Founders - #198 Nathan Rothschild (Rothschild Family Dynasty)

Episode Date: August 18, 2021

What I learned from reading The House of Rothschild: Money's Prophets by Niall Ferguson.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----A business can only be managed well if one pays as much attention to the smaller business transactions as one does to the larger ones.All banks have histories, only the Rothschilds have a mythology. Ever since the second decade of the nineteenth century, there has been speculation about the origins and extent of the family's wealth; about the social implications of their meteoric upward mobility; about their political influence, not only in the five countries where there were Rothschild houses but throughout the world.Unlike modern multinationals, however, this was always a family firm.Perhaps the most important point to grasp about this multinational partnership is that, for most of the century between 1815 and 1914, it was easily the biggest bank in the world. In terms of their combined capital, the Rothschilds were in a league of their own. The twentieth century no equivalent.What exactly was the business the Rothschilds did? To answer these questions properly it is necessary to understand something of nineteenth-century public finance; for it was by lending to governments or by speculating in existing government bonds-that the Rothschilds made a very large part of their colossal fortune.It was war and the preparation for war which generally precipitated the biggest increases in expenditure.It was in this highly volatile context that the Rothschilds made the decisive leap from running two modest firms—a small merchant bank in Frankfurt and a cloth exporters in Manchester—to running a multinational financial partnership.The system they developed enabled British investors (and other rich "capitalists” in Western Europe) to invest in the debts of those states by purchasing internationally tradeable, fixed-interest bearer bonds. The significance of this system for nineteenthcentury history cannot be over-emphasised. For this growing international bond  market brought together Europe's true “capitalists": that elite of people wealthy enough to be able to tie up money in such assets, and shrewd enough to appreciate the advantages of such assets as compared with traditional forms of holding wealth (land, venal office and so on). Bonds were liquid.The Rothschilds spent so much time, energy and money maintaining the best possible relations with the leading political figures of the day.They constantly strove to accelerate the speed with which information could be relayed from their agents to them. They relied on their own system of couriers and relished their ability to obtain political news ahead of the European diplomatic services.The primary concern of this book is therefore to explain the origins and development of one of the biggest and most unusual businesses in the history of modern capitalism.The history of the firm is inseparable from the history of the family.Inevitably, there were conflicts between the collective ambitions of the family, so compellingly spelt out by Mayer Amschel before he died, and the wishes of the individuals who happened to be born Rothschilds, few of whom shared the founder's relentless appetite for work and profits.There are few major political figures in nineteenth-century history who do not feature in the index of this book."I see in Rothschild," he went on, "one of the greatest revolutionaries who have founded modern democracy": Rothschild destroyed the predominance of land, by raising the system of state bonds to supreme power, thereby mobilizing property and income and at the same time endowing money with the previous privileges of the land. He thereby created a new aristocracy.All the copies of the outgoing letters from the London partners were destroyed at the orders of senior partners.Nathan was a fiercely ambitious and competitive man.The merchants who are well organised are the ones who get very rich, and the ones who are disorganised are the ones who go broke.In a market crowded with numerous small businesses, subject to rapid fluctuations in prices and interest rates and almost completely unregulated, it took a combination of burning aggression and cool calculation to survive and thrive. Nathan Rothschild possessed both in abundance.Nathan felt himself almost at war with his business rivals.Nowadays everybody calls himself 'Excellency.' I remember, however, what our father used to say, With money you become an Excellency.Father used to say, If you can't make yourself loved, make yourself feared.We owe not only our wealth but also our honourable position in society primarily to the spirit of unity and cooperation that binds together all our partners, bank houses and establishments.Playing hide and seek with the authorities was becoming second nature to the brothers. Indeed, even their sons were already being taught to attach importance to secrecy.Nathan had only one concern: business.Nathan gloried in his ascetic: After dinner I usually have nothing to do. I do not read books, I do not play cards, I do not go to the theatre, my only pleasure is my business.Our old established practice of buying some gold whenever we can find any.Contemporaries found Nathan Rothschild an intimidating man: coarse to the point of downright rudeness in manner.Such bruising encounters in the office were later distilled into the famous "two chairs" joke, probably the most frequently reprinted Rothschild joke: An eminent visitor is shown into Rothschild's office; without looking up from his desk, Rothschild casually invites him to "take a chair." "Do you realise whom you are addressing?" exclaims the affronted dignitary. Rothschild still does not look up: "So take two chairs.”To give mind, and soul, and heart, and body, and everything to business; that is the way to be happy. I required a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times as much wit to keep it.Stick to one business, young man. Stick to your brewery and you may be the great brewer of London. Be a brewer, and a banker, and a merchant, and a manufacturer, and you will soon be bankrupt.When a guest at the same dinner expressed the hope "that your children are not too fond of money and business, to the exclusion of more important things. I am sure you would not wish that," Nathan retorted bluntly: "I am sure I should wish that."This man is really a complete original.He and his brothers recognised that there might be a conflict between higher education and a successful business apprenticeship.I advise you not to let him study more than another two years so that he should enter the business when 17 years old. Otherwise he would not be deeply attached to business.No one could conceive that the man who, since the death of his father in 1812, had been the unquestioned leader of the house of Rothschild, might die at the very height of his powers.All that mattered was that they should hold together in unity.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

All banks have histories. Only the Rothschilds have a mythology. Ever since the second decade of the 19th century, there has been speculation about the origins and extent of the family's wealth, about the social implications of their meteoric upward mobility, about their political influence, not only in the five countries where there were Rothschild houses, but throughout the world. The five houses work together so closely that it's impossible to discuss the history of one without discussing the history of all five. They were the component parts of a multinational bank. Unlike modern multinationals, however, this was always a family firm. Perhaps the most important point to grasp about the multinational partnership is that for most of the century, between 1815 and 1914, it was easily the biggest bank in the world. In terms of their combined capital, the Rothschilds were in a league of their own.

The 20th century has no equivalent. Not even the biggest of today's international banking corporations enjoys the relative supremacy enjoyed by the Rothschilds in their heyday. Just as no individual today owns a large share of the world's wealth as Nathan Rothschild did as an individual. The economic history of capitalism is therefore incomplete until some attempt has been made to explain how the Rothschilds became so phenomenally rich. What exactly was the business the Rothschilds did? That was an excerpt from the book I'm going to talk to you about today, which is The House of Rothschild, Money Profits from 1798 to 1848, and it was written by Neil Ferguson. And this is part two in a series I'm doing on the Rothschilds.

The last podcast I did was on the founder, the patriarch of the Rothschild family dynasty. That was Meyer Rothschild. He's also in this book, but I'm going to focus mostly on what happens after he dies when his third son, Nathan, is actually the one that takes control of the family. So let's go back to this introduction where I was just reading from where I left off with the author saying,

you're trying to make an economic history of capitalism. We have to figure out how the richest family the world's ever seen or what's rumored to be. We really don't actually know what exactly was the business that they did. And so in the introduction, he spends a little bit of time trying to describe this. And a lot of this is just going to remain unknown. And so one of the things I'm going to focus on really is like the traits and the ideas that the Rothschilds had, as opposed to trying to document where a lot of their money came from, because they were extremely secretive and we don't actually know that much.

So it says, to answer these questions properly, it's necessary to understand something of the 19th century public finance, for it was by lending to governments or by speculating in existing government bonds that the Rothschilds made a very large part of their colossal fortune. And so then he goes to describe, Neil Ferguson goes on to describe, like, what is the problem that governments are having at this point that the Rothschilds are presenting their services as a solution to? And he says, all 19th century states occasionally ran budget deficits, meaning their tax revenues were usually insufficient to meet their expenditures. It was war and the preparation for war which generally precipitated the biggest increases in expenditures.

So the easiest way to distill this down is governments needed money to kill other humans and there was no sophisticated financial markets for which they can borrow easily says the the deficits were not easily financed national capital markets were not very developed borrowing was very borrowing was very expensive and so you read that you're like okay they're going to try to help the finance needs of governments in europe throughout the time well where are they getting this money from and so i talked a little bit about this in the last book, but Meyer Rothschild winds up managing later on in his life, and this takes several years for him to do,

and he does it in small steps, but he winds up managing one of the largest fortunes in Europe at the time. It's this small German state called Hesse Castle, and it says it was effectively run by its ruler at a profit through the hiring out of his subjects as mercenaries to other states, including he sold, so he sells essentially peasants, like the people that he's in charge of,

forcibly to fight in other wars, including the American Revolution. And because the need for soldiers was so high, the demand was so high, and the supply was so low, he made a ton of money. And so the book says, involvement in the management of this huge investment portfolio was one of the first steps Meyer Rothschild took in order to become a banker rather than a mere coin dealer. He was also a merchant as well. And this is another example of like right place at the right time, because this time period in history, this is from 1793 to 1815 is where we're at. The book was characterized by recurrent warfare. So they

have a supply of money they can lend out and they have almost essentially unlimited demand. It was in this highly volatile context that the Rothschilds made the decisive leap from running two modest firms. So they have a small merchant bank that they're running in Frankfurt, back in Germany, and a cloth exporter in Manchester, England that is run by Nathan Rothschild. And Nathan is who I'm going to spend most of the time talking about because he's the second formidable individual in the Rothschild family, the first being, obviously, the founder, Meyer. And I call him Meyer. He changes his name and actually changes the spelling.

And it's widely believed he did that to further assimilate into the non-Jewish societies that he was doing a lot of business with. So he says they're going from, you know, this tiny, small merchant bank in Frankfurt, and they're exporting cloth exporters in England to running a multinational financial partnership. And it's funny, as I was reading about that later in the book, you can really think of Nathan going from a pirate to a banker is the way I would, I interpreted what the author was telling us.

I'll tell you more about this. Right now, Neil's just giving us this whole overview of what's occurring in the Rothschild dynasty around this time. And this is the way to think about this because they're like, you know, what did they do? How did they have such a fortune? What exactly was their business? First of all, it's a very unusual business, very opaque and very secret, like I said. But you can think of the Rothschilds as inventing the international bond market. And there is some debate over whether they invented it or they just massively broadened it. But either way, they played a very important role in building out

what is going to be one of the largest industries the world's ever seen. So it says in Britain at the time, it says at the same time, fiscal retrenchment and monetary stabilization in Britain created a need for new forms of investment for those who had grown accustomed to putting their money in high-yielding British bonds during the war years. It was this need which Nathan and his brothers successfully met. The system they developed enabled British investors and other rich capitalists in Western Europe. So the rich capitalists in Europe, the British investors at this time, this is usually royalty. A lot of this is their money is in land. They call those immovable assets throughout the book. And so Nathan is really the one that's leading this effort into building an entire new asset class that is a lot more mobile and liquid to invest in the debts of those states

by purchasing internationally tradable fixed interest bonds. The significance of this system for 19th century history cannot be overemphasized. And he tells us why. For this growing international bond market brought together Europe's true capitalists, and they pick capitalists in quotation marks, and he defines that as the elite of people wealthy enough to be able to tie up money in such assets and shrewd enough to appreciate the advantages of such assets as compared with the traditional forms of holding wealth. So at that point, it's mostly land and things like that. Bonds were liquid and they were, of course, capable of accruing large capital gains. Their only disadvantage was that they were also capable of suffering large capital losses. And if you think if you pause right here and you think about what's happening in history, this might be relatively new phenomenon.

It's a phenomenon that still occurs to this day. But the same people that are interested in investing, the description of which I would say the description of an investor today, an investor back then, is true. Now, where they derive their wealth from is probably different, but it's a group of elite people that are wealthy enough, meaning they have some level of disposable income, to be able to tie up money in such assets. And obviously they're doing that because they hope the assets increase in price and shrewd enough to appreciate the advantages of such assets compared with traditional forms of holding wealth and so when i was reading this section i was like okay bonds these international bonds uh are are new at this point um as i go through and i'm reading the the the history of entrepreneurship if you think of that's what we're doing is we're reading all these biographies and all the asset the new asset classes that are like like constantly uh invented over time like this is very similar to like the venture asset classes that are like like constantly uh invented over time like this is

very similar to like the venture asset class that is exploding in size and popularity in our in our time now because if you go back and and look at like how hard was it for bob noyce to get funding to leave shockley semiconductor to start his own company he wound up teaming up if you remember these podcasts i did on that he winds up teaming up with ar Rock, one of the first venture capitalists. I'm still looking for a biography, by the way, because he winds up funding Fairchild, Intel, Apple, Teledyne. I mean, the guy's career is outrageous, but he gives us, in one of those books, Arthur Rock gives us a history, Arthur Rock rather, gives us a history of the industry that he's trying to help pioneer. He talks about, it wasn't called venture capital back then, it used to be called adventure capital,

and most of that was coming from like these huge the estates of these robber barons like the whitneys the rockefellers the vanderbilts and so on and so forth but my point being here is like i really try to think of things as like a metaphor for things that happening in the past for metaphor what's happening today like in the rush house day it's brand new the international bond market was not sophisticated it was very tiny compared tiny compared to how big it got in the future. In our day, maybe that's the Rothschilds had here in the late 1800s, excuse me, late 1700s to mid-1800s as the desire we have today, I guess is the point I'm making there.

And that's what popped to my mind as I'm reading this section. So it says, okay, so there's, it's capable of suffering large capital losses. What determined the ups and downs of the 19th century bond market? The answer to this question is central to any understanding of the history

of the Rothschild Bank. The most important factor was political confidence, the confidence of investors, and especially in big market-making investors like the Rothschilds, in the ability of the bond-issuing states to continue to meet their obligations, that is, to continue to pay interest on their bonds. So the most important factor is confidence and political confidence. You have to know the state of that confidence. And so that's why the Rothschilds put a huge value on good information and speed and moving quickly. This explains the importance they were all the Rothschilds always attached to having up to date political and economic news. The Rothschilds spent so much time, energy and money maintaining the best possible relations with the leading political figures of the day. They carefully developed a network of agents in other key financial markets whose job it was to keep them supplied with the latest financial and political news, and they constantly strove to accelerate the speed with which information could be relayed from their agents to them. From an early stage, they relayed on their own system of couriers,

say the private information network is the way you could think about this. From an early stage, they relayed on their own system of couriers and relished their ability to obtain political news ahead of the European diplomatic services. So a way to think about that section is, hey, if I get information, if I have information before you do, I can act on that and i can profit from that and so they would have this private network they they were rumored to have really advanced like uh homing pigeons that they would be able

to send messages really rapidly to each other and then in the other book i was going to do a three-part series but i'm only going to do this is the last book on the rush i was going to do because the further we got we get away from nathan's death the less interested i was because it turns from like a monarchy like this formidable individual leading the family to more like a committee structure which i'm generally not interested in but the other book that book the the sequel to the book i hold my hand talks about this like they wind up losing the rush winds up losing some of their edge with the invention of things like the telegraph. Railroads start to be able to move people and information around faster

and so they lose this edge, this value of speed or this edge of speed and good information they have. It diminishes with the invention of more technology in the future. And what I found also interesting is when I got to this section, I read a book a long time ago by Michael Lewis called The Flash Boys. And in that book, you have private investors and private companies actually spending hundreds of millions of dollars to lay fiber optic cable, if I remember correctly. This has been probably, I don't know, maybe eight, 10 years, something like that, since I read the book. But they spent an inordinate amount of money digging up the earth and laying down cables so

they can actually front run orders and act on information faster than the people that don't have that uh that information and it's all it's all trading information but what was interesting is in you know in the rosh hails day they might have a day in advance or maybe two days in advance that they know more than other people and they can do a lot of uh they can obviously profit a lot in that short amount of time period in the book flash Flashboys, you're talking about that that's been reduced down to like milliseconds. But it's fundamentally the same idea that the Rothschilds had, that if I can get this information quicker, I can profit from it. These are other lines of business the Rothschilds were involved in. This has got to be the longest introduction of any book that I've ever read.

It's like over 30 pages. At the core of this book, then, is the international bond market, which the Rothschilds did so much to develop, though due attention is also paid to the many other forms of financial business the Rothschilds did. Bullion broking and refining, accepting and discounting commercial bills, direct trading in commodities, foreign exchange dealing and arbitrage, even insurance. The primary concern of this book is therefore to explain the origin and development, and I double underline this section, of one of the biggest and most unusual businesses in the history of modern capitalism. The biggest but also one of the most unusual business. The history of the firm is inseparable from the history of the family. Inevitably, there were conflicts between the collective ambitions of the family

so compellingly spelled out by Meyer before he died and the wishes of the individuals who happened to be born Rothschilds. And this is the most important part of this section and why I started to lose interest as I got deeper into the, like down the family line away from people like Meyer and Nathan. Because it says, you know,

Meyer set the tone. He's like, this is what I want the family to be. This is how we're going to keep our fortune. I'm going to keep building it. And then, you know, later generations did not grow up in the ghetto like he did, did not have that effort. And so it says in the wishes of the individuals who happened to be born Rothschilds, few of whom shared the founders relentless appetite for work and profit. And so that paragraph made me think of that quote I told you about last on the last podcast from Game of Thrones when they're talking about, OK, well, who actually makes families families rich? Is it the fancy lads in silk, the descendants? No, it's the formidable individual and i wind up re-listening to that part and i'm going to play the the clip instead of me reading the clip because

uh the character played by braun has such a better accent than i do i got will never belong to a cutthroat no who were your ancestors the ones who made your family rich fancy lads in silk they were fucking cutthro. That's how all the great houses started, isn't it? With a hard bastard who was good at killing people. So he uses the term hard bastard who's good at killing people. For our purposes, it's a formidable individual who's good at making money, who's good at building businesses. Those are the people I'm very interested in reading about and learning from. This is one sentence that tells an entire story. There are few major political figures in 19th century history who do not feature in the index of this book. And one of the, I would say the most important ideal that to the Rothschilds was unity. This was laid out by Meyer. It's what he talked about on his deathbed. He talked about it for years up before he died. Later on, his descendants call unity, the unity of the family, starting with the five brothers, the first and holiest of their duties. So it says, success in all great transactions

depend on the application of the consciously adopted and fundamental maxims. These maxims come from the father. One of these principles obliged that the five brothers are to conduct their combined business in an uninterrupted community of interest the notion of perfect fraternal harmony was inspired by the brothers themselves and they think about how crazy in two generations they go from being so poor they're in like you know he grew up in a ghetto and the five brothers which was interesting to me, is the five brothers, they grew up in the ghetto too. Their descendants grew up in these estates and these castles and just this crazy life of luxury. But the five brothers remember that.

And so for them in their lifetime, if you think about it, not Meyer missed this. He died before this happened. But if you think about it, in their lifetime, they go from growing up in a prison-like ghetto to being nobles um and so this is also as they're when they're when they're made noble you see their by their choice of the coat of arms for their family what's important to them the notion of perfect fraternal harmony was inspired by the brothers themselves when they submitted a design for a coat of arms following their ennoblement by the Austrian emperor. So part of this depicted one arm bearing five arrows, the symbol of the unity of the five brothers. So I'm still in the introduction.

This really helped crystallize my understanding of the role that the Rothschilds played. And I never thought of it in the last book, like Rothschilds as revolutionaries, right? So they're describing what the effect, their contemporaries are describing what the effect of the Rothschilds growing this international finance market, how that changed the entire society. I see in Rothschild, so they're talking about Nathan Rothschild. I see in Rothschild as one of the greatest revolutionaries who have founded modern democracy. That's a hell of a statement. What does he mean by that? Rothschild destroyed the predominance of land by raising the system of state bonds to supreme power,

thereby mobilizing property and income, and at the same time endowing money with the previous privileges of the land. He thereby created a new aristocracy. So what he's talking about there is before all the wealth was held by land, by noble title, by these kind of like monarchies of all sides, some powerful, some not. But when you invent an entire new asset class, it's not the same as the asset class that produced most of the wealth in your time. You enable meteoric social mobility. So now you have private families that are richer than entire countries. And I never made the connection on my own until I read that, that one byproduct, one unexpected byproduct of that is now that the people, these monarchs, have less power. And if you look at how many of these

monarchies over the next 200 years turned into democracies or some version of that, you can look back and say, okay, well, what started that? And so his sentence, he's like, I see in Rothschild, one of the greatest revolutionaries who have founded modern democracy. That completely went over my head in the last book. That is a mind-blowing thought. And I love how they made the connection there. Let me continue the next paragraph. It says, not only had the Rothschilds replaced the old aristocracy, they also represented a new materialist religion. Money is the god of our time, and Rothschild is his prophet. And I just want to point out a similarity, too, that i noticed that everybody referred to

them not as the ross childs even though you know they are written about sometimes in the family unit but they use the singular ross child to describe the patriarch at the time that's what they would call meyer they wouldn't call meyer they call him ross child and now nathan this is who the quote that quote was just about they call him ross child just like his father uh this is the opportunity that the author we're still in father uh this is the opportunity that the author we're still in the introduction this long ass introduction uh the opportunity that that the author is pursuing with this book and again this book is i think was published first time in like 1998 and even though we've done older books than that by by means but i just love the idea that

talks about the utility like the time use utility in a lot of books like you can still learn from something that's over 20 years old. Part of the purpose of this book is to supplant Rothschild mythology with historical reality, insofar as that can be reconstructed from surviving documentary evidence. And so he's talking about up until this point, you know, a lot of stuff written about them has been, it's either conspiracy theory, myth, truth covered with a bunch of other lies. And his point is like, you know, well, let me just read it. There is, however, a further explanation for this relative lack of scholarship.

And that is the intractability of so much of the material. There is a vast amount of it. We Rothschilds are inveterate scribblers and cannot live without letter writing and letter receiving. So when I read that, I'm like, well, that kind of conflicts. Like, what are you talking about? You're saying, OK, you have a lot of letters, right, because they wrote letters constantly. That's how they communicated. But a lot of it can't be reconstructed.

And so we know from the last book that they they Rosh Hashanah is optimized for secrecy and privacy. And so he he cleans this up here. He's like, OK, all the copies. So there's a lot of letters, but all the copies of the outgoing letters from the London partners, from Nathan, right, were destroyed at the orders of the senior partners. We therefore have precious few letters by Nathan compared with the thousands from his brothers which have survived and so that's why there is i mean this this is an extremely extensive book it's like 500 pages unbelievably detailed but there is surprisingly little known about how they made their money how much money they have there's because they optimized for secrecy and privacy and they destroyed records there's just large gaps so that's why we're left with conjecture but let's just let's look at this from like a human nature perspective.

What we know about when you study history, you see that regardless of time and place, when you expose humans to similar stimuli, they act in remarkably similar ways. Right. And so think about this. London made the most money. And yet all the copies of the outgoing letters from outgoing letters from London were ordered to be destroyed. So therefore, that tells you you have a massive, massive gap in what we can ever hope to understand about them. So as I'm reading the book, what I'm hoping to learn, I'm not trying to recreate exactly how they made their money. I want to know how they thought. So let's go back to this description of the letters that do survive. It talks about their correspondence has a uniquely direct and intimate quality the partners were frank sometimes

even abusive one another and made no secret of their opinions of the monarch monarchs and ministers they had to deal with which was rarely flattering they had a disdain especially nathan had disdain for the people he was working with it for the aristocracy in in large part and it might be because he's got a giant ego he probably probably thinks he's much more talented and smarter than they are. The contrast could hardly be greater with the formal functional business letters they address to political friends and business associates outside the family. The Rothschild letters reveal a reality which is in many ways way more fascinating than even the most fantastic myth.

Okay, so I want to go to this question, like why did they excel in this field? And part of it has to do not with a lot of fields at this time, a lot of like jobs or occupations you could you could go into were limited to for Jewish people. And so it says by the later 18th century, it was Jews who had to come to be seen as the most enterprising operators when it came to money changing and all kinds of lending. At a time when most fields of economic activity were closed to them, Jews had little alternative but to concentrate. That's the most important word in this entire section. They had little alternative but to concentrate on commerce and finance.

And concentrate Nathan did. He did not have any interest outside of the family and business business was his god it took up all his time nathan was fiercely ambitious and competitive man quick to take offense as to give it for his business dealings initially now this is his father still alive at this point initially nathan nathan took his orders from frankfurt that's his father so there's a bunch of uh letters in here where we have leftover from his father talking to Nathan about this. But I'm just going to – some of this I repeated in the last podcast because I didn't make the connection either until I read this book where it's not good enough to know something. You actually have to apply it.

And Nathan did not heed his father's advice until he – I wasn't making a massive mistake that could have ruined the entire family. So his father saying, hey, you're completely disorganized. Like, get your books and orders. You got to follow, like, follow the money to the last cent. Right. The more you sell, the worse it will get if you aren't organized. You're just making the problem bigger for yourself. You're focusing on enlarging the business instead of actually knowing how your business is doing.

It really is necessary that you keep a precise record of every single transaction. The merchants who are well organized are the ones who get very rich, and the ones who are disorganized are the ones who go broke. So the mistake Nathan makes, again, this is like a decade, maybe a decade and a half after his father is telling him this, so he knows that he should do this. At one point, there is so much turmoil. They're invested in so many

different things. They have no idea where their money is. And so there's all these letters going back and forth between different, you know, the brothers spread out in five different cities. And they're like, hey, where's the money? I don't have any money over here. Do you have the money? Where's it at? And they had such poor record keeping. They wound up having to do almost like a forensic accounting to figure out, OK, and actually locate the money. For a while, they were just like, are we broke? And after that, they always made sure that their books, and I'm sure they had multiple versions of the books, in case they got into trouble, just like their father did.

But they always made sure they were up to date. This is more about Nathan. So, you know, he leaves Frankfurt at an early age, lands in England. And at this point in his career, he's just running their cloth exporting business from Manchester. And we see that he copies a lot of what his father did in finance back in Frankfurt and applied it to his cloth business. So it says, this is actually my note, like his father, Nathan optimized for volume over margin. He would pay cash to his own suppliers up front so he could get a 15 or 20% discount, but then would extend to his customers longer repayment periods to increase the amount of

customers he has. So it says, at a time when profit margins in the textile industry could be as high as 20%, Nathan charged a modest 5 to 9%. This is a deliberate ploy to attract customers and increases market share and his letters to potential buyers. Nathan constantly stressed that his markup as a middleman was lower than those charged by his competitors. So lower prices, more customers, more favorable repayment terms for his customers, more customers, the more Nathan could pay in cash, the less he had to pay his suppliers on a percentage basis. But he had to give, here's the problem. He pays his money up front and then he waits for his money for many, many more months longer than his competitors. The more credit he could give his customers,

the more customers he attracted. This seems to have been his fundamental principle. So that's his formula for running this business. Here's the problem. It's not even a problem. I mean, it is kind of scary, especially if those customers go out of business or whatever the case is, but this is going to lead him into finance as well. So it winds up being obviously really positive. The practical implications of his system were nerve wracking. It was very easy to get commissions, but not quite as easy to get paid for them. So Nathan began to concentrate increasingly amounts of his own attention on the various credit transactions generated by his business. He constantly shopped around for better borrowing and billed discounting facilities, dealing with a succession of London bankers.

Like his father, he was gradually shifting from being a merchant to being a merchant banker. And he goes into the personality type and that he was well suited for this business. The frantic hustling atmosphere of these formative years is vividly captured in the letters of Nathan, the letters of Nathan's, which have survived in a market crowded with numerous small businesses subject to rapid fluctuation in prices and interest rates and almost completely unregulated. It took a combination of burning aggression and cool calculation to survive and thrive. Nathan possessed both of those traits in abundance. Later on, they refer to him as the Napoleon of finance.

And it says Nathan felt himself almost at war with his business rivals. So it was around this time he also had an opportunity presented because there was a restriction on trade from England during the Napoleonic period that winds up creating this opportunity for large profits. And so this is what I was referencing earlier. We get to the point where he transitions from a pirate to a banker. Under these circumstances, Nathan therefore had little option but to carry on his export business illegally. He became a smuggler. He was sending a consignment, let's just give some examples of what he was doing. He was sending a consignment of coffee to Sweden via Amsterdam using an American registered ship and fake Dutch documents. Such shipments could not legally be insured so that the risk involved were very substantial,

but so were the potential rewards nathan had earned a reputation as a man who regularly succeeded in getting goods to the continent into to the continent so right now he's smuggling like his own wares to be resold on the continent eventually he's going to use this same network to get gold and other financial instruments that can actually fund wars going on in Europe. This is merely a stepping stone for now. Nathan had made up his mind to become a fully-fledged banker. He had traveled a long way since leaving behind the cramped confines of the ghetto and the discrimination symbolized by the Jew statutes.

That's that law that restricts what Jewish people can do, where they can go, how they can act, just 12 years before. So basically he's making the point, like, that's a hell of a jump just in 12 years. But Nathan Rothschild could not have acquired his new address at a better time. And so what they're referencing there is the fact that Napoleon goes, the patron, the main patron of the Rothschild family is the guy that's running the Hess Castle fortune at the time. Napoleon winds up deciding, hey, I'm going to take over your lands. He flees in exile. And then that's the opening. They get to enter into the world of finance because now they have access and they're managing one of the largest fortunes in Europe. And that's a direct result

of Napoleon basically deposing Wilhelm. Okay, so I want to get into the Rothschilds after Meyer dies. And this is a little bit about that and some business maxims that they would repeat for many decades after their father's death. Meyer's influence on his descendants was profound and enduring. Four days after their father's death, his son sent out a circular to their most valued clients to reassure that there'd be no change in the conduct of the family business. His memory will never fade among us. Our blessed father remains unforgettable to us. Such pious sentiments are not always translated into practice once the first pain of bereavement has passed, but the sons of Meyer meant what they said. Time and time again, in the years after his death, they hark back to

their father's words, to his business aphorisms, his paternal commandments to them, his male descendants. A typical example is Amschel's request for better stock market information from Nathan. Father used to say, a banker has to calculate. There is no merit in making transactions in the dark. Other maxims related more to the firm's relations with the government. Nowadays, everybody calls himself excellency. I remember, however, what our father used to say. With money, you become an excellency. The key was to establish some kind of financial leverage. As Amschel put it, it is better to deal with a government in difficulties than with one that has luck on its side. We heard this from our father. Another example, James remembered a tip that he would

often put into practice in his relationship with rival firms. Father used to say, if you can't make yourself loved, make yourself feared. Of all these pieces of business advice, the one most frequently cited was on the importance of cultivating which again is seen as their most important first and holiest of duties, is the way they refer to it. Nearly 30 years after their father's death, his eldest son would be moved to remind all the other partners, including those that had never even met their grandfather, of the same all-important nexus between unity and success.

Unity was what our blessed father, with his last words, enjoined me to uphold as our first and holiest of duties. Our father, who united in himself boundless integrity, the deepest of insights, the wisdom of experience,

and the pious habits of a sage, is who we owe not only our wealth, but also our honorable position in society to. I therefore request most urgently that you will always take care to implant in your heirs the same consciousness of concord and togetherness so that the same spirit of unity and cooperation continues to exist for as long as it is possible. To do so will be of benefit both to you and your descendants. It will prevent our business interests from being split up and will stop others benefiting from our great efforts our knowledge and the experience we have laboriously accumulated over many years so this constant um emphasis on

unity the fact that like it's it's the family it's us versus them the family versus the world this is a theme that's's played out over and over again in different points in history, different cultures. You know what's the funny thing that came to mind as I'm reading this? It's constantly reminded to you how important it was to the Rothschild. It reminds me of some of my favorite movies, The Godfather 1 and Godfather 2. So in Godfather 1, you have Don Corleone played by Marlon Brando.

He's telling his son Santino after a meeting. They're in a meeting with somebody else and Santino makes the mistake of speaking up when he should be quiet. And so after the meeting, he grabs him and he says, never tell anyone outside the family what you're thinking. That could easily have been said by not only Meyer Rothschild, but any of his sons. And then in Godfather 2, Michael, who's now taken over for his father says to his older brother so think about michael corleone uh even though he wasn't the older brother like this is not like a typical monarchy where succession just flows to by age it goes by who's the formidable individual they call their brother the commanding general which i get to in

a minute but anyways michael saying to his older brother, Fredo, and the same same thing. They were in a meeting. Fredo made the mistake of speaking up and taking sides, speaking up in a meeting and not acting in the best interest of the family. And so Michael says to Fredo, he's like, listen, Fredo, you're my older brother and I love you, but don't ever take sides with anyone against the family again. And then he has like a pause for a second or two. And he says, ever. And we see a similar thing with Salman Roshchild saying here, it's established rule with us. We're not going to rebuke or express any kind of public rebuke

about the conduct of anybody else. On the same page, there's another quote from Salman Roshchild. He says, my brother in London is the commanding general and I am the field marshal. And so now we get into where Nathan's part of it has to do with like his personality and the fact that how aggressive he is. But it's also the fact that he was in the right place at the right time. And the vast majority of their wealth is going to be made in London. This is changes in the future, like future generations. And it gets a little bit more equitable even I think after Nathan dies. But this is a little bit about the fact

that these European powers' inability to pay for war winds up opening up these largest opportunities of Nathan's career. So it's a little bit about this. Historians have never adequately explained how an obscure Jewish merchant banker, who only a few years before had been a smuggler, and a few years before that, a minor textiles exporter, was able to become the principal conduit of money from the British government to the continental battlefields on which the fate of Europe was decided in 1814 and 1815. Of all the steps in the ascent of the House of Rothschild, this surely was the greatest, yet it's also the least understood.

And as good a job as the author tries to do here it's still the least understood and you'll see what i mean by that a little bit uh three distinct elements were required to turn nathan into the napoleon of finance what a freaking nickname huh um first was the absence of competition the second was nathan's favor the second in nathan's favor was the appointment of John Charles Harries as commissionary in chief. Harries was to be Nathan's buttress, his first friend in a high place. So what they're referencing there is that his father, Nathan's father, intentionally cultivated a relationship with the right-hand guy of the landgrave, of Wilhelm,

the guy that had access to one of the largest fortunes in Europe at the time and so we see Nathan's doing that that's why they call him Nathan's Budarest because that guy's name is Budarest Nathan's doing the exact same thing but his Budarest is named John Charles Harry's and so these are very important people to know and relationships cultivate because they have influence on the final decision maker and then this is the third and most important reason. And again, think about this is what they're really engaging in here. If you think about it, smuggling and geographical arbitrage, which was really fascinating how like you move money and assets around. Now we do that digitally, right? They literally had to move around in like physical

form and they get caught. You know, it's very dangerous, like smuggling drugs. The third and most important reason Nathan became involved in British war finance was that he had a solution to the problem of how to get money to Wellington. Nathan subsequently made what he had done sound easy. Now, this is Nathan talking. When I settled in London, the East India Company had 800,000 pounds worth of gold to sell. I went to the sale and bought it all. I knew the Duke of Wellington would need it. I had bought a great many of his bills at a discount.

The government, meaning the British government, sent for me and said that they must have it. So he buys it, then resells it to the government. They don't know how to get it to Wellington. When they got it, they did not know how to get to Portugal. I undertook all that, and I sent it to France, and that was the best business I ever did. The Rothschilds became involved in smuggling gold from England to France. So that is what they're getting paid to do. The youngest Rothschild brother took care of all the business on the other side of the channel. And again, this is also, you know, obviously you have to be smart, determined, and there's a great deal of luck involved, like right place, right time thing here, right? Where not only did you need this war,

not only did you need to have the foresight to realize oh my god that these guys are going to need this this asset that i have access to right but then because you have this distributed which is extremely right this time there's like distributed multinational private bank is the way you could think of the rothschilds at this point you embedded in that you have like this this this uh logistical advantage because even though you're in England, the center of the world of world finance at this point, you have brothers dispersed in very strategic places. And in this case, when you have to get something across the channel, well, guess what? I have my brother sitting on the shore. So it says the youngest Rothschild brother took care of the business on the other side of the channel, exchanging the imported guineas for bills on London, the prices of which were naturally very low in France at that time, and which can then be

redeemed for a profit in London. And there was also another thing. I've read close to between these three books, I don't know, close to a thousand pages on the Rothschilds. Their business is still way more complex than my understanding. There's so many examples of these transactions that I can't follow. It's like they transfer one asset to one country, they change that asset to another asset, then they send the transitioned asset into another country and they do the same thing and then they send it back all across the continent. And part of me thinks they did it on purpose to make it more complicated for any kind of outsider to kind of reconstruct, right? Which is what Neil Ferguson, the author, was saying at the

very beginning. Like, I'm trying my best to reconstruct this, but there's a lot of missing information. There's a lot of myth and there's like some truth buried with lies. And so when I was when I was reading the book, it made me think of like some of the decisions they make and how complex everything gets. I remember reading one time a book on like the discovery process for major like tobacco cases. And like some of the largest cases like like in uh like u.s history and one strategy that attorneys would have the same strategy they know okay there's they're in embedded in some of these documents that i have is very bad news for my clients that's going to be revealed in discovery so what they would do is like they would bury they would they would bury that needle in a gigantic haystack so let's say you had a half a dozen documents that

you you know if it came to light it would look bad and maybe you lose the case you would send opposing counsel like millions of pages and what you're doing there is just you're you're trying to hide the information that you don't want other people to know about and just sheer volume i feel like a lot of the stuff that the rothschilds did was very similar to that like principle and maybe it's just because i'm on the outside and you know i'm not well versed in that business anyways maybe they it was just common like sense to them and they knew their business like the back of the hand which i'm sure they did but it's extremely extremely complex so anyways um playing hide and seek with the authorities was becoming second nature to the brothers. Indeed, even their sons were already being taught to attach importance to secrecy.

Now, here's something surprising to you. Like, they're smuggling gold from Britain and going to France and other places. Napoleon knew, and he allowed this to go on. So, again, this wound up being a massive mistake for Napoleon, but also very benefit like the rush house benefited from the fact that Napoleon was making this mistake. So it's saying they were quite well informed talking about Napoleon was quite well informed about what they were doing. They saw this huge outflow of gold from from England and they took that as advantageous to them, not realizing that that gold was financing the people that were going to fight them. Napoleon followed the advice of his minister of public treasury, who argued that any outflow of gold from Britain was a sign of economic weakness and therefore advantageous to France. This is a bad miscalculation. On the contrary, the Rothschild's

ability to relay gold across the channel was about to become a decisive source of strength for Britain. In 1814, Nathan was officially charged with the task of financing Wellington's advance through France. And so now it gets into, you know, they had more than one way to make money. And they're calling what I was just calling confusion. They're calling diverse intergovernmental payments. So it says in each case, there were at least two ways and sometimes three to make a profit.

The first and most obvious took the form of commissions. So they would charge about 8%. The second, potentially more lucrative, but also riskier, lay in exploiting the often rapid and large exchange rate movements which occurred during this period. The brothers were able to take advantage of the variations in exchange rates. This is what I meant about geographical arbitrage. The brothers were able to take advantage of the variations in exchange rates from place to place, which reflected reflected the absence especially pronounced in wartime of an integrated european foreign exchange market so now we go to the next year this is 1815 this is like the most pervasive rothschild he's going to call it a myth right and he's going to say hey the fact is most one of the most well-known

is that they had information they had access to information and knew the result of the battle waterloo a day maybe two days before anybody else did and they were able to make a lot of money on this. I'm going to read what Neil Ferguson says here, and then I'll tell you my own notes. It says, It had been repeatedly claimed that by obtaining the first news of Napoleon's defeat at Waterloo before the government itself, Nathan was able to make a huge sum of money on the stock exchange. He was rumored to make profits of between 20 and 135 million pounds. Now, he says this those amounts have long ago been debunked. The real story is very different. It is possible that a series of miscalculations by the brothers led to losses rather than profits in the critical period

before and after Waterloo. On this occasion, it seems reality is diametrically opposite to myth. So then over the next few pages, they go into all the detail about what reportedly happened, right? But it says, no, the myth is diametrically opposed. They said they made 20 to 135 million pounds. Imagine if that was true, right? If you made that much money in 1815, it's incalculable, almost impossible to understand that much money in that time. But here's this is so I'm going to skip over all the highlights I had for the next few pages, because then I get then I get really confused. So this says by the summer of 1816. So now we're a year later. Right.

He writes by the summer of 1816. It's true that the brothers estimated that their combined capital amounted to, let's say, a million pounds, implying a doubling of their capital between March 18th and July 1816. Right. But there's a good reason to doubt whether this period immediately after Waterloo was when the bulk of this increase occurred, but they just said they lost money, right? But now it's saying, well, they lost money right after Waterloo, but then they were able to make it up by July of the next year, right? The trouble is that, now this is where I start to have different thoughts. The trouble is that it's almost impossible to say precisely how the Rothschilds performed financially in this period because they had no ideas themselves. And why is that? Because there were substantial gaps in the records reflecting the habits of concealment, which had developed in Frankfurt, which means the secrecy they were taught by their father. reason that in addition to it's just being smart to not let people know how prosperous you are in

general but to the reason it was so important to their father because he saw other people get killed for this it arouses envy in others and not only that because there's so much anti-semitism at this time they didn't want or some people i should say didn't want jewish people succeeding like this so it says there were additional gaps in the records reflecting the habits of concealment which they developed in frankfurt during the period of the French occupation. It is fair to conclude that the huge profits of 1814 and 1815 were made in ways much more mysterious than the traditional Waterloo myth implies. Okay, so let's pause here. We, what do we know? We know there's this huge historical event that they were betting on one way or the other, right? We also know that they had access to information way before other people did.

We also know from the record, well, the third thing we know, I guess, is that a bunch of records are missing. The fourth thing we know is the records that do exist do show a doubling of assets. So let me go back to my note, which is like 10 pages before where we just were, right? When this whole thing pops off. And before I read this to you, just I think it's obvious if you read the section from what I just read to you, like the unknowns, unknown, the unknown unknowns greatly outnumber the known knowns, right? And so I read this whole section and the note I left myself is like, if you were taught by your father to obsess over secrecy and you made 100 million pounds in 1815, what would you say? So I have no idea what happened. I do know that if he did make 100 million pounds, we would not know about it.

It is almost certain that this family would have kept that secret. And so whatever the amount is, they come out of this, this time they they're writing to each other. And there's some letters where like a year later, they're like, we have more money than we could ever, like, we have more money than we need for our lives. And they're still relatively young. This is where Nathan is like unquestionably the leader of the family. Nathan really began to emerge as the dominant domineering partner. Nathan had only one concern, business. So you can think of him as completely single-minded.

Nathan gloried in his aesthetic. I had to look up that word. I thought it was aesthetic. That's not, it's aesthetic. And it says, characterized by or suggesting the practice of severe self-discipline and the absence of all forms of indulgence. So it says he's glorying in the fact that he's disciplined and he's not focused on anything else. He says, after dinner, I usually have nothing to do.

I do not read books. I do not play cards. I do not go to the theater. My only pleasure is my business. Remember, this is the Napoleon of finance we're talking about. His older brother, the oldest, Amschel, was not like him. Amschel was the most cautious of the five and constantly yearned to live a quiet life. Me? I don't want to eat the world. He's talking about his brother wants to eat the world. Eat the world, he wrote. His ideal was to work in tranquility without the anxieties which Nathan's Napoleonic approach necessarily generated.

And this is what I mentioned earlier, that even though they're super, super rich, the brothers, their descendants are different, but their brothers never forgot that they grew up in the ghetto. In the end, they were authentic bonds of brotherly love forged in the ghetto where no other ties could rival. Did anyone promise us more when we all slept in one little attic room? Asked Solomon when Nathan was grumbling at having sold some securities too soon. From all sharing a little bedroom in the ghetto to being the richest family in the world in one lifetime. That's wild. Throughout 1816, he ignored his nervous brother. Oh, so this is, I'm going to skip over like what they're trading and all. Again, there's just tons of different financial transactions in this book. Really, this is just demonstrates for you nathan's personality is default aggressive

he puts all of his family's wealth even in 1816 is it all of it i forgot how all let's see close to all of it i think in one security threat 1816 he ignored his nervous brother's repeated advice to take profits family opinion on the strategy was divided cautious as ever one brother said it was stupid to invest one's whole fortune in one single security so this is not the family's fortune it's all of the money in the london trading house and continued to urge nathan to sell by july with the security left over 82 they wind up making a ton of money and essentially said the other brothers had to acknowledge that his brother had pulled off one had had pulled off another business masterpiece.

So later on their business starts to slow down because now there's not war. There's not chaos. Right. And so peaceful times are bringing good times and then good times bring more competition. So now you got to remember when they started, there was no competition. So now they have more competition. They're complaining about like the slowdown in the business. And so really the principle here is that you got to go to where there's less competition. And so this is one way to do it. I'm going to tell you why this reminds me of a quote from that book, The Big Rich, that I read.

It's founders number 149. If you haven't went back and listened to that podcast, it's about the second oil boom in Texas history. And the crazy wildcatters and people and oil speculators I think they cover like four people in the book the book is insane it's absolutely the people in that book are insane and there's a lot more books on oil I also read Mark Rich's book King of Oil or the biography of Mark Rich called King of Oil that's in the archive as well but there's a bunch more books in the future I want to do on oil just because the amount of demand and wealth the demand for oil right on a global basis is hard to even for us to understand. But the amount of wealth generated is just mind boggling and how rapid it happens. And then the influence of that rapid increase in wealth on human behavior is fascinating. So there'll be more books on oil, definitely in the future. But what's happening here is, okay, we got to figure out what are we going to do do we have more competition coming into like england where how can we like expand our business there was one obvious response to the difficulties experienced by the rothschilds in london and paris between

1815 and 1819 and that was to seek new business elsewhere so it says the central and east european states emerged from the war with dire financial problems which could be addressed only with the assistance of foreign capital so we can't go to these more developed nations like Britain and France, but we can go all these other ones. They also go to South America. They do a lot of business in Brazil. Later on, they'll do business in America and all this other stuff. But the reason I thought about that is like you can't everybody's focused on the same goal here. Right. So everybody goes to where the good times are. So they're coming in. They see the rush outs having all the success. They're going to come in. It's gonna be a ton of competition, but everybody everybody goes to where the good times are so they're coming in they see the rush outs having all the success they're going to come in it's gonna be a ton of competition but everybody's attracted to like the easy money the good places right and there's a quote from

the big rich that i think is applicable to so many other different domains and says the trouble with this in this one oil wildcatter talking about what he does uh which is like a risky strategy compared to what everybody else does. And that's why he got rich and they didn't. The trouble with this business is that everybody expects to find oil on the surface. If it was up near the top, it wouldn't be any trick to it. You've got to drill deep for oil. And the main point is you've got to go where other people aren't. Okay, let's fast forward a few years.'s a bank there's a massive banking crisis that's going to happen in england in 1825 and they really credit nathan rothschilds was like saving them from going insolvent but um really the main point here is when i got to this section the rothschilds

were constantly always accumulating gold i don't know why they knew this was going to be so valuable or like what it was but the reason like for whatever reason and usually comes from some kind of insider's perspective is you'll see these times in history the the way the Rothschild desired gold and they would constantly keep buying and accumulating and not getting rid of it is very similar to what John D Rockefeller did with Standard Oil stock and the reason he had a lot of people had, you know, equity ownership in Standard Oil. But the reason Rockefeller was so much richer is because he would buy it and keep it at every opportunity. And he advised others to

do so. I remember in that book, Titan talks about I think that's founders number 16 or 18, somewhere like one of the first books I did. But he says to somebody, he's like, listen, whatever you have to do, sell the shirt on your back, but do not sell your stock. And a lot of his partners didn't take heed to that advice. So they would want to, you know, buy a yacht or a big house. So they'd have to liquidate some of their stock and Rockefeller would buy it from them. And he just keep accumulating over and over again. I'm going to skip over like the details of the Bank of England crisis, but just pull out some stuff here we were back to our old established practice of buying gold whenever we can find any and so they have this huge accumulation of gold nathan winds up delivering a green delivering it to the bank of england saves them from defaulting nathan was

still delivering a gold a year gold a year later as nathan recalled later there was a good deal of gold supplied from the whole world i imported it and it was imported from almost every country we got it from russia from turkey from austria from every quarter in the world and if he didn't come through it says 73 out of the 700 county uh banks in the country had failed and the guy that the head of like their i guess it'd be like the not not the treasury secretary, like the highest like financial executive or politician rather in England at the time admitted the country came within 48 hours of putting a stop to all dealings between man and man, except by barter. How crazy is that sentence? Had it not been for the most extraordinary exertions above all on the part of Rothschild, Nathan, the bank would have stopped payment.

Of course, Nathan would not have made such immense deliveries of gold without asking for generous commissions in return. The rescue of the bank was a remarkable achievement, which owed everything to the international nature of the Rothschild's operation. In effect, the brothers were establishing the system of international monetary cooperation, which would later be performed routinely by central banks, and on which the gold standard came to depend. Increasingly, their position in the international gold market was becoming as dominant as their position in the international bond market. So really, I want to remind myself of that, because there's certain assets that you want to hold on to for dear life,

and it's going to change in not only a time period, but where your particular vantage point is. Might be shares in a private company, might be your own business, might be stock you've had forever, whatever it is. Like in Rockefeller's day, it was standard oil stock. In the Rothschild day, it's gold. Well, what is the equivalent today? Like what do you have access to that might be unbelievably valuable if you hold on to it for a long period of time? I'm rereading, or not rere rereading i'm reading another biography of coco chanel and the equivalent for her was her ownership and perfume it is insane the sales and granted the fashion house is still around today the sales of perfume in the early let's say that from the 1920s

1930s 1940s just from her royalties from her perfume made her one of the richest if not the richest woman in the world so that would be her example do whatever you do don't get rid of your interest in chanel number five perfume okay so moving on the rothschilds have made so much money from gold and liquid assets that they start getting into the immovable assets. And this is when they start spreading out into real estate. And it's interesting, you can still Google, I was watching a documentary on the Rothschild real estate collection. I think they have like 44 states. I mean, you got to see what these look like. It's remarkable. So it says, nothing symbolized

the Rothschilds' escape from the gloomy confines of the Frankfurt ghetto better than their acquisition of real estate outside it. In 1815, virtually all the family's wealth was held in the form of paper, bonds and other securities, and precious metal. The brothers still lived in rented accommodations. They are probably the richest family in the world at that point.

And they're living in rented accommodations. Carl hadn't had enough of this. He's one of the younger brothers. It is galling that one should make as much money and live like a dog. While others who don't have a tenth of our fortune live like princes. So they start buying a bunch of stuff. Amsel bought a house in the suburbs. For the first time he found himself living in fresh air.

This is what I mean about. This is a hell of a sentence. So for the first time he found himself living in fresh air he had spent virtually all of his 42 years cooped up in the ghetto working eating and sleeping in its cramped and dingy rooms and it's funny because he buys a house and has a garden and i think the first night he lives there he sleeps outside in the garden and he's just like i slept out he was telling his, I slept out in fresh air. Like, it's clean. I'm not sitting in my own waste.

He's like, I might sleep outside every day or every night, rather. I got to move ahead because this is also an interesting, or I don't even know if you'd call it. I guess it is interesting. They would learn from the mistakes of others, but then their solution to that winds up causing some form of inbreeding. So it says they were unquestionably exceptional in financial terms, but they were also exceptional in the way they operated as a family. Most family firms had a limited lifespan. The idea that successive generations would lose the economic motivation, the work ethic that had driven their fathers and grandfathers. So we are in 1820s right now, right? What is remarkable is now we're living 200 years after the events in this book, and they still, again, there's no way to know. Some people say they have $2 trillion.

Some say they have a couple billion. But anyway, they know they have multiple billions to this day, the family, and it's just dispersed between a lot of different descendants. But it's just hard to fathom that. 200 200 years later they're talking about most families have a limited lifespan they're broke after two or three generations and now you know what is that 10 generations some something about moving forward like they still have an insane amount of money

that's that's mind-boggling innumerable other family dynasties had far shorter lives lasting just one or two generations. The Rothschilds took exceptional precautions to avoid this decadence. The necessary step first towards perpetuating the firm was to produce sons. Remember, they would not. You call if you listen to the podcast today. Last week, Meyer made sure he's like, listen, the daughters are excluded from this. We don't want the husbands they marry to have access to Rothschild's funds. So all the money and assets stay on the male line.

Right. And then not only that, they wind up first. They start marrying other like prosperous Jewish families. And that's not enough. Rothschilds have to marry Rothschilds. And I'll go into more detail why this might have led to early deaths in some cases. So it says they have to produce sons the family practiced a remarkable sustained strategy of endogamy after 1824 rothschilds tended to marry rothschilds this was an extraordinary there was an extraordinary amount of intermarriage and so it talks about later on when like modern day geneticists would look at their family tree like

oh this is not good you're you have a severe lack of genetic diversity, and it can cause all kinds of problems. Not even the royal families of Europe were as closely inbred. The references to our royal family suggest that the Rothschilds regarded them as a kind of model. So then there's a lot of talk about how they're viewed in society. I don't think the Rothschilds really care. So there's this one sentence I think summarizes this. You ought to know that honors and profits do not go hand in hand. And the Rothschilds answer that is, that's fine. I'll take the money. You can keep the honors and everything else. They would even turn down, and I'll go into more because this is, again, well, I'm right here anyway, so I'll continue on this vein. But this is about Nathan's's personality and he just seemed to think he was like he thought the old way of things were dying

and like he knew better so like he would even given offered like honored honorable titles and all this other stuff he's like i don't give a shit about any of that like at all so more about his personality he's hard-nosed, aggressive, confident and obsessed. Contemporaries found Nathan Rothschild an intimidating man, coarse to the point of downright rudeness and manner. Such bruising encounters in his office were later distilled into the famous two chairs joke. It says this is probably the most frequently reprinted Rothschild joke. An eminent visitor is shown into Nathan's office without looking up from his desk. He casually invites him to take a chair. Do you realize whom you are addressing? Exclaims the affronted dignitary. Rothschild still does not look up.

So take two chairs. Nor was it only his own territory or his office that Nathan was famed for his blithe disregard for social ranks. This is what I mean about he just doesn't care. Like you're into status. I'm into money. It's essentially the way you would you would. And he knows that money would trump status. Right. So he's talking to like some, you know, somebody of more noble rank and says, I guess at the same time.

This is I think I read this to you last week, last podcast, too. When a guest at the dinner expressed the hope that your children are not too fond of money and business to the exclusion of more important things i am sure you would not wish that nathan retorted bluntly i am sure i would wish that and then he says to give mind and soul and heart and body and everything to business that is the way to be happy i require a great deal it requires a great deal of boldness and a great deal of caution to make a great fortune and when you have it and when you have the fortune it requires 10 times as much wit to keep it. Then he gives some advice to another person at dinner that I thought was funny, or not funny, that was valuable.

And it's like, don't get distracted. Stick to one business. He talks about, listen, tons of people are coming to me. They're offering me all kinds of opportunity, and I say no to. So he says, stick to one business, young man. Stick to your brewery, and you may be the great brewer of London.

Be a brewer and a banker and a merchant and a manufacturer and you will soon be bankrupt. More on his personality and his single-mindedness. A frequently repeated anecdote has Nathan telling the composer, I'll skip the name, this composer, he says, I understand nothing of music. This, patting his pocket and making his money rattle and jingle is my music another description of nathan this man is really a complete original he was amused by the combination of bad manners sharp wit and lack of deference with which nate which nathan brought to polite society and so if you think about nathan's point he brings this up too i think he would even make like busts like statues like miniature statues of all the different royal people that would come and ask him for loans if these are the people supposedly running the world they're they're all

they have all the power and yet they come to him for money he's in a unique position to see their flaws and then i think you also add to the fact that in general i'm pretty sure the rothschilds were extremely anti-social they wind up courting these people as like they thought of it as work this is a little bit about that so they they're willing to do things they don't like to do in order to get closer to a goal and a goal this is going to remind this reminded me of something Arnold Schwarzenegger said that I thought was really good advice I'll give to you after this the brothers themselves disliked it disliked intensely the great majority of social functions they gave they thank god when the dinners were over this is one of the brothers i think of nothing else but business if i attend

a society party i go there to become acquainted with the people who might be useful for the business they considered giving a like a large dinner they're saying when they pay for a large dinner when they hire a chef and they have to pay the chef's bill, they considered it the same as when they had to bribe politicians. Like it's the same exact thing to them. And so this idea that you take something you don't like to do, but you still do it because it gets you closer to a goal. I think one of the best mental models I've come across is the way Arnold Schwarzenegger approached this. He was asked, he's like, listen, you're working out so hard. You're working out five or six hours a day and you have a smile on your face.

And the others are shooting the documentary Pumping Iron at this point. And the others are working out just as hard as you, but they look sour in the face. Why is that? And his answer was fascinating. He says, because I'm shooting for a goal. In front of me is the Mr. Universe title. So every rep that I do gets me closer to accomplishing that goal. To make this goal, this vision turn into reality. Every single thing I don't like to do that may be

painful, uncomfortable, right? Every single thing he's using the word rep, it could be anything in your professional life that you know you have to do that will get you closer to your goal, but you don't like to do, right? Instead of being sour in the face, like his other people, he's like, I'm smiling. He flips it. It it it's very powerful idea so it says in front of me is the mr universe title so every rep that i that i do gets me closer to accomplishing that goal to make this goal this vision turn into reality every single set that i do every repetition every weight that i lift will get me one step closer to turning this vision into reality so i couldn't wait to do another 500 pound squat i couldn't wait to do another 500 pound squat. I couldn't wait to do another 500 pound bench press. I couldn't wait to do another 2000 reps of sit-ups. I couldn't wait for the next exercise. So let me

tell you something, visualizing your goal and going after it makes it fun. No matter what you do in life, you've got to have a purpose. And another way to think about this, I heard somebody put this in like a, like a more succinct terms. It's like, instead of waking up and like, oh, this is what I have to do today. Oh, I got to do this. It's you flip your mindsets. I get to do this. So the other bodybuilders in this case are running off the same goals.

Arnold's like, oh, I have to do these reps. Arnold is saying I get to do these reps. This is Nathan on honors and titles. Perhaps the hardest thing to explain is Nathan's apparent doubt about the value of such honors. A number of letters would seem to suggest that he was offered but turned down the offer of a knighthood when someone tried to tell Carl that his brother had accepted he refused to believe it

and he says he's writing to Nathan that he refuses to believe it because you love simplicity and there is some kind of you know it's complicated as our business is there is some kind of simple way like desire for simplicity that Nathan lived his life or it's just like i focus on one thing and one thing only uh that's when nathan declined a prussian decoration in 1818 he suggested that it be given to solomon instead because here in london i have no use for such a thing whereas my brother loves ribbons and is a baron who intends to live in paris where one can decorate himself with such things. And so their point was like, we're not, you know, some people now they're calling us barons, they call us noble. But again, more important than being aristocrats is we're merchants, we're entrepreneurs,

we're investors. Let us remain merchants. It is extremely nice to possess the title and not to make use of it, except in private. A positive business letter from a finance minister is worth more than all the titles of nobility. Nathan's disdain for aristocratic trappings persisted. He regarded it as little more than fancy dress. Another thing that the brothers thought, because remember, they came from the ghetto. There's all this debate of what's the next generation? What are our sons going to do? And they're like, listen, we're going to value everybody else at this time they're sending their

they make sure their sons are educated you know higher education over and over again you know maybe for 10 or 15 years like these long periods and the rothschilds were like no apprenticeship is more valuable because you're their point is like you're you're wasting like if you if you put somebody in the business when they're 18 or 19 or 20 or 21 something like that right um they're young they're aggressive they can learn a lot more in the business as opposed to like you making them go to these secondary educations that might last from the time they might be 28 or 29 before you get in the business you've wasted like a huge valuable part of their career and you're doing it in quote unquote, to be educated instead of just apprenticing. So it says he and his brothers recognize that there might be a conflict

between higher education and successful business. I advise you not to let him study. They're talking about one of their descendants more than another two years. So he should enter the business when he's 17 years old. Otherwise he would not be deeply attached to the business. The subsequent business career of the son, the only one of Nathan's sons to attend an English university, proved that analysis to only be too accurate. The Rothschild's view was that the best apprenticeship was learning by doing. Okay, so now we get to 1836. Nathan is 58 years old, and he's at the height of his powers i'm going to read a fictional account of nathan he was lord and master of the money market of the world and of course virtually lord and master of everything else he literally held the revenues

of southern italy in his pawn pawn palm and monarchs and ministers of all countries courted his advice and were guided by his suggestions he was still in the vigor of life and was a money-making machine he had a general intelligence equal to his position and look forward to the period when some relaxation from his vast enterprises might enable him to direct his energies to great objects of public benefit but in the height of his vast prosperity he died. So this is about a wedding and a funeral and then Nathan's death. They're all going back

to Frankfurt to meet and they also have to renew a partnership agreement, which they had to do every few years, right? And what blew my mind is the last, this is 1936,

the last time all five brothers had met together was in 1828. So it was extremely rare. So they're meeting for this wedding and they're having was in 1828. So it was extremely rare. So they're meeting for this wedding and they're having this meeting and this debate and this ongoing process of hammering out this new partnership agreement.

It says, Only one shadow hung over the brothers' deliberations and over the nuptial preparations beyond the closed doors. And that was the fact that Nathan was dying. Or rather, he was ill. for no one could conceive the man who since the death of his father in 1812 had been the unquestioned leader of the house of Rothschild might die at the very height of his powers. Nathan had suffered a reoccurrence of an earlier complaint and rectal abscess as his wife put it he again had a visit from the most unpleasant

visitor a disagreeable boil in the most inconvenient place which annoys him considerably particularly in sitting down so her father suffered from a severe case of hemorrhoids and rectal boils and all those other weird medical conditions and in both books it talks about the fact that when you're in the the ghetto in frankfurt it's limited there's like a couple hundred families they're all there's there's a lack of genetic diversity that can result in illness and disease and might they don't know for sure might have led to the early death of nathan his father lived a little longer. I think his father died when he was like 66 or 68, something like that.

So he gets over to Frankfurt. He's not doing well. And the primitive medical industry they have does not help and may have even contributed to his death. The final illness and death of Nathan Rothschild is a case study in inadequacies of 19th century medicine. So they start like lancing the boil, they cut him open, but they keep telling the family, no, no, he's fine, he's fine, he's going to be fine.

The large opening has been running famously and no other operation is expected. Is expected will be necessary. The doctor arrived this morning. He found both wounds in much more forward state than he had imagined. In fact, he's quite satisfied by the way they're going on and assures us only time is requisite to see Nathan quite restored. And it's remarkable how fast this happens because the wound becomes infected and that's what he's going to die of. So on June 13th, they're saying it's fine. Then a few days later, it's like, oh,

something's going on. We're going to have to operate again to cut him open again. And again, this is done without anesthesia. For six weeks, the family waited in vain for Nathan to recover. Doctors continue to open and drain the wounds. And then by July 24th, Nathan lapsed into a violent fever and was plainly in danger. The onset of septicemia.

So as he is dying, they have to, it says it was decisive as well as a fraught moment in the history of the firm for the head of the family was dying before the new partnership agreement had been signed. So it's obvious for a few days that he's going to die. He knows he's going to die. They hammer out a new partnership agreement and then he has to wind up doing the same thing that his father did on his deathbed where he's talking about what he wants the future to be. And this is where I'll close. The practical provisions of the future had been made. Nathan offered some parting advice.

He charged his sons to always apply all their efforts to keep the business property intact and not participate in any risky ventures. He gave them much wise counsel and obeyed them to avoid all evil company. He told them that the world, with his death, with his impending death, told him that the world would now try to make money out of us so that it behooved them to be all the more careful. All that mattered, he said, was that they should hold together in unity. He died in the full possession of his faculties,

and ten minutes before his death, he said to his daughter, Betty, good night forever. At the time of his death, he was most likely the richest person in the world. And that is where I'll leave it. So if you want to know the full story, read the book. If you buy the book using the link that's in the show notes of your podcast player, you'll be supporting the podcast at the same time. That is 198 books down, 1,000 to go. And I'll talk to you again soon.