Chapter XI. More Lessons of Monopoly

While they were still interested in Detroit, my brother, with Mr. Wilson and some others, acquired the Nassau street railroad franchise in Brooklyn, N. Y. I had nothing to do with this at first, but all concerned in the ownership wanted me to take an active part in the management and as soon as I was somewhat free from pressing matters in Detroit I joined them.

A very troublesome suit was pending in which it was charged that a lot of Brooklyn councilmen had made this Nassau grant ostensibly in good faith, but in reality to someone who represented them. The enterprise was taking on such proportions that it was well worthwhile to employ the most skillful legal talent obtainable, and our people engaged Samuel B. Clark and Elihu Root as their attorneys. Joseph H. Choate was later called in to assist them.

After the case had been well worked up by these lawyers, Albert Johnson and Mr. Wilson, the prospective purchasers, put the whole thing up to me for a decision. In view of the fact that the grant was clouded and that litigation was likely to continue for some time would I advise them to make the investment? I replied that I would; that few street railroad grants were free from crookedness, but to prove the case was another matter. I didn’t believe it could be proved, so my advice was to build. Mr. Root’s characteristic comment on this, I remember was , “No matter what the decision, Johnson, you can’t avoid being either a good prophet or a good advisor.”

The case was dropped after the first court decision against the politician who had brought the suit, and in the meantime work on the railroad was progressing. Before finishing its own line the Nassau acquired the Atlantic avenue system and established the first five-cent fare from Brooklyn Bridge to Coney Island. Previous to this the fare had been about twenty-five cents. The five-cent fare was really the beginning of the great popularity of Coney Island and it changed the character of its patronage. People who had been accustomed to go there three or four times in a season, now went several times a week and took their families. The crowds steadily increased, and five-cent lunches became more popular than seventy-five-cent dinners.

At this time there were four surface street railroads in Brooklyn, the Brooklyn Rapid Transit being the largest, the Nassau system next. In addition to these surface lines there were an elevated road and a municipally owned and operated line on Brooklyn Bridge. The municipal line was a mile and a half long from the Park Row Terminal on the New York side to the Brooklyn terminal near the business center of the city. The fare for this mile and a half was two and a half cents. This was the first case of municipal ownership of a city transportation line in this country and was the most efficient so far as the public was concerned of any line in existence before or since.

The management was vested in the Bridge authorities appointed by the two cities. Now here was a commission appointed by two notoriously corrupt city governments yet performing its various duties with absolute fidelity to the public. Why? Because the enterprise was operating under the daily observation of the persons most interested in it. Between a privately operated enterprise and one publicly operated the people will always insist upon a higher degree of efficiency in the latter. This was strikingly illustrated in the case of the Municipal Traction Company’s operations in Cleveland a few years later. The people soon become disheartened and give up the fight in trying to get good service from a private company.

And between two public enterprises, one under the eye of the people and the other removed from their observations, the one they have closest contact with will be hold to higher standards. For example, witness the placid indifference with which the ordinary citizen regards a one hundred thousand dollar robbery of customs receipts, and by contrast his virtuous wrath if by change his postman happens to be late three days in succession. He doesn’t mind being robbed indirectly and at long range, but he will have his mail delivered at the same time each day or know the reason why. What’s the postoffice for anyway?

The history of the city ownership and operation of those tracks on the Brooklyn Bridge if properly studied will completely answer the objections raised by opponents of municipally owned and managed street railways.

The cheapest fare between New York and any part of Brooklyn at this time was seven and one-half cents, the city getting two and one-half, as has been stated, and the surface lines five cents, though to any of the suburbs of Brooklyn it cost more than that.

The Nassau people urged the building of a surface line across the Bridge on the roadway, giving two surface tracks in addition to the two elevated tracks already in use. All four of the surface car systems wanted to cross the bridge if any of them was going to do so and they chose me to represent them in an effort to get a franchise. I was instructed to procure a franchise for no less than twenty years. I made my application to the Bridge authorities. They said they would not think of granting a franchise for more than ten years at the longest.

I reported. All the companies except ours demurred. The others hesitated about spending so much money for so short a grant. I told them I would try again, but that I felt it was so important to get a five-cent fare into operation between New York and Brooklyn in view of the rapid growth of the latter city, that I was in favor of accepting the ten-year grant. I was accordingly instructed to go ahead and get it; but when I had my next interview with the Bridge officials they said they had changed their minds and didn’t think they cared to make a grant for so long a time as ten years. I went back to my people then and reported that for my own company I was going to take anything I could get; that if the grant was a public benefit it would continue; if it wasn’t it ought to end. I don’t think the last argument made much impression on them, but the prospect of seeing our cars running over the bridge with a through fare of five cents, while passengers from all other lines would have to change at the bridge and pay seven and one-half cents did, and it moved them to agree to take for their companies anything I could get for ours.

Of course I wasn’t very particular whether they moved or stayed. A grant that would take us over and leave them behind wouldn’t be a bad thing for the Nassau. Finally on behalf of the four companies I accepted a grant that could be terminated by telephone or other message from the Bridge authorities. This grant, which we sometimes referred to as our “ten minute franchise,” was really just as good a grant as any company ought to have, and in this case it proved very lucrative, although it destroyed the city’s street railroad, which property was finally operated by the Elevated Company. The real weakness in the city’s case was that it had already given away all the surface road and elevated rights in Brooklyn. If all these facilities could have been operated by the city by the same efficient public management that had prevailed on the Bridge for so long, a most admirable municipal system would have been the result.

The surface tracks were laid across Brooklyn Bridge and completed December 18, 1897, and my brother Albert ran the first car over them on the last night of that year.

In 1898 E. H. Harriman became interested in acquiring the Nassau property. He was not so large a steam railroad operator at that time and really wanted the Nassau road for the Brooklyn Rapid Transit Company. He was chosen as the expert negotiator for his side and I served in the same capacity for ours. We had a long and bitter contest and the result many times appeared very doubtful. I got to know him very well and our relations, though hostile at first, became more than friendly and led to Mr. Harriman’s suggesting more than once that I join him in a wider field.

The final scene in these negotiations is worth describing, as it illustrates so admirably the degree of confidence in which large business interests hold each other. There were seven main holdings representing the Nassau and its purchases and each of these in turn was split up among various ownerships. It was necessary to change the personnel of many boards of directors and to change the character of many kinds of securities, and if a hitch should occur in any of these steps it would prove very embarrassing. Nobody had sufficient confidence in anybody else to allow this to be done by piecemeal. It had to be done all at once or not at all.

After months of negotiation a time was fixed for the transfer of the property, the delivery of certified checks, stocks and bonds, the reorganization of many boards of directors, changes of officers and many important transactions that had to be done ostensibly in a certain sequence of time, but in reality instantaneously on account of total lack of confidence among the distinguished gentlemen involved in the enterprise.

A room in the Empire Building was engaged for the day or as much longer as it should be needed. Banks and trust companies had been notified. All securities and certified checks had been previously presented to and initialed by the party who was to receive them, so that in the final exchange this work of verification was saved. Representatives of the banks and trust companies, the lawyers of the various interests, the numerous boards of directors, the delegates generally of the enterprises involved, and a handsome important-looking man named

Vorhees, were finally all assembled in this one room. Here around a great circular table sat the leaders of the seven interests with their associates grouped back of them, — as fine a band of pirates as ever cut a throat or scuttled a ship.

Much time was lost in the last three hours in settling an unforeseen dispute which arose late in the proceedings. Finally the lawyers announced that all was ready. Then there was a sort of roll call in which all papers which were to be exchanged were called aloud and checked off. This done, Mr. Vorhees suddenly became the most important figure in the room. Looking wise, saying nothing and knowing less, he executed a contract agreeing to buy all of this property, involving some thirty million dollars, and then another in which he sold everything he had just bought. He performed very much the office that a stock exchange does when it enables people to make big trades while concealing the identity of the principals and preventing their meeting, thus obviating possible litigation. He looked so handsome, his manner was so impressive and his compensation so moderate that I hesitate to apply a harsh name to him. Yet he was in truth a legal dummy. But he was important, fully as important and knew quite as much about what was taking place as the policeman who guarded the door. For the brief space of a few seconds Vorhees was the owner of a thirty-million-dollar property, but of course the door was locked. It was not locked because of Vorhees, but because of the high regard in which the gentlemen doing business held each other. It had been announced that nobody would be permitted to leave the room until every interest had received and acknowledged what it was entitled to and the announcement was accompanied by the locking of the doors.

The currents and counter-currents represented in that transaction were not known to any one person, certainly not to the brokers or to the lawyers. Nobody knew all the subdivisions of ownership. The way we did this business was the only practical way in which it could have been carried out.

No one had any interest now in what he had had, the whole interest centered on what he was to get. After the reorganization of the boards of directors, the selection of new officers for the various companies, the delivery of certified checks and securities, there was another roll call and each was asked “Have you received what your interest is entitled to?” After everybody had answered in the affirmative the doors were opened and Mr. Vorhees departed with the thanks of his colleagues for his great courtesy and the masterful manner in which he had conducted the transaction.

For our securities I received quite a handful of certified checks of one hundred thousand dollars each in denomination. These I had previously presented at the bank to ascertain that they were genuine and all I had to do in the final accounting was to examine my own initials on them.

Banks and trusts companies remained open long after midnight to receive our deposits and lock up our important papers. The transfer was now complete. Some of us knew what effect the transaction would have on certain stocks and improved our opportunities by judicious stock purchases the minute the stock exchange opened in the morning.

While I was interested with a lot of people who were accustomed to deal in rather big transactions, and during a time of great business depression, I received a call from Mr. Wilson one night long after midnight. He came to my room at the Waldorf in New York and asked me to forgive him for waking me, but said he was in a state of terrible depression and felt that he must have me talk to him and cheer him up. We chatted for some time on various topics and when I had finally succeeded in getting him into a more tranquil frame of mind, I asked him why he didn’t give up business since it worried him so excessively. He was worth many millions and with his simple tastes couldn’t spend his income.

“Yes, yes,” he said, “I ought to stop business. I know it and I’ve tried it. My family seems to get some enjoyment out of life and I ought to. But I can’t – not away from the office. I have stayed away for weeks at a time as a trial, and then I get so blue that I have to rush back. Then after I’ve been at the grind awhile I am overwhelmed with the awfulness of it all, as I was tonight when I had to come down here to see you.”

“Well,” I answered, “if you will play the game you’ve got to take the thumps.” He answered that he saw no relief in any course he could now take.

That incident set me to thinking seriously of my half-formed resolution to give up business. I asked myself whether it was possible if I continued in it that I should come to be possessed with the insanity of it as this unhappy old man was. Would it become a habit with me, like a drug? Would I find myself powerless to give it up, as the gambler is powerless to stay away from his games? I was young and strong and I dearly loved the stimulation that went with the fight. But I decided that I must get that stimulation some other way. I knew I “was as other men” and I foresaw that in the end business would control my destiny; that I should not rule it, but that it would rule me. No, much as I enjoyed the game, I wasn’t willing to take the thumps, and having reached this decision I threw all my energies into my efforts to get out of the various things I was engaged in. This sounds easier that it was, and I never did get out entirely, but from the night of that old financier’s visit I never lost sight of the fact that I must give up the money-making game. I retired from the Nassau and Detroit interests at about the same time, and it was within a few months of this that we sold the Lorain mill.

I was now prepared to devote myself to the advancement of the principles advocated by Mr. George. I wanted to see those principles put into practice. My temperament and training made it impossible for me to take up the academic promotion of the questions, and my future activities were as greatly misunderstood and criticized by some of the doctrinaires of the George school, as by my political enemies. I “got it” both going and coming.

I understood pretty thoroughly the lessons which Privilege teaches before I took up the question on the other side; I had some idea of what the fight would cost me, but I embarked in this new field from purely selfish motives. I was seeking happiness and I chose the line of least resistance. All my public doings are to be accounted for in this way.