What I learned from reading When Money Was In Fashion: Henry Goldman, Goldman Sachs, and the Founding of Wall Street by June Breton Fisher.

Among the many letters of sympathy received by the family after Henry's death was 1 from Sidney Weinberg, who had been elevated to the position of partner in Goldman Sachs in 1927 and assumed the role of senior partner 5 years later.

Weinberg had started his career with the firm as a janitor's assistant, an eighth grade dropout whose chores included cleaning the office and brushing off the partner's boots.

For a long time, he was known around the office simply as Boy.

But like Henry, whom he greatly admired and viewed as 1 of the geniuses behind the success of Goldman Sachs, Sidney was an excellent listener and an adaptive student.

In 1919, after he left the Coast Guard, in which he served during World War I, he approached Henry seeking a job.

Henry advised him to return to Goldman Sachs.

That was where the opportunity lay, he said.

Demonstrating once again a canny talent for spotting human potential, Henry offered to act as Weinberg's mentor and to introduce him to valuable contacts in the business world.

At Goldman, Weinberg became a salesman of commercial paper for $28 a week plus 1.8% in commissions.

Henry advised him to ask for a bigger piece of the pie as his sales escalated, and he advanced to earning 33% commission at a time when the stock market was booming.

And in the 1930s, Henry recommended and endorsed him for seats on many of the corporate boards on which he would serve for almost 40 years.

Weinberg joined Walter Sachs as a co-chairman of the firm, became a trusted advisor to presidents and corporate chairmen, and was credited with steering Goldman Sachs into a revitalized era of prosperity and stature.

That was an excerpt from the book that I'm going to talk to you

about today, which is When Money Was in Fashion, Henry Goldman, Goldman Sachs, and the Founding of Wall Street, and it was written by Henry's granddaughter, June Bretton Fisher.

So I wanted to start with that excerpt that comes at the end of the book, Henry had just died, to prove a point that he was just doing an act of kindness.

He was helping Sidney Weinberg in the 1920s.

He had already been forced out of the Goldman Sachs partnership, so he didn't have any financial benefit to the wonderful career that Weinberg winds up going and having at Goldman Sachs over the next 40 years.

There's actually 2 additional resources I used to prepare for the podcast in addition to reading this book.

And 1 of them is this essay, and I'll link down below in the show notes for both of these.

an essay that Malcolm Gladwell wrote in 2008, it's called The Uses of Adversity, and it is about Sidney Weinberg's story.

Henry Goldman makes an appearance in that essay as well.

I thought it was worth the time I invested in reading it.

And the second was an episode of a podcast.

The title of the podcast is Goldman Sachs.

And that episode's great because in an hour, they give you a complete overview of the Goldman Sachs of today how they make money what businesses are involved in how the firm is organized today.

So I jump right into the book there's this quote That's

at the very first on the first chapter that

I thought was fantastic and it comes from Walter Sachs who at the time was a senior partner of Goldman Sachs.

So this is about 11 years after Henry's forced out

of the firm, which I'll get to, which was 1 of

the most surprising parts of the book for me.

And Walter said men can learn from the past and I've been shocked how little some of the younger executives in the present firm know about its origins.

They don't even know that my grandfather whose picture is on the wall there founded the firm.

And that just speaks to why the book was written.

It's meant to catalog the history the very beginning of the firm it ends the story ends in like the 1920s 1930s and what is unique about this book is it kind of reads like a family diary.

So let's go to write to the beginning says my grandfather Henry Goldman was the son of a poor German immigrant named Marcus Goldman.

Marcus Goldman is going to be the founder of Goldman Sachs.

And I've actually looked for biographies of Marcus Goldman in the past and haven't found any.

And I think the first part of this book kind of serves as a brief overview of how Marcus got to America and how he's in when he started what would eventually become Goldman Sachs and the vast majority of the book is about Henry Goldman.

But I think this brief overview of Marcus's life was is very useful.

And so the note I left myself when I first read this part was this is how Goldman and Sachs actually meet this is happening in Bavaria and Marcus's father is his name is Wolf.

So it says Wolf was especially proud of his son Mark who at the age of 16 had been encouraged by the schoolmaster to make periodic trips to the synagogue where the rabbi offered more advanced classes to outstanding students.

It was there that Mark made the acquaintance of Joseph Sacks, the 19 year old son of a poor saddle maker.

The 2 young men became fast friends never dreaming that their futures would be in twine for more than a century in a land they had yet to see and so Joseph Sacks keeps popping up in market in Marcus's life.

I didn't realize that it's not that is not the Joseph Sacks is not the sacks that is the Goldman Sachs.

It's going to be his son Marcus brings in Joseph son and then once he brings him into the partnership that he's already started they rename the firm firm Goldman Sachs.

And so now we get to the point where Marcus's father actually advises him, hey, you got to get out of Germany.

to tie into another founder that I've covered in

It had become increasingly apparent that there was no future for young Jewish men in Germany.

Wolf reluctantly concluded it was time for his eldest son who had just turned 27 to seek a new start in the United States.

The newspaper had been running stories almost every day about the grand opportunities available to newcomers in America.

A recent article had told about a boy named Levi Strauss.

This is back on founders number 33 actually read pretty sure if I remember correctly.

It was the book written by the historian the company historian of Levi Strauss that tells his Levi's life story, which is absolutely fascinating.

So now think about this the future founder of Goldman Sachs his dad and him are reading newspaper articles about the opportunity and being inspired by Levi Strauss's story that was remarkable to me.

A recent article told about a boy named Levi Strauss from a nearby village who had left the old world and soon afterward made a fortune sewing work pants for gold prospectors heading out West.

So Marcus does the trip across the Atlantic winds up in Philadelphia bumps into Joseph Sachs who had moved there with his wife a few years earlier they were moving again because Joseph is going to he's a teacher he's gonna start a school and that's

I think he's going up to Boston or something like that he's like hey if you need

a place to stay you can rent we're about to move you can rent our room this the reason I'm bringing this up to you is because it talks about what Marcus was doing the jobs he had and that he had to take right coming to a brand new country not a lot of money has taken the opportunity to get and just a sense of gratitude that he has really impressed me so he went to meeting his new landlady her son gives Marcus job her son Manfred had a little shop on the ground floor facing the street where he sold goods and tobacco.

But he had hopes of enlarging the business and peddling a wide range of goods from a horse-drawn wagon around the city.

He was looking for a strong, reliable helper who could walk the streets 7 days a week and would not be afraid to work regardless of rain or snow or the humid summer heat.

Mark jumped at the chance and for the next year, for the next 3 years rather, he was sold textiles and spices and learned the language and customs of his adopted land.

Sometimes he would put in as many as 14 hours a day.

The guy's working insane amount of hours.

Listen to his response, which I found so impressive to this.

He was courteous, cheerful, and popular among his customers.

In the letters he wrote to relatives in Germany.

He always spoke of his good fortune and happiness.

And so he's doing this for 3 years and then we see immediately that Marcus has founder mentality.

Other people might see a stream of immigrants coming in arriving by boat from Europe every day.

He sees opportunity as he hawked his wares along the river.

Mark watched the newcomers arriving on steamships carrying all their goods in small suitcases.

And he recognized an enormous untapped market for sturdy, inexpensive clothing that was unfolding before his eyes.

So this is the first business he's ever going to start.

Bertha had also told him that she's seen a wonderful new invention being demonstrated downtown that day.

In less than 10 minutes, the 2 agreed to gamble on their first investment.

The next morning, Marcus applied at the first bank of the United States for a 5 dollar loan to buy 1.

He used the balance of the loan to rent a storefront on a busy street where he started a new career as a tailor.

massive opportunity that this business is

He's gonna run it over the next 6 years before he moves to New York and becomes a banker.

I wanna, at this point in Marcus's life though, they're having children.

1 of the children that they have is Henry was obviously the main focus of this book right and was fascinating to me in this comes up over and over again is because Henry had a problem reading they thought he was dumb and so says Henry been slow learning to read It was finally determined that the youngest that that the youngster rather suffered from a stigmatism and hit and his chores in the shop were limited to fetching and carrying clothes from the storeroom or fastening the shutters at closing time.

His mother was convinced he would never succeed in a competitive world and was inclined to coddle and baby him and This is a main point in Henry's life this idea that other people saw him as deficient because he had trouble reading He wants of going blind his eyes did like they get worse and worse I said gets worse and worse over time eventually at the end of life It sounds to me that he's almost completely blind and even this this is a important The reason I'm bringing this up to you is because that is why it's not called Goldman and Goldman and it's called Goldman Sachs His own father Marcus didn't think that Henry was capable enough.

And so when he was when it was time to pick a partner, he chose his son-in-law.

So that's another thing you need to know about Goldman and Sachs.

They were you know, it starts with this deep friendship between Joseph Sachs and Marcus Goldman.

There's like so many this family tree is so crazy, but a lot of them are marrying each other and so when Marcus chooses his son-in-law over his son Henry uses that as fuel he had a deep desire to prove people wrong and it turns out he's really really smart It's just he has to learn through listening.

He has like this superpower, this listening superpower he uses through his entire life.

He's just not, he's not gonna be able to see, he can't even see the page, he can't read.

So let's get to the point where Marcus, again, founder mentality, always chasing opportunities.

Over the next 6 years, his store thrived, but Philadelphia began to lose some of its steam as an economic center, as an economic center, as the Civil War wound down.

New York had replaced it as a commercial and cultural center and money making it investing it exchanging it was the engine that was propelling its growth.

Marcus's wife prodded her husband to take his profits and relocate to New York the city of progress where opportunities seem limitless.

So we've already seen hey, I'll make the jump from Bavaria to America to chase opportunity.

I'll make the jump from Philadelphia to New York.

I'm going to chase opportunities exhibiting once more an extraordinary ability to reinvent himself and adapt to a new environment.

A trait that would define his success over the years.

Marcus sold his share of the business and set out for new horizons.

And so the very beginning of the firm that will eventually turn into Goldman Sachs benefit is benefiting from a financial boom, growing customer base, and that there's no barriers to entry.

This blew my mind because this is exactly we live in almost the exact opposite scenario today

in terms of how difficult it is to start a

new bank today in 1869 gold was flowing into New York from California and vast numbers of immigrants were arriving on ships from Europe almost every day this provided a potential growing potential clientele for bankers at the time check this out at the time no qualifications are special training where needed to enter the banking business and then we see Marcus just like every other all of history's great entrepreneurs were studying the the successful entrepreneurs came before them So he's inspired by this guy named Joseph Siegelman.

So it says following examples of established German Jewish bankers like Joseph Siegelman who came from a similar background as Marcus and had become very very rich in a relatively short period of time Marcus hung out a shingle advertising himself as M Goldman banker.

Is this a description of the very first business that he does he consider herself a banker and a broker of IOUs for the tanners and droolers in this district in Manhattan known as the swamp by buying this is what he was doing by buying promissory notes at a discount in the morning and selling them to banks in the afternoon he enabled merchants to raise short term working capital that's very fascinating because Henry's what Henry Goldman is credited with his innovation for Goldman Sachs was getting the company into IPOs of new firms that were consolidating and expanding their businesses.

That is where Henry is going to make his fortune.

The notes later came to be known as commercial paper.

And so this line gives you an insight into Marcus's personality.

Won't come as a surprise to somebody that was working 7 days a week, 14 hours a day and grateful for that opportunity.

Marcus was anxious to capitalize on every waking hour.

So Joseph Sachs, Marcus's friend, had started this prep school that was really difficult and that is where Henry's are sitting Marcus's sons Henry and Julius are going to go says Henry and his brother attended the Saks Collegiate Institute for boys which was founded by the goldman's old friend Joseph Saks Which was considered the city's number 1 college preparatory school and this description of Joseph Sachs Sachs was a gifted teacher But famously short on patience He would come down on you like a ton of bricks if you were ever caught Slacking Henry remembered And so this is the first part of the book where I realized, oh, Henry's not dumb.

He just needed to find the best way that he learned, the way he learned best.

Henry was an attentive listener who committed everything he heard in school and much that he heard outside of the classroom to memory.

in school, he gets admitted to Harvard, he's gonna have to drop out though.

He was granted admitted to Harvard, but his eyesight had become so poor that he no longer felt capable of keeping up with his studies and he dropped out, leaving the world of academia forever.

It was a bitter blow that fate had handed him especially when he realized that his father's dreams for him would be shattered and this this is what the point that the author makes that the fact is they saw this as like the disability that would prohibit for him from ever having a successful career in business Marcus to straightforward to disassemble his disappointment wondered out loud what kind of career could be cobbled together for this son of his.

So at this point of the book the authors already now transferred over for the end of Marcus's career and in the markets his life with the beginning of Henry's a career and really his career in business and just what he does really smart like you can't control people's other people's impressions of you.

He didn't think he was as dumb as his father made of thought or he didn't think he that he was incapable of being successful in business as his father thought but how he responds that is really really clever so let's get to their first.

This is a mark at Marcus's 60th birthday.

This is when he's going to start Goldman Sachs after the toast of the at the birthday have been offered and the candles on the cake extinguished Marcus asked for a moment of silence.

He spoke of the amazing turns in the road of his life that his life had taken since he had left Germany 30 years before and of his joy in being surrounded by such a wonderful family most of which have been now intermarried with Joseph Sacks's family.

And then he invited his son-in-law Sam to join him in the business.

We'll get to more about this, but Sam and Henry are going to be partners and they hate each other.

Like this, I had no idea that the Goldman and Sacks's, the 2 families, wind up not speaking for like a hundred years.

There's just crazy stories in the book about that.

I've always believed that Henry, so now this is obviously the author who is the granddaughter of Henry talking about her grandfather.

I've always believed that Henry was seen by his father as unable to manage such a role because of his physical ailment.

While Marcus decision was based on what he thought was common sense and not emotion, it was a crushing blow to Henry.

Imagine like stop here for a second just put yourself in the shoes of Henry.

Like your father starts his firm, it's about to be turned into Goldman Sachs.

It's doing really well really successful.

You want like you have a good relationship with him.

You're interested in finance and he chooses your brother-in-law a year and a half past and Marcus was so pleased to Sam's performance that he asked him to become his partner from then on the firm was known as Goldman and Sachs Henry was still shocked that he'd been passed over he was dumbfounded by then he he was in his mid 20s and so Henry you know could have said oh what was me could have just given up He's like okay.

That's fine He sets out trying to build his own career and so he becomes a traveling salesman And this is the reason this is really smart Is because he winds up learning sales, learning people, and then learning the value of listening and the advantage it gives him over so many other people.

He became a traveling salesman of textiles.

It must have been a lonely life, traveling cross-country in the 1870s.

But it afforded Henry the time he needed for introspection and observation.

And as it turned out, the experience provided an education.

So he's traveling all over the country on this relatively new technology of the day, which is the railroad, the railroads, right?

And so that gets him out of New York and he gets to see how other people are conducting business.

Henry was able to see beyond his reflection in the dark window and to gain a bird's eye view of the mom and pop retailers.

The little machine shops the small town banks that were popping up all across the country.

And so it says as the railroads were carrying him from New York to Philadelphia to Boston to Chicago and st Louis he was able to overhear the ramblings and rumblings of his fellow passengers most of whom were also in trade and to learn what people outside of New York were thinking and talking about.

This experience turned him into a consummate observer that made me think of I think it was episode 212.

I read like a 6600 or 700 page biography of Michael Jordan.

I find myself thinking a lot about the book actually but there's something that Michael said that book which was fantastic and he says that successful people listen and those who don't listen don't survive long and I think if we could go back and ask Henry Goldman his opinion of that quote he would agree with it and then spread all throughout the book over hundreds of pages there's just like 1 lines that give you an insight into Henry Goldman's personality this is the first 1

bunch of random lines to you this this is the first 1 He was somewhat of a loner comfortable with his own company.

He had important matters on his mind and he was not 1 to waste time on small talk.

And then I like this 1 because it was Henry's advice to his sons when he was about to die.

Ultimately, we have to set our own criteria for what constitutes failure and what constitutes success.

So he's a traveling salesman for many years.

I think he starts out in his mid-20s And then he winds up working in the firm.

He finally gets invited into the firm, but as a junior partner.

So he's underneath his brother-in-law, right?

So it says in 1885, Henry was finally invited into family, but only as a junior partner.

The firm's name was then changed to Goldman Sachs and Company.

And from then on, also, I want to bring this up to you because the unique structure in the way that the firm was organized.

So it says, and then from then on, for almost 50 years, all of Goldman Sachs partners were members of were members of the intermarried families.

Their assets are a major portion of their assets were tied up in the firm and provided working capital as well as savings.

The practice continued until Goldman went public over 100 years later making it an extraordinarily profit oriented organization.

The partners were never allowed to withdraw any of their money without making a formal petition to the senior partners so that may explain that unique structure may explain why he was still living at home when he was 33 years old.

This may have explained why Henry was in no hurry to move out to a home of his own.

Even as he approached the age of 33 because it sounded like all of his wealth was tied up into the firm right and so for 10 years he's gonna work as a junior partner while his father and Sam Sam Sachs are the senior partners and then it goes into something that just blew my mind so it talks about at this point you know they're obviously all intermarried the patriarch of the family still alive.

He Marcus is kind of keeping everybody together.

This is going to be like the Civil War that happens.

So it says in later years this occasion the social occasion would be remembered as 1 of the last times that the Saxons and the Goldman's would gather on a social basis who could have guessed that this close-knit intermarried family who is also doing business together would soon be enmeshed in a feud drenched in such animosity that the members and their children would not exchange a word for almost 100 years.

And so once Henry's forced out of the partnership seems to me like it reads if you read to between the lines

was forced to resign and I'll get into why that was case but he never talked to his partner again and Henry was like

I think on the last page of the book, and it talks about where the fact that the families previously had built final resting places in the cemetery.

And so the Goldmans did this and the Sacks did this.

And Henry picked a spot where his back was turned to the sacks so says in his final resting place Henry had built for himself and his heirs It was larger and grander and its back is turned on the saxes in death as in life So there is no happy ending.

It's not like oh we had a big fight, and then we reconciled No, they hated each other till death.

So it says, Henry bided his time, still playing a watchful waiting game.

It wasn't until his father stepped aside 2 years later that he was finally elevated to the same level of authority as Samuel.

When it did happen, he had just celebrated his 43rd birthday.

So it's about 10 years as a junior partner.

And after years of being made aware that he was expected to fail he was determined to achieve a role of leadership and dominance And prove all the predictions wrong So it's very clear Henry Goldman had fire in his belly And used people doubting him as fuel And so a way to think about what's happening now is Sam and Henry wound up being great and terrible partners And it's a shame that they couldn't resolve their personal differences because I think they would have had more success They were able to stay together There was like Goldman had this almost near-death experience that actually more Malcolm Gladwell writes in that essay that I linked below Where they they wind up using there's this guy that comes in winds up using a lot of leverage.

I think that he grows their assets like 500 million or something like that.

I think they go down all the way down to like 10 million or something like that.

So anyways, the new partners were polar opposites.

They found it difficult to agree on anything.

Sam was suspicious of everyone and worried all the time.

He was deferential to the establishment, meaning the other financial houses in Wall Street at this time and in London.

Henry has more of an entrepreneurial bent.

Sam envisioned that the Goldman Sachs of the future as an international banking concern and Harvard ambitious to expand the firm's currency dealings overseas.

So that's actually a good role that he played.

They went about having separate strengths, which again, that's very valuable

he was never known to have an original streak.

Now they're going to compare and contrast the 2 personalities and their approach to work.

Sam met his match in Henry, who was stubborn and immutable in all his convictions.

Henry was a creative, ambitious risk taker, and his forte was trading railroad bonds, which were the hottest commodity of the time.

He proved to be an extremely successful speculator.

And he winds up adding about $5 million to the company's balance sheet over a 10-year period, which would be an insane amount of money to this day as new businesses started up every day and the distribution of goods.

So it's talking about like what is the technological impact that the railroad is having.

I've read a bunch about the railroad founders.

There's a lot of analogies there between the railroad network in the late 1800s early 1900s and the Internet of today as new businesses started up and check this out because if you read this this pair or if you listen to the paragraph about to read you it almost sounds like the describing Internet as new businesses started up every day and the distribution of their goods was being revolutionized by the rapid spider webbing of railroads across the country.

Henry was itching to get into the action, but Sam shrank away from that plan.

So Henry wants to invest in the new technology of his day, which is the railroad.

So this is really going to set the tone like the beef that Henry and Sam have forever, how they wind up, how Goldman Sachs grows through partnering with other firms in London, and how they made money.

Neither Sam nor Henry could ever admit that he was wrong.

In 1897, on 1 of his frequent trips to Europe seeking to expand Goldman's currency exchange business.

See all Founders transcripts on Applepodcasts

#253 When Money Was In Fashion: Henry Goldman, Goldman Sachs, and the Founding of Wall Street