Greed Hauls No Freight

I find much inspiration in the Antiplanner’s posting about railroad magnate James J. Hill.

[Hill] quickly built to Grand Forks and Devils Lake, North Dakota, accessing hundreds of thousands of acres of prime wheat growing country. The St. Paul & Pacific came with a small land grant, which Hill sold to settlers at rock-bottom prices with the goal of putting farmers on the land who would grow crops that his railroad could ship. The railroad was soon shipping close to a quarter of the spring wheat grown in the U.S. and paying its shareholders 8 percent annual dividends.

The railroad helped fulfill the demand for grain. It enabled more farmers to get more wheat to market. Those who dismiss entrepreneurship as greed overlook the essential nature of business. It must satisfy customers, and leave them better off than if they had not engaged in trade.

Long before most other railroad managers, Hill also realized that the nature of the railroad business was changing from a premium service (like air freight today) to a commodity service requiring heavy-duty rails, locomotives, and freight cars. “What we want is the best possible line, shortest distance, lowest grades, and least curvature that we can build between the points to be covered,” he told his engineers.

Hill’s road was so successful that it became a commodity. Rather than limit service to maximize rate of return, as a “greedy monopolist” might be seen doing, Hill sought to make his service more efficient, less costly, and to maximize total return. Yes, he made a fortune. But he also made it possible for everyone in Great Northern territory to gain more, too.

When the leaders of one community offered to give Hill $65,000 to build a line to their city, Hill wrote,

“It has not been our policy at any time to burden the communities along our lines with additional taxes for railroad facilities. If the people [in your] county will give us moral support in procuring what right-of-way we require at fair and reasonable prices, we will build the road and have it completed this year on condition that the bonds voted for the $65,000 be returned to the officers of the county and by them burned or destroyed. The people of your county will largely have to support the road when it is built and the additional burden of the [bonds] would be a hardship to them.”

If greed was Hill’s motivation, would he not have taken the handout form those city fathers? It seems he had something more than money driving him, combined with some sense of ethics. The people would pay for the new rail line, but they would pay for service as earned, not through the corrupting lens of politics.

I do not propose James Hill for sainthood. His employees, perhaps coming to overestimate the value of their contribution to the road, certainly saw him as something less than noble. My aim is to challenge the lazy perception that great fortunes are built out of greed and exploitation. Greed did not haul the freight. Great fortunes are made by keeping a share of the value added by one’s activity.