1957

Vanderbilt's transatlantic campaign against the Collins Line was a war over subsidies. Edward K. Collins ran the celebrated American steamers that carried more passengers than Cunard and as much express freight, but the ships lost money: pushed at top speed to meet the requirements of the mail subsidy contract, they burned enormous quantities of coal and needed constant repair. In January 1852 Collins petitioned Congress to raise his subsidy from $385,000 to $858,000 a year, and dramatized the request by bringing the Baltic to Washington on the Potomac, mooring her off Alexandria for President Fillmore and the Cabinet to admire. The spectacle worked, but opponents wrote a cancellation clause into the new contract, and after the loss of the Arctic in September 1854, with the line's fortunes sinking, Collins's enemies invoked it, cutting the payments back to the original $385,000. The episode exposed the fragility of a business model built on political patronage rather than operating economics.

Into Collins's crisis came Vanderbilt's signature weapon, the underbid. He submitted an offer to carry the ocean mails from New York to Southampton for $390,000, less than half of what Collins believed he required, deploying the same technique he had used to freeze out competition on the New York to Isthmus service. Collins, his subsidy gutted and his flagship Adriatic perpetually delayed, never recovered; when he died on January 22, 1878, it was in a modest house at 133rd Street, his passing almost unnoticed, a few old shipmasters at the funeral, harbor flags lowered, no stone on his grave, and his widow and stepsons quarreling over a pitifully small estate. The contrast with his old rival was total: the death watch at the Commodore's mansion in 1877 had been world news. The subsidized pioneer was forgotten; the unsubsidized competitor became the richest American of his century.

Decision — Hired Tom Knapp from Graham-Newman; converted from broker to investor. Context: Bill Tweedy retired 1957; Howard Browne became president. Outcome (known): 1959 partnership pooling; the investor era began.