I recently came back from a family trip to Rhode Island. I visited the state’s capital Providence, and several shore towns including Newport. Providence is home to Brown University and is similar to many state capitals. Some lovely parts combined with a noticeable homeless and drug presence. I’ve visited many state capitals and noticed that where the politicians are so too are those affected by homelessness and drug addiction. It seems like you can’t have one without the other.
The majority of our trip was spent exploring Newport and the surrounding towns. I’ve heard about Newport since I was a kid and have always wanted to visit. Rhode Island is a small state. I’ve driven past it several times going to other parts of New England. What intrigued me most about Newport was the stories I heard about the Vanderbilt family and the Gilded Era. After touring several of the mansions previously owned by the Vanderbilt’s and other prominent families during that time I can say with certainty that my expectations were more than exceeded.
If you are unaware of the Vanderbilt’s or the Gilded Era do a quick search on the Internet. Once you do you will surely be impressed by the opulence exuded. The properties that were built to be summer homes spared no expense concerning material and location. The mansions were built close to each other with several overlooking the Atlantic Ocean. By the time you are done with the tour of the home’s interior, you will be blown away by the grounds exterior and breathtaking views.
The following is a passage from a Forbes.com article titled The Vanderbilts: How American Royalty Lost Their Crown Jewels. It gives insight into the history of one of America’s wealthiest families, how that wealth was created and how the money was all blown away. The comparison of politicians on the 2020 Presidential trail who are looking to spend us into obscurity is strikingly similar to that of the Vanderbilts and the Gilded Era. History repeats itself when it’s not learned from. Think of that time as a cautionary tale against spending promises made by politicians using our hard-earned tax dollars. The Vanderbilt family legacy is a classic example of the perils of Other People’s Money (OPM).
Cornelius “Commodore” Vanderbilt started the family business by borrowing $100 from his mother and piloting a passenger boat on Staten Island in 1810. He expanded into steamboats and then went on to build railroad empire New York Central. Its tracks stretched Vanderbilt’s empire across the United States and gave him a monopoly for all rail service in and out of New York City. He reportedly accumulated a $100 million fortune by the time of his death in 1877 – more than was held in the U.S. Treasury at the time.
“Any fool can make a fortune; it takes a man of brains to hold onto it,” Commodore is said to have told his son William Henry “Billy” Vanderbilt, according to Fortune’s Children: The Fall of the House of Vanderbilt, a family history written by cousin Arthur T. Vanderbilt II.
Young Billy did his best: he inherited the family’s 87% stake in New York Central and expanded the business, reportedly doubling the family fortune to over $200 million.
Cornelius had urged that the bulk of the family fortune be endowed upon one descendant, but when Billy died in 1885, he left the family’s stake in the company to both of his sons, Cornelius Vanderbilt II and William Kissam Vanderbilt. The division of the Vanderbilt fortune in the third generation coincided with a decline in family interest in New York Central – and a gradual increase in spending.
Cornelius Vanderbilt II managed the railroads until his death in 1899. William Kissam Vanderbilt took over but retired soon after to concentrate on his yachts and thoroughbred horses, while brother George Vanderbilt’s 146,000 acre Biltmore estate ate into his branch of the family fortune. According to Vanderbilt’s book, William is said to have remarked: “Inherited wealth is a real handicap to happiness… It has left me with nothing to hope for, with nothing definite to seek or strive for.”
The Gilded Age brought with astonishing spending and endless rallies to keep up appearances. Among the Vanderbilt family’s prized assets were an impressive art collection of old masters and a string of houses in Newport, Rhode Island, including The Breakers, and 10 mansions on Fifth Avenue in Manhattan.
The Vanderbilts also became philanthropic – third generation William Kissam Vanderbilt gave $1 million to built tenement houses in New York City, as well as hundreds of thousands of dollars to Columbia University, the YMCA, the Vanderbilt Clinic and Vanderbilt University. It was the third generation who stopped growing the fortune: William’s extensive philanthropy and spending left an estate reportedly worth the amount he had inherited in 1885 when his father died.
The remainder of the article is a short read and worth the time if you want to learn more about what contributed to the families’ financial downfall. One word summarizes it all: overspending. The first generation created the wealth and the second maintained and grew it. By the time the following generations got their hands on the money, they spent it on philanthropy, high society and living a lavish lifestyle. They didn’t have to work for the money because they were born into it. They most likely assumed the money would always be there. So much so that spending it on everything and anything and looking rich took precedence over maintaining and creating wealth and remaining rich.
Several other wealthy families of that time still maintain significant holdings to this day. What lessons can be learned from the Vanderbilts? As I listen to several of the Democratic Presidential candidates make promises of Green New Deals, which has little to do with the climate, and more about the elimination and creation of entire industries with programs costing multiple trillions of dollars, I can’t help but compare them to those who have an addiction for spending other people’s money. The majority of those politicians are not independently wealthy and have amassed the majority of their net worth in academia or while serving in political office. Very few have created a business. What most of them only have experience with is spending your tax dollars (aka OPM) on social programs.
I didn’t realize the extent of the Vanderbilt’s philanthropic efforts until a few years ago. A day before I was driving through my old neighborhood for my aunt’s wake I read an article about the family and how they spent their money on many charitable causes. As I followed the funeral precession I passed by my old elementary school P.S.14. For all the years I lived there and drove by it I only knew it as P.S.14. It wasn’t until after reading that article and looking at the school on my way to the gravesite that I noticed a name etched in cement above an entranceway. That name was The Vanderbilt School. The same family that donated so generously and provided me and countless other children to this day a place to attend elementary school did so unknowingly at their financial peril. While I am grateful for having a place to go to school with a swimming pool that could be used during the summer months, I would imagine the city would have built a learning facility without their endowment. Many colleges and universities have buildings named after wealthy people who donated large amounts of funds. Having their name on the side of a building leaves a lasting legacy of their families generosity and wealth. When a person, family, or country spends other people’s money (aka taxpayer) to the point where the wealth is all gone and all that’s left is a Gilded Era gone by, history will repeat itself once more. The United States of America, like many great countries before it, will go bankrupt, and all that will be left are stories like the Vanderbilts whose lavish spending was fueled by an addiction to OPM.