America’s Gilded Age fortunes are infamous, but much less well known to the average person in America are its early tycoons. Like those of the late 19th century, those of the earlier part of that century benefited from opportunities obvious only in hindsight along with employing at least some questionable practices. John Jacob Astor possessed the greatest of America’s early fortunes, somewhere in the area of $20 million to $25 million by the time of his death.

Waldorf

           John Jacob Astor was born Johann Jakob Astor in 1763 in Waldorf, in southern Germany. Astor was a butcher’s son with three older brothers. Perhaps because of some of his brothers’ earlier emigration, Astor knew that greater riches could be had abroad than in Waldorf. He followed an older brother and emigrated to London where he lived for three years. While there, he anglicized his name, learned English, and heard about America where he was to find yet another new home.

Flutes and Furs

           Astor emigrated to America at the age of twenty. It was to America that another of his brothers had left Waldorf, among the German mercenaries hired to fight for the British king, George III, in America. He left London in 1783, the year the Treaty of Paris ended the American War of Independence, and arrived at the mouth of the Chesapeake Bay in January 1784. It would be another two months until he could disembark as the ship became stuck in ice. He brought with him seven flutes to sell in America; his brother in London was a musician and instrument maker.

           While stuck aboard the ship that brought him to America, he learned of the fur trade from another passenger who had traded in fur pelts. Animal furs could be bought for very little in America compared to the price they commanded in Europe. Astor decided upon this as his new work. He found employment with a New York fur dealer for whom he made trips to Montreal, a fur trading capital in North America.

           By 1786, Astor was in business for himself. He would soon return to London to sell a shipment of furs there. Perhaps in London, if not earlier, Astor came to learn of the Asian market for furs. Soon after, he opened a small shop on Water Street in New York, exporting furs not only to Europe but to Asia. John Jacob Astor was worth a quarter million dollars by 1800.

           Astor obtained a charter for the American Fur Company in 1808 with $1 million of capital. The business expanded Astor’s fur trading into the Pacific Northwest, just two years after the region was explored by the Lewis and Clark Expedition. There, 1,550 fur pelts were purchased from Native Americans by Astor’s associate Alexander Ross in a single winter. Astor’s company paid £35 for the entire stock, worth £2,250 in the Far East. A settlement, Fort Astoria, was established in Oregon to support the shipment of western pelts to China without transport back east but the War of 1812 disrupted this plan and tilted the balance of power in the fur trade back towards the British-Canadian companies.

           Astor’s ships exported furs and Hawaiian sandalwood to China and imported tea worth as much as $100,000 per shipload back to America. Deferring the payment of taxes amplified the profitability of these ventures. At the time, American customs duties could be paid nine, twelve, or in some cases eighteen months after importation without any interest charge. Thus, Astor could reinvest the full gross profits of his ventures into new voyages before having to pay the high tariffs. Because duties were high, even relative to net profits, this deferral had considerable value. Being an American firm did bring other advantages. British and Canadian fur traders had to respect the British East India Company’s monopoly on British trade with China, whereas Astor did not.

           The merchant was also keen on bending or breaking rules to his advantage. Astor worked around an embargo in effect in 1809 by claiming a Chinese official needed to return home, allowing one ship to leave port as an exception. In reality, the official was just a dockworker, but the exception allowed Astor to send a ship to China and make a profit of $200,000. Years later, in 1816, Astor secured passage of legislation that banned foreigners from the American fur trade.

John Jacob Astor, painting by John Wesley Jarvis, c.1825

Finance

           With the money gained in trade, Astor became something of a financier. At any time, he held a portfolio of debts due from others. Astor came to hold a portfolio of grocer’s notes received from buyers in exchange for the tea he sold. He also came to trade in Treasury notes which he bought and sold at discounts ranging from 3% to 9%. His involvement in government securities could be massive. Astor participated in the purchase of a block of $16 million worth of unsold government bonds during the War of 1812. The war made trading conditions difficult but Astor seized on the moments of opportunity. When he received advance news that peace was coming, he sold stocks of merchandise at higher wartime prices before they fell.

The City’s Landlord

           Whereas trading in furs and tea made Astor rich, real estate kept him rich. In one of his most notable deals, John Jacob Astor purchased a New York estate, the Morris Estate, that had been confiscated during the War of Independence. Title over the estate was tarnished given the confiscation, that the prior Loyalist owners had only a lifetime interest in the property, and that some 700 families had settled on the land since its confiscation. Astor would have to evict them.

           Courts held that Astor was indeed the rightful owner of the estate, comprising one-third of Putnam County, New York, but Astor ultimately settled with the state government to avoid the latter some political headaches. Astor also purchased property from Vice President Aaron Burr after his fatal duel with Alexander Hamilton. He subdivided this New York City property into 400 lots.

           Astor bought other properties and also acquired real estate from defaults on mortgages he had made, such a loan to a whiskey distiller whose default gave him control of a large swath of what is now Midtown Manhattan. In a city that surpassed Paris in population as it welcomed 40,000 immigrants a year, Astor could expect that New York real estate would pay off. In 1834, he divested of his fur business altogether, selling it to two other firms, to focus on real estate. By this point, little of his wealth was invested in the fur trade anyway. Astor was bearish on the fur business, concerned that changing tastes in fashion would reduce demand as fur supply was also becoming scarcer.

Wealth

           John Jacob Astor was the wealthiest American of the early 19th century, becoming the country’s first multi-millionaire. His fortune was estimated at $20 million at the time of his death in 1848. Three years earlier, the New York Sun’s list of the city’s richest people, published a similar figure, reporting Astor’s wealth at $25 million. Cornelius Vanderbilt, the future railway magnate still in the ferry business at this time, was worth a mere $1.2 million, per the list. Of Astor, Hunt’s Merchant Magazine said “For nearly forty years he has been characterized as perhaps the greatest merchant of this if not of any age— the Napoleon of commerce”. Astor’s bequest included the founding of a library in New York, the Astor Library.

Lesson

           A few aspects of John Jacob Astor’s life and business reveal intriguing, if not surprising, facts about commerce in early America. The importance of the fur trade, and the potential wealth it could support, even into the 19th century may seem surprising given the fur trades’ usual association with a much earlier era. Asian trade in early America also gets little attention but American trade with China is in fact almost as old as the country itself. John Jacob Astor, the wealthiest American of his day, was a merchant whose career spanned an area far larger than the country itself, not just from New York to the Pacific Northwest, then still disputed territory, but from China to Europe.  

More from the Tontine Coffee-House

         John Jacob Astor advocated for the creation of the Second Bank of the United States. Also, read about the role of seashells as money in the American fur trade. Lastly, consider subscribing to this blog’s newsletter here

Further Reading

1.      Madsen, Axel. John Jacob Astor: America’s First Multimillionaire. John Wiley, 2001.

2.      Markham, Jerry W. “Chapter 4 – The Robber Barons.” A Financial History of the United States, Sharpe, Armonk, NY, 2002, pp. 251–264.

3.      McNamara, Robert. “John Jacob Astor, America’s First Millionaire.” ThoughtCo, Dotdash, 4 Apr. 2017.

4.      Youngman, Anna. “The Fortune of John Jacob Astor.” Journal of Political Economy, vol. 16, no. 6, June 1908, pp. 345–368.

Leave a comment

Your email address will not be published.

Social Share Buttons and Icons powered by Ultimatelysocial
LinkedIn