Edward H. Harriman
Edward Henry Harriman was born in Hempstead, Long Island, New York, the son of an Episcopal minister. He attended Trinity School in New York City, and in 1860, won its top prize for scholarship. But academic pursuits could not contain him, and the next year he left school to find employment on Wall Street. Beginning as an office boy, he worked his way up to the position of managing clerk for an investment firm. In the summer of 1870, Harriman, with a loan from an uncle, bought a seat on the New York Stock Exchange and established the firm of E. H. Harriman & Company and became a successful investor.
In the late 1870s, Harriman met Mary Williamson Averell whose father, William J. Averell, was president of the Ogdensburg & Lake Champlain Railroad Company. After marrying Mary in 1879, Harriman became a director on the
board of his father-in-law's railroad and bought a controlling interest in the Lake Ontario Southern, which he reorganized as the Sodus Bay & Southern. He then offered to sell that strategically important road to competing Pennsylvania and the New York Central railroads. Playing one line off the other he eventually sold the line to Pennsylvania and reaped a handsome profit.
In these first years of railroad investment and management, Harriman established his principles that to be profitable, a line must have excellent rolling stock and a well-maintained right-of-way. This mode of conducting business combined with his eye for a profit led to Harriman's election to the board of the Illinois Central railroad in 1883. He developed a highly centralized management structure for the Illinois Central in 1888, one he would duplicate in later railroads. Harriman's major business achievement was the reorganization and rebuilding of the Union Pacific Railroad, in which he gained a controlling interest in 1897. Installing himself as chairman of the board, Harriman set about reducing the company's indebtedness and improving its equipment, investing some $50 million by 1904.
Harriman joined numerous investment syndicates interested in purchasing, improving, and selling railroads at a profit. 1899 proved to be a particularly busy year. He joined investors in purchasing the Chicago & Alton, increasing its profitability by attracting additional passenger and freight traffic and improving employee productivity, and became a member of a committee reorganizing the Kansas City, Pittsburgh & Gulf Railroad. As on the Chicago and Alton, earnings and productivity rose. In that same year, he tried to merge the Chicago, Burlington, and Quincy into the Union Pacific. Though this effort failed he succeeded in buying a majority interest in a competing road, the Northern Pacific. His interest became known to James J. Hill, president of the rival Great Northern Railway, who gave Harriman a seat on the board of the Northern Securities Company, a holding company for stocks of the Great Northern, Northern Pacific, and Burlington railroads. In 1904 the Supreme Court found Northern Securities guilty of monopoly and ordered it to divest itself of Great Northern and Northern Pacific stock. Selling Harriman's interest earned the Union Pacific a profit of about $70 million.
In 1900, Harriman gained control of the Central Pacific, the western end of the transcontinental linking the Union Pacific with the west coast, and the Southern Pacific, a south-western transcontinental. By 1904, Harriman's investments in the Central Pacific exceeded $22 million and some $70 million on improvements to the Southern Pacific. But the federal government, through the Interstate Commerce Commission, attacked Harriman's control of the Southern Pacific, and in 1913, a Supreme Court ruling forced the Union Pacific to sell its Southern Pacific stock.
The year 1908 appeared to threaten the recession for the American economy. Several railroads faced bankruptcy, including the Erie, a crucial but underperforming line in the northeast. Harriman invested some $5.5 million in the Erie and saved it from bankruptcy, generating a rally on Wall Street. The next year though, Harriman went to Europe seriously ill. He returned to die the day before his thirtieth wedding anniversary, probably from cancer of the stomach.