, many more. Open your free iHeartRadio app, search Delivering Happiness with Nick DiTuro, and listen now.
27:38Jacob, until I researched this episode, I'd never really thought about the term robber baron. I mean, it's kind of weird, like the baron part. Yeah, baron. Why baron, right? Yeah, everyone used this to describe... Why not, like, robber magnate or something? Yeah. And people were using this routinely to describe Rockefeller and Carnegie and eventually Jay Gould. And the term came from medieval Europe. Oh, I love this. When actual barons, feudal lords, would build a castle next to a river like the Rhine. And then they would charge people who took boats past the castle. They would tax trade. Like a troll on a bridge.
28:13Like a troll on a bridge. And they were making money without adding anything to the economy. It's just a tax. It, in fact, makes commerce more expensive. It makes things more expensive for everyone. And so what the metaphor is that these robber barons were sitting next to the river of commerce in the United States of America in the late 1800s and just extracting their tolls, their taxes from all commerce. So there's this idea, a poorly chosen phrase, in my opinion, in economics, rent seeking. And I wish they called it something other than rent seeking. But rent seeking is this idea. It's the idea that you're getting money without providing any value.
28:56You have some angle. You have some way you can do it. Maybe you have a castle on the river and cannons or whatever it was. And it's an important distinction, right? People can provide value. Even finance provides real value to people and you get some money for that. That's good. Rent seeking, getting money just because you can when you're not providing any value. That's bad. And it's really an important distinction. And that's what I'm feeling in Jay Gould. It's hard to know what to think of him in an era where everyone's doing bad things and there's all these monopolists and just not good people.
29:29Yeah. But Jay Gould in particular at this point in his life is making millions of dollars without creating anything real, without improving people's lives, I would say. And he's not even like there's plenty of good finance, right? There's useful finance that allows, well, it allows people to build railroads and it's good when they build railroads. But coming into an existing railroad and manipulating the stock is not helping anyone. And maybe the combination of being very smart and having no laws at this time led someone like Gould, like he was just sitting there in front of him. He'd come up with these ideas.
30:06Here's one. This is an amazing one. At one point, he has$10 million in the bank for the Erie Railroad Company. $10 million in the bank. And so he had the bank write a$10 million certified check and hand it to him. Okay. He's got money in the bank. They write him a check. A lot of money. Yeah. Now, at the time, if banks wrote a$10 million check, they would have to set aside$10 million to pay that check. They would have to reserve that money. It turns out this was locking up a big chunk of the available liquidity, the available cash in the New York banking system. $10 million is a lot of money. OK.
30:41So what, are interest rates going to go up? What's his play? Exactly right. There's less cash in the system. There's less money to lend. Interest rates go up. Stocks start to sell off. The New York Times called it a full panic. Oh, my God. Jay Gould not panicking. He knew this was going to happen. He had shorted his own company and shorted Vanderbilt's companies. He made money off the panic. Yeah. And then just ripped up the cashier's check after he had made his money. Uh-huh. That's an incredible play. This is why no one invites Jay Gould to the parties. You can imagine. I don't want to, like, I'm not pro-Jay Gould, but you can imagine it being fun as a clever game.
31:20Right. If you don't care if you're hurting other people, it's very clever. And people have fun being clever. I think no one was laughing or enjoying it alongside Jay Gould. Was Jay Gould enjoying it? Do we know? It's hard to say. People were amazed at his brilliance and he would come up with ideas that were so nefarious. This one is pretty clever. People would be shocked in the room that anyone could think of it, much less pull it off. So when Gould decides to tell his henchmen and cronies that he's got a bigger plan, everyone's like, well, maybe it'll work. His plan was he was going to manipulate the gold market in the United States of America.
32:06You think railroads and the Erie line is big? The gold market is the foundation of the U.S. economy. And Gould had a plan. And all he had to do to pull this off was to either bribe or co-op the president of the United States. Yes! Ulysses S. Grant. So big U.S. So at this time, this is 1869, the U.S. was not on the gold standard. Oh, right. We'd gone off in the Civil War. Like it was a thing countries did at the time. You go off because of the war. And then at some point after the war, you go back on. The currency they were using was called the greenbacks. And so they could sort of be exchanged for gold.
32:43But the government would buy and sell gold to keep the value of the greenbacks steady. So there was a gold market in New York. So when harvest time came, for instance, the price of gold went up because there was much demand for hard currency. And the U.S. would then sell the gold that they had in their vaults to make the price stable. This is what they routinely did. Jay Gould's great gold keeper started in 1869. Again, I'm getting this from the book American Rascal. That summer, Gould weaseled his way onto a steamship with the president of the United States. At dinner— Weaseled. He weaseled. This is loaded language.
33:18He boarded. He boarded. Go on. I will be more neutral then. Gould managed to get an invitation onto a steamship with the president of the United States. And the plan was to get Ulysses Grant drunk and pitch him the idea that Gould should be allowed to increase in value. But Grant, I guess, was trying to cut back on the whiskey at this point. So he was sober and Gould made the pitch, said, you know, farmers would really benefit from a weak U.S. dollar because foreigners could buy more American wheat. Yeah, well, and it would be inflationary, which actually would be good for farmers. In fact, farmers in the decades after the Civil War were screwed by deflationary monetary policies.
34:04So he's not wrong. He's not wrong. The way to make the currency weaker is to increase the gold price, more greenbacks for every ounce of gold. And President Grant seemed unimpressed. He just changed the subject. So Gould went to plan B, B for bribery. Very good. He managed to get to the president's brother-in-law and offer him a cut of the plan. Just convince the president to increase the price of gold and you can make millions. Gould made the same offer to a high-ranking official at the Treasury. and they start to lobby the president. And Gould starts buying gold. You know, the price moves a bit, but not much.
34:44So Gould also, just for good measure, plants an editorial in the New York Times that says that the president is going to let gold surge. Everyone reads this, and the price of gold starts to go up. Because people are buying. Everybody's buying. I don't know, planting PR and giving money to relatives of the president. Not entirely unfamiliar. Not unfamiliar. These days, though, I think his plan would be called a pump and dump, a rug pull, because he is not long gold. He bought and bought gold. And more importantly, let everyone know that he, the brilliant and evil Jay Gould, was buying. So everyone in the street knows this.
35:30They know he's got some plan. So they start buying. They start buying. gets higher and higher from 141 greenbacks per ounce to 164 greenbacks per ounce. And then Gould gets the word. Despite the bribery, despite the lobbying, President Grant is about to order the government to bring the price of gold back down. It's getting too high. Gould has a day, tops, to get out of the market. So, classic, Gould starts secretly selling gold. while, of course, boldly announcing to everyone that he's buying, buying, buying, buying. He sends his confederate? Confederate? Okay. I'll grant you confederate. He sends his confederate, Jim Fiske, to the floor of the gold market.
36:13And Fiske is a large man. He has a very nice suit, diamonds on his hands and his cane. He has two showgirls on his arms so that everyone looks to Jim Fiske. And he starts talking about gold, saying, oh, gold's going to go to$200. Oh, gold. He says, here's a quote, sell it short and invite me to your funeral. And he's just lying, to be clear. He is just lying. He's in on the plan. Yeah. Because a team of brokers is quietly selling all the gold that Gould owns into the rally. And then the announcement comes. Treasury official in New York stands outside the office, declares the government is going to sell$4 million worth of gold and bring the price back down.
36:57Flood the market. And people start sprinting from the Treasury announcement to the gold exchange. And when word gets out, it's an absolute bloodbath. Reminds me of trading places. A little bit, right? We've already had trading places. Everyone's like, oh! They call it Black Friday. Was this the first? It's the biggest. It's the biggest Black Friday, not the last. Price of gold just drops off a cliff. On the floor of the gold exchange was a young telegraph operator helping to send the gold quotes out on the wire. Thomas Edison? Young Thomas Edison. Remember we were going to start a show called Young Thomas Edison.
37:37Why don't you read this from Thomas Edison? The excitement was prodigious. New Street as well as Broad Street was jammed with excited people. Oh, I sat on the top. I sat on the top of the Western Union Telegraph booth to watch the surging crazy crowd. One man came to the booth, grabbed a pencil and attempted to write a message to Boston. He was so excited that he had the operator write the message for him. Amid great excitement, Spire, the banker, went crazy and it took five men to hold him and everybody lost their head. Apparently that banker, Albert Spire, took his shirt off and was begging people to shoot him in the chest.
38:16Oh, my God. I know. I took a turn. Edison was 22 years old, broke at the time, certainly didn't have any money invested in gold. So he just watched amazed, later saying, quote, these occasions are very enjoyable to a poor man. Now, through all of this, Gould's running everything from his office nearby. Somehow people figure out, we was had! A mob forms outside his office. They're shouting, lynch him, hang him. The police show up. Gould runs through a back door to escape. The next day, he does the calculation. He managed to sell most of his gold and make a fortune. As for everyone else, nobody seems to know.
39:00The gold floor was so frantic that the buy and sell orders were scrawled out. They're indecipherable, barely readable squiggles. The exchange says that contracts representing$500 million in gold changed hands, which is like three times the amount of commercial gold in the U.S. at this time. Trading it back and forth. Trading it back and forth. It will take months to figure out who's on the hook, who owes what. But Gould, he'd already prepared for this. He bribed a judge to have one of his associates appointed as the person who would determine the final settlements. Gould was going to be fine, except for, you know, showing your face at Delmonico's.
39:44Gould even bankrupted his own broker. I love this moment from the book American Rascal. Why don't you read this, Jacob? Henry Smith, the broker, said to Gould, I will live to see the day, sir, when you have to earn a living by going around this street with a hand organ and a monkey. And Gould famously retorted, Maybe you will, Henry. Maybe you will. And when I want a monkey, Henry, I'll send for you. Boom. The end of Jay Gould and maybe some monkeys after the break.
40:35combined. So whatever your customers listen to, they'll hear your message. Plus, only iHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business? Think iHeart. Streaming, radio, and podcasting. Call 844-844-iHeart to get started. That's 844-844-iHeart. I'm Nick Turturro. You probably know me from NYPD Blue, The Longest Yard, or Spike Lee's Black Klansman. But I'm also from Queens, which means I know pizza. And on my new podcast, Delivering happiness with Nick Turturro, I deliver pizza from Prince Street Pizza to a new guest. You deliver pizza now?
41:10Then we sit down for a real conversation. I've shared a slice with everyone, from Seth Rollins. What are you doing with my belt? To Alex Rodriguez. Just to let you people know, we're talking to one of the goats here. To Bill Burr. I don't think I've ever met somebody so exactly out of their mind as I am. And now, we even have more great guests coming up, including the great John Turturro. It's called happiness. Delivering happiness. Mariano Rivera. Oh my God. And many, many more. Open your free iHeartRadio app. Search Delivering Happiness with Nick DiTuro. And listen now. 30 years ago, an island off Manhattan almost brought down New York City.
41:50Who will you trust? Your friends and neighbors? Or will you trust the people five miles overseas? This is a story about neighbors turning on each other. And what happens when a forgotten place decides it's had enough. We reached for a feeling that exists in this city, but we're not stopping, are we? I'm Ben Nadeff-Haffrey, and for my new series on revisionist history, I took a deep dive into Staten Island's attempt to secede from New York City in the 1990s, and what it all has to do with the politics of resentment that dominate America today. Listen to Revisionist History, The Staten Island Problem, on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
42:54And we are back from the break. Eventually, the rest of the board of the Erie Railroad came for Jay Gould. He was just too toxic at this point. They voted him out as president, but they couldn't serve him the papers, the announcement, because he had barricaded himself in his office with a team of thugs and lawyers outside. It's all a cartoon. This whole show is a cartoon. Now, eventually, the board figured out the one thing that Gould might care about. Money. It's money. I know what it is. They knock on the door and they say, hey, you know, if you resign as president, the stock price will probably go up immediately.
43:34And Jay Gould's like, OK, got it. I quit. No, he bought a bunch of eerie stock first. Then he quit. And then he made two million dollars as the price went up. Robert, can I talk about the principal agent problem right now? Yes. Yes. So, you know what this is, right? But this is actually a fear people had when companies started to get bigger. For most of history, most companies was like somebody owned it. Maybe it was a family. And those were the people who worked at the company. So they cared about the company and their customers and all those things. And as companies get bigger, you have the separation of ownership and control, right?
44:12People who own the stock own the company, but they don't control it. Somebody else works there. And the fear is the CEO is not going to work for the best interests of the owners. The CEO is going to work for the best interests of the CEO. And this was obvious to everybody when joint stock companies first started getting going. And you really see it here. Like, plainly, Jay Gould is not running the company for the benefit of all the shareholders. He's running it for the benefit of Jay Gould. Nowhere in his decision-making process is, well, how is it going to affect the people who put their freight onto my ear on the road?
44:46He's like, how do I get millions of dollars out of manipulating this company? Yeah. So now he's gone? He's got his extra millions and he's out? 36 years old and out of work. So young still. I know. He did so much. He had a ton of money, but no more inside information. The robber baron was exiled from the river. The cows were in the moonlight. All he had now was his smarts. And you know what? He kind of went straight. No. He started to buy railroads. And then, I know this is going to shock you, he would operate the railroads. This was the age of the transcontinental railroad push, you know, trying to get tracks laid across the whole country.
45:28And Gould was buying up the right parts of the system, consolidating his gains until he controlled the Union Pacific Railroad itself. Yeah, the biggie. So in some ways, Gould was so famous at this point for being evil that he didn't need to do anything evil anymore. He would come into a market and competitors would immediately be scared. They'd be like, oh, no. Like, what's his angle? Is he going to get a judge to throw me in jail? Is he going to short everything and blow up the railways? Is he going to sell the rails for scrap metal? And he didn't. He would run the railroad. He would fix things up.
46:03He would ride his tracks every year to take notes on the ride and what needed to be fixed. And it was a lot of work. At one point, he owned one-sixth of the rail miles in the United States of America. Now, sometimes he would get his beak a little wet. For instance, I love this story because it involves Western Union, the telegraph company. He hated the Western Union monopoly. This is where Edison comes in, right? Yeah, yeah. So he started a competitor to Western Union, and he bought the rights to a new technology from? From Edison. From Edison. The quadruplex. Edison's first, really first big invention that let you send four messages at a time on one wire.
46:44And Gould paid Edison$30 ,000 for this. And we talked about this in a previous show. But what we didn't talk about was Gould's side. Obviously, Thomas Edison wanted to improve telegraphy. What Gould wanted to do was short the stock of Western Union and then announce that he had the quadruplex. So, of course, the stock dropped. Gould made money. Gould even snipped the wires of the Western Union. That's the Gould. Of the Western Union that ran along his railways, right? Now we got the cartoon villain again. They would lease out the side of the railroads. Just to put— He's leading out a railroad car with a big scissors and just cutting it as he goes by.
47:23Exactly. Snip, snip. Eventually, Gould was able to drive Western Union into financial trouble, and then he bought the company. He now owned it. But this seemed like almost nostalgia for him at this point. You know, he already had a ton of money. One villainous deed, one dastardly deed for the good old days. One last score. At this point, he moved out of the city to his summer home, Lindhurst, up on the Hudson River, which we have both been to. I've been outside of. I've jogged past it. I've taken a tour of this mansion, and it's a little bit sad. It's built as a castle up above the Hudson River, so the views are great.
48:01But the actual rooms are tiny and dark, and it feels defensive. Are you just projecting sad? I feel like you're projecting sad onto it. Did he charge all the boats going by a toll? He did not. There was a railroad line that ran through, well, along the river at the edge of his property. Still, when you take whatever, the metro north, the train goes right by there. But the railroad was owned by Cornelius Vanderbilt, his sworn enemy. So when Gould would head to work on Wall Street, this is what they told me in the tour. When he had to work on Wall Street, he had a bridge that was built over the railroad tracks to a dock.
48:37So he would take all of his stuff and take a steamship into the city so he wouldn't have to get on Vanderbilt's railroad line. And he liked to claim it was faster and better than the railroad. I didn't want to take that Vanderbilt train anyway. I mean, it's also cartoonish, right? I'm just trying to amp up the cartoonishness. It's true. It's true. Well, it's about to get a little sad. Gould got sick with tuberculosis in his 50s. And around this time, Carnegie and Rockefeller are starting to, because they're older, urge the rich to give away their money. Easy to say when you have all the money.
49:10And Carnegie and Rockefeller were doing it in this very showy way. And Gould did give away some money. He, for instance, gave money to help preserve George Washington's home at Mount Vernon. But he told them, don't put my name on it. The New York Tribune had one nice thing to say about Gould. Quote, He never bought a eulogy. He didn't put his name on anything. Going into the story, doing the research, I desperately wanted to end with something redeeming about Jay Gould. Because, right, you know, you don't want the story to be just pure evil. And if you squint a little bit and ignore his youthful criminal-like behavior, you could say that he matured from a speculator into a CEO.
49:58You know, he helped consolidate the ragtag railroad system into a more streamlined transcontinental behemoth. He helped Union Pacific and Western Union, big names that exist today, help them win and become profitable. But I think this is the crucial part. You can make an argument that he was a good guy, but nobody liked him enough to even try to make that argument. And one biographer said, quote, at one time or another in his life, he broke almost every man who worked with him. Let's leave it there. We don't have to redeem him. He was who he was. Yeah, his legacy is in the congressional hearings and the new laws that he helped inspire.
50:43After his shenanigans with the Erie Railroad, the first government railroad commission was formed. It never occurred to them that we're going to have to need to regulate railroads everywhere. And when they saw Jay Gould, they're like, yeah, we're going to need to regulate railroads. In 1887, Interstate Commerce Act was passed to combat price fixing on the railroads, which he had engaged in. and the Sherman Antitrust Act passed 1890, two years before Jay Gould's death. I will say that when news of his death got out, a crowd formed outside the stock exchange in Wall Street. Not to mourn him. They weren't mourning him.
51:22People gathered expecting the share price of his companies to drop. They wanted a bargain and easy money. That's a fitting tribute, I guess. Yeah. Robert, I have a question that I bet one of our listeners can answer. Was Jim Fisk from this story the inspiration for Big Jim in the Bob Dylan song, Lily, Rosemary, and the Jack of Hearts? Truly, I don't know. Write to us at businesshistory at pushkin.fm. You can also find me on X or on LinkedIn. Or if you'd rather tell Robert, Robert, you are a radio smith in the various places. I am. Our show today was produced by Gabriel Hunter Chang, was engineered by Sarah Bruguere, who, if you're watching on YouTube, you will see, has just built us a beautiful new studio.
52:08Love it. The video editor is Matt Nielsen. Our showrunner and editor is Ryan Sweaty Dilly. Sweating it out where it's 30, I hear, in London, which apparently counts for hot there. I'm Jacob Goldstein. Hi, Robert Smith. Thanks for listening.
52:28From Taco Night in Tulum to sushi in Tokyo, make every bite rewarding with gold from Amex. Wherever you die, four times the membership rewards points at restaurants worldwide are piling up. Learn more at AmericanExpress.com slash Explore-Gold. Terms and points cap apply. I'm Nick Turturro. You probably know me from NYPD Blue, The Longest Yard, or Spike Lee's Black Klansman. And on my new podcast, Delivering Happiness with Nick Turturro, I deliver pizza to a new guest. I've shared a slice with everyone. from Seth Rollins, what are you doing in my belt? to Bill Burr. I don't think I've ever met somebody so exactly out of their mind as I am.
53:04And now we even have more great guests coming up, including the great John Turturro. It's called happiness. Delivering happiness. And many, many more. Open your free iHeartRadio app, search Delivering Happiness with Nick Turturro, and listen now. 30 years ago, an island off Manhattan almost brought down New York City. Who will you trust? Your friends and neighbors? Or will you trust the people five miles overseas? This is a story about neighbors turning on each other and what happens when a forgotten place decides it's had enough. But we're not stopping, are we? Listen to Revisionist History, The Staten Island Problem, on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
From the publisher
Jay Gould became hugely rich without ever really making a product or offering service to benefit his customers. Other "Robber Barons" in the 19th century forged steel or pumped oil to make money - but Gould preferred to manipulate the stock market or bribe judges and politicians to generate a profit.
Even when he was fired from the railway company he mismanaged, he used this inside information to profit from the soaring share price. No one liked Jay Gould - indeed many people physically assaulted him because of his awful behaviour - but his real legacy was the raft of laws America passed to try to prevent such a businessman ever rising to power again.
Write to us at businesshistory@pushkin.fm
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