Sources of Growth
The friends of [Harriman's] youth describe him as frank, open, fond of gaiety and fun. The twenty-odd years of the Stock Exchange had effectually removed the frankness and the openness. In their place he had a studied reserve, a careful holding of himself in leash, a fixed resolve that no man should be able to guess the real thoughts and motives that lay within his mind.
—C. M. Keys, “Harriman: The Man in the Making”
Railroads were the obvious arena for a man of ambition in the 1880s. As the largest and most dynamic industry in the nation, they were the catalyst for an industrial revolution that was transforming American life with bewildering speed. More track would be laid during the 1880s than in any other decade. Expansion wars of unparalleled ferocity raged well into the depression of the 1890s, giving rise to the systems that would dominate the railroad scene for much of the next century. A man entering the field during these years could find himself overwhelmed and confused by the sheer rush of events, as if he had wandered unexpectedly into the swirl of a vast and desperate battle.
For a man of uncommon intelligence and clarity of vision, however, the panorama unfolding before his watchful eyes offered a classroom of exceptional value. Anyone who learned the correct lessons there would be well prepared for the conditions that followed. Like Wall Street, where the industry's roots ran deep, the railroad arena was no place for the timid or unwary. The challenges were great, the risks even greater. In one sense at least they were inescapable for Harriman. As a broker he had little choice but to learn the intricacies of rail securities because they were the lifeblood of the New York Stock Exchange.
The exchange accepted its first rail stock in 1830 and then watched the list mushroom. By 1885 it contained 125 railroad issues compared to only 26 nonrail stocks. Railroad bonds also dominated that market, where they competed only with state and federal securities. The orgy of mergers that would create a new breed of industrial securities was still a decade away, the utilities even further in the future. With the list so top-heavy in one area, no broker could afford to be less than expert in rail issues. 1
But railroad securities were not the same thing as railroads. Dealing in the