The 19th Century “Club Men” Who Created the Most Profitable Stock of Their Time

Editorial Note: Last week, Julia, several of our editors and a couple dozen Chairman’s Circle Members returned from a Wealth Cruise that navigated the Panama Canal and traveled along the Atlantic Coast of Colombia to Miami. Recognizing the incredible feats of engineering that molded the landscape of the Isthmus of Panama, Julia was inspired to share her thoughts with all Members in a two-part essay. Part 1 is below. Stay tuned for Part 2 on Thursday.

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Dear Member,

If The Oxford Club had been around in the mid-1800s, this would have been our ideal logo:

Its imagery reflects the Club’s sensibilities toward global investing, innovation, optimism, free enterprise, bravery and sophistication. It’s no surprise that – centuries ago – the three owners of this logo shared these same ideals and employed them to create one of the greatest engineering feats in history.

If these “brave companions” were living today, I would be honored to have them in our Club as lifetime Members.

And had we been in existence back then, perhaps we would have recommended their company’s stock as a promising new speculation. It would have been a great call. It ended up being the best-performing stock of the 1800s.

This hugely successful 19th-century company helped revolutionize global connectivity by constructing the first ocean-to-ocean railroad in the world.

Not across the U.S., but across the mosquito- and alligator-infested swamps of Panama.

Years before we had a transcontinental railway, and more than 50 years before the Panama Canal was built, this company created a railroad across the Isthmus of Panama, from the Atlantic to the Pacific.

This breakthrough resulted in faster travel, trade and communication not only between the two American coasts, but around the world.

And yet most Americans have never heard of it.

The Panama Railway’s remarkable history isn’t taught in schools. Its history is overshadowed by the illustrious story of the Panama Canal, which, ironically, would never have been built had it not been for the railroad.

Stories about the working conditions during the construction of the Panama Canal are notorious: unsanitary living conditions, yellow fever, malaria, dysentery, work accidents, etc. But a half a century earlier, workers on the Panama Railway faced even more formidable conditions than the workers who built the canal.

As David S. Parker, Army engineer and former governor of the Canal Zone put it:

It is almost inconceivable that the railroad survey – just the survey – could have been made by a comparative handful of men who had no proper equipment for topographic reconnaissance (no helicopters, no recourse to aerial photography), no modern medicines, nor the least understanding of the causes of malaria or yellow fever. There was no such thing as insect repellent, no bulldozers, no chainsaws, no canned goods, not one reliable map.

Created in 1849, the New York-based Panama Railroad Company quickly became profitable. It was the best-performing stock of its day, climbing to a high of $295 per share (in the 1800s!), making it the highest-listed stock on the NYSE. And its dividends averaged 15% over 20 years.

But the secret to the success of the PRC lay in the hands of its founders: three well-liked, highly driven visionaries who lived in New York City. They were already highly successful in their separate careers before they came together to form the PRC in 1849 and fund it by issuing shares.

The founders of PRC were members of New York’s most prestigious business clubs, such as the Century Association, Knickerbocker Club and Manhattan Club, and even the Metropolitan Museum of Art Club.

They were “go for it” entrepreneurs willing to move forward despite government impediments. They were extremely confident, optimistic, determined and able to improvise in challenging situations. These qualities can arguably be described as uniquely American, especially the skill of improvisation.

(It could be argued that one of the main reasons the Americans were able to complete the Panama Canal was our ability to improvise and innovate… For example, we were able to quickly rebuild the railroad to update it for more modern trains, and an American doctor solved the deadly obstacle of malaria that had plagued both the PRC and Panama Canal projects.)

Unlike most entrepreneurs, the PRC founders didn’t need money. It was something “beyond wealth” that drove them to attempt the impossible. For one, they dreamed of spreading liberty throughout the world, not by military conquest, but by expanding globally connected commerce. They believed capitalism was the great unifier and peacemaker for the world.

To get approval and funding for a project as massive as the Panama Railway, they needed to combine resources in a way we believe every Club Member should do to be successful today. They masterfully employed a combination of their “financial, intellectual and social” capital.

The PRC founders were all born in or around 1805. They were graduates of elite schools, like Columbia College. They grew up watching a relatively uncouth New York “village” become a booming cosmopolitan city. They were inspired by the powerful achievements unfolding in their own backyards – from the historic celebration of the Erie Canal with Governor Clinton to the advent of regularly scheduled steamship travel abroad from their New York port.

And they enjoyed a front-row seat as their city became an influential financial powerhouse.

The first PRC partner, Henry Chauncey, was a respected Wall Street financier.

The second partner, William Aspinwall, is perhaps the most well-known today. Aspinwall was one of the world’s most successful shipping magnates. He owned the fastest clipper ship in his time.

The third partner, John Lloyd Stephens, started out as a lawyer from a prominent merchant family. But his true calling was reflected in his numerous “Indiana Jones-style” escapades abroad, immortalized in his best-selling travel books.

The famous historian David McCullough wrote that Stephens “… could have been the creation of Jules Verne.” He was a sensation, a man-about-town, a romantic patriot and a raconteur. Stephens’ writing was known for its personable, easily relatable style, its wry humor and its stories of often-perilous adventures (a predecessor of Mark Twain).

Stephens was also a lawyer and noted public speaker. He was admired in both Republican and Democratic political circles. In 1839, he became a diplomat under President Van Buren. Van Buren sent him to Central America to negotiate treaties in what was then a collection of warring states.

During one of Stephens’ early escapades to Europe, he interviewed the highly esteemed scientist Alexander von Humboldt. Like Stephens, Humboldt was a romantic explorer. Stephens was fascinated by Humboldt’s findings in Mesoamerica, particularly his documentation of “ancient relics” he saw there.

Inspired by Humboldt, Stephens brought down with him on his diplomatic trip to what is now Honduras British artist and architect Frederick Catherwood. Together, to the world’s amazement, they proved that the Americas did indeed have an advanced ancient civilization, one that rivaled those of Egypt, Jerusalem and Rome.

In his books, Stephens described how they reclaimed Mayan cities from the jungles of the Yucatán and Central America. But it was in Catherwood’s pages of exquisite illustrations that Americans got their first captivating view of the Mayan ruins.

During these years as explorer, author and diplomat, Stephens also explored Nicaragua and the Isthmus of Panama to survey a route for the U.S. government’s much-desired canal. In the end, Stephens turned from the more comfortable life of an author and a diplomat to follow his greatest passion: connecting the Pacific with the Atlantic.

Stephens was the driving spirit behind the PRC. Appointed vice president of the company in 1849, he went to Colombia to negotiate a contract with the New Granada government. The PRC received full rights to build and operate a railway or canal there, including the rights to build and operate the two ocean ports.

In 1850, he became president of the PRC and traveled by steamship to the jungles of Panama to oversee the most difficult part of the entire enterprise… the initial clearing and construction. Sadly, Stephens died of malaria at 47 before the railway was completed.

Together, these men opened the doors to transcontinental travel, trade and communication.

On Thursday, I’ll share exactly how they helped transform America into an international powerhouse and I’ll explain how their story impacts The Oxford Club and your membership.

If you find yourself inspired by their story, please share your thoughts here.

Good investing,

Julia