I just re-read a brief history of the Rio Grande Railroad. I’m always baffled by that railroad. It seemed to be almost a hodge-podge of lines, sort of patched together. It’s not clear to me, if there was ever any kind of grand(e) plan about it’s development. Most development looks like it was just an effort to extend the line over the next big hill, and then expand from there.
How did this railroad stick around so long, utilizing what had to be the toughest route from A to B ?
(1) Good people … loyal to a fault.
(2) This railroad could adapt & change where others could not. It handled adversity well.
(3) Hodge-podge - NO…Survivor -YES.
It went where the traffic was, and did whatever was needed to get there.
When a traffic source dried up, it backed away. No futile attempts to rescue dead horses.
When traffic patterns changed, it changed to conform. That included merging with the D&SL and completing the Lucin Cutoff to finally make a short route through the Rockies.
Over its lifetime, the Grande went from being a feeder connecting mining camps to the outside world to being a bridge route - quite a transition, if you think about it.
Chuck
Lucin Cutoff? I thought that was built over the Great Salt Lake, by SP? Maybe the Dotsero Cutoff?
What was there, that made their people loyal, when so many weren’t? Today, most consider DRG as something of an underdog. Did the railroad feel that way?
The history can be captured in seven distinct periods:
Stage 1, 1870-1890: Development railroad built opportunistically at very low cost to capture very high-rated traffic, with virtually no effort at permanence. Management, clear-eyed about the potential of the road, refrain from wasting the money on fool’s errands like building to the Pacific. Real-estate and land development/mineral development programs run in parallel reward the developers richly.
Stage 2, 1890-1910: Very high positive cash flow, particularly from coal, enables a second set of owners to finance ventures such as WP, many of which were indistinguishable from bear runs on the stock value of established competitors. D&SL built in parallel with no apparent rationale other than a bear run both on Rio Grande and the UP.
Stage 3, 1910-1940: Original traffic sources other than coal in severe decline. Regulation creates a rate umbrella enabling participation in transcontinental traffic flows if the plant can be rebuilt to accommodate it. Enormous cash infusions from its own profits and the MP’s profits reconstruct almost from scratch the entire main line from virtual junk into a reasonably good trunk line considering the terrain. The expenditure bankrupts both the D&RGW and the MP. The
The railroad was small enough that Mr. Holtman knew practically everyone by first name, small enough that managers could grasp its instant situation at a glance, small enough that competing views of its future were at a minimum; small enough that everyone knew that if they didn’t care and didn’t work hard they would soon be out of a job; big enough that it mattered to the states and the shippers; big enough to command enough resources to tackle monumental jobs like the Thistle Mudslide with elan and speed; big enough to make competitors wary; big enough to be a career springboard for those with big ambitions; big enough to make the homeguard satisfied with their workday. It was the right size for its time and its territory
RWM
Why was there a second set of owners, when it appears the first set were doing pretty good by themselves?
The “visionary” wasn’t that great a businessman (and was a worse engineer). The folks he surrounded himself with rescued him more than once, but still couldn’t save him. One of those people started a competing railroad 15 years after displacing the visionary and pulling the railroad back from the brink.
I wholly agree that Palmer was all legend and little substance, but he still manages to fool people today.
RWM
I’m lost. Who is/was Palmer?
William Jackson Palmer, promoter and president of the D&RG. Began his railroading career at the PRR where he rose to secretary to J. Edgar Thomson. Purchased a colonel’s commission in the Union Army and was field-promoted to Brigadier, enabling to adopt the title General Palmer. Post war became a locating engineer after a fashion for the Kansas Pacific. Incorporated the D&RG in 1870 but soon chased out by the bondholders, whereupon he became president of the then-independent Utah side of the railway, the Denver & Rio Grande Western (later Rio Grande Western). Left railroading in 1901. Also founded Colorado Coal & Iron Company, the west’s first successful steel maker and a major coal mining concern, which later became CF&I Steel, and is now Rocky Mountain Rolling Mills. CF&I was funded by John Rockefeller.
RWM
One of the many problems of regulation was the “Strong Road/Weak Road” delima.
If two or more railroads served a route, they often didn’t do so with similar costs. So where to set the common, regulated rate? Did the regulators set it to allow the low cost carrier to make what they considered to be a “reasonable” profit. If they did that, then the higher cost carrier would fail financially. So trying to be the wise men they weren’t, they kept the rates at a level so a high cost carrier like the DRGW could possibly earn a buck.
This obviously ill served the public by keeping rail rates higher than they would have been absent regulation. Despite this hampering of the US economy the system kind of “worked” until truck competition developed. Then it began to hurt all railroads by artificially holding (through government fiat) rail rates high and limiting the railroads ability to compete with the truckers.
The signficant fights the railroads had with the regulators were not about raising rail rates, they were about lowering rail rates. Can you imagine any logic that propted a government economic regulatory agency to order prices to be kept high? Such was economic regulation of rail rates.
With the reduction of economic regulation the DRGW has assumed its rightful place in the US economy, as determined by a bumpy ride into a market driven world.
The counter-argument was that minimum-rate regulation preserved rail service to small shippers, remote areas, and small towns, and redressed the balance of power between urban and rural. As that is first an ideological statement and only by its method of execution a seeming economic position it is not my perogative to declare it good or bad. At a minimum it rather depended on who you were or where your interests lay, and if one’s vision of a America was through a Jacksonian lens it seemed quite proper.
As we know the formula exploded with the advent of trucks, autos, and paved roads, and given a choice between nationalizing railroads and immense subsidies to preserve a modicum of rail service to rural areas and their small shippers, or loss of service to rural areas and small shippers, Congress chose the latter.
RWM
Well, we both agree that the system quit working when trucks became viable. One major problem of regulation was that it didn’t change with the new technolgy.
I do disagree that rural areas and small shippers have lost rail service. Small shippers use rail via 3rd parties, such as UPS. Some of the rail functions have shifted to trucks, but the small guys can still use rail when it makes economic sense. Grain still moves out by rail, again with a shift of some functions to truck. The rail gathering system is naturally different when the grain is loaded into a semi in the field than it was when the grain was hauled by a team and wagon.
The minimum rate regulation had its foundation in the concept that one person should pay more so than another person could pay less. That gives the person paying less a “claim” on the earnings of another person. Jackson certainly felt he had a “claim” on the earnings of his slaves, but I don’t know if he would have extended the thought beyond that.&
Baloney. This is historically, absolutely, factually, wrong, and, notwithstanding isolated instances of the circumstance, it reflects neither historical experience nor the attitude of the industry. This is historical revisionism at its worst.
Prior to the enactment of the ICC Act, railroad rates were plummeting as a result of competition. Historian Gabriel Kolko, among others, has thoroughly documented the proposition that railroad rate regulation was the result of the railroads themselves attempting to mitigate the effects of true competition which was putting unacceptable downward pressure – to fat cats desiring to remain fat – on rail rates. The rail industry acted in concert to stop that process and to force rates to rise by political fiat, notwithstanding economic trends in the opposite direction – the normal result of a successful Capitalistic system. It was a raw exercise of political power to exempt the rail industry from the usual rules of economics. It enabled and perpetuated an attitude of entitled inefficiency that served the industry poorly when confronted by changes in the modern world, for which the industry has continued to blame: the modern world. The attitude has plagued the industry ever since.
That never changed. Even though railroad rates were at an all time high, railroads wanted them to go even higher and the primary impetus behind the Staggers Act was the perception, and the avowed complaint, that the ICC was not allowing sufficient increases in rail rates. There is abundant testimony in the record to this effect. The railroads wanted to raise rates, and fully intended to do so when deregulated. When rates were deregulated two things happened: railroad rates plummeted, just as they had been doing prior to the enactment of the ori
That’s sort of the Liberty Valance approach to history that’s all around us. When the legend becomes the truth, print the legend.
What a great thread! Succinct and incisive analysis by knowledgeable people, tied closely enough to the real world that I can understand most of it. I wish the contributors to this thread would collaborate on a “business history” or “history from a business perspective” on a couple of my favorite railroads. Thanks, folks.
Excellent summaries RWM
Colonel Palmer, as he was known, was a visionary alright, his “vision” was a railway that would extended from Denver, south into New Mexico and eventually to the silver mines of northern Mexico and eventually all the way to Mexico City, and westward thru the gold fields of the rockies to Utah and eventually to the Pacific. Making Denver the Chicago of the west capitalizing on mining, agriculture and transcon shipping traffic from the entire southwest. Didnt quite pan out, that initial vision never got much farther than the gold fields of the nearby rockies but it was certainly a “visionary” dream.
It’s very hard to discriminate between what Palmer said and what he believed. Were his schemes visionary? Or merely clever marketing schemes to separate British investors from their money? There’s an interesting (and very rare) set of volumes entitled “Early Financing of the Denver & Rio Grande” that argues that the organization was about 98% a real-estate development plan and 2% a railroad. There is much evidence that Palmer was a front man for the real players who remained out of the limelight. The visionary schemes of Mexico evaporated from the promotional efforts once the railroad reached the land grants of southern Colorado and the San Luis Valley that the promoters controlled, and the Pacific Coast schemes never seemed more than token and half-hearted, designed merely to attract the small and naiive investor who expected ANY railroad west of the Mississippi to have Pacific plans in its portfolio.
From a logical point of view the Palmer projection to Mexico City was just two points on a map with a thick line drawn between them. There was no traffic moving that way nor any solid expectation there ever would be. One suspects Palmer selected Mexico City simply because it was a place investors might have heard of – it “looked” like a