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FreightWaves Classics/Leaders: John Thomson made the Pennsylvania Railroad an industry leader

John Edgar Thomson was born on this date 214 years ago in Springfield Township, which is near Philadelphia. His father (John Thomson) was a leading civil engineer; he helped build the Chesapeake and Delaware Canal, as well as the first experimental railroad in the United States. 

A photograph of John Edgar Thomson. (Photo: Pennsylvania Academy of the Fine Arts)

Although John Edgar Thomson had little formal education, he worked closely with his father from an early age. Therefore, he received a sound foundation in engineering, which he supplemented with reading, observation and experience.

A successful civil engineer and industrialist, Thomson is remembered most for his leadership as the third president of the Pennsylvania Railroad (PRR). He served in that position from 1852 until his death in 1874. Under his presidency, the PRR grew into the world’s largest business enterprise, as well as being a model for technological and managerial innovation.

Early career

Trained as a surveyor, Thomson joined the Pennsylvania Engineer Corps in 1827 at the age of 19. Working on a survey crew, he assisted with the layout of the route of the state’s Philadelphia and Columbia Railroad. 

He was soon promoted to assistant engineer, which led to his hire as head of the engineering division of New Jersey’s Camden & Amboy Railroad in 1830.


Thomson visited Great Britain in 1832 and made an inspection tour of the new railways being constructed across the country. England’s Stockton and Darlington Railway had opened on September 27, 1825 and became the world’s first steam locomotive-hauled public railway. That first steam-powered locomotive was designed by George Stephenson. (To read more about Great Britain’s early railroads, follow this link to a FreightWaves Flashback Friday article.)

The Georgia Railroad

After returning to the United States, Thomson was hired as the chief engineer of the newly chartered Georgia Railroad, a position he held from 1832 to 1847. During his tenure, the railroad built an Augusta-to-Atlanta rail line, which was the longest rail line built by one company up to that time. 

Thomson laid out the railroad’s route, negotiated and oversaw construction contracts, operated sections as they opened, and promoted possible connections to the north and west. By 1845, he had completed the railroad from Augusta to Marthasville (present-day Atlanta), a distance of 173 miles (it was the longest railroad in the world at the time). In addition, Thomson later bought control of the Montgomery and West Point Railroad and helped finance and lay out the route of the Nashville and Chattanooga Railroad. Also in 1845, he surveyed and designed the Augusta Canal, which was finished two years later.

Thomson’s record at the Philadelphia and Columbia Railroad, the Camden & Amboy Railroad and the Georgia Railroad led to Thomson’s hiring as the first Chief Engineer of the Pennsylvania Railroad.

This was formerly the Georgia Railroad station in Thomson, Georgia. The town was named for John Edgar Thomson. (Photo: Brian Brown/vanishingnorthgeorgia.com)
This was formerly the Georgia Railroad station in Thomson, Georgia. The town was named for John Edgar Thomson. (Photo: Brian Brown/vanishingnorthgeorgia.com)

The Pennsylvania Railroad

Pennsylvania had invested heavily in state-owned canals and short-line railroads, most of which were neither profitable nor efficient. The state was falling behind nearby states in infrastructure development, which was deemed a key part of economic growth. 

As the PRR’s chief engineer, Thomson led the effort to build a rail line across the Allegheny Mountains from Pennsylvania’s capital Harrisburg west to Pittsburgh. The rail line was built in order to eliminate the inefficient Allegheny Portage Railroad and the state’s slow-paced canals. When completed, the new rail line would link Philadelphia to the fast-growing states and territories to the west. This would also give Philadelphia more opportunities to compete with Baltimore (which was served by the Baltimore & Ohio Railroad) and New York City.

Thomson did a magnificent job. “With unbounded energy he sought out the best routes, making allowances for grades and river crossings.” He overcame the railroad’s problem of crossing the Allegheny Mountains. Working with Herman Haupt, Thomson co-designed what became famous as “Horseshoe Curve,” which is located near the city of Altoona. Built in 1845, Horseshoe Curve is located at the end of a long “U,” which gradually climbs up two sides of a steep valley. 

The Pennsylvania Railroad logo. (Image: American-Rails.com)
The Pennsylvania Railroad logo. (Image: American-Rails.com)

The through line between Philadelphia and Pittsburgh opened for rail traffic in February 1854. By building a rail line with practical grades and the Horseshoe Curve, rail passengers and goods were able to travel between New York City and Chicago through Pennsylvania, giving the state an edge in the development of the American Midwest. The Thomson/Haupt design was so effective that its design has been virtually the same since its construction over 175 years ago! 

The rail line also made Philadelphia a major outlet for long-haul passenger and freight traffic from the west. It also strengthened the Port of Philadelphia, which had access to the Atlantic Ocean.

A 1934 photo of the Horseshoe Curve. (Photo: A. P. McDowell/Library of Congress American Memory collection
A 1934 photo of the Horseshoe Curve. (Photo: A. P. McDowell/Library of Congress American Memory collection

President of the PRR

Thomson was a leader of a faction that ousted the incumbent board of the Pennsylvania Railroad in 1852. This led to Thomson being named the third president of the railroad. His focus shifted from engineering to finance and general management. 

He repeatedly reorganized the railroad into more efficient subdivisions, established cost accounting and paid specific attention to the selection of vice presidents. Thomson’s organizational model was imitated by numerous other railroads, but also was imitated by other large American businesses in a number of industries. 

In 1857 Thompson financed the railroad’s $7.5 million acquisition of the entire system of Pennsylvania’s state transportation works, which consisted of 278 miles of canals and 117 miles of railroad, as well as real estate and rail equipment. With this acquisition the PRR dominated the state and controlled most of the short-haul traffic from the many towns along its heavily populated route.

A wood-burning locomotive. (Photo: civilwartalk.com)
A wood-burning locomotive. (Photo: civilwartalk.com)

Another major change that Thomson led was changing locomotives’ fuel from wood to coal. Other railroads followed the PRR’s lead; this created new demand for coal, much of which was mined in Pennsylvania, and the PRR shipped the coal to all railroads. Thomson also introduced important improvements at the PRR, including a system for handling passenger baggage and the use of steel rather than iron rails.

Thomson arranged for the consolidation of several western railroads in 1856 into the Pittsburgh, Fort Wayne & Chicago Railway. In 1860, the Pennsylvania Railroad consisted primarily of its main line from Philadelphia to Pittsburgh, with a few short branches. 

The Pennsylvania Railroad's Kensington Freight Station in Philadelphia. (Photo: hiddencityphila.org)
The Pennsylvania Railroad’s Kensington Freight Station in Philadelphia. (Photo: hiddencityphila.org)

Post-Civil War expansion

Thomson expanded the Pittsburgh, Fort Wayne & Chicago Railway westward, into Ohio and parts beyond. The railroad was formally leased to the PRR in 1869. This led Thomson to create the Pennsylvania Company in 1870-71, which was one of the first holding companies. The Pennsylvania Company was created, in part, to take over the properties west of Pittsburgh, which were being developed into large northwest and southwest systems.

In less than 10 years, the PRR had expanded within Pennsylvania to nearly 1,000 miles by 1869. The railroad also controlled rail lines northward to the shores of Lake Erie, through New York state. The PRR purchased the Pittsburgh, Fort Wayne and Chicago line, which gave the railroad a connection to Chicago through Ohio and Indiana. 

The PRR began to expand on the East Coast as well. It gained an entry into New York City by acquiring the United Railroad and Canal Company in 1870. The acquired line owned or leased 456 miles of railroad and 65 miles of canals in New Jersey. Thomson also established links to the South. 

The PRR was headquartered in Philadelphia; Thomson put the railroad behind an effort to build Philadelphia as a trans-Atlantic port. He founded the American Steamship Company in 1870, which was controlled by the Pennsylvania Railroad. 

Steel was likely used as early as 1300 B.C., but large quantities of high-quality, relatively low-cost steel became available following the Civil War. Thomson contracted with steel magnate Andrew Carnegie for steel to replace all the railroad’s wooden railway bridges, as well as to replace the railroad’s iron tracks with stronger steel tracks. With stronger rails and bridges, trains could be designed to be heavier, faster and more efficient.

In 1871-72 the PRR expanded into the Midwest by making astute acquisitions. It bought the Cleveland & Pittsburgh Railroad in 1871 and a number of smaller railroads in Ohio, merging them into the system. The key acquisition was the purchase of the Pittsburgh, Cincinnati, Chicago and St. Louis. Its lines extended westward from Pittsburgh to St. Louis, and had branches that went southward to Cincinnati and northward to Chicago. This system included over 1,400 miles of track, and gave the PRR a second rail line to Chicago, a direct rail line to St. Louis, a second rail line to Cincinnati, and access to areas not previously served.

A Cleveland & Pittsburgh locomotive pushes a railcar. (Photo: clevelandmemory.contentdm.oclc.org)
A Cleveland & Pittsburgh locomotive pushes a railcar. (Photo: clevelandmemory.contentdm.oclc.org)

Technology

In addition to significantly expanding the PRR system and getting the railroad on a solid financial basis, Thomson’s leadership helped the PRR become the technological leader of the industry. Philadelphia emerged as the center of the locomotive industry, and new innovations were often offered first to the PRR, which often adopted them.

Management overhaul

As the major railroad systems grew in size during the 1850s-1870s, large-scale management problems also grew. New methods had to be implemented to mobilize, control and apportion capital, to operate a widely dispersed system, and to supervise thousands of specialized workmen spread over hundreds of miles. The major railroads solved these problems and became models for all large businesses. 

The key innovators were three engineers – Benjamin H. Latrobe of the Baltimore and Ohio, Daniel C. McCallum of the Erie Railroad, and Thomson of the PRR. “They devised the functional departments and first defined the lines of authority, responsibility, and communication, together with the concomitant separation of line and staff duties that have remained the principles of the modern American corporation.”

The financial crisis of 1857 was the catalyst that led Thomson to overhaul the organizational structure of the PRR. The departmental operating structure dated from his appointment as the railroad’s president in 1852. At that time, the railroad was much smaller; its rail lines were incomplete and traffic levels were much lower.

A Pennsylvania Railroad train around 1870. (Photo:

Thomson had established staff officers who were centrally located in Philadelphia to direct the company’s operations, finances, construction, repair, freight and passenger business, maintenance and motive power. In the years since, the railroad’s gross revenues had more than doubled, and in 1857, the PRR had thousands of employees dispersed over 400 miles, handling almost $5 million annually. Thomson knew he needed more accurate information more quickly regarding costs in order to set competitive rates that would generate not only revenues, but profits well.

Thomson developed a new management system that was suitable for a large, dispersed corporation with many functions. The system was based partially on the work of Daniel McCallum, the Erie Railroad’s general superintendent. McCallum had outlined a new organizational structure for his company two years earlier. 

McCallum had established operating divisions at the Erie. Thomson adapted that idea and combined it with the departmental structures used by the Baltimore & Ohio Railroad. He developed the first line and staff managerial organization in American corporate history. Thomson’s organizational plan gave men at lower levels enough authority to demonstrate their talents, although they were always under the oversight of higher line officers. To accomplish this, the rail line between Philadelphia and Pittsburgh was divided into sections, each with a divisional superintendent responsible for everything in his section. All divisional officers reported to a general superintendent, who coordinated operations. Thomson’s plan “clearly delineated the lines of authority from employees at the lowest divisional levels through the general superintendent.” 

This marker commemorates Thomson's birthplace. 
(Photo: waymarking.com)
This marker commemorates Thomson’s birthplace.
(Photo: waymarking.com)

Forms were standardized, and information flowed much more smoothly and quickly through established channels. Responsibility was spread across the company, and many of the railroad’s future leaders gained knowledge with their first taste of authority at the lower levels of the company’s line organization. 

At the staff level, the president, vice presidents, assistants, general superintendent, controller, auditor, and treasurer, made general policy and dealt with issues, while the line organization managed the railroad’s employees and operational decisions regarding rail traffic. 

Thomson’s new organizational structure was in place by December 1857. Over the ensuing years it was widely copied by other companies across the nation. “Thomson’s thought processes lent themselves to creating organizational solutions to complex problems; his engineering background trained him to think logically, to recognize cause and effect relationships, and to create mechanisms that operated with a minimum of friction.” However, it may have been his “appreciation of others’ talents and his belief in allowing young subordinates the greatest measure of freedom wherever possible” that made the decentralized system work so well. 

Business

Thomson was a conservative, risk-averse financier. His railroads avoided financial difficulties during the panics of 1837, 1857 and 1873, while rival railroads often went bankrupt. The Pennsylvania Railroad was worth about $400 million in the early 1870s (before the Panic of 1873 depressed values), generated $25 million in annual traffic revenue and annual profits of $8.6 million. It paid steady dividends, and was a favorite for cautious investors. Thomson hoped to turn the PRR into a transcontinental line, and in 1871 the Pennsylvania briefly controlled the Union Pacific.

Thomson’s legacy

Thomson died in Philadelphia on May 27, 1874. A historic marker marks the location of his birth in Springfield, Pennsylvania, and a street in the community is named for him. The city of Thomson in McDuffie County, Georgia, was named for him. Andrew Carnegie was a great admirer of Thomson; he named his main company the J. Edgar Thomson Steel Company and  also named the Edgar Thomson Steel Works in Braddock, Pennsylvania, after him.

U.S. Steel's Edgar Thomson Works. (Photo: Detroit Publishing Co./Library of Congress
U.S. Steel’s Edgar Thomson Works. (Photo: Detroit Publishing Co./Library of Congress

Thomson died not long after the financial Panic of 1873, which reduced his fortune by about 75% (to $1.3 million). He bequeathed most of his estate to charity, including a fund to help orphans whose fathers may have been killed in the course of their railroad duties. That fund is still making bequests today, 148 years after Thomson’s death.

Influence on the PRR and the industry

During his presidency, the PRR extended westward through Ohio, Indiana and Illinois. Its rail lines stretched from New York, Philadelphia, Baltimore and Washington in the east to Pittsburgh, Buffalo, Cleveland, Cincinnati, Indianapolis, Louisville, St. Louis and Chicago in the west. 

John Edgar Thomson (Photo: storiesofphiladelphia.wordpress.com)
John Edgar Thomson (Photo: storiesofphiladelphia.wordpress.com)

Thomson’s “sober, technical, methodical and non-ideological personality had an important influence on the Pennsylvania Railroad.” During his presidency the railroad was on the cutting edge of technological innovations. The PRR was well-known for its conservative management and steady growth, as well as for avoiding financial risks. Under his tenure, the Pennsylvania Railroad became the world’s largest railroad, with 6,000 miles of track. It also was noted for generating steady financial dividends, implementing high-quality construction, improving equipment, numerous technological advances, and innovative management. 

Fortune magazine established a business Hall of Fame in January 1975 with 19 initial honorees. Although such notable railroad leaders as E.H. Harriman, James J. Hill and Commodore Vanderbilt were not included, Thomson was chosen for the honor. Among his fellow honorees were Henry Ford, Thomas Edison and J.P. Morgan. The editors of Fortune praised him “for setting a pattern of rail construction and organization that was long imitated. They noted he expanded his railroad system from 250 miles to over 6,000 miles as his company’s profits rose from $617,000 to $8.6 million during his years in charge.” Moreover, “they were particularly impressed by the fact that in large part those profits came from his ability to cut costs, from 1.909 cents per ton mile in 1864 to 0.978 cents in 1873. But Thomson would have been proudest of the editors’ personal tribute – their simple declaration that ‘no scandal touched this man.’”

Note: The illustration of the Horseshoe Curve is from the contemporarycondition.blogspot.com.

Scott Mall

Scott Mall serves as Managing Editor of FreightWaves Classics. He writes articles for the website, edits the SONAR Daily Watch series, marketing material for FreightWaves and a variety of FreightWaves special projects. Mall’s career spans 45 years in public relations, marketing and communications for Fortune 500 corporations, international non-profits, public relations agencies and government agencies.