Cornelius Vanderbilt was born in 1794, the son of humble farmers who eked out a living on Staten Island, N.Y. With very little schooling as a boy, he began working alongside his father, who also ferried cargo between Staten Island and Manhattan on a small sailing ship. Cornelius eventually worked as a steamship captain, and in the 1820s went on to start his own business.
He became one of the country’s largest steamship operators, and by the 1860s he branched into the railroad industry. Nicknamed the Commodore, he was known for being a fierce businessman, unafraid of ruthlessness when he felt the situation required it.
By the time he passed away, he was worth more than $100 million—the largest individual fortune in American history up to that time. He had thirteen children, and was said to have told his son, William “Billy” Henry Vanderbilt, “Any fool can make a fortune; it takes a man of brains to hold onto it.
Billy was able to grow that fortune to over $200 million in his lifetime.
When Billy passed away, the stake was divided between his own two sons, and this third generation is where things started to shift.
Today, Cornelius’s home in Manhattan is occupied by the retailer Bergdorf Goodman, and Anderson Cooper, CNN anchor and sixth generation Vanderbilt, told radio host Howard Stern, “My mom’s made clear to me that there’s no trust fund.”
Mayer Amschel Rothschild
The Rothschild family, on the other hand, perpetuated its family wealth for several generations. Mayer Amschel Rothschild was born in Frankfurt, Germany, in 1743. He started his business by dealing in coins and antiques.
He began extending credit to customers and dealing in foreign currency trading and government loans, eventually founding a banking dynasty. He had ten surviving children— five of them sons, who all joined him in the family business spread across Europe. As their wealth and prominence grew, a French journalist wrote: “There is but one power in Europe and that is Rothschild.”
Mayer taught his five sons conservative money management by making investments that produced reasonable profits rather than aggressive returns. They continued their family wealth for generations by establishing the following system:
- They loaned their heirs money or entered into joint ventures.
- The loans had to be repaid to the “family bank.”
- The knowledge and experiences those heirs gained had to be shared with other family members.
- Family members gathered at least once a year to reaffirm virtues and intentions, or they couldn’t participate in the family bank.
Subsequently, the Rothschilds’s wealth compounded and grew as it passed to future generations—an example of family management done right.
Abundance vs. Scarcity