9 ms·

One robber baron’s gamble on railroads

81 points by samclemens 3y ago

mediumsmart 3y ago
Here is real journalism about these kind of humans. https://archive.org/details/historyofgreatam01myer https://archive.org/details/historyofgreatam01myer
- dredmorbius 3y ago
  Care to give us a capsule review and reason for recommending that here?
ssss11 3y ago
Railroads’ early days is what I think of in this current early days of crypto/blockchain. So many scams, but the innovation is there waiting to be utilised well. “As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business”
- paulryanrogers 3y ago
  Curious what innovation I may be missing in crypto. Can you elaborate?
  - 300bps 3y ago
    Blockchain technology has historically claimed several innovations: 1. Decentralized currency 2. Immutable ledger 3. Transparent transactions 4. Streamlined transactions (no T+2 or T+1 settlement) 5. Borderless transactions (between people in other countries) 6. Microtransactions (transactions a tiny fraction of a cent) 7. Smart contracts These are innovations, the question is do they solve real world problems without creating more? For example, decentralization is great until you lose your keys or the government wants to shut down money laundering. I have yet to see a real world benefit from blockchain / cryptocurrency technology. web3 is the closest to reality but I feel like it goes against human nature and the concept of decision fatigue. I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?"
    - rlpb 3y ago
      > I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?" No prompt needed - just as your electricity company doesn't prompt you before you watch TV either. You trust the rate to be reasonable and you just get billed for it. This pricing model is the consumer's ideal pricing model for most things - pay close to what it actually costs at a reasonable rate - because that's the most efficient and keeps decision fatigue minimal. We just don't have it for everything because the industry hasn't matured yet.
    - harry8 3y ago
      > I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?" Neither does netflix. Vast amounts of under-used subscriptions paid at a full rate would suddenly get a huge discount. At the other end they wouldn't be getting much more revenue out of those that watch more than average because they'd likely cut down. There must be plenty of ways of making a microtransaction in ways customers don't mind, many of those haven't been invented yet. I have no idea why blockchain is necessary for microtransactions nor why we all have to pay a microtransaction sized spending tax to the owners of the payment systems every time we spend our money now. Will blockchain fix this? I have my doubts about blockchain but damn, someone should. It seems popular amongst the powerful that they can cancel someone's ability to raise funds on the basis of an accusation alone. Most people hate that idea as stated, except for "$that_guy who I've just heard of and is clearly a creep so that's fine." Who is it today? How did that work out in the past? Maybe it will be more like justice this time than before? Who knows?
    - pests 3y ago
      Where are the innovations? Every bullet point has other solutions or a very major asterisk that is always conveniently left off. I've been a big proponent of crypto over the years and think its pretty cool technology. I just can't think of any problem it solves that isn't better solved by some other solution.
      - legutierr 3y ago
        Is there a better solution for the performance of atomic swaps between antagonistic traders each operating in a different legal jurisdiction?
- nawgz 3y ago
  Can you elucidate me on how you made that connection? I only see the point that both lead to scams, which... Is not very insightful. Railroads are a physical device for logistical transportation. This has a very obvious value prop. Crypto is an "alternative" "financial" "system", which is missing the key components of regulation and trust that back all functioning financial systems. Hard to draw the parallel for me.
  - ta8645 3y ago
    > missing the key components of regulation and trust I thought that those are supposed to be the key components of crypto. You trust that it is regulated by mathematics, the market, and infrastructure, rather than relying on fiat.
    - Retric 3y ago
      Mathematics alone doesn’t interface with the real world thus you get crypto exchanges etc. The crypto ecosystem is therefore still built on trust not the blockchain.
    - PeterisP 3y ago
      The key products of the financial system is not transfer of money (which crypto provides) but rather credit (with the associated issues of trust and enforcement of settlement against someone's will) and payment for goods and services (with the associated need for fraud prevention on both sides of the deal and reversibility of payments). Mathematics cannot provide that kind of trust.
- dotcoma 3y ago
  Would love to better understand the connection between railroads and cryptocurrencies, if possible. Railroads, scams aside, were extremely important for the economy for at least 50 years after this scam. Same with crypto? Really? And NFTs, too?
  - legutierr 3y ago
    It's relevant that the first railroad bubbles took place several decades before the events described in the article. Sometimes it takes a long time for capital-intensive technologies to be fully deployed, and for economic benefits to be fully realized. In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040. And meanwhile, nearly everything "financial" involving counter-parties will happen on-chain. Why? Because public blockchains eliminate counter-party risk for a large number of transactions, provide unparalleled transparency, and give anyone with an internet connection access to global financial markets, enfranchising billions of people who are otherwise locked out due to unsatisfactory local conditions. Blockchain tech will make developed economies more efficient, and will accelerate development world-wide. If you don't agree that public blockchains actually do anything useful, then you'll probably object to the railroad analogy. But if you see value in blockchains, then there are clear parallels: • Initial cost of the build-out being funded by early investors who might not be around to realize the long-term benefits of the technology. • Speculative energy attracting scammers alongside legitimate operators. • Long-term benefits not being obvious after the first wave of investment dies down. • The true value of the technology only being realized when network effects are fully realized, years after the technology's introduction.
    - dotcoma 3y ago
      @legutierr: You say: > In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040. While this is certainly possible, it is not assured. We KNOW that railroads ended up being very important; we can, at best, guess that crypto will be as important for our financial systems.
ajb 3y ago
Article doesn't mention this, but the previous year, 1872, the there was a massive financial panic due to equine influenza, which brought the transport system to a halt. Which could be a good reason for overinvestment in "iron horses"
- dredmorbius 3y ago
  Horses and railroads were complements rather than substitutes. Long-haul travel moved via ships, barges, or canals, with a cost advantage of roughly 20:1 over a horse and wagon. In particular, the Erie Canal was absolutely instrumental in opening up the interior of the US, connecting the Hudson River and East Coast to the Mississippi-Ohio-Missouri-Red river systems. A single horse could draw a barge of 20--40 tonnes, vs. a maximum of about one tonne on a cart or carriage. Significant political resistance to railroads came from canal operators. The Mississippi river itself was effectively the first inland highway of the US, serving as a transportation corridor from Canada to the Gulf of Mexico, from Ohio to Montana, from Virginia (west of the Continental divide) to Texas and Oklahoma Territory. What railroads could not offer was "last mile" delivery, for which horse-drawn drayage was the only viable option through the first decade of the 20th century. Trains increased demand for, and use of, horses, until automobiles ultimately displaced the latter. It's possible that investors hadn't drawn this connection in the 1870s, but the reality was that rail and horses reinforced one another.
  - ajb 3y ago
    Very interesting, thanks!
mitthrowaway2 3y ago
If only we could be investing so much in railroads once again!
cjs_ac 3y ago
Antecedents from the UK include the Railway Mania of the 1840s[0] and (to a lesser extent) the Canal Mania of the 1790s to 1810s[1]. [0]: https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania [1]: https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania
- tuatoru 3y ago
  The story of the Newry Canal, the first one, is amazing. Over a hundred years from first order to construct, to opening. Much delay, neglect of oversight, scope creep, fraud, misaligned interests and lack of drive. I had no idea Wikipedia could tell such good stories! 1. https://en.wikipedia.org/wiki/Newry_Canal https://en.wikipedia.org/wiki/Newry_Canal
javitury 3y ago
For those into board games, financial misconduct of early american railroad companies inspired the renown game "1830: The Game of Railroads and Robber Barons" and the 18xx game series.
hackermatic 3y ago
My perception of the history of long-distance American railroads (not ones that were built for a specific task like connecting a mine to a market) is that many of them -- maybe even most of them -- were failures in their first iteration. After going bankrupt and ruining a lot of investors, others bought the assets at fire-sale prices, and the opportunity to avoid the massive capital outlay of actually building the lines is what made them profitable in the long run.
- Gibbon1 3y ago
  The first railroad over the Appalachians bankrupted the first two groups of investors. The third attempt managed to run a line through and it changed the world. Because unfathomable amounts of cheap grain from Ohio appeared on the international market. Big issue with rail is there are huge network effects are impossible to price in pure market. Which is why except for the US and Britain most countries built state owned rail. Britain and the US eventually nationalized or quasi nationalize rail. And attempts at privatization seem to fail.
  - WalterBright 3y ago
    > attempts at privatization seem to fail Heavy regulation is the usual culprit.
  - MoreSEMI 3y ago
    In the case of the US I think you mean Amtrak is nationalized? But that’s passenger rail. The us has a private freight rail system, which is from what I understand, is one of the best in the world.
    - panick21_ 3y ago
      US railroads love the pat themselves on the back for their cargo rail. They are very profitable for the investors of those rail networks. But calling them best in the world is nonsense. They just have lots and lots of old infrastructure that they can use and they don't need to share their rail with passenger travel, and their only responsibility is making a profit so they can cut anything away that isn't profitable. Of course that then just leads to more traffic and trucks on the road. So far worse for the nation as a whole.
louwrentius 3y ago
Gordon says. “We get crashes on Wall Street about every 20 years, because that’s how long it takes people to forget what happened the last time. A generation of new guys think they’re as smart as they come, and then it turns out that they’re human, like the rest of us.” Sounds familiar, just can’t put my finger on it.
AlbertCory 3y ago
> It was like selling to crypto investors today this is like saying that electricity was like crypto. Railroads had an undeniable economic value. So did all the optical fiber that was laid during the dot-com boom. Eventually it got used. https://www.cnet.com/tech/mobile/is-fiber-optic-construction-creating-overkill/ https://www.cnet.com/tech/mobile/is-fiber-optic-construction... I have fiber to my house now. Crypto, on the other hand, is more like 8-track tape. Or laser disks.
- dredmorbius 3y ago
  LaserDisk and 8-Track both had beneficial uses and customers.
  - AlbertCory 3y ago
    Not like railroads, though.
    - dredmorbius 3y ago
      Though in the spirit of accuracy, not like cryptocurrency either. There was a nearly 20 year period, from the mid-1960s through the mid-1980s, where 8-track tapes were an option, and for much of that, the option for portable recorded music in automobiles, until displaced first by the compact cassette tape (introduced at about the same time, but lagging 8-track through the early-to-mid 1980s), and later the CDROM. The lifespan of 8-track in automobile sound systems isn't much different from that of the CDROM, roughly 1990--2010, when it was in turn supersceded by iPod and iPhone connections. Similarly, LaserDisc (not LaserDisk or Laser Disk as we've both been writing) afforded tremendously superior video and audio quality as compared with VHS or BetaMax video tape. It also had a considerable lifetime, from its introduction in 1978 through the mid-1990s, ultimately being replaced by the DVD after its introduction in 1995. Again: both formats provided useful function at the time and were not simply vehicles for fraud and crime as cryptocurrency overwhelmingly seems to be. Yes, both suffered from technical and/or market limitations, but that doesn't negate the actual utility delivered. <https://en.wikipedia.org/wiki/8-track_cartridge https://en.wikipedia.org/wiki/8-track_cartridge> <https://en.wikipedia.org/wiki/LaserDisc https://en.wikipedia.org/wiki/LaserDisc>
simonebrunozzi 3y ago
Tangentially related, but if you're into videogames, the really old Sid Meyer's "Railroad Tycoon" was a game that made me so curious about these barons, and made me learn a lot about trains and the 1800s US.
- em-bee 3y ago
  and if you are into FOSS games there are OpenTTD and Simutrans
downrightmike 3y ago
Railroads are critical infrastructure and need to be public. They are massively mismanaged, inefficient and that's all on purpose.
- AlgorithmicTime 3y ago
  They're not, really, though. US freight rail is remarkably efficient and cheap.
  - panick21_ 3y ago
    The US freight rail gets way to credit. The have been letting the waste majority of infrastructure decay. They continue to have a smaller and smaller share of the total transport market. They derail trains at an astonishing rate. They are very profitable doing a small number of things. But an increase amount of actual transport needs has been moving to trucks (on federal subsided highways). Given that those railroads have almost no competition from personal transit and that the US as a country is perfect for railroading, the overall market share the railroads have is astonishing small. And the borders between the 4 monopolies causes lots of problems. If a central authority took control and stopped with the attitude of cut everything out that isn't highly profitable, the US could leverage its rail road infrastructure far better. And would save money from fewer truck on the road (and the inherent green house effect). The railroads profits alone could finance a nation wide rail electrification program.
- kortilla 3y ago
  Yes, if there’s one thing government does well, it’s managing things efficiently.
  - malermeister 3y ago
    Look at the places with the best railway infrastructure. Almost all of them are government run.
    - downrightmike 3y ago
costco 3y ago
This is my favorite period of US history to read about. > "As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business. Railroad owners often made more money on construction, land and mineral rights than they did on operating the tracks themselves." To elaborate: - The people who ran the railroads would also own the companies constructing the railroads. They would charge ridiculous fees and profit at the expense of shareholders and creditors when they inevitably went bankrupt. In the Credit Mobilier case, tens of millions of (1860) dollars in government money given to the Union Pacific ended up in the hands of the construction company Credit Mobilier because construction costs were inflated by a factor of 2. Of course, some congressmen also secretly had stakes in Credit Mobilier. The looting at the Union Pacific puts PDVSA to shame! - Land grant gamesmanship: "Land grants to railroads were made in broad belts along the proposed route. Within these belts the railroads were allowed to choose alternate mile-square sections in checkerboard fashion. But until they determined the precise location of their tracks and decided which sections were the choicest selections, the railroads withheld all the land from other users" - The fact that the people running the railroads were often promoters and had none of their own money at stake resulted in highly inefficient routes being built. They didn't care because they got paid either way, and in fact preferred more construction even if it made the company less profitable. - Routinely diluting investors to nothing. - Bankruptcy plans that favored shareholders and directors over creditors (JP Morgan's restructuring plan for the Erie). The "Erie War" is a combination of a lot of these that is just insane: https://en.wikipedia.org/wiki/Erie_War https://en.wikipedia.org/wiki/Erie_War It's also worth noting that while there were plenty of opportunists and promoters there were people who were interested in actually building economical railroads like Vanderbilt and the lesser known Ned Harriman. Also lots of interesting parallels to how privatization in post Soviet states unfolded. Arguably, in the long run (in both cases), the more "rational" operators who weren't just looting and bankrupting ended up with control of the major assets. Though you could also say that in the case of Russia guys like Deripaska got their start from looting.
- WalterBright 3y ago
  > They also yielded stupendous levels of fraud and chicanery The Washington State ferry system runs at stupendous levels of losses. For example, the diesel ferry boats are aging out. The idea is to replace them with electric ferries. Any sane organization would just go buy an electric ferry boat. But not Washington, oh noooo. They have to design their own special electric ferry boat. It gets worse. The boats also must be built in the state, to make the local unions happy. This means that the boat builder gets to charge monopoly prices, which are in the stratosphere. It's even worse than the local light rail system, where special rail cars had to be "custom designed for the Pacific Northwest" (whatever that means), and so naturally had to cost a fortune. Nobody was ever able to explain why the PNW needed custom rail cars, and the local media would never even ask the question. Would standard rail cars melt in the rain? Nobody knows.
8bitsrule 3y ago
The article is overly-hard on Jay Cooke. He was just getting started on the NPR when ... The 1873 Depression started with the Vienna Stock Exchange. Article completely fails to mention Oakes Ames, the Lincoln-recruited boss of the Union Pacific Railroad, which precipated the Crédit Mobilier scandal (i.e. charging the US $94M for the $50M railroad.) Today a monument to Ames and his brother still exists on the empty open plains of southern Wyoming: a 60x60x60-foot granite pyramid, 20 miles from Laramie. The UP board hired 85 men to build it in 1875; President Hayes attended the dedication ceremony. https://en.wikipedia.org/wiki/Ames_Monument https://en.wikipedia.org/wiki/Ames_Monument
- dredmorbius 3y ago
  NPR here is the Norther Pacific Railway. Usually abbreviated simply as NP. And surviving today as BNSF (the Burlington Northern Santa Fe Railroad). Not the somewhat later broadcast operation.
hyperthesis 3y ago
When you owe the bank enough money, and you can't pay... you don't have a problem. The bank has a problem.
- analog31 3y ago
  Another version: If you owe the bank a dollar, you're a debtor. If you owe the bank a million dollars, you're a partner.
- teddyh 3y ago
  “When a man owes you a hundred dollars, you have power over him. When a man owes you a million dollars, he has power over you.” — <http://freefall.purrsia.com/ff200/fv00123.htm http://freefall.purrsia.com/ff200/fv00123.htm>

81 points by samclemens 3y ago

Here is real journalism about these kind of humans. https://archive.org/details/historyofgreatam01myer https://archive.org/details/historyofgreatam01myer

dredmorbius 3y ago
Care to give us a capsule review and reason for recommending that here?

ssss11 3y ago

Railroads’ early days is what I think of in this current early days of crypto/blockchain. So many scams, but the innovation is there waiting to be utilised well. “As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business”

paulryanrogers 3y ago
Curious what innovation I may be missing in crypto. Can you elaborate?
- 300bps 3y ago
  Blockchain technology has historically claimed several innovations: 1. Decentralized currency 2. Immutable ledger 3. Transparent transactions 4. Streamlined transactions (no T+2 or T+1 settlement) 5. Borderless transactions (between people in other countries) 6. Microtransactions (transactions a tiny fraction of a cent) 7. Smart contracts These are innovations, the question is do they solve real world problems without creating more? For example, decentralization is great until you lose your keys or the government wants to shut down money laundering. I have yet to see a real world benefit from blockchain / cryptocurrency technology. web3 is the closest to reality but I feel like it goes against human nature and the concept of decision fatigue. I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?"
  - rlpb 3y ago
    > I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?" No prompt needed - just as your electricity company doesn't prompt you before you watch TV either. You trust the rate to be reasonable and you just get billed for it. This pricing model is the consumer's ideal pricing model for most things - pay close to what it actually costs at a reasonable rate - because that's the most efficient and keeps decision fatigue minimal. We just don't have it for everything because the industry hasn't matured yet.
  - harry8 3y ago
    > I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?" Neither does netflix. Vast amounts of under-used subscriptions paid at a full rate would suddenly get a huge discount. At the other end they wouldn't be getting much more revenue out of those that watch more than average because they'd likely cut down. There must be plenty of ways of making a microtransaction in ways customers don't mind, many of those haven't been invented yet. I have no idea why blockchain is necessary for microtransactions nor why we all have to pay a microtransaction sized spending tax to the owners of the payment systems every time we spend our money now. Will blockchain fix this? I have my doubts about blockchain but damn, someone should. It seems popular amongst the powerful that they can cancel someone's ability to raise funds on the basis of an accusation alone. Most people hate that idea as stated, except for "$that_guy who I've just heard of and is clearly a creep so that's fine." Who is it today? How did that work out in the past? Maybe it will be more like justice this time than before? Who knows?
  - pests 3y ago
    Where are the innovations? Every bullet point has other solutions or a very major asterisk that is always conveniently left off. I've been a big proponent of crypto over the years and think its pretty cool technology. I just can't think of any problem it solves that isn't better solved by some other solution.
    - legutierr 3y ago
      Is there a better solution for the performance of atomic swaps between antagonistic traders each operating in a different legal jurisdiction?
nawgz 3y ago
Can you elucidate me on how you made that connection? I only see the point that both lead to scams, which... Is not very insightful. Railroads are a physical device for logistical transportation. This has a very obvious value prop. Crypto is an "alternative" "financial" "system", which is missing the key components of regulation and trust that back all functioning financial systems. Hard to draw the parallel for me.
- ta8645 3y ago
  > missing the key components of regulation and trust I thought that those are supposed to be the key components of crypto. You trust that it is regulated by mathematics, the market, and infrastructure, rather than relying on fiat.
  - Retric 3y ago
    Mathematics alone doesn’t interface with the real world thus you get crypto exchanges etc. The crypto ecosystem is therefore still built on trust not the blockchain.
  - PeterisP 3y ago
    The key products of the financial system is not transfer of money (which crypto provides) but rather credit (with the associated issues of trust and enforcement of settlement against someone's will) and payment for goods and services (with the associated need for fraud prevention on both sides of the deal and reversibility of payments). Mathematics cannot provide that kind of trust.
dotcoma 3y ago
Would love to better understand the connection between railroads and cryptocurrencies, if possible. Railroads, scams aside, were extremely important for the economy for at least 50 years after this scam. Same with crypto? Really? And NFTs, too?
- legutierr 3y ago
  It's relevant that the first railroad bubbles took place several decades before the events described in the article. Sometimes it takes a long time for capital-intensive technologies to be fully deployed, and for economic benefits to be fully realized. In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040. And meanwhile, nearly everything "financial" involving counter-parties will happen on-chain. Why? Because public blockchains eliminate counter-party risk for a large number of transactions, provide unparalleled transparency, and give anyone with an internet connection access to global financial markets, enfranchising billions of people who are otherwise locked out due to unsatisfactory local conditions. Blockchain tech will make developed economies more efficient, and will accelerate development world-wide. If you don't agree that public blockchains actually do anything useful, then you'll probably object to the railroad analogy. But if you see value in blockchains, then there are clear parallels: • Initial cost of the build-out being funded by early investors who might not be around to realize the long-term benefits of the technology. • Speculative energy attracting scammers alongside legitimate operators. • Long-term benefits not being obvious after the first wave of investment dies down. • The true value of the technology only being realized when network effects are fully realized, years after the technology's introduction.
  - dotcoma 3y ago
    @legutierr: You say: > In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040. While this is certainly possible, it is not assured. We KNOW that railroads ended up being very important; we can, at best, guess that crypto will be as important for our financial systems.

ajb 3y ago

Article doesn't mention this, but the previous year, 1872, the there was a massive financial panic due to equine influenza, which brought the transport system to a halt. Which could be a good reason for overinvestment in "iron horses"

dredmorbius 3y ago
Horses and railroads were complements rather than substitutes. Long-haul travel moved via ships, barges, or canals, with a cost advantage of roughly 20:1 over a horse and wagon. In particular, the Erie Canal was absolutely instrumental in opening up the interior of the US, connecting the Hudson River and East Coast to the Mississippi-Ohio-Missouri-Red river systems. A single horse could draw a barge of 20--40 tonnes, vs. a maximum of about one tonne on a cart or carriage. Significant political resistance to railroads came from canal operators. The Mississippi river itself was effectively the first inland highway of the US, serving as a transportation corridor from Canada to the Gulf of Mexico, from Ohio to Montana, from Virginia (west of the Continental divide) to Texas and Oklahoma Territory. What railroads could not offer was "last mile" delivery, for which horse-drawn drayage was the only viable option through the first decade of the 20th century. Trains increased demand for, and use of, horses, until automobiles ultimately displaced the latter. It's possible that investors hadn't drawn this connection in the 1870s, but the reality was that rail and horses reinforced one another.
- ajb 3y ago
  Very interesting, thanks!

mitthrowaway2 3y ago

If only we could be investing so much in railroads once again!

cjs_ac 3y ago

Antecedents from the UK include the Railway Mania of the 1840s[0] and (to a lesser extent) the Canal Mania of the 1790s to 1810s[1]. [0]: https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania [1]: https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania

tuatoru 3y ago
The story of the Newry Canal, the first one, is amazing. Over a hundred years from first order to construct, to opening. Much delay, neglect of oversight, scope creep, fraud, misaligned interests and lack of drive. I had no idea Wikipedia could tell such good stories! 1. https://en.wikipedia.org/wiki/Newry_Canal https://en.wikipedia.org/wiki/Newry_Canal

javitury 3y ago

For those into board games, financial misconduct of early american railroad companies inspired the renown game "1830: The Game of Railroads and Robber Barons" and the 18xx game series.

hackermatic 3y ago

My perception of the history of long-distance American railroads (not ones that were built for a specific task like connecting a mine to a market) is that many of them -- maybe even most of them -- were failures in their first iteration. After going bankrupt and ruining a lot of investors, others bought the assets at fire-sale prices, and the opportunity to avoid the massive capital outlay of actually building the lines is what made them profitable in the long run.

Gibbon1 3y ago
The first railroad over the Appalachians bankrupted the first two groups of investors. The third attempt managed to run a line through and it changed the world. Because unfathomable amounts of cheap grain from Ohio appeared on the international market. Big issue with rail is there are huge network effects are impossible to price in pure market. Which is why except for the US and Britain most countries built state owned rail. Britain and the US eventually nationalized or quasi nationalize rail. And attempts at privatization seem to fail.
- WalterBright 3y ago
  > attempts at privatization seem to fail Heavy regulation is the usual culprit.
- MoreSEMI 3y ago
  In the case of the US I think you mean Amtrak is nationalized? But that’s passenger rail. The us has a private freight rail system, which is from what I understand, is one of the best in the world.
  - panick21_ 3y ago
    US railroads love the pat themselves on the back for their cargo rail. They are very profitable for the investors of those rail networks. But calling them best in the world is nonsense. They just have lots and lots of old infrastructure that they can use and they don't need to share their rail with passenger travel, and their only responsibility is making a profit so they can cut anything away that isn't profitable. Of course that then just leads to more traffic and trucks on the road. So far worse for the nation as a whole.

louwrentius 3y ago

Gordon says. “We get crashes on Wall Street about every 20 years, because that’s how long it takes people to forget what happened the last time. A generation of new guys think they’re as smart as they come, and then it turns out that they’re human, like the rest of us.” Sounds familiar, just can’t put my finger on it.

AlbertCory 3y ago

> It was like selling to crypto investors today this is like saying that electricity was like crypto. Railroads had an undeniable economic value. So did all the optical fiber that was laid during the dot-com boom. Eventually it got used. https://www.cnet.com/tech/mobile/is-fiber-optic-construction-creating-overkill/ https://www.cnet.com/tech/mobile/is-fiber-optic-construction... I have fiber to my house now. Crypto, on the other hand, is more like 8-track tape. Or laser disks.

dredmorbius 3y ago
LaserDisk and 8-Track both had beneficial uses and customers.
- AlbertCory 3y ago
  Not like railroads, though.
  - dredmorbius 3y ago
    Though in the spirit of accuracy, not like cryptocurrency either. There was a nearly 20 year period, from the mid-1960s through the mid-1980s, where 8-track tapes were an option, and for much of that, the option for portable recorded music in automobiles, until displaced first by the compact cassette tape (introduced at about the same time, but lagging 8-track through the early-to-mid 1980s), and later the CDROM. The lifespan of 8-track in automobile sound systems isn't much different from that of the CDROM, roughly 1990--2010, when it was in turn supersceded by iPod and iPhone connections. Similarly, LaserDisc (not LaserDisk or Laser Disk as we've both been writing) afforded tremendously superior video and audio quality as compared with VHS or BetaMax video tape. It also had a considerable lifetime, from its introduction in 1978 through the mid-1990s, ultimately being replaced by the DVD after its introduction in 1995. Again: both formats provided useful function at the time and were not simply vehicles for fraud and crime as cryptocurrency overwhelmingly seems to be. Yes, both suffered from technical and/or market limitations, but that doesn't negate the actual utility delivered. <https://en.wikipedia.org/wiki/8-track_cartridge https://en.wikipedia.org/wiki/8-track_cartridge> <https://en.wikipedia.org/wiki/LaserDisc https://en.wikipedia.org/wiki/LaserDisc>

simonebrunozzi 3y ago

Tangentially related, but if you're into videogames, the really old Sid Meyer's "Railroad Tycoon" was a game that made me so curious about these barons, and made me learn a lot about trains and the 1800s US.

em-bee 3y ago
and if you are into FOSS games there are OpenTTD and Simutrans

downrightmike 3y ago

Railroads are critical infrastructure and need to be public. They are massively mismanaged, inefficient and that's all on purpose.

AlgorithmicTime 3y ago
They're not, really, though. US freight rail is remarkably efficient and cheap.
- panick21_ 3y ago
  The US freight rail gets way to credit. The have been letting the waste majority of infrastructure decay. They continue to have a smaller and smaller share of the total transport market. They derail trains at an astonishing rate. They are very profitable doing a small number of things. But an increase amount of actual transport needs has been moving to trucks (on federal subsided highways). Given that those railroads have almost no competition from personal transit and that the US as a country is perfect for railroading, the overall market share the railroads have is astonishing small. And the borders between the 4 monopolies causes lots of problems. If a central authority took control and stopped with the attitude of cut everything out that isn't highly profitable, the US could leverage its rail road infrastructure far better. And would save money from fewer truck on the road (and the inherent green house effect). The railroads profits alone could finance a nation wide rail electrification program.
kortilla 3y ago
Yes, if there’s one thing government does well, it’s managing things efficiently.
- malermeister 3y ago
  Look at the places with the best railway infrastructure. Almost all of them are government run.
  - downrightmike 3y ago

costco 3y ago

This is my favorite period of US history to read about. > "As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business. Railroad owners often made more money on construction, land and mineral rights than they did on operating the tracks themselves." To elaborate: - The people who ran the railroads would also own the companies constructing the railroads. They would charge ridiculous fees and profit at the expense of shareholders and creditors when they inevitably went bankrupt. In the Credit Mobilier case, tens of millions of (1860) dollars in government money given to the Union Pacific ended up in the hands of the construction company Credit Mobilier because construction costs were inflated by a factor of 2. Of course, some congressmen also secretly had stakes in Credit Mobilier. The looting at the Union Pacific puts PDVSA to shame! - Land grant gamesmanship: "Land grants to railroads were made in broad belts along the proposed route. Within these belts the railroads were allowed to choose alternate mile-square sections in checkerboard fashion. But until they determined the precise location of their tracks and decided which sections were the choicest selections, the railroads withheld all the land from other users" - The fact that the people running the railroads were often promoters and had none of their own money at stake resulted in highly inefficient routes being built. They didn't care because they got paid either way, and in fact preferred more construction even if it made the company less profitable. - Routinely diluting investors to nothing. - Bankruptcy plans that favored shareholders and directors over creditors (JP Morgan's restructuring plan for the Erie). The "Erie War" is a combination of a lot of these that is just insane: https://en.wikipedia.org/wiki/Erie_War https://en.wikipedia.org/wiki/Erie_War It's also worth noting that while there were plenty of opportunists and promoters there were people who were interested in actually building economical railroads like Vanderbilt and the lesser known Ned Harriman. Also lots of interesting parallels to how privatization in post Soviet states unfolded. Arguably, in the long run (in both cases), the more "rational" operators who weren't just looting and bankrupting ended up with control of the major assets. Though you could also say that in the case of Russia guys like Deripaska got their start from looting.

WalterBright 3y ago
> They also yielded stupendous levels of fraud and chicanery The Washington State ferry system runs at stupendous levels of losses. For example, the diesel ferry boats are aging out. The idea is to replace them with electric ferries. Any sane organization would just go buy an electric ferry boat. But not Washington, oh noooo. They have to design their own special electric ferry boat. It gets worse. The boats also must be built in the state, to make the local unions happy. This means that the boat builder gets to charge monopoly prices, which are in the stratosphere. It's even worse than the local light rail system, where special rail cars had to be "custom designed for the Pacific Northwest" (whatever that means), and so naturally had to cost a fortune. Nobody was ever able to explain why the PNW needed custom rail cars, and the local media would never even ask the question. Would standard rail cars melt in the rain? Nobody knows.

8bitsrule 3y ago

The article is overly-hard on Jay Cooke. He was just getting started on the NPR when ... The 1873 Depression started with the Vienna Stock Exchange. Article completely fails to mention Oakes Ames, the Lincoln-recruited boss of the Union Pacific Railroad, which precipated the Crédit Mobilier scandal (i.e. charging the US $94M for the $50M railroad.) Today a monument to Ames and his brother still exists on the empty open plains of southern Wyoming: a 60x60x60-foot granite pyramid, 20 miles from Laramie. The UP board hired 85 men to build it in 1875; President Hayes attended the dedication ceremony. https://en.wikipedia.org/wiki/Ames_Monument https://en.wikipedia.org/wiki/Ames_Monument

dredmorbius 3y ago
NPR here is the Norther Pacific Railway. Usually abbreviated simply as NP. And surviving today as BNSF (the Burlington Northern Santa Fe Railroad). Not the somewhat later broadcast operation.

hyperthesis 3y ago

When you owe the bank enough money, and you can't pay... you don't have a problem. The bank has a problem.

analog31 3y ago
Another version: If you owe the bank a dollar, you're a debtor. If you owe the bank a million dollars, you're a partner.
teddyh 3y ago
“When a man owes you a hundred dollars, you have power over him. When a man owes you a million dollars, he has power over you.” — <http://freefall.purrsia.com/ff200/fv00123.htm http://freefall.purrsia.com/ff200/fv00123.htm>