Nvidia's Risky Business
This article uses the historical failure of the Northern Pacific Railway and Jay Cooke's financing tactics as a cautionary tale for modern tech bubbles. It draws parallels between 19th-century railroad speculation and current market enthusiasm for companies like Nvidia.
Why it matters
It provides historical context for understanding how speculative bubbles form and the risks of relying on aggressive retail funding and media hype.
On January 1, 1870, Jay Cooke, hailed as an American hero for his role in financing the Union effort in the Civil War, signed a contract that would, if you squint, lead to world war.
In 1864, Congress had created the Northern Pacific Railway Company with the goal of linking the Great Lakes and Puget Sound with tracks that would eventually run from Duluth to Tacoma; the charter included 40 million acres of land adjacent to the proposed line in exchange for accomplishing the build-out. For the ensuing six years, however, Northern Pacific struggled to secure financing, even as the Union Pacific and Central Pacific railroads built towards each other, driving the golden spike linking Sacramento and Omaha in May 1869.
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