Albert Fink

Introduction

Not all German immigrant entrepreneurs started companies or managed and expanded existing firms. Some demonstrated their creativity in other ways. Albert Fink (born October 27, 1827 in Lauterbach, Grand Duchy of Hesse; died: April 3, 1897 in Sing Sing (now Ossining), NY) was a builder of railroads and economic institutions. He used his considerable professional skills to expand railroads in the United States, to develop management tools for the efficient operation of individual railroads, and to create institutions for the efficient and, most significantly, profitable management of the railway system in the United States. His success in the latter endeavor, particularly in the creation of railway pools, may have been at least partially responsible for passage of the Interstate Commerce Act in 1887 and creation of the Interstate Commerce Commission.

Fink was educated and trained in Germany and migrated to the United States with a younger brother in the year following the revolutions of 1848. He obtained his first professional job with the Baltimore and Ohio Railroad (for which he designed and built bridges and depots). He later became chief engineer, superintendent, and eventually vice president of the Louisville and Nashville Railroad, guiding it through the traumatic Civil War period. He began producing innovative cost analyses after the war, which he made available to the industry, and finally created and became the guiding spirit of two major railroad pools, the very successful Southern Railway and Steamship Association (1875-1876), and the New York-based Trunk Line Association, of which he became commissioner in 1877. The core members of the Trunk Line pool were four major eastern railroads: the New York Central, the Pennsylvania, the Erie, and the Baltimore and Ohio, but under Fink’s leadership (1877-1889) it eventually expanded to include forty railroads. Charles Francis Adams, a prominent railroad expert and state utility commissioner, said of Fink’s management of the pool, “…it is certainly a great advance on any solution of the railroad problem which has yet been suggested.”[1] Albert Fink made numerous original, and quite entrepreneurial, contributions to the development of American railroads during his almost forty years in the industry. His immigration to the United States provided his adopted country with a great innovator in the fields of railroad engineering, railroad management, and railroad economics.[2]

Family and Ethnic Background

Albert Fink was born on October 27, 1827, to Andreas S. (1778-1842) and Margherita (née Jacob) Fink (1789-1849) in Lauterbach, Duchy of Hesse. Albert may have been the oldest of what almost certainly were many children. We know that two of his younger brothers, Henry (two years younger) and Rudolph (born Nov. 29, 1834), also immigrated to the United States, and that all of his sisters and at least one other brother (Fritz) remained in Germany.[3] Andreas Fink was an architect and builder who appeared to be quite prosperous. He lived in a substantial house and designed and built the local Lutheran church.[4] Andreas died when Albert was only fourteen years old, but that appeared to have had nothing to do with Albert’s decision to emigrate.[5]

Albert attended a private school in Lauterbach that prepared him for university. Desiring to follow in his father’s footsteps, at age fourteen he entered the polytechnic school at Darmstadt, where he studied architecture and engineering. He graduated in 1848 with high honors.[6] After his course of study, and at the insistence of his instructors, he moved to Offenbach, near Frankfurt am Main, to gain some practical experience, including learning how to build a house with his hands, an experience he later praised. He also met his first love in Offenbach, his future wife, Mimi (n.d.).[7]

At this time Albert also got caught up in the revolutions of 1848. The uprisings extended from Vienna and Berlin to Darmstadt and even to little Lauterbach. Writing in confidence to his trusted brother Henry, Albert admitted, “I was in Frankfurt on the fateful day of the uprising – the 19^th of September – and I did my part. It was a bloody and horrible affair and I cannot sleep for thinking of it. And what was gained? While I am writing our comrades are fighting in Vienna against tyranny. May they win! The end of this Vienna uprising I do not see, but upon it the fate of Germany hangs. I wish to go where there are no princes and prince-servers or officials, where the relationship between men is not regulated. I am still young. Why should I not try? I have hope that I will lead the way for you, Rudolph and Fritz; that you will join me so that we can be free and lead useful lives.”[8] Some years after Albert Fink’s death, his daughter met with another famous “Forty-Eighter,” Carl Schurz, whom Albert had never met. At this meeting she showed him, to great emotional effect, what she called “Father’s Call for Freedom,” a broadside calling for all to join the demonstrations.[9]

Albert Fink followed through on his stated intention, even though he had been offered a low-paying teaching position at the polytechnic institute in Darmstadt. For the next few months he thoroughly reviewed his polytechnic course and studied English. Then, with his younger brother Henry, three chests, and a feather bed in tow, he traveled to Le Havre, France, boarded the Zurich on April 10, 1849, and headed for the United States, arriving in New York on May 2. Rudolph, only fifteen years old, was left behind for the time being. Albert was immediately impressed with the city: “Here in New York the people have anxious faces and walk fast as if they were in a hurry. I cannot sleep because of the noise. The city, which is built on an island of rock, is tremendous….”[10]

Albert and his brother at first had difficulty finding jobs in New York, and they almost left for South America, but after eight months of trying, they moved to Baltimore and finally obtained jobs with the Baltimore and Ohio Railroad (B&O). Albert was hired as a draughtsman and quickly rose through the ranks. Over the course of his railroading career, Albert took on increasingly complicated tasks. He moved from the B&O to the Louisville and Nashville Railroad (L&N), wrote treatises on railroad costs, tried to retire twice but got enticed into forming and managing railroad pools, and finally, worn out and ill, retired in 1889. Several years prior to his retirement, most likely in 1887, Fink traveled to Germany for the first time since he had left, visiting several relatives, as well as his home town of Lauterbach. He was accompanied by his daughter, Ellen, who remained in Dresden to study and learn the German language. Albert visited her each summer. Shortly after he retired, Albert returned to Germany once again, spending most of his time in Carlsbad “for rest,” but also visiting several other countries, including Morocco.[11] His daughter returned to the United States with Albert in December 1889. The household moved from New York, where they had stayed for years at the Windsor Hotel, back to the family home in Louisville. Albert loved to travel and until the final years of his life, he was able to travel extensively in the United States, the territory of Alaska, and Europe.

Albert Fink’s personal life was not without its tragedies. Once settled in Baltimore with a good job, Albert prepared to send for Mimi, to whom he wrote: “Many Germans think of America as a journey to a far off world like a star, but you must think of it as only a trip.”[12] He expressed in letters his deep love, advised her to study English, yet also warned her as follows: “I long for your coming with all my heart my beloved. But I must be perfectly honest with you. I am away most of the time – often I work from four in the morning until late at night. You would be alone so much. Always I am worrying about that. Only our great love would make your happiness possible….”[13] The exact date is uncertain, but Mimi arrived in the United States and joined Albert in Baltimore. Within a year, however, she died in childbirth, along with her baby. There is no record of Albert’s reaction, except that he then devoted himself even more intently to his work.

Albert moved to Louisville, Kentucky in 1857.[14] At some point before the outbreak of the Civil War he met the sophisticated daughter of a prominent Louisville banking family, Sally Moore Hunt.[15] The two were married on April 24, 1865, in Christ Church Cathedral. Their daughter Ellen was born on March 4, 1870. Tragedy struck once again when Sally died on March 7, 1872. A single entry in Albert’s diary on the day following the death of his wife read “I have had happiness.”[16]

Business Development

The first weeks Albert Fink spent in New York were bewildering and disappointing. Certified with the highest university honors, Fink applied for work at several construction firms but was unsuccessful. He was met with indifference and his European credentials were not appreciated, especially his training in architecture, a profession not yet recognized in the United States.[17] He and his brother seriously considered going to South America where they were told men with professional skills were welcomed. However, just before booking their trip for Rio de Janeiro, they heard that the Baltimore and Ohio Railroad, one of the pioneer railroads in the United States, was extending its line to Harper’s Ferry, Virginia (now West Virginia). They decided to go to Baltimore to apply for positions with the railroad, where they sought a meeting with the railroad’s line foreman, Wendel Bollman (1814-1884), a self-taught civil engineer and also a son of German immigrants. After a number of failed attempts, they finally met with Bollman but could not secure jobs.[18] Nearly destitute (“I am down to my last penny. I never knew I could feel so helpless; I do not know what to do.”[19]), Albert took a job as a carpenter. At the same time, however, he began thinking about railroad construction issues, particularly the necessity of crossing rivers. It was during this time that he designed what came to be known as the Fink bridge truss, for which he received three separate patents, the first of which was awarded in 1854.[20]

Eventually, Albert came to the attention of Benjamin H. Latrobe II (1806-1878), chief engineer of the Baltimore and Ohio, who recognized the potential of the twenty-two-year old and hired him as a draughtsman in December 1849.[21] His engineering skills were recognized immediately and Fink rose quickly to become Latrobe’s principal assistant. He was given responsibility for the design and erection of bridges, stations, and repair shops for the new section of the railroad that ran from Cumberland, Maryland, to Wheeling, Virginia (now West Virginia), on the Ohio River.

Fink’s engineering and architectural skills were especially important in the design and construction of railroad bridges. His innovative truss was used for the first time in the construction of a bridge that spanned the Monongahela River at Fairmont, Virginia (now West Virginia), in 1852. This bridge, with its three spans, each 205 feet in length, was the longest iron railroad bridge at that time in the United States. The impetus for this design came from the desire to erect a structure that could carry a massive, moving weight over long spans without the necessity of building expensive masonry piers that could potentially obstruct waterways. “Fink’s design combines elementary principles of bridge design with a practical application of available materials – cast and wrought iron – for the most efficient solution to building long-span bridges quickly and economically.”[22]

In 1855 Fink was promoted to division engineer and continued to work on extensions of the B&O. He also served as consulting engineer for the Norfolk and Petersburg Railroad. He remained in these positions until the line extensions were completed. He left the B&O in 1857, at age thirty and on good terms, to accept a position as a construction engineer for the Louisville and Nashville Railroad in Louisville, Kentucky.[23]

One of Fink’s first tasks for the L&N was to oversee the construction of freight and passenger stations.[24] After that came the challenge of bridging the Green River. The location was approximately seventy-four miles south of Louisville, near Munfordville. The bridge was to be quite large for its time and had to span a wide gorge at considerable height above the river. Upon completion, the Green River Bridge was the largest iron bridge in the United States. Fink was promoted in 1859 to chief engineer of the L&N and superintendent of the road and machinery departments. While he was overseeing construction of the L&N and its bridges, Fink also took on the design and construction of the then incomplete Louisville (Jefferson County) Courthouse. It was completed in 1860 to mixed reviews.[25]

The American Civil War placed the Louisville and Nashville Railroad in a perilous position. The line ran directly through some of the most hotly contested territory in the conflict. In July 1861 Confederate troops seized all but 67 miles of the line, reaching to within thirty miles of Louisville. When federal troops later advanced, the retreating army destroyed as much railroad property as possible.[26] Reports show that Albert Fink, without waiting for the protection of federal troops, brought work gangs to the area and repaired the damage. “Such rapid work was a marvel to the military engineers. It was done so quickly that the advancing [f]ederal army found always an open line to their rear and the reconstruction was at times completed far to the front of the moving forces….The road was the only one in the South of which the army did not take military possession.”[27] The L&N, under Fink’s leadership, continued to be the target of Confederate raids, particularly those of General John N. Morgan, and repairs had to be done repeatedly. This brought Fink into the midst of actual fighting, for which he was awarded the title of colonel.[28] In addition to keeping the L&N running, Fink kept meticulous accounts and prepared dispassionate reports during the war, a practice he eventually would develop into a system. In 1865 Fink was promoted to the position of general superintendent and in 1869 become vice president and general superintendent.[29]

After the war, Fink continued to oversee expansion of the L&N and to build bridges for the L&N and other railroads. In 1866 he designed and constructed a truss bridge over the Tennessee River at Decatur, Alabama, the following year receiving a patent (No. 63,714) for its design. Between 1868 and 1870, Fink built a truss bridge over the Ohio River near Louisville. The bridge was constructed by the Louisville Bridge and Iron Company, which had been formed in 1865 by the L&N, with Albert Fink as president of the company.[30] The bridge was the first in the country to cross the Ohio River, contained a 396-foot span, and was the longest iron-truss bridge in the world at the time.[31] Fink received his third and final patent (no. 116,787) for this bridge. The longest bridge designed by Fink was completed in 1885 for the L&N over the Ohio River at Henderson, Kentucky, with sixteen spans, the longest of which was 522 feet, setting another record for iron-truss bridges.[32]

After becoming vice president of the L&N, Fink began to devote more attention to the economic side of the railroad business. He had always been a meticulous collector of information, and his reports were well known for their detailed and dispassionate analyses. In the early 1870s, Fink sought to create a system of cost accounting that would provide the details necessary for profitable rate making for the L&N. He recognized that railroad lines and branches varied tremendously, that no single rate would suffice, and that each segment of the railroad would have to be treated separately. He started from the cost side, first dividing costs into those that were fixed (overhead) and those that were variable (marginal). He further subdivided variable costs into those that were related to the length of the line and those that were related to the volume of freight or number of passengers. In the end Fink created seventy-five separate cost categories. He then used four complex equations with ratios and a summation equation to arrive at a total cost per ton-mile. This knowledge could then be combined with demand characteristics to determine rates for different categories of traffic and between different points on the line, subject always to fluctuating characteristics.[33]

Fink published several books and pamphlets explaining his methods, some of which were abstracts of his annual reports for the L&N, while others included his congressional testimony. Perhaps best known is An Investigation into the Cost of Passenger Traffic on American Railroads: with Deductions for its Cheapening (1874).[34] The May 30, 1874, Railroad Gazette described this work as “the fullest investigation into the cost of railroad transportation ever published in our country in our language.”[35] This was followed by Cost of Railroad Transportation, Railroad Accounts, and Governmental Regulation of Railroad Tariffs (1875), Investigation into the Cost of Passenger Traffic on American Railroads, with Special Reference to Cost of Mail Service and its Compensation (1876), and The Railroad Problem and Its Solution (1880). Alfred D. Chandler Jr. notes that Fink’s work has been cited as “the foundation stone of American railway economics” and Louis Galambos has called Fink “the father of cost accounting.”[36] In his recent study of transcontinental railroads, Richard White wrote, “Albert Fink knew more about railroad rates than any other nineteenth century North American. He studied railroads the way Darwin studied evolution….”[37]

Albert Fink as Organizational Entrepreneur

The Panic of 1873 hit the railroad industry hard. Weaker firms defaulted on their bond and loan interest obligations and many entered receivership. The L&N survived but the times were difficult. Salaries were slashed by ten percent and the road ceased paying dividends on stock. This austerity took its toll on Fink, a natural builder. He resigned as vice president of the company in July 1875 and declined to seek re-election to the board of directors in December.[38] Fink intended to take a vacation in Europe, but instead was enticed to accept the position of commissioner of the newly formed Southern Railway and Steamship Association. This was a combination (pool) of twenty-five southern railroads that was formed for the purpose of regulating railroad rates and facilitating the movement of through traffic across member lines. “It was largely of Mr. Fink’s creation and was a highly organized institution. It was designed as a machine to enable the railroads to work together with or without pooling, as might be thought expedient.”[39] Such an organization was deemed necessary by business leaders because of the economics of the railroad industry, with its high fixed costs and low marginal costs, which drove individual railroads to cut rates to below cost to gain business. This was known as cutthroat competition. Self-regulation was one of the potential solutions to this problem. The Southern Railway and Steamship Association, with Fink at the helm, was successful in establishing stable rates and arbitrating disputes among the various railroads. “The plan of work and the body of rules were prepared by Mr. Fink with German painstaking and thoroughness and were administered by him with distinguished ability, justice, tact and resolution.”[40] The southern pool proved successful and remained in existence until 1887, when the Interstate Commerce Act forbade pooling.[41]

By the middle of 1876 the southern pool was running smoothly and Fink returned to Louisville. After a year devoted to personal matters, he decided to take his long-desired European vacation. He departed Louisville in June 1877. “This time he got as far as New York, arriving there at a time when the chief executive officers of the four eastern trunk lines were endeavoring to compass measures to prevent the recurrence of the disastrous railroad war of the preceding year.”[42] Fink was consulted and the executives convinced him to organize and lead the Trunk Line Association, whose initial task was to apportion the west-bound traffic. At about the same time executives of western railroads had formed their own pool. In November 1878, Fink suggested that the two organizations coordinate their activities and in December a joint executive committee was formed. Fink was elected chairman of this committee as well as holding his position as commissioner of the Trunk Line Association. “He thus became the executive officer of all the most powerful railroads in the United States, so far as concerned their competitive traffic arrangements.”[43] The joint executive committee had effective rate-making power over the trunk lines. Fink’s office employed about 60 to 65 clerks who collected statistical information to use for pooling and rate-making. The budget for the whole office, including Fink’s salary, was about $5,000 per month (approx. $113,000 per month in 2011$). This expense was covered mostly by the four trunk lines but partly by the western roads.[44]

The joint executive committee of the two railroad pools worked well as long as all members played by the established rules. The only substantial power the joint executive committee could exercise to discipline rogue railroads was to threaten to cut the rates of competitors, which usually was effective, especially after Albert Fink personally explained the likely consequences.[45] One example of how the committee worked that had direct relevance to immigrants was reported in the New York Times on July 19, 1890. This contained a report on an executive committee meeting the previous afternoon. The “greater part of the afternoon was occupied by the committee in discussing complaints relating to immigrant passenger traffic. It is alleged that the Delaware and Lackawanna and the New York, Ontario, and Western Railroad have violated the regulations established by the Trunk Line Commission by selling tickets to immigrants through agencies outside of the Barge Office. Second-class tickets have been freely sold, it is said, instead of regular immigrant tickets, and the business of other roads than the two mentioned has been considerably injured.”[46] While no specific action was taken, it was recognized that the cause of the complaint needed to be rectified.[47]

Fink’s experience and position made him an obvious candidate for expert testimony before both state and federal legislative committees as they considered railroad legislation in the late 1870s and 1880s. In 1879, for example, Fink was summoned to testify before the New York legislature’s Hepburn Committee and asked to describe and defend the pooling system, which he did vigorously.[48] He furthermore argued that a system of high rates rigidly maintained for everybody would be preferable to “a low system of rates with all the uncertainties, the ‘cuttings,’ the special rates, and demoralizing discriminations which the latter plan entails or results in.”[49] In later testimony before Congress, he was ambiguous regarding the creation of a national railroad utility commission. To Fink, it all depended on the specific powers of the commission: “I am in favor of having a competent commission appointed for the purpose of collecting information, in order to help to a proper understanding of this intricate subject, such commission to be empowered to receive complaints and to investigate the same; and to act as a mediator and counselor between the railroads and the public.”[50] Passage of the Interstate Commerce Act in 1887, with its prohibition of pooling and its creation of the Interstate Commerce Commission (ICC), made Albert Fink’s positions as commissioner of the Trunk Line Association and chairman of the joint executive committee much more difficult.[51] He firmly believed that the association should continue its pooling agreements regarding rates without allocating traffic and that it should seek to cooperate with the ICC.[52]

In June 1889 Albert Fink decided to retire, again. The New York Times commented on his importance to the railroad associations and wondered if his resignation would be accepted, but this time he could not be dissuaded. He announced his intention to travel to Europe and enjoy “an entire relaxation from business cares.”[53] Albert Fink did travel to Europe, returning with his daughter in December. He moved back to Louisville where he spent the rest of his life refusing job offers and traveling until he had to enter a sanitarium in upstate New York. He died there of pneumonia on April 3, 1897. Funeral services were held at Christ Church (Episcopal) Cathedral in Louisville.

Personality and Social Status

Albert Fink worked hard, perhaps obsessively, but he clearly made a positive impression on those he encountered in his personal and professional life. He was an imposing figure, six-feet-one-inch tall, with massive proportions, a broad forehead, and a dark complexion.[54] Professionally he has been described as follows: “Albert Fink’s chief characteristics were conscientiousness, passionate love of truth, fine sense of justice, perseverance, untiring energy, dauntless courage, and strong will. Nothing could make him deviate from his path of duty.”[55] Personally, “He enjoyed society, but his life was too busy for him often to be able to indulge in social pleasure. His manners were simple and very cordial. The strength and simplicity of his character and the kindness and gentleness of his nature won for him the affection of men and women, young and old.”[56] And, as one of his colleagues with forty years of experience in the railroad business commented in the Wall Street Journal, “Albert Fink, besides being one of the gentlest and most lovable men that ever existed, was, in the opinion of many who knew him, the greatest railroad man that this or any other country ever produced.”[57]

Albert Fink clearly was financially successful, if not spectacularly wealthy. The 1870 Census lists the value of his real estate as $26,000 (roughly $460,000 in 2011$) and that of his personal estate as $45,000 (roughly $800,000 in 2011$).[58] His salary as commissioner of the Trunk Line Association was the substantial sum of $25,000 per year (approx. $570,000 in 2011$). There is no evidence regarding his charitable giving while he was alive, if in fact there was any. He left no charitable bequests in his will, making several specific bequests to a sister and sister-in-law (the widow of his brother Fritz) back in Germany, and to nephews and nieces in the United States. The bulk of his estate was left to his daughter in a trust to be managed by his brothers.[59]

There is no evidence that Fink belonged to any exclusive social clubs or organizations. Perhaps because of his work ethic, he had no time for these things. He was an elected member of the American Society of Civil Engineers and served the organization as vice president in 1879 and president in 1880.[60] Fink did not appear to rely on any form of German immigrant network. He was married in, and had his funeral in, the same Anglican church. On her first trip to Germany with her father, Ellen Fink commented, “During his absence of thirty-five years his home life and business associations had been entirely with Americans so that German customs and manners were all new and strange to me.”[61] Yet he did eventually return to Germany many times and saw that his daughter studied there and learned the German language.

In terms of social status, Albert Fink was, of course, prominent among people in the railroad industry and related fields. However, he was also friendly with distinguished people in other professions. For example, while living in New York City, he was friends with General Benjamin Bristow who had been secretary of state under President Grant and was at one time a presidential candidate himself. He was a friend of John Bigelow, ambassador to France. Sometimes, his daughter writes, while living with her father in New York, she would find herself at dinner parties attended by Supreme Court justices.[62] Fink was well known in Louisville as well, where, after his return from New York, people would visit him in his library to discuss topics of the day. Fink had a close relationship with Ellen C. Semple (1863-1932), the Louisville native and anthropogeographer who befriended both Fink and his daughter, joining them at one point on a trip to Alaska.[63]

Fink was close to his two brothers, Henry and Rudolph, even though they only saw each other occasionally. Henry had immigrated with Albert, and Rudolph arrived a few years later. Both brothers followed Albert into the railroad industry and both were quite successful. At one point early in their careers all three brothers worked for the Baltimore & Ohio. When Albert left to join the Louisville & Nashville, Rudolph followed on his heels. They eventually went their separate ways. Henry later came to be known as the “Railroad Doctor,” because of his ability to transform the bankrupt railroads of which he had become receiver into going concerns. When he died in 1912 he was chairman of the Norfolk & Western Railroad. Rudolph went to Mexico in 1881 and became general manager and president of the Mexican Central Railroad, part of the Atchison, Topeka, and Santa Fe system. He went from there to become receiver and then president of the Memphis & Little Rock Railroad.[64] Rudolph died on February 1, 1913.

Conclusion

Entrepreneurship is harder to define precisely than most people appreciate, and there is no widely accepted theory of entrepreneurship. Joseph Schumpeter focused on the creation of firms, but this may be too narrow a definition. Certainly an entrepreneur must be creative and must create positive economic value.[65] If creativity is the key, then Albert Fink was an entrepreneur. He was a designer of bridges, a builder and manager of railroads, a student of the economics of railroads, and a creator of regulatory organizations. He had a major impact on the business of railroading in the United States. As stated in his New York Times obituary, “No single man ever wielded so potent an influence directly upon the railway traffic of this country as did Albert Fink during a period of twelve years, beginning in 1877.”[66]

Fink started out at two successful railroads, the Baltimore & Ohio and the Louisville & Nashville. Such was Fink’s reputation at the L&N that Supreme Court Justice Louis Brandeis, though he had never met him, in 1926 donated an extensive railroad library to the University of Louisville in memory of Albert Fink and Milton Smith. Brandeis said of Fink, “Distinction was first given to the Louisville and Nashville Railroad through the genius, the professional attainments, and the trustworthiness of Albert Fink.”[67]

Fink’s engineering skills were instrumental in the rapid physical expansion of American railroads, and many of his contributions have been long lasting. In addition, his business acumen led him to create what many regard as the bases of modern cost accounting and railway economics. His energy and focus enabled him to accomplish these things and set high standards for engineers and business persons today. As the young Albert Fink wrote just before he immigrated to the United States, he wished only “the pure joy of following my chosen work in a country where…I may lead a free and useful life.” This he did.

Notes