American Colossus

American Colossus

Prologue: The Capitalist Revolution

John Pierpont Morgan enjoyed an excellent Civil War. He didn’t fight, although he was prime military material, being in his midtwenties and blessed with solid health. Instead he hired a substitute in the manner of many rich, tepid Unionists. Morgan’s father was a transatlantic banker with one foot in New York and the other in London; to train his son for the business he had sent him to school in Switzerland and college in Germany. The young man’s aptitude for numbers prompted one of his professors at Gottingen to suggest a post on the mathematics faculty, but he replied that he heard the family business calling, and he returned to America to become a commodities trader. In an early transaction he bought a boatload of coffee without authorization; before his astonished superiors could fire him, he unloaded the cargo for a fat profit. They appreciated the income but distrusted the audacity and so declined to make him a partner, whereupon, in 1861, he planted his own flag on Wall Street.

His timing couldn’t have been better, nor his scruples more suited to the opportunities the war afforded. Hearing of a man who had purchased five thousand old carbines from an armory in New York for $3.50 each, Morgan proceeded to finance a second purchaser, who paid $11.50 per gun, rifled the barrels to improve the weapons’ range and accuracy, and sold them back to the government for $22.00 apiece. The government got something for the six-fold premium it paid to repurchase its guns, but not nearly as much as Morgan did.

Morgan speculated in all manner of commodities during the war. Though he didn’t shun honest risk, neither did he unnecessarily court it. He cultivated confidential informants who could tell him, a critical moment before such news became common knowledge, of the latest developments on the battlefield. His rewards were remarkable, especially for one so young. The tax return he filed in the spring of Appomattox revealed an annual income of more than $50,000, at a time when an unskilled worker counted himself lucky to get $200.
Morgan wasn’t alone in profiting from the nation’s distress. Andrew Carnegie had clerked on the Pennsylvania Railroad during the decade before the war; by the time the war ended he was crowing, "I’m rich! I’m rich," from his speculations in railroads, iron, and oil. John D. Rockefeller focused on oil and did even better than Carnegie, creating the company that would show America and the world what an industrial monopoly looked like and how it behaved. Jay Cooke sold more than a billion dollars of bonds for the Union and took several hundred thousand in commission for himself.
Excerpted from American Colossus by H. W. Brands Copyright © 2010 by H.W. Brands. Excerpted by permission of Doubleday, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.