The post-Civil War period witnessed an era in which vast fortunes were made in oil, meat-packing and steel. Millions of dollars were accumulated by such industrial giants as Andrew Carnegie, J. Swift Armour and John D. Rockefeller. Whether they were robber barons or lords of creation is a debatable point -- but no one disputes that their wealth gave them enormous power. In the pre-Civil War period, however, when millionaires were rare in this country, one name stands out. John Jacob Astor had no equal in the ability to amass wealth. How someone of such modest origins, without inheritance, was able to accomplish such a feat, stands out as one of the most remarkable stories in this country's economic history.
There were three main circumstances that contributed to Astor's remarkable success. He was an industrious individual with tremendous drive, he was skilled in fur trading and he was able to avail himself of a vast wilderness with scant government supervision. Using devious and illegal means in his dealings with the Indians, Astor was able to monopolize the fur trade in the western United States during the early days of our nation. Then, shrewdly recognizing the potential of trade with China, he began to trade his furs with them, returning with extremely valuable cargoes. Astor's genius was in continually being the first: finding emerging markets where competition had not yet developed.
By the time he sold the American Fur Company in 1834, he had already accumulated several million dollars. For many, it could well have been the ending of a successful career, but for John Astor, it was only the beginning. Astor's first stage of fortune-building involved producing goods and trading them. In his second stage he sought to profit from the productivity of others. His activities centered mainly around New York City, and the venture was real estate. Toward the close of his life, Astor commented, "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."
Although he regretted not having the foresight to buy land when he was young, Astor spent the later part of his life marching towards that objective of owning Manhattan. He was no different, however, from others during that period who made vast fortunes in real estate. Peter Goelet, the Rhinelanders, and the Lorillards were among those who made fortunes in land.
Recognizing that the trend in this country would be a shift from rural areas to urban America, Astor knew that an increase in population, accompanied by the building of new homes, stores, factories and city services, would make New York City real estate a gold mine. His motto -- "Buy and hold. Let others improve." -- reaped him untold millions of dollars as he hungrily bought up hundreds of lots for as little as two or three hundred dollars. His methods were ruthless and at times illegal, but during the period of Tammany politics, these practices were not uncommon, and few were prosecuted, unless they angered the party bosses.
Taking advantage of the Panic of 1837, he bought countless mortgages from small landowners who were in dire need of cash and could not make their payments. Once he obtained land he rarely sold it. Instead he leased it at five per cent for a period of twenty-one years. As values increased during that period, his portfolio increased significantly. As soon as tenants fell slightly behind in their payments to him, Astor then took control of the property. In this way, as well as through manipulations and deal-making with city authorities, Astor built up even greater and more profitable land holdings.
Buying waterfront property -- and there was plenty on Manhattan Island -- along with water grants, provided Astor with valuable rights. Obtaining these lands and water grants through his political connections, he was able to get the city to fill in much of these areas with an assortment of land fill, thus extending and increasing his land value. With an ever-increasing population and business community, his fortunes rose, so that by the middle of the 19th century, he was the wealthiest man in America, worth twenty million dollars. He was the exemplar for the advice of Will Rogers, a century later: "Buy land. They ain't makin' any more of the stuff."
- Contrast the terms 'robber barons' and 'lords of creation'.
- Describe how John Jacob Astor initially became a millionaire.
- How did Astor make a fortune in real estate?
- Explain Astor's motto, "Buy and hold - let others improve."
- Do increasing land values add to the wealth of a nation? Explain.
- Are there still fortunes to be made in real estate today? Name some modern figures who have done so.
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