Lessons From the Beginning of America's Economic Independence

Twenty years after America's political independence from England, its transportation network connecting the country's towns and cities remained inadequate for the needs of its own commerce. At the turn of the 18th century, information traveled at the same speed as people whether by messenger, the mail, or the newspaper. The news that George Washington died on December 14, 1799 took seven days to travel the 240 miles from northern Virginia to New York. Under these conditions, few institutions operated across long distances, even as Americans began to move west over the Appalachian mountains by the thousands.At that time, New York's aristocrats were classic landed gentry, owners of vast manorial estates along the Hudson River. They felt that people of their class were the rightful owners of business monopolies, and unsurprisingly, this attitude gave the ruling class a windfall of profits which they used to maintain their social control. Cornelius Vanderbilt became very wealthy by breaking the transportation monopoly and he did it by challenging the laws in court and he competed for customers by offering more consistent and faster service at lower prices.Vanderbilt grew up on Staten Island, off the coast of New York when New York City was smaller and less important than Philadelphia. He got into the family business young, ferrying people to and from the island. One of his first insights was to run his ferries according to a set schedule instead of the common practice of holding the boats at the pier for a threshold of passengers before setting sail. Vanderbilt gave the customer more control of their time, and he became known for regular, consistent service.


He took an active interest in the technical design of his boats to gain tactical advantages. For instance, because of a particular shallow channel at Raritan, all ferries needed to shuttle passengers by scow to the New Brunswick pier. The ferries ran aground if they tried to dock. To solve this key problem, Vanderbilt lengthened his boat to reduce its draft, enabling it to dock at the pier regardless of the tide's height. His competitors followed, as he knew they would, but a pattern of-leadership began and Vanderbilt became known as being one step ahead of the rest.Vanderbilt grew his business by investing in partners who had access to technology that he did not. He bought shares of other boats and managed his partners' boats when it was beneficial to him. For instance, he learned the intricacies of steam by running Thomas Gibbons' boat, the first steamboat in America. As he kept his sailing boats operating, he expanded into steam building his technical knowledge as he went along. In addition, his partnership with Gibbons, who was a very good attorney, gave Vanderbilt the winning legal strategy in Washington to break the monopoly.