First, they were indeed lucky in having an industrial revolution. A lot of that technology befitted business: telegraphs, steam boats and trains meant communications were much easier, huge advances in energy and mechanization meant it was possible to develop new devices, industries. There was also the development of banks and the intellectual property protections of patent laws. Unlike the pre-industrial world, wealth could , increasingly, independent of owning land and farming it.

However, it's also true that 19th c. robber barons did exist, with practices that were not merely morally questionable, but simply wrong, even by the standards of the day. There are a number of possible illustrations of this, but a good one would have to be the Erie Railroad Wars, fought between Cornelius Vanderbilt, on one side, and Jim Fisk, Jay Gould and Daniel Drew on the other.

Railroads were the high-tech stock of the time, benefiting from not only intense public interest but also some public funding, grants of land. Vanderbilt had done quite well in the previous high-tech boom in transportation, steam boats. In the later 1850's he began to move into railroads. He bought several railroads in New York , including the Harlem Railroad that ran into New York City. In 1867 he set his sights on the Erie Railroad, which ran across the entire state. It was in deep debt, controlled mostly by Daniel Drew, Jim Fisk and Jay Gould. They had perfected the art of the short sale. Both then and now, a short sale is a way to make money from a falling stock price. A contract would be signed between the investor and someone ( today typically a stock broker) to supply the broker with , say, 30 shares of Company X at $50 per share on April 1, and company X's stock was trading at $55 when the contract is signed. If the stock price fell to $40 by April 1, the investor could purchase the stock at $40 and the broker would have to pay $50 . Gould, Fisk and Drew had discovered that they could manipulate the stock prices on the company they controlled- putting out false information about it, announcing bad profits to make the stock price go down, or the reverse to make the price rise. It was not good for the company ( tending to strip it of assets) but profitable for them, and with the wealthy Vanderbilt trying to buy the Erie they were able to do the same. The Erie, to be very profitable, had to connect to New York City, to the Harlem Railroad. This required permission from the NY Legislature. To make the price fall, Fisk, Gould and Drew began bribing the NY Legislators to deny . Vanderbilt, wanting to have a profitable railroad, bribed the Legislature to accept. The bribes went back and forth, legislators taking from both sides. Meanwhile, Gould and Fisk were also printing off some new shares of stock for Vanderbilt to buy, watering down the stock. Vanderbilt had sunk about 7 million into buying the Erie when Gould and Fisk finally shoveled enough money into the Legislature to make it vote their way, and deny.

This was supposed to make the stock price fall: Gould, Fisk and Drew waited for the expected drop in the price of Erie stock, which they had shorted. To everyone's surprise, it didn't drop. Vanderbilt had managed to buy most of the Erie stock, and could therefore decide the price. And Drew, Fisk and Gould were then faced with a terrible prospect: they'd signed huge contracts shorting the stock, which meant that they had to buy Erie stock- lots of Erie stock - to fulfill their contracts, or go to jail for fraud. But Vanderbilt owned most all of it.

Not only had Drew, Gould and Fisk shorted the stock, but most of the NY Legislature was doing the same. They were part-time legislators, not paid very well, and they had eagerly taken advantage of what they thought would be a sure thing. In any case, all were now completely at Vanderbilt's mercy. What precisely Vanderbilt was able to extract from Gould, Fisk, Drew and the NY Legislature is not entirely known. He certainly was able to get back his $7 million, and forced Drew into retirement. Gould and Fisk ended up with the Erie Railroad, which limped along for some years until being bought by another railroad. Jay Gould would over-reach himself once again a few years later, trying unsuccessfully to corner the Gold Market ; the infamous Black Friday.

Eventually, it became more difficult for the president of a corporation to run the company just in order to manipulate the share price: any CEO doing so now would be fired by the Board.

John Steele Gordon: The Scarlet Woman of Wall Street