Carnegie, Vanderbilt and Rockefeller were the empire builders of the 19th Century, just as Gates, Walton and Ford are titans of the 20th. In this article, however, we will look at three pioneering men who laid the foundations that these latter captains of industry built upon. (Make your dream a reality. Find out what you can do to reach your financial goals in How To Make A Million In Your Small Business.)

John Jacob Astor
John Jacob Astor, the fourth son of a butcher, left Germany to make it big in the American fur trade in the 1700s. The fur trade was an extremely important and competitive industry at that time. Astor took up a position in the less volatile area of middleman, buying furs from trappers and natives and then selling them for a profit to trading vessels. Astor's American Fur Company quickly became a powerhouse. In return for help financing the revolution, Astor gained concessions from the government that squeezed out Canadian competition, and then he bought out the Canadian companies' American holdings at a discount. One by one, he crushed out all his competition and held all the companies together via an early version of a trust.

Although Astor's holdings were increasing, the overall sales in fur were dropping. Seeing the eventual decline of the fur industry, Astor sold and put the proceeds from selling his fur empire into buying the undeveloped land around New York. He bought a considerable chunk of Manhattan and either developed it or leased it for development. He later regretted not buying the entire island. John Jacob Astor spent the last years of his life overseeing his vast real estate holdings. He was America's first millionaire, and left most of his fortune to his family, using a small amount for charitable works. The Astor family became the first "old money" family formed in the U.S. and their extravagant parties and balls were the definition of American upper class. Astor's life became legendary and inspired immigrants from all over the world to come to the land of opportunity and make it rich. Not bad for the fourth son of a butcher. (Quit your job, be your own boss and earn a paycheck. Find out what to do to make it happen, in Start Your Own Small Business.)

Thomas Edison

Thomas Edison gave up the life of a telegraph operator and moved to Boston in 1868 to become an inventor. He revealed his first invention to the world: an electrical vote recorder. It fell flat. When Edison designed an improved stock ticker printer, however, the resulting success allowed him to leave the railroad behind forever. Edison opened up the world's first R&D firm in Menlo Park, CA, to create new technology and improve on existing models. As a hired gun, he improved the telephone and invented the phonograph and light bulb. (Discover how technology changed the way we exchange information when trading, check out The History Of Information Machines.)

If we are trying to imagine a world without Edison, however, we can't merely subtract the light bulb, but the fixtures, cables, wiring, sockets, power plants, generators, storage batteries and many other components that have to be in place so the light bulb can fight off the night. With the help of J.P. Morgan, Edison mass produced not just the light bulb, but the infrastructure needed to power it. This became a textbook case of vertical integration, as the Edison Electric Company merged, created and bought out companies that fit along its business lines. (Find out how the economic system we now use was created, read The History Of Capitalism.)

The savings in cost and the economies of scale from mass production put an electric light in every home in America, while the rest of the world was still burning candles, whale oil and kerosene. This steadily growing combination of companies became General Electric in 1892. The lesson of mass production and vertical integration was certainly not lost on one of Edison's employees, Henry Ford. Most inventors are remembered for one innovation. Edison, by making invention a business and using mass production to distribute the results, has put his name to thousands of innovations that we use everyday, and inspired millions more by his systematic approach - his name can still be seen all over the world.

Alexander Turney Stewart
Alexander Turney Stewart was born in Ireland in 1803 and worked as a teacher before striking out for the new world. Stewart and his wife started a small dry goods shop that quickly grew in both size and the range of products it sold. Stewart had an uncanny eye for quality, particularly with fabrics, and bought entire shipments wholesale in order to give customers the best price. He was a leader in customer service and one of the first merchants to give customers, "a little extra," as an encouragement for repeat business. For all his kindness to customers, Stewart was very hard on his employees. In a time when extravagant and outright lies were considered necessary sales skills, Stewart docked his employees' pay when he caught them doing anything to the detriment of the customer. Stewart was also one of the first to display goods openly in the windows to attract customers passing by on the street.

His willingness to go the extra mile and his habit of passing on the savings from his hard bargaining with wholesalers led to smaller profits on each sale compared with competitors, but it vastly increased his volume of sales. This is the same economies of scale approach that Wal-Mart uses today. Stewart's cash position was so strong in that he was able to buy up the goods and properties of competitors who failed during the depression of 1837. Stewart opened the first of his large stores in 1848.

Stewart organized the goods into various departments to make finding a specific product easier for customers, thus giving us the term "department store." He also used his excess profits to buy up suppliers and distributors in Europe, Asia and South America ensuring that his stores had a steady and reliable supply line. He sent specialists, each trained to buy products for one of the departments, all over the world in search of quality at wholesale value. Stewart believed that if he offered the best goods at the best prices, he would never lose a customer. Stewart's "customers first" approach drew huge crowds to his massive department stores, and by the 1870s, many outlets were earning thousands in sales every day, and millions every year. In his later years, Stewart mimicked Astor by putting much of his fortune into real estate, until he died in 1876. (Owning property isn't simple, but there are plenty of perks. Find out how to buy in Investing In Real Estate.)

The strategies used by Astor, Edison and Stewart - namely, economies of scale, vertical and horizontal integration - inspired later financial titans to build equally massive and profitable industrial empires. The story of Astor, in particular, inspired a flood of ambitious immigrants who spread out all over the country and helped transform the young nation from an outpost to a financial giant. The lessons are still being put to good use today in industries that even the imaginative Edison could never have foreseen. But even with all the dynamic changes in the intervening centuries, ideas like Stewart's customer-first approach never get old. (Read more about titans of business in Henry Ford: Industry Mogul And Industrial Innovator, J.D. Rockefeller: From Oil Baron To Billionaire and Giants Of Finance: Charles Dow.)

Related Articles
  1. Investing Basics

    The Pioneers Of Financial Fraud

    These fraudsters were the first to commit fraud, participate in insider trading and manipulate stocks.
  2. Investing Basics

    The 3 Most Timeless Investment Principles

    Benjamin Graham pioneered cutting edge concepts that propelled other top investors to fame.
  3. Technical Indicators

    The Gann Studies

    Learn why this pioneer of technical analysis believed it's possible to predict the future.
  4. Professionals

    Credit Risk Analyst: Job Description and Average Salary

    Learn what credit risk analysts do every day and how much money they make on average, and identify the skills and education needed for this career.
  5. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  6. Financial Advisors

    Putting Your CFA Level I on Your Resume

    Learn techniques for emphasizing your CFA Level I status in the Skills and Certifications or Professional Development section of your resume.
  7. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  8. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  9. Savings

    How Americans Can Open a Bank Account In Thailand

    Have your paperwork in order and be sure to shop around.
  10. Savings

    Opening a Bank Account in Costa Rica as an American

    It shouldn’t be too hard to do, provided you have the appropriate documentation and forms. But be prepared for lots of paperwork!
  1. Who decides if a financial security should be escheated?

    There is no one entity who "decides" to escheat assets. Rather, financial institutions are required to report inactive accounts ... Read Full Answer >>
  2. How long do I need to keep income tax records?

    Keep all tax-related records for at least three years. For example, keep your 2015 tax return, filed in early 2016, at the ... Read Full Answer >>
  3. Why is the Cayman Islands considered a tax haven?

    The Cayman Islands is one of the most well-known tax havens in the world. Unlike most countries, the Cayman Islands does ... Read Full Answer >>
  4. Why is Andorra considered a tax haven?

    Andorra is one of many locations around the globe considered a tax haven because of its relatively lenient tax laws. However, ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center