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Speaker 1

00:00

I was just at Capital Camp for a few days. Capital Camp is this investing and entrepreneurship conference that takes place every year in Missouri. And while I was away, I slept so poorly and I was so sleep deprived that on the airport, at the airport on the way home, I actually rented 1 of those private rooms that you can nap in. And I told my wife this and she said, you should include that in your next 8 sleep ad.

Speaker 1

00:20

And she was right. I'm so used to being able to control the temperature of my bed now, that when I travel, I actually notice a difference in the quality of my sleep. I keep my 8 sleep at home extremely cold. It's cold before I get into bed.

Speaker 1

00:32

And I had no idea, because the 8 Sleep's the first mattress I ever had where I can actually control the temperature of my mattress. And so I had no idea how much just that 1 feature would improve the quality of my sleep. I now find myself falling asleep faster and waking up less during the night. That 1 feature alone, in my opinion, is worth 10 times the price.

Speaker 1

00:51

The founder of 8sleep, Mateo, listens to founders and he's giving other founder listeners a discount. You can get $150 off and your very own 8sleep by going to 8sleep.com forward slash founders. This isn't just for the USA. They ship everywhere.

Speaker 1

01:06

Canada, UK, parts of Europe, Australia. If you want to upgrade your sleep and get 150 dollars off, go to 8 sleep dot com forward slash founders. There was no Internet in John D. Rockefeller's day.

Speaker 1

01:17

There was no Internet in J.P. Morgan's day. But 1 thing is for sure, if there was, they would have both used meter to make sure that their business Internet was fast, secure, reliable and could scale up as their businesses expanded. These families are about to talk to you about the Rockefellers, the Rothschilds, the Morgans, the Toyotas.

Speaker 1

01:34

They spent their days, they were very busy laying the foundation for their dynastic domination. You are busy building a world class business. In both cases, it would be smart to let meter handle your internet and Wi-Fi while you focus on what you do best. Meter gives your business faster, simpler, and more secure internet and Wi-Fi for all parts of your empire.

Speaker 1

01:55

It works in any commercial space. That could be your office, a warehouse, a laboratory, everywhere. 1 of my favorite things about meters how easy they make it for their customers All you have to do is give meter your address and the square footage of your commercial space and meter takes care of the rest That's not all in the wise words of Steve Jobs 1 more thing There's no upfront cost to you, which means you can expand your business without worrying about expensive upfront costs. Meter grows right along with your business.

Speaker 1

02:22

You simply pay 1 monthly rate. Check out their website by going to meter.com forward slash founders. It'll explain all the value that Meter can provide your business. That is meter.com forward slash founders.

Speaker 1

02:34

As you're about to hear with the Toyota family dynasty, sometimes the smartest thing a founder can do is actually sell their business. Tiny is the easiest way for you to sell your business. Tiny provides straightforward cash exits for founders. Tiny helps founders sell their businesses without any of the hassle.

Speaker 1

02:50

Tiny buys businesses of all sizes. They can do deals from a million dollars to well over a hundred million dollars. If you have a business that you want to sell now or in the future, make sure you get in touch with Tiny. All you have to do is just email them.

Speaker 1

03:03

You can email them at hi at tiny.com. And 1 thing that I wanna mention, I also know that there's a lot of venture capitalists that listen to this podcast. There may be businesses in your portfolio that you know are not gonna get funded again, but would make wonderful, profitable internet businesses. Tiny wants to hear about those opportunities as well, and you can get in touch with them by emailing them at hi at tiny.com, and they respond within 48 hours.

Speaker 1

03:29

And of course, you can learn more from their incredibly designed website at tiny.com. And 1 more thing before we jump into the episode, I've been getting a lot of messages about people wanting to hear more about my personal history. I think the single best source for that is this interview I did on 1 of my favorite podcasts. It's on the Invest Like the Best podcast with my friend Patrick.

Speaker 1

03:47

I'm gonna leave a link down below, but whatever podcast player you're listening to this in, if you don't already follow that show, search for Invest Like the Best, follow that show, and then listen to episode 292, which is David Zenra, Passion and pain. This is a book about family and business. At its heart is the dynasty, the succession and interaction of family members over generations, and the firm, the business unit that embodies and expresses this interaction. I shall define a dynasty as 3 successive generations of family control.

Speaker 1

04:17

No small achievement. Growth, diversification, and technological advance can all work against the continuity of the family firm. To these factors, I shall add another, success. Simply put, As the firm develops power and prestige, the heirs find many interesting and amusing things to do rather than run their business.

Speaker 1

04:38

Typically, rather than wear the shirt sleeves of their forefathers, they finish in silks and velvets and focus on politics, culture, and the unabashed pursuit of the good life. As a historian, I was drawn into the drama of these stories and the larger-than-life qualities of many of these competitors for wealth. These tales trace the entangled histories of legendary lineages such as the Fords, the Rockefellers, and the Guggenheims. But 1 that need not be a Rothschild or a Toyota to have use for the lessons in this book.

Speaker 1

05:09

Our own families play central roles in most of our lives and the successes, failures, and cautionary notes of these narratives can inform and inspire us all. We can learn a great deal about business from these dynasties. These are extraordinary men and women, full of eccentricities and geniuses. As an example, consider the legendary patriarch, the bold enterpriser who sets out to do well for himself and ends up founding an empire.

Speaker 1

05:37

Nathan Rothschild fits this bill. He had a super keen mind, a sharp tongue, and a sense of dignity and authority that some families need many generations to acquire. Nathan quickly moved from selling merchandise into banking and outdid the best of his competitors. The Brits, his existing competitors, were not always ready or able to understand the force of this outsider, who ignored the rules of proper behavior.

Speaker 1

06:01

This is an example of 1 of my favorite maxims, which is those on the margins often come to control the center. Those on the margins often come to control the center. 1 day, a powerful, wealthy English dignitary pushed his way into Nathan's office and interrupted the busy banker at his task. Nathan told him to take a chair, that he'd be with him in a minute.

Speaker 1

06:21

The man was offended. "'Don't you know who I am?' he said, pointing to the royal crest on the lining of his top hat. Nathan's reply, "'Then take 2 chairs.'" Another time, someone asked him how he had made his fortune and he answered by minding my own business. It is from such brash keen dedicated entrepreneurs that great dynasties are founded.

Speaker 1

06:46

That was an excerpt from the book I'm going to talk to you about today, which is Dynasties, Fortunes and Misfortunes of the World's Great Family Businesses, and it was written by David Landys. So I've told you before, 1 of my favorite things to do is spend time in used bookstores, and this is where I stumbled upon this book, picked it up, read within like 2 minutes. I was like, oh, I'm definitely buying this book. What it is is the author is a historian and he profiled 11 family dynasties throughout history in 3 primary industries.

Speaker 1

07:14

So you got banking, automobiles, and then natural resources. And so before I jump into the first family dynasty, this is what, after studying all these different families across all these different industries, this is what he realized was the largest predictor, or the largest cause, rather, for their eventual decline and downfall. And the way you and I have spoken about this in the past is the fact that it's very common in human nature that they go to sleep on a win and they wake up with a loss. And so this is what I mean here.

Speaker 1

07:40

The biggest threat to continuity, meaning dynastic family continuity, okay? The biggest threat to continuity was enrichment and success. We will see this story repeated across industries. Once the family had the wherewithal to indulge their inflated ambitions, they tended to copy their better.

Speaker 1

07:59

So I need to pause there. So what is he talking about? Almost all the dynasties started as outsiders. This is something that's very obvious in this book, but also very obvious if you read a couple hundred biographies of some of the great history educators, entrepreneurs.

Speaker 1

08:11

That's why I said 1 of my favorite maxims actually comes from Game of Thrones, the 1 I mentioned in the intro, that those on the margins often come to control the center. So what happens after those on the margins get to control the center, you see this over and over again, once the family had the wherewithal to indulge their inflated ambitions, they tended to copy their bettors, meaning they started on the outside, they usually overtake their competitors, they wind up generating wealth, And what do they do? They just copy and imitate the people that they are replacing. So that's what he means.

Speaker 1

08:38

That is they tend to buy estates. They purchase honors and titles and live the life of idleness and self-indulgence. That was the mark of gentility. And so all of these dynasties without exception can be traced to 1 formidable Individual somebody that's intensely and insanely focused on the building up of both their business and their family Think about what David Ogilvy told us last week.

Speaker 1

09:01

I think I was an episode 306 He says great industrial leaders are always fanatically committed to their jobs. They are not lazy or amateurs. These are power law type people. Of course, individual families are not going to be able to produce multiple family members of the same caliber.

Speaker 1

09:17

That doesn't mean they can't continue on. And so the first family I'm going to talk about is the 1 that really, out of everybody in the book, kind of bucked the trend, and that's the Rothschilds. And we'll get into there. Because there's never been another Nathan Rothschild, but they have been able to muster enough talent and discipline to not squander the wealth that's been built up over the last few centuries.

Speaker 1

09:35

And so David has a great way of putting the difference of mentality between the founder of the dynasty and those usually the people that come afterwards. He writes it in French, so I had to actually go and translate this. This is the first time I've come across this maxim and it's excellent. It's something I already put in a read-a-wise, something I'm gonna keep reminding myself of.

Speaker 1

09:53

And he says, for many of the great founders, appetite comes with eating. I was like, what the hell does that mean? And it's a saying that means that the more you have, the more you want to have. The great founders are obsessed with what they're doing.

Speaker 1

10:04

They want to continue doing more of it. They enjoy it. It's like work as their own hobby. Their descendants just like the fruits of the labor, in many cases, the labor that they did not themselves do.

Speaker 1

10:15

And so they like these like lazy, like what he calls a life of idleness and self-indulgence. But that is 1 of my favorite lines in the entire book. For many of the founders, appetite comes with eating. The more that you have, the more you want to have.

Speaker 1

10:29

And I think that's obvious if you look back on a lot of the founders that you and I have talked about, a lot of the founders that you and I have read biographies on, their exit strategy is death. They found their life's work and they had no intention of retiring and they just kept doing it because they enjoyed to do it. Okay, so with that, the first family, I picked 4 families that I'm going to talk about. Many of them, 3 out of the 4 families have done multiple podcasts on.

Speaker 1

10:48

What I will do is I would use this podcast, this episode, as like a jump off point. I will list in the show notes, you can find on the podcast player and at founderspodcast.com, all of the episode and the episode numbers of all the different podcasts I've done on the Rothschilds, the Rockefellers, and the Morgan family. This will be the first time I talk about the Toyota family, which I actually really enjoyed. And then from there, based on what you hear in here, if you want to go deeper, you can use that as a reference point.

Speaker 1

11:12

But I do want to start with the Rothschilds because they seem to be the exception to the rule, at least in the 11 families profiled in this book. It says, more than anything, the Rothschilds are a case study in tenacity and a dynasty in which the traits of persistence and intense focus have been passed down from 1 extraordinary generation to the next. Their family dynasty is going to start in a ghetto. I think it's the world's actually first Jewish ghetto in Europe.

Speaker 1

11:38

It's Frankfurt. It was the ancestral home of the Rothschilds, and it was neither a pleasant nor an auspicious place to start a global empire. It was home to the first Jewish ghetto in Europe, which was created in 1460. First thing that pops out here is number 1, the Rothschilds capability of turning a liability into an asset.

Speaker 1

11:56

The ghetto was a terrible environment in which to live, but the adversity and oppression bred traits that would be central to the rise of the Rothschilds. First, a network of Jewish traders and financiers developed who offered 1 another support. Second, the Rothschilds learned that family was their greatest resource, the 1 place where they could place absolute trust. So no 1 wants to be born into an environment like this, but the people that are capable of surviving, they develop a very unique set of skills.

Speaker 1

12:24

From this environment, they fought to overcome oppressive conditions and became stronger, more savvy, and better connected as a result. And there's really only 2 generations of Rothschilds that have to deal with this. So the founder of the Rothschild dynasty, I did a two-part series on the Rothschilds. Episode 197 is on the dad, Mayer, and episode 198 is more on his sons.

Speaker 1

12:44

So let's go over a few traits that he had that are valuable. Number 1, he had an innate talent for his trade. Starts out, they're merchants, but they're also money lenders and money changers. Mayer had a good head for figures, meaning he was good at math, which was a great advantage in a world of multiple monies, multiple currencies is what they mean there.

Speaker 1

13:00

Number 3, he took time and built a foundation of the empire by gaining specific knowledge, very valuable specific knowledge. 1 specialty of money changers, which was their business, their initial business, was a knowledge of the rare coins that passed through their hands. There was a significant market among collectors for these items and savvy dealers, which was what Mayer was, would begin systematically hunting for rarities, which then they resold to specialists. So that skill and specific knowledge is valuable and interesting.

Speaker 1

13:30

But what makes it even more powerful is that Mayer combines it with a trait that actually bucks human nature. He thought that long-term relationships were more valuable than short-term profit. That may be easy to say when you're already rich. This guy is living in a ghetto.

Speaker 1

13:45

He's living in a two-room house with, I think, they have something like 10 kids. So let me give you an example of this. Mayer was a go-getter. He would shave his margin or even sell at a loss for important people.

Speaker 1

13:55

The readiness to prefer connections to immediate profit testified to his long-term horizon. Second thing he did, he realized that they were without a lot of financial resources at the time, so everybody in the family had to help the business. This is something that they would continue over the next few generations. So they're changing money, they're collecting coins, but they're also dealing merchandise.

Speaker 1

14:16

So they would sell things like fabrics, yarn, goods from tropical lands. They would sell spices, teas, coffee, and chocolate. Where's he going to put all the stuff? He's got to put in his house.

Speaker 1

14:25

His crowded house was jammed with crate barrels and stacks of merchandise. The family occupied what little space was left. There was 1 bedroom for mayor and his wife. In the other bedroom, the children, boys and girls of all ages, were piled together atop 1 another.

Speaker 1

14:40

As they grew old enough, they were all enrolled in the business. As the children got old enough to marry, Their spouses were also joined in the enterprise as employees, but never as partners." He actually puts that rule in writing on his last will and testament. They were very, very fearful of outsiders. And another way they avoided this, which I'll get into a little bit is there's a lot of incest.

Speaker 1

15:02

Eventually, this is something that's going to reoccur. Like I said, all the dynasties can be traced down back to 1 formidable individual. We're going to call the people the power law person. Eventually, the power law person will appear, and that is going to be for the Rothschilds, that is going to be Nathan Rothschild.

Speaker 1

15:17

It was Mayer's third son, Nathan Rothschild, who gave the Rothschilds a special advantage when he immigrated to England. Nathan was bright and enterprising, and he had the kind of pride that exacerbated those who expected Jews to be suitably meek and deferential. And as we'll see, he also had extreme, extreme levels of self-confidence way before. I always talk about the, there's this great maxim that belief comes before ability.

Speaker 1

15:40

He had extreme levels of self-belief way before there was any evidence that that belief was justified. We'll get into that in a minute. He quickly made a fortune in cottons and then married the daughter of 1 of the richest Jews in England. When his prospective father-in-law asked for proof of his prospects, meaning this is very common, like, are you going to be able to provide for my daughter?

Speaker 1

15:58

Like, what's your business? How much money do you make? That kind of stuff. This is what I mean about excessive self-belief.

Speaker 1

16:04

When his respective father-in-law asked for proof of his prospects, Nathan told him that if he was concerned about having his daughters provided for, he might as well just give them all to Nathan and be done with it. Whoa. Nathan then moved to London and began competing with other bankers for a share of government issues. That's going to be the main source of like they're going to have a bunch of different businesses, but essentially like they're financing governments, they're financing wars.

Speaker 1

16:27

They're having some of the most powerful people in Europe indebted to them. Nathan became the commanding general of the clan of his entire family, even though he was his father still alive. He's the third son. They all recognized him for as just this unique, formidable genius.

Speaker 1

16:43

He ran his office under strict rules of privacy and discipline. No 1 could enter unless summoned. This is something I already mentioned in the intro, but it's 1 of my favorite stories, so I'm going to repeat it. 1 day, an English dignitary pushed his way in.

Speaker 1

16:54

Nathan recognized the visitor and said, Take a seat. I'll be with you in a minute. The visitor was offended by such offhand disrespect. Don't you know who I am?

Speaker 1

17:01

He said, showing Nathan the Royal crest on his hat. Nathan was in no way disconcerned. Then take suit 2 seats. It was a great time to work and earn in London.

Speaker 1

17:10

So it's something that you sees over and over again. Some of this is just, you know, randomness, luck, whatever you want to call it. But Nathan was the right person at the right place at the right time in history with the right set of skills. And this is an example of that.

Speaker 1

17:26

It was a great time to work and earn in London. British businessmen were far ahead of anyone else in industrial enterprise and they needed a constant flow of funds. Nathan had come along just at the right time. So the order I have that I'm going to talk to you about, start with the Rothschilds, then I'm going to go into the Morgans because the Morgans, just like every, I don't even know why I'm repeating this because this is so obvious at this point.

Speaker 1

17:51

The Morgans patterned themselves off the great people that came before them. So they literally studied the Rothschilds and they looked at the career of the Rothschild family dynasty and said, okay, how can we do that? What did they learn over the course of their career that we can use on our own, right? And what is fascinating to me is, so the Rothschilds start in London, they're at the right place, right?

Speaker 1

18:12

They miss, at this point in history, you'd rather be in London than anywhere else. Now, what the Morgans' growth of the Morgan family dynasty is the Morgans are going to play that role. But in America and the Rothschild had Rothschild's had the opportunity to expand to America before the Morgans. And they didn't think they needed to do so because all their power derived from Europe.

Speaker 1

18:36

And so that gap in the market that the Rothschild seeded, the Morgans jumped into. And so therefore you could also argue that JP Morgan was the right person, the right place, at the right time, with the right set of skills, and in the right geographic location. Okay, so moving on. At the beginning of this chapter on Rothschild, which is like 10, 15 pages earlier than where I am in the book right now, it said something that was fascinating.

Speaker 1

18:59

It says, the Rothschilds developed the technique of absolute discretion to perfection. I was like, okay, what does that mean? Later on, it gets into some of the services that they're offering these great like royal houses all throughout Europe. And a lot of them, not only did they need financing, but they also needed the Rothschild to help them hide and then move their wealth around the continent.

Speaker 1

19:21

And so when you go back and you read books on the Rothschilds, a lot of it was the value of the network they built, not only the network for business people, but also like the logistical network. The Rothschilds scrambled around using special carriages, horse-drawn carriages, pre-arranged relays of horses and hidden compartments. They also had a network of ships where they could move things over water. Nathan's biggest coup was lending the British government the money it needed to finance Wellington's campaign against Napoleon.

Speaker 1

19:44

Nathan had just bought 800, 000 pounds in gold from the East India Company. Now, here's the problem. Because there's such a secret family, there's more unanswered questions than there are like no knowns about the Rothschild. So like this 1 section when they're talking about this, where they made an unbelievable amount of money, It starts.

Speaker 1

20:02

There's just a bunch of questions on this page like how why where and the answer to a lot of these questions are we don't know. It says Nathan made this money available to the British crown though we have no record of this operation in the Rothschild archive. But it is believed that this was the single most lucrative transaction that the Rothschilds ever made. So Nathan is running his family even though his father is alive.

Speaker 1

20:23

However, when his father dies, he leaves behind like a list of guiding principles for the family. They adhere to this pretty strictly for the next, let's say, 2 generations. There's 1 or 2 deviations, and then eventually it changes over time. Obviously, the further away you get from Mayer's death, he died in 1812.

Speaker 1

20:43

But I want to tell you a little bit about this. Before he went, he drew up a partnership agreement and a will that laid out the principles he felt should guide the family enterprise into the future. These clear rules for order, family behavior, and the succession of power very much distinguished the Rothschilds from the other banking dynasties. So that's why I wanted to start with them because they are the ones that are the exception to the rule, the ones that buck the trend.

Speaker 1

21:05

He began by distinguishing his direct male descendants from any other Rothschild relations. There would be no room in the business for son-in-laws. They could work as employees, but they have no ownership and they have no say in the management. And then very similar to Sam Walton's autobiography, he's writing when he's dying, he says, hey, if you come with any of this foolishness, I will come back and haunt you from the grave.

Speaker 1

21:26

He has like a line that's very similar to that in his autobiography. We see the mayor puts this in his will. I shall never forgive my children if they should against my parental will take it upon themselves to disturb my sons in the peaceful possession of their business. I do want to get into 1 way that the Rothschilds try to keep the business in the family.

Speaker 1

21:45

And this is what I referenced earlier. 16 of the 18 matches made by Mayer's grandchildren were between uncle and niece or first cousins. So Nathan Dijon at the time of his death He is likely the richest person in the world. Nathan died in 1836 when he was only 59.

Speaker 1

22:06

He may have been the richest man in the world, but he had the misfortune to live in an age where that did not know about antisepsis. He was infected by an abscess on his lower back. And then this line is a great description of what I was explaining earlier that you shouldn't expect there to be another Nathan, especially in their own family. The brilliant entrepreneur and innovator was gone and his like would not be found again.

Speaker 1

22:28

And so what happens next should be expected. Human nature is constant. The family's rigid adherence to mayor's rules began to lose force as time marched forward and future generations came of age. This was inevitable.

Speaker 1

22:38

1 cannot become enormously rich, drink and dine with high status dignitaries, and play and flirt without absorbing new values and habits. And so it was with the Rothschilds. And really what they're about to describe is the difference between a founder and a manager. The founder wants to innovate.

Speaker 1

22:54

He wants to grow, wants to keep on going. The family's already rich. They just don't want to lose what they already have. The passage of time changed the family gradually from an active promoter and investor to a custodian of family fortunes.

Speaker 1

23:07

So then we have this guy named Frank Harris who talks about this conversation he has with 1 of the grandchildren. The grandchildren are adults and running the business at this point in history. And it says Harris reports gleefully on the profits made by Barings, which is another family dynasty. They actually covered in this book on this transaction they did for the Guinness Brewing Company and where Barings made over a million dollars.

Speaker 1

23:28

And this would have been in the mid to late 18 hundreds. And so Harris says, don't you wish that you had done the deal? And the Rothschild descendant returns a soft answer. We did have it and we turned it down.

Speaker 1

23:42

Harris said, aren't you sorry now? And the Rothschild grandchild said, when I turn down deals, I go home at night, carefree and easy. When I take on a project, I can't sleep. The tacit rules of the Rothschild dynasty now we're aimed at preserving sleep and peace of mind.

Speaker 1

23:59

And so I got this page. I left a note to myself. And I think the reason this happens over and over again is because if your goal is just accumulation of more money, like that's probably the right move. You are already 1 of the richest families in the world, if not the richest family, and being abundantly cautious is probably the correct move if the continuation and continual accumulation of money and then pass it down to the next generation is the goal.

Speaker 1

24:24

And we are living almost 200 years after the events that you and I are discussing in this book, and we can't tell how much money they have, but we know they have a lot. Or I should say it is likely that they have a lot. The author is then comparing and contrasting Nathan, the power law person, power law founder, with his descendants. Nathan had given himself heart and soul to making money.

Speaker 1

24:44

His descendants worked rather to spend it, a theme that we see repeat itself for many of the great dynasties. But unlike many of the great dynasties where the offspring began to stray many Rothschilds remain powerful in the business world. It is as if they possessed a secret genetic gift for making money. For making money.

Speaker 1

25:01

And then this summary of the section is exactly why I wanted to talk about them first. The Rothschild family is perhaps the most important and tenacious dynasty in modern business history. Only a few dynasties have shown as much persistence across centuries. Okay let's jump right into the Morgans.

Speaker 1

25:17

The great thing about the Morgan chapter is the author does a lot of the work for you and I where he is going to constantly reference, I guess compare and contrast, the Morgans and the Rothschilds. So it says the Morgans offered a very different response to success and growth from that of the Rothschilds. The Rothschilds insisted that their bank be an exclusively family enterprise, no outside partners, and they have held to that. The Morgans were not numerous enough to do that, nor did they see outside partners as intruders.

Speaker 1

25:47

On the contrary, they needed them. The result was that the family bank moved on to a Morgan-less managerial corporation. So I just want to pause there because they're like, hey, the Morgans couldn't do what the Rothschilds did because there just wasn't enough of them. I can't remember which other family, it's talked about in the book on another family I'm not gonna profile, where they realized that the, essentially, if you wanna build a family dynasty, they would recommend that you have a bunch of kids, 8, 10, 15 kids, whatever the case is, you're gonna, because the natural distribution of, let's say you have 10 kids, a handful of them are not gonna be interested in business.

Speaker 1

26:24

Maybe 1 or 2 are gonna have the same level of drive and intensity than maybe the founder or similar drive and intensity than maybe the founder of the family had. But that was explicitly stated in the book, where they're like, okay, the only way to get around this, if you want to have a family dynasty that lasts a long time, is you have to have a bunch of kids, and then you have to convince your children to have a bunch of kids. And so I'm pretty sure J.P. Morgan's dad, Junius, who I'm going to talk about in a second, I think he only had 2 sons.

Speaker 1

26:50

And when they say kids, in this time, it's obviously going to be the male line of the family that they're optimizing for. Before I get to Junius, I want to talk about Junius's dad. The Morgan family dynasty is interesting because the actual Morgan company wasn't even started by a Morgan. We'll get to there in 1 second.

Speaker 1

27:11

But there was a lot of wealth transferred down over multiple generations, So they were successful. They are a case study in successfully saying, hey, we start with Joseph Morgan. He's gonna make a bunch of money. He's gonna give some of that money to his son, Junius.

Speaker 1

27:24

Junius is gonna make a bunch of money, give that money to his son, JP. And so they were successful in taking an inheritance and growing it and passing it on to the next generation. So JP Morgan, his grandfather was this guy named Joseph Morgan. He did a bunch of things, but what he is most well known for is that he was, he made a lot of money in real estate, but he was also 1 of the founders of the Aetna Fire Insurance Company.

Speaker 1

27:47

So Joseph Morgan is the first person in the Morgan family where he has a knack and a love for business and then he passes along that love and passion for business to his son. So it says, most important, Joseph put his son Junius Spencer into the trade. So Junius is gonna have 10 years of experience in banking and in commercial trade before his father passes away. Joseph left an estate of over a million dollars, so that would be about 40 to 50 million dollars when this book was published.

Speaker 1

28:16

This book was published 20 years ago, so it's even more now. Junius took this money and then went after bigger game. Now, he does something really smart here. He winds up moving from America.

Speaker 1

28:24

The Morgans are Americans. He moves to America because this is 1854. Where is the center of commerce in the world at this point? In the Western world, clearly London.

Speaker 1

28:33

He had moved to London and then send his son, JP Morgan, to school in France and Germany. On the past episodes I've done on the Morgan family, I told you before that I found Junius to be the most impressive of all the Morgans. This is an example of that. This untypical breakout from local to regional to national to international over the course of generations was the building of a global family fortune.

Speaker 1

28:56

Junius to me seems the most driven. We have evidence of this here. He is. He set out.

Speaker 1

29:01

He's like, I want a dynasty. From the beginning, Junius had far reaching aspirations. He would build a dynasty. His models were the Berings and the Rothschilds.

Speaker 1

29:09

Both European banking family dynasties. Both are covered in this book. So it talks about his son, JP Morgan. JP's health left much to be desired.

Speaker 1

29:19

Throughout his entire life work had to be compensated by intervals of recovery and repose. He would engage in fierce spells of activity followed by long vacations and months of travel. You can still get, if you're in the right business, you could still get really wealthy by doing this like sprint, sprint, rest cadence that's very different from, I would say, most of the founders that you and I cover, the grinders. When I got to this part, all the way back on episode 124, I did a three-part series on Larry Ellison.

Speaker 1

29:48

There's this fantastic biography of Larry Ellison called Soft War, an intimate portrait of Larry Ellison and Oracle. And Larry Ellison was like this too. He states in that book, he's like, listen, Bill Gates is a grinder, I'm a sprinter. And so let me just read a quote from the biography of Larry Ellison.

Speaker 1

30:04

And it says, although he always talked about technology and Oracle with passion and intensity, he didn't have the methodical relentlessness that made Bill Gates so formidable and feared. By his own admission, Ellison was not an obsessive grinder like Gates. I am a sprinter. I rest.

Speaker 1

30:18

I sprint. I rest. I sprint again. Ellison had a reputation for being easily bored by the process of running a business and often took time off, leaving the shop to senior colleagues.

Speaker 1

30:27

That is very much in my mind, the model I have of JP Morgan. And I think he was bored by the process of running a business. I think he said he did something like, I can't remember the exact number, like he would do a year's worth of work in 3 months or maybe a year's worth of work in 9 months, something like that. But I know he took at least 3 months off every year.

Speaker 1

30:45

But that comes later in the Morgan family history This is what I meant that makes their dynasty so interesting because the actual the launching point Not including the the money from their grandfather and Junius's father Joseph comes from George Peabody. He's not even a Morgan says George Peabody was also an American living in London. He was a high quality merchant banker of London. Peabody is going to run across Junius and recruit him to take over.

Speaker 1

31:11

I'm pretty sure Peabody was like this miserly figure. I think at 1 point I'd read about him previously. Let's say he was making like $300, 000 a year. He would live on like $3, 000.

Speaker 1

31:22

Like he wouldn't spend any of his money. I think, you know, let's say he's making 300, 000. He would live on like $3, 000. Like he would actually spend like $3, 000 a year.

Speaker 1

31:29

So anyways, I'm pretty sure he didn't have any kids. So he recruits Junius, almost like this adoptive son. And it's from this. This is the prehistory of what becomes now in our modern day and age, J.P.

Speaker 1

31:40

Morgan Chase. Chase Manhattan obviously buys out J.P. Morgan, I think for $30 billion. That's how this chapter ends.

Speaker 1

31:45

This was a great opportunity, not only because Peabody was a lead, it was the leading house in Anglo American trade. Peabody himself was also approaching retirement. He had run into Junius Morgan in various transactions, liked what he saw and offered him a partnership in 1854. When Peabody then retired 10 years later, the firm became J.S.

Speaker 1

32:05

Morgan & Company. J.S. Morgan & Company. When Junius retires, it's taken over by J.P.

Speaker 1

32:10

That becomes J.P. Morgan & Company. That is the company that Chase Manhattan buys many, many years later. I love what the auth points out because this is exactly how I felt when I was reading the history of the Morgans a few years ago.

Speaker 1

32:21

The history of the House of Morgan tends to glide too quickly over the career of Junius. And yet it was he who won the family place and fame in international banking. And their first big break comes from, again, we talked about this earlier, your competitors are always going to leave gaps in the market. He's very much, Junius is very much powdering his family off the Rothschilds, the Barings who even came before the Rothschilds.

Speaker 1

32:43

They're all operating in Britain at the time. This is the center of the financial universe. And there is this war between Prussia and France that France loses and needs a bunch of money for restoration. This is in 1870.

Speaker 1

32:57

But the leading British bankers, including the Barings and the Rothschilds, had little faith in this opportunistic French political creation. So they're like, no, we're going to pass on this. Junius is like, oh, I'll take this up. I'll take you up on this.

Speaker 1

33:09

It was at this point that J.S. Morgan and company stepped forward and agreed to underwrite the loan. And so there's a bunch more detail about what happens. I'm just going to get to the punch line.

Speaker 1

33:16

Junius made a fortune from this unanticipated windfall estimated he made about 450000000 dollars in today's money from this 1 trend. This 1 single transaction like the Rothschilds after the Napoleonic Wars, he now felt himself a legitimately important player in international finance. And like the Rothschilds, then he found the old timers, beginning now with the Rothschilds, unwilling to concede status to this brash newcomer, just like in the story of Nathan Rothschild, the people that were in power, the powerful families, powerful business owners at the time in England did not want to see their position to this young upstart. Now, I think a generation, 2 generations later, we have Junius playing the role of Nathan Rothschild.

Speaker 1

34:00

Junius sends his son, JP, to America. Junius is going to stay in London, so they're going to have basically the Bank of Morgan, the House of Morgan becomes this two-headed monster. And this was perfect timing again. And this is probably why JP Morgan is so much well-known throughout history than his dad was, even though his dad might have even been a more impressive person.

Speaker 1

34:18

It's because he's at the right place where you're going to have this gigantic explosion in the American economy, and that is where his son is. Junius Morgan continued to thrive by doing business with American exporters and importers. Much of this rise was the work of his son, JP. And so for the next 30 years, and this is terrible that this happened, JP winds up burning all these letters.

Speaker 1

34:38

But for the next 30 years, we just have Junius, you have 30 years of history of Junius and JP writing letters back to each other. And Junius is really trying to shape and get his son ready to take over the family dynasty. A little bit of detail about that here. Junius did his best to provide his enterprising son with experience, guidance, and working connections.