HOW MUCH DO YOU KNOW ABOUT FINANCIAL HISTORY ? running the company .” Indeed , as an operator , Gould was remarkably non-dictatorial and humble . According to Klein ’ s history of the UP :

In meetings he [ Jay Gould ] never dominated discussion but let it drone on before expressing succinctly and precisely the point others had been groping for . He did not command or dictate but suggested politely . Far from being an imperious figure , he was content to dwell in the shadows and let others take credit . For a man consumed by ambition , he was strikingly unaffected by considerations of ego or vanity .

Expertise in each of the above disciplines was profiled on a standalone basis for explanatory purposes . However , in practice all of the disciplines work together , many times simultaneously , which adds a level of complexity to financial strategy that helps to explain why it is difficult , and rarely done well .

Despite its historical context , the above framework can provide insight into “ activist investing ,” which is popular today . To explain , corporate executives who employ suboptimal strategies , allocate capital unwisely , manage their finances poorly ( e . g ., uneconomical stock buybacks ) and / or run inefficient operations over time invite “ activism ,” especially when their under-performance is followed by behavior such as “ insider selling .” Therefore , executives should generally not try to “ outsmart ” activist investors , as some business scholars have recommended , but rather manage their companies in accord with sound strategic , investment , financial and operational principles over time . For executives so inclined , the experiences of Jay Gould offer many valuable lessons .

Maury Klein is Professor Emeritus of Business History at the University of Rhode Island and the author of 18 books including The Life and Legend of Jay Gould and the official history of the Union Pacific Railroad . He won an Emmy award as co-writer of the 2013 documentary , Railroad Man : The Life and Legend of Jay Gould .

Joseph Calandro , Jr ., is Managing Director of a global consulting firm , Fellow of the Gabelli Center for Global Security Analysis at Fordham University and author of Applied Value Investing . He is the corresponding author and can be contacted at : jtacalandro @ yahoo . com

Sources

Beinhocker , Eric . The Origin of Wealth . Boston , MA : Harvard . 2006 .

Calandro , Joseph . “ The ‘ Next Phase ’ of Strategic Acquisition .” Journal of Private Equity . Winter 2015 . pp . 27 – 35 .

___. Applied Value Investing . New York : McGraw-Hill . 2009 . Chapter 7 .

Fischer , Philip A . Common Stocks and Uncommon Profit and Other Writings . Hoboken , NJ : Wiley . 2003 [ 1996 ].

George , Bill and Jay Lorsch . “ How to Outsmart Activist Investors .” Harvard Business Review . May 2014 . pp . 3 – 9 .

Goetzmann , William , Roger Ibbotson and Liang Peng . “ A New Historical Database for the NYSE 1815 to 1925 : Performance and Predictability .” Journal of Financial Markets . 2001 . pp . 1 – 32 .

Hudson , James . The Panic of 1857 and the Coming of the Civil War . Baton Rouge , LA :

Louisiana State University Press . 1987 .

Klein , Maury and Joseph Calandro . Jay Gould , the Union Pacific Railroad and Financial Strategy . September 21 , 2016 . Available at : http :// ssrn . com / abstract = 2834923

Klein , Maury . Union Pacific : The Birth of a Railroad 1862 – 1893 . New York : Doubleday . 1987 .

___. The Life and Legend of Jay Gould . Baltimore , MD : Hopkins . 1986 . pp . 495 – 497 .

Lubetkin , M . John . Jay Cooke ’ s Gamble : The Northern Pacific Railroad , The Sious , and the Panic of 1873 . Norman , OK : University of Oklahoma . 2006 .

Sobel , Robert . The Money Manias : Tales of Entrepreneurs and Investors During the Eras of Great Speculation in America . New York : Weybright & Talley . 1973 .

1 . On August 11 , 2016 , the three major stock market indices matched a record last reached in 1999 . What was it ?

2 . What legislation , passed during the Depression era of the 1930s , separated commercial banking from investment banking ?

3 . Who was known as the “ Financier of the American Revolution ”?

4 . What is a victory tax in the context of the Olympic Games ?

5 . Wells Fargo , the center of a recent banking scandal involving the opening of unauthorized accounts , acquired what major bank in 2009 ?

6 . Ratification in 1913 of the 16th Amendment to the US Constitution gave Congress what power ?

7 . What companies have announced plans to merge that — if completed — would create the world ’ s largest hotel company ?

8 . Nationally , women earned 72 % of what men earned in 2015 . What state had the lowest women ’ s earning percentage ?

9 . What is the wage base cap on the Social Security employment tax ?

10 . What do Wells Fargo and American Express Co . historically have in common ?

1 . The Dow Jones Industrial Average , the S & P 500 Index and the Nasdaq Composite Index all closed at their all-time highs on the same day . 2 . The Glass-Steagall Act of 1933 ( later repealed in 1999 ). 3 . Robert Morris 4 . A tax on the value of a medal won during the competition . If applied , the tax for winning a gold medal could be as high as $ 9,900 . 5 . Wachovia Bank . 6 . The power to levy and collect a tax on income . 7 . Marriott International and Starwood Hotels & Resorts Worldwide . 8 . Wyoming , with 54.3 %. 9 . $ 118,000 10 . Henry Wells and William Fargo were involved in the founding of both companies . www . MoAF . org | Fall 2016 | FINANCIAL HISTORY 39