What I learned from reading Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses by David Landes.

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These families are about to talk to you about the Rockefellers, the Rothschilds, the Morgans, the Toyotas.

They spent their days, they were very busy laying the foundation for their dynastic domination.

You are busy building a world class business.

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As you're about to hear with the Toyota family dynasty, sometimes the smartest thing a founder can do is actually sell their business.

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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.

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.

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.

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.

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.

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.

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.

"'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.

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.

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.

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.

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.

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.

They purchase honors and titles and live the life of idleness and self-indulgence.

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.

I think I was an episode 306 He says great industrial leaders are always fanatically committed to their jobs.

Of course, individual families are not going to be able to produce multiple family members of the same caliber.

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.

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.

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.

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.

Their descendants just like the fruits of the labor, in many cases, the labor that they did not themselves do.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

He's living in a two-room house with, I think, they have something like 10 kids.

He would shave his margin or even sell at a loss for important people.

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.

So they would sell things like fabrics, yarn, goods from tropical lands.

They would sell spices, teas, coffee, and chocolate.

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.

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.

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.

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.

He had extreme levels of self-belief way before there was any evidence that that belief was justified.

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?

This is what I mean about excessive self-belief.

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.

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.

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.

They all recognized him for as just this unique, formidable genius.

He ran his office under strict rules of privacy and discipline.

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.

Nathan recognized the visitor and said, Take a seat.

The visitor was offended by such offhand disrespect.

He said, showing Nathan the Royal crest on his hat.

It was a great time to work and earn in London.

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.

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.

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?

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.

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.

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.

It says, the Rothschilds developed the technique of absolute discretion to perfection.

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.

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.

Nathan had just bought 800, 000 pounds in gold from the East India Company.

Because there's such a secret family, there's more unanswered questions than there are like no knowns about the Rothschild.

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#307: The World's Great Family Dynasties: Rockefeller, Rothschild, Morgan, & Toyada