Long before Vanderbilt, Gould, Rockefeller, Carnegie and Ford, there was John Jacob Astor, perhaps the first truly diversified capitalist in America.

Born in Waldorf, Germany in 1763, Astor came from humble origins, the son of a minor official in Germany. He worked in Waldorf and in London, making musical instruments before he set sail for America in 1784.

Originally, Astor and his shipmates were slated to dock in New York but bad weather forced them into Chesapeake Bay, so he eventually found his way to Baltimore. According to the various sources listed below, Astor had either $20, $25 or $250 on him. On issues of this kind, however, I defer to the late great Robert Sobel, so we'll call it $25. Plus Astor is alleged to have had seven flutes with him.

Astor then moved on to New York where he went to work for his brother, a butcher, while selling his flutes at this time, for a song.

But he wasn't to be a butcher for long. It seems that on the ship over, he had heard some stories from his fellow passengers about the fur trade. So he left his brother's butcher business and started trading furs. Within a year he was back in London selling furs he had purchased in America and then, in turn, buying trading goods to take back with him. He still dealt a bit in musical instruments but it was furs that he really focused on.

By the early 1790s, Furrier Astor was becoming a real force and he began to invest in banks as well as an insurance company. By 1800 he was worth around $250,000, had a ship, and was now importing arms and wool.

In April 1808, John Jacob founded the American Fur Company. Spurred on by Lewis and Clark's expedition (those two first gazed upon the Pacific Ocean in November 1805), Astor sought to compete in the far Northwest with the established Canadian firms.

In 1811, one of Astor's subsidiary companies established Fort Astoria (now Astoria, Oregon), the first permanent U.S. settlement on the Pacific Coast. Thanks to this community, a St. Louis newspaper reported, "It appears that a journey across the Continent of North America might be performed with a wagon, there being no obstruction on the whole route that any person would dare call a mountain." And so the concept of the Oregon Trail came into being (though it wasn't until the 1840s and 50s that the dream was really fulfilled).

Astor succeeded largely through shrewd dealings with the Indian tribes and friendships with British officials who allowed him to branch out (important in the Northwest Territories).

He was not a learned man. As a matter of fact, education was not high on the list of many of the tycoons and robber barons who were to follow. Horace Greeley's Tribune described John Jacob as an aggressive man "who wrote a wretched scrawl, setting spelling and grammar equally at defiance." [Geisst]

And Astor's business practices were highly questionable and sometimes downright unethical. Author Charles Geisst comments on his practices in monopolizing the fur industry.

"(Astor) openly advocated plying Northwest Indians with liquor in order to make them more amenable to doing business."

Astor also had many leading politicians working for him. It was the kind of behind the scenes work that would probably draw more than one investigation today. The famous Senator Thomas Hart Benton was in Astor's "employ" when Benton pushed through the abolition of the War Department's 'factory' system, which competed with Astor's trading posts. Astor then bribed officials to gain exclusive rights to set up more of his posts.

For example, Michigan Governor Lewis Cass received $35,000 from Astor in 1817 in return for Astor's gaining exclusivity in the Michigan fur trade. It was a bargain for John Jacob.

Astor also loaned politicians money all the time, like $5,000 to James Monroe, who took 15 years to repay it. Or the $20,000 he lent to Henry Clay during the panic of 1819 when credit was impossible to come by.

By the early 1820s, Astor had a total monopoly on the fur business, spending $2 for goods that fetched $140 in London.

But Astor was involved in more than beaver pelts. At the start of the War of 1812, the U.S. government was struggling to find a way to finance the conflict. Astor and two other's, including the big financier Stephen Girard, purchased $10 million in war
bonds that the government was unable to sell. Astor and Girard, in turn, then acted as an underwriting syndicate, buying the bonds with their own funds and borrowed money, then reselling them for a profit. It was the first underwriting of government bonds. And Astor used his vast connections list to full advantage. The $10 million block was purchased for 40 cents on the dollar and sold for 82 cents…a $4.2 million profit. This whole venture proved to be a source of conflict under the presidency of Andrew Jackson as it "showed how the commercial banking sector was making enormous profits at the expense of a hard-put government." [Geisst]

Astor was also involved in the creation of the Second Bank of the United States (SBUS), a highly controversial venture established by Congress in 1816. Congress owned 20% of the stock and had 5 of the 25 board seats. Astor was lending Clay money, as well as Daniel Webster, both of whom served on the SBUS while they were sitting in the Congress. You can imagine that Astor received some favors.

By 1835, Astor was growing weary and he retired from the fur trade to concentrate on New York real estate. Actually, all the way back to 1797 he had been a player, then buying a farm in the middle of Manhattan for $25,000, considered quite high at the time. He held on and at the time of his death it sold for that amount per square yard.

Once Astor sold a lot on Wall Street for $8,000. He was told that in a few years it would go for $12,000. But Astor said he was going to take the $8,000 and buy 80 lots north of Canal Street, so when the Wall Street property hit $12,000, his 80 lots were worth
$80,000!

Astor was the wealthiest American prior to the Civil War, worth an estimated $20 million at his death in 1848. But his rags-to- riches story was far from the norm in the America of that time. In Astor's New York, by 1828 the top 1% of New York's families (owning $34,000 or more) held 40% of the wealth, the top 4% held 76%.

But while you could criticize John Jacob Astor's business practices, as he entered his retirement years he became quite the philanthropist and actively sought to put forward a kinder image of himself. Among the many institutions that benefited from his largesse was the establishment that would become the New York Public Library.

Yet on his deathbed Astor lamented, "Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the Island of Manhattan."

Brian Trumbore

Sources:

"Wall Street: A History," Charles Geisst
"The Pursuit of Wealth," Robert Sobel
"A History of the American People," Paul Johnson
"America: A Narrative History," George Brown Tindall and David Shi