How Did the Vanderbilts Make Their Money?

The Vanderbilt name is well-known to affluent Americans, thanks to the opulent mansions the family built throughout the country’s first 100 years. The family was the wealthiest in America through the Gilded Age, known for lavish parties filled with colorful characters at their estate.

So, how did the Vanderbilts make their money and what happened to it?

Cornelius “Commodore” Vanderbilt is the answer to the first half of that question. He built a railroad empire that stretched from New York across the country. He also founded Vanderbilt University in 1873.

By the time he died in 1877, Vanderbilt’s $105 million fortune was more than the U.S. Treasury held at the time and made him one of the world’s wealthiest men.

He was followed by William Henry Vanderbilt, who inherited and doubled his father’s fortune before dying himself less than a decade later. Of course, that didn’t stop him from losing $150,000 to one of the most infamous Ponzi schemes of all time with General Ulysses S. Grant.

The family tree of one of the most influential families in American history is quite the storied view.

How the Vanderbilts Got Started

Commodore Vanderbilt started the family empire with a $100 loan from his mother. He used it to buy a boat which ferried freight and passengers between Manhattan and Staten Island. At 19, he married his first cousin and had 13 children with her.

He leveraged this business into a steamboat business that soon became cross-oceanic. When the Civil War started, he donated his prized ship to the Union Army to help it combat the confederate ironclad Virginia. He also lost his youngest son to illness during the war.

Afterward, he sold the company’s ships to focus on owning railroads. He even built the Grand Central Depot that became Grand Central Terminal. And Vanderbilt University was created through a gift of $1 million, at the time the largest charitable donation in American history.

But how did the Vanderbilts make their fortune?

How Did the Vanderbilts Make Their Money?

Cornelius was worth $105 million ($2.6 billion in 2020 dollars) when he died based on his ownership of 13 railroads. His will left 95 percent of the estate to his son and four grandsons. Billy more than doubled that inheritance to $232 million ($6.22 billion inflation adjusted) before his death nine years later.

Much of this was because they owned the only cross-country transportation method during the westward expansion and settlement of America.

However, Billy’s children failed to advance the fortune from there. They weren’t as frugal as their father and grandfather. Instead, they continued to spend on expensive real estate investments.

Cornelius II, for example, netted $5 million from his grandfather Commodore and $70 million from his father Billy. His own estate was only worth $73 million upon his death, due to real estate spending and philanthropy.

William Kissam Vanderbilt inherited $55 million from his father and converted P.T. Barnum’s Great Roman Hippodrome into Madison Square Garden. He founded The Jockey Club and lost a large portion of his wealth in a divorce settlement.

George Washington Vanderbilt built the famous Biltmore Estate, which is the largest privately-owned home in the United States. Frederick William Vanderbilt was the director of 22 railroads and also built several historical mansions. His estate was worth $80 million when he died.

How Much Are the Vanderbilts Worth Today?

If measured in today’s dollars, the Vanderbilt fortune was worth over $6.2 billion. That’s not a full picture though, because the U.S. Treasury of the time wasn’t worth that much. By comparison, Jeff Bezos is the richest man in the modern world but is certainly not more valuable than the U.S. government.

Although once the nation’s wealthiest family, over 120 living family members gathered in 1973 at Vanderbilt University. None of them were millionaires, although there are still some successful contemporary Vanderbilt descendants.

Journalist Anderson Cooper, actor Timothy Olyphant, and musician John P. Hammond are all Vanderbilts. But they found success largely despite being Vanderbilts, not because of it.

That’s because the Vanderbilts are the cautionary tale you’ve heard about people who are born rich. Rampant spending and mismanagement caused what is known as the fall of the House of Vanderbilt (a phrase used to describe the demolition of many of their luxury mansions).

How Did the Vanderbilts Lose Their Money?

After Cornelius and William’s generation, the Vanderbilts largely lived a luxurious lifestyle with no concept of the value of money. They spent millions buying influence and gaining social acceptance while donating to charities.

By the fourth generation, they were a family of socialites, gamblers, and playboys. None of them noticed the decline of the railroad industry following World War II.

In that time, most of the family’s mansions were torn down and replaced in what’s known as the Fall of the House of Vanderbilt.

What was once the second largest railroad in the country was bankrupt by 1970. Instead of being given a bailout like the mortgage, airline, and automotive industries in the 21st Century, the government took over passenger services and christened it Amtrak.

Despite Cooper’s mom Gloria Vanderbilt being a successful fashion designer, she’s clear with her son that he has no inheritance to look forward to.

Were the Vanderbilts the Richest Family in the World?

Both Cornelius and his son William were the richest men in America when they died. The vast fortune was created by the burgeoning railroad and shipping industries. They successfully navigated business and understood their trade like nobody else.

As each generation passed behind them, the family was less involved in business and more involved in high society. This path inevitably led the family to lose its fortune as railroads lost luster to buses, airplanes, and other forms of transportation.

Today, the Vanderbilt empire is little more than a government-owned train system and a prestigious university. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.