#103 Hetty Green (The Richest Woman in America)

What I learned from reading The Richest Woman in America: Hetty Green in the Gilded Age by Janet Wallach. ---- [0:10] She was the smartest woman on Wall Street, a financial genius, a railroad magnate, a real estate mogul, a Gilded Era renegade, a reliable source for city funds. [0:19] “I have had fights with some of the greatest financial men in the country. Did you ever hear of any of them getting ahead of Hetty Green?” [1:10] I go my own way, take no partners, risk nobody else’s fortune. [1:29] She was considered the single biggest individual financier in the world. [1:58] A Mind at Play: How Claude Shannon Invented the Information Age by Jimmy Soni and Rob Goodman (Founders #95) [2:55] Watch your pennies and the dollars will take care of themselves. [3:31] Don’t close a bargain until you have reflected on it overnight. [4:00] I am always buying when everyone wants to sell, and selling when everyone wants to buy. [4:51] I never set out for anything that I don’t conquer. [5:55] To live content with small means; To seek elegance rather than luxury, And refinement rather than fashion; To be worthy, not respectable, and wealthy, not rich. [7:27] Her father’s advice: Never owe anyone anything. [9:44] By the time she is 13 she is the family bookkeeper. [11:53] She paid attention when he (her father) repeated again and again that property was a trust to be taken care of and enlarged for future generations. She obeyed when he insisted that she keep her own accounts in order and later praised the experience. “There is nothing better than this sort of training,” she said. [13:28] Hetty hungered for money itself. [14:08] List of financial panics discussed in the book: Panic of 1857, Panic of 1866, The Long Depression 1873-1896 which had several panics within, (Panic of 1873, 1884, 1890, 1893) Panic 1901 and Panic of 1907. [16:18] She was a master at studying what happened before her. [16:31] The First Tycoon: The Epic Life of Cornelius Vanderbilt by TJ Stiles. (Founders #54) and Tycoon's War: How Cornelius Vanderbilt Invaded a Country to Overthrow America's Most Famous Military Adventurer by Stephen Dando-Collins (Founders #55) [17:15] Clever men like Russell Sage, a future role model for Hetty, kept substantial amounts of cash on hand and used it to buy stocks at rock-bottom prices. John Pierpont Morgan told his son there was a good lesson to be learned from other people’s greed and good bargains to be found in the aftermath. In future times, Hetty would always keep cash available and use it to buy when everyone else was selling. Much later, Warren Buffett would do the same. But most people watched their money wash away in the flood. [23:57] This was the start of the contrary investing she followed for the rest of her life: buying when everyone else was selling; selling when everyone else was buying. “I buy when things are low and nobody wants them. I keep them until they go up and people are crazy to get them. That is, I believe, the secret of all successful business,” she said. [26:46] Hetty, like Claude Shannon, Warren Buffett, and Ed Thorp, collected a lot of information. Hetty read more and studied more than most other people. [28:07] The opportunities were enormous for those with the stomach to take the risks. [30:25] The markets may change, the methods may be revamped, but as long as human beings are propelled by greed and ego, they are doomed to repeat the mistakes of the past. [31:11] She had a pile of cash when others were scouring for pennies, but she also had a deft mind and the colossal courage to push against the crowd. [36:17] Hetty’s investments were not always known: she purchased property under fictitious names, bought stocks under other identities, and was praised by shrewd observers for how closely she held her positions. [37:41] Williams greeted his new customer with all the courtesy and respect due a woman of her wealth. “I have observed that many a tattered garment hides a package of bonds and that gorgeous clothing does not always cover a millionaire,” he told his colleagues. [44:14] The Fish That Ate the Whale: The Life and Times of America's Banana King by Rich Cohen (Founders #37) [45:52] Hetty didn't like the idle rich. She respected authentic achievement. [48:48] Companies who stocks had skyrocketed collapsed when their lack of capital was revealed. [49:22] The HP Way: How Bill Hewlett and I Built Our Company by David Packard. (Founders #29) [49:30] More companies die from indigestion than starvation. —David Packard [50:58] She used her intelligence to increase her wealth, her independence to live as she wished, and her strength to battle anyone who stood in her way. [55:24] They sought her out to sell off their possessions. As rates rose, more and more of “the solidest men in Wall Street,” she said, from “financiers to legitimate businessmen,” came to call, begging to unload everything from palatial mansions to automobiles. “They came to me in droves,” she recalled. [59:30] When it comes to spending your life, there have to be some things neglected. If you try to do too much, you can never get anywhere. [59:53] You see this advice over and over again. You just got to figure out what that thing is that you want to focus on. No one can answer that question for you. [1:00:14] I think the key to a happy life is getting to the end of your life with the least amount of regrets as possible. [1:00:24] She prized the life she led. “I enjoy being in the thick of things. I like to have a part in the great movements of the world and especially of this country. I like to deal with big things and with big men. I would rather do [this] than play bridge. Indeed, my work is my amusement, and I believe it is also my duty.” ---- 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. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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• 0:00David Senra?

  A passerby might say she looked as poor as a church mouse, but her clothes were merely a costume to conceal her incredible wealth. Hetty Green was the richest woman in America. She was the smartest woman on Wall Street, a financial genius, a railroad magnate, a real estate mogul, a Gilded Era renegade. "I've had fights with some of the greatest financial men in the country," she said. "Did you ever hear of any of them getting ahead of Hetty Green?" The public resented the somberness of her clothing, the plainness of her diet, the austerity of her home. But Hetty Green refused to yield to the role of Gilded Age socialite. Indeed, she refused to comply with any stereotype.

• 0:41David Senra?

  Defiantly independent, she made her own rules and lived by them. Whatever method she used to make her money, she would not succumb to the tactics of other millionaires. She did not employ workers as slave wages, did not steal land from the public, or outsmart stockholders, or pay off government officials. She did not scheme with Wall Street, or speculate with other people's money. "No," she told a reporter, "her formula for success was simple: common sense and hard work. I go my own way, take no partners, risk nobody else's fortune." Her holdings ranged from mortgages and real estate in New York to dozens of buildings in downtown Chicago, gold, copper, and iron mines out west,

• 1:26David Senra?

  diamonds and pearls, railroads and government bonds. She was considered the single biggest individual financier in the world. By the time she died in 1916, she was worth $100 million, the equivalent of more than $2 billion today. Okay, so that is an excerpt from the book that I read this week and the one I'm going to talk to you about today, which is "The Richest Woman in America: Hetty Green and the Gilded Age", and it was written by Janet Wallach. So I found out about Hetty Green when I was reading the book A Mind at Play, which is the book about Claude Shannon. And in the book, it says that when Shannon wanted to learn about investing, he read books about other investors. And one of the people that he read about and that he studied was Hetty Green.

• 2:11David Senra?

  So my calculus was rather simple. Claude Shannon was really smart. And if he learned from Hetty Green, why wouldn't I? So I'm going to jump right into the book. I have a lot of notes. In fact, I spent about two hours before I sat down to record, trying to edit down my notes with not a lot of success. So at the very end of the book, they have this excerpt, this additional chapter. It's called "The Wisdom of Hetty Green", and it contains a bunch of aphorisms that she'd repeat throughout her life. And I actually think putting that at the beginning is a way for, one, for us to learn about the personality, like who was the person? And I think having the information before you study, like their early life and how they built their business. I think that's helpful. Alright, so let me just read you some of the aphorisms that I particularly enjoyed. "Before deciding on an investment, seek out every kind of information about it."

• 2:54David Senra?

  She says, "Watch your pennies and the dollars will take care of themselves." "After your business is over, you may take your colleague to dinner and the theater, or allow him to take you. But wait until the transaction has been closed and the money paid." She's got some advice on what to do before making a deal. She says, "Before making a deal, if anyone is fool enough to offer you the full amount, take it. If you are offered less, tell the man you will give him the answer in the morning. Think the matter over carefully in the evening. If you decide that it will be to your advantage to accept the offer, say so the next day." And then this ties into another one of her aphorisms, which is, "In business generally, don't close a bargain until you have reflected on it overnight."

• 3:37David Senra?

  She says, "It's the duty of every woman to learn how to take care of her own business affairs." "When good things are so low that no one wants them, I buy them and lay them away in the safe. When owing to some new development and they go up and my shares are so needed that men will pay well for them, I am ready to sell." More on how the way she invests and thinks about value. "I am always buying when everyone wants to sell and selling when everyone wants to buy." And I'll give you several examples of that later on. Then she's going to list what I would say is like her main focus. She says, "Railroads and real estate are things I like. Government bonds are good, though they do not pay very high interest. Still, for a woman, safe and low is better than risky and high."

• 4:23David Senra?

  And finally, common sense is the most valuable possession anyone can have. So let me go back to what she was saying, that the fact that she likes railroads, real estate, and government bonds. I would say, after studying her, that's where, that was her circle of competence. That's where she invested most of her money. Okay, so I want to go over, pull out a couple of other excerpts that will explain to you like the person behind the ideas. And so if you could only, if there's only one sentence that could distill her personality down, it would be this. And this is a quote from her. She says, "I never set out for anything that I don't conquer." More examples of her personality from the book. "When Sylvia," who was her aunt and the richest person in Massachusetts at the time, "when Sylvia warned her away from a dangerous horse, Hetty took it upon herself to break him and rode the wild animal until

• 5:08David Senra?

  he settled down." Here's another idea, a little quick story that'll give you an idea of her personality. "On one occasion, she trundled down with a satchel stuffed with $200,000 worth of bonds and handed them over to John Sisko." John Sisko was her banker at the time. "Her banker admonished her for carrying negotiable securities on public transportation. 'It's dangerous,' he told her. 'You should have taken a carriage.' Hetty shot him a look with her steely eyes and replied, 'A carriage, indeed. Perhaps you can afford to ride in a carriage. I cannot.'" And then another way to, to learn about the personality of somebody is, is through like the quotes and the things that they are attracted to. And so this is, Hetty would repeat this quote that came from her favorite poem. And now

• 5:53David Senra?

  she's quoting her, her favorite poem. She says, "To live content with small means, to seek elegance rather than luxury, and refinement rather than fashion. To be worthy, not respectable, and wealthy, not rich." Okay, so now I want to get into her early life. One thing to know about her early life is she was raised in a Quaker family, that she comes from multiple generations of successful whalers, which was a massive industry at the time. In fact, the, the city, New Bedford, blew my mind to find out in the book, at the time where Hetty was alive and her family was operating the whaling business, it was the richest city in the world per capita. Okay, so let me tell you a little bit about her father. He

• 6:36David Senra?

  had a huge influence, both negative and positive in her life. And it says, "He was consumed by wealth and the intent to increase his means. He admitted that making money was the great object of his life." He pursued his fortune like Ahab pursued the great white whale. Hetty's not born yet, um, she's gonna actually wind up being the first born of her family. But what, what her father Edward really wanted, he really wanted a son. So the book talks a little bit about that. He says, uh, they, meaning Hetty's mother and father, they had no doubt that their first born would be a boy. He, meaning Edward, took satisfaction in knowing his son would inherit both the wealth and the pedigrees. He would educate him in the intricacies of enterprise. It was the duty of every heir, he believed, to increase the family's riches.

• 7:21David Senra?

  With that in mind, he would teach his boy to loan at interest and tell him never to borrow a cent. Uh, one of his favorite sayings was never owe anyone anything. Uh, to, to the surprise and shock and then grief, it's a girl. Edward, which was her father's name and, and Abby, which is her, her mother, Hetty's mother. He says Edward fumed at his fate, Abby sobbed in her pillow. Both rejected their only child. Like the biblical Ishmael, the unwanted Hetty was cast aside. Dismissed from the house, she went to live with her grandfather, Gideon. She was two years old. So Gideon, at the time, uh, that Hetty's two years old, he's the one that inherited the family's whaling business.

• 8:04David Senra?

  Eventually it's going to be passed when Gideon dies to Hetty's father. Gideon actually is the first one that starts educating her in business. And so, uh, let me share a little bit about that with you. He says, with his eyesight failing, he handed the evening newspapers to Hetty and asked her to read aloud. In her child's voice, she was, she called out the stock quotations and commerce reports. That was how she absorbed some of his business methods, she later said. And so from very beginning, they were extremely frugal, uh, their entire goal in life. And I'll talk more about, it's really interesting how the, the family viewed money and how they taught their kids to, to think about it. Um, but their entire goal, I would say is to increase their riches, not to, to spend frivolously. So Hetty, uh, understands that, that lesson from a very early age.

• 8:48David Senra?

  And so as a result, she starts saving money from an early age. Uh, at the age of eight, she gathered the precious coins she had saved from her weekly allowance, oh, and opened a bank account. Not only did she Earned compound interest, she made her family proud. So eventually her grandfather dies and her father inherits the business. And so these are some business lessons that she learns from her father. After he sent her away, they had a, their second born was a son. He died in infancy and then they weren't going to have any more kids. So over time, their relationship was somewhat repaired. And you understand why I use the word somewhat there. But she, he essentially starts to tutor her and to bring, he does something really smart. That he brings her around his business at a very early age. And we've seen this in the past from other founders too.

• 9:32David Senra?

  They were fortunate to have entrepreneurs as parents, right? You can learn a lot at that age. So let me go over some of the business lessons she learned from her father. Just to give you an idea, she is around 10 years old at the time. And by the time she's 13, she comes, she becomes the family's bookkeeper. As inspiration for a young girl in search of a way of life, Hetty turned to her father. It was said, "He squeezed a penny until the eagle squawked." He was known for his cunning and boldness. Edward Robinson ran the company and controlled its affairs and presided over the Bedford Commercial Bank. So something about the whaling, they talked a lot about the whaling industry at the time, which at this time in American history was perfectly legal. Obviously now it's illegal.

• 10:13David Senra?

  But the way I would think about the nature of the whaling industry at that time is very similar if like you invested in like early, early stage companies or even like movies. Each expedition could be thought of as like a miniature company. So you could seed their voyage, right? In return for part of the profits if they're successful, right? But they're heading out into open sea. They don't know if they're going to be successful. But the return, so they capped their downside, right? So maybe they invest $5,000 total for the journey. And in some cases, if they're successful, they'd bring back over $100,000 worth of, like they sell essentially whale oil. And so they had a bunch, the family would have a bunch of these.

• 10:54David Senra?

  It doesn't take very many of these successful investments to generate an excessive amount of wealth. So when her father dies, he's going to have assets of over $6 million. And this is in like the 1800s. So it's a substantial fortune. Even though, I bring that up now, because even though he squeezed the penny until the eagle squawked, he did not spend frivolously. Alright, so it says, uh, he ran the company and controlled his fare. He also presided over the commercial bank. Uh, he was the one Hetty chose to emulate. As her father's anger subsided, the adolescent Hetty stayed closer to his side. She watched him closely as he assessed the inventory, inspected the ships, dealt with the captains, and heard the rough talk of the crews. She listened to him bargain with merchants and berate them when he thought they were charging too much.

• 11:39David Senra?

  She followed along when he took her to the counting house and showed her how to read the ledgers. He brought her to the brokers and taught her how to trade commodities. She paid attention. This is, uh, this is a especially important sentence. One of the most important sentences in the book, in my opinion. She paid attention when he repeated again and again that property was a trust to be taken care of and enlarged for future generations. How many families on the planet think of wealth like that? Very few. She obeyed when he insisted that she keep her own accounts in order and later praised the experience. "There is nothing better than this sort of training," she said.

• 12:18David Senra?

  "A girl, a girl acquires the habit of keeping track of every cent and gets the most value for every dollar she spends." Knowing how frugal and fond of money he was, she imitated her father's ways. Slowly, she flourished and felt she was gaining his approval. So she's being exposed to a very unique set of childhood experiences that very few people on the planet in history would be exposed to. And as a result, it's going to change the way she thinks about work and, and what she's naturally interested in. So, at this time, New York is experiencing a financial boom. They send her, their daughter, to New York. It doesn't stipulate how, how long. My, um, estimation is like for maybe like a summer, maybe three, maybe half a year. So think three to six years, three to six months, right?

• 13:02David Senra?

  While she's there though, you know, they're trying to introduce her as like a lady of society. And to be like trained in etiquette and other stuff. Hetty was not interested in that at all. And so this is what the book says about it. It says Hetty was focused on expanding her fortune. The debutante's world held little attention for her. She may have enjoyed dancing and she may have indulged in gossip, but she had no taste for frothy teas, no craving for fussy clothes, no liking for luxuries that money could buy. Hetty hungered for money itself. So she winds up going back to New Bedford after a few months. She cuts her trip early. She does have a little bit of money to invest at this time. She's still rather young. But she, you know what's funny? I didn't realize going into the book.

• 13:46David Senra?

  It's a biography of Hetty Green, no doubt, but it also is like a brief history of all the different financial crises that she lived through. So let me, I have a list of economic crises that she, that the book talks about and that we, that are kind of instructive in understanding why she was able to accumulate so much money. Right? She becomes the richest woman in the world. So let me just list some of them. Panic of 1857, Panic of 1866, the Long Depression, which lasted from 1873 to 1896 and had a bunch of different panics within that. That includes the Panic of 1873, the Panic of 1884, the Panic of 1890, the Panic of 1880, 1893, and in the 1900s, the Panic of 1901 and the Panic of 1907.

• 14:30David Senra?

  And so these are almost like characters, like additional support, like supporting cast in the book as well. I've told you in the past, I find it fascinating to go back and read about times of like great human struggles. Sometimes that's war. A lot of that time for me is like financial crisis. And the book almost becomes repetitive and you just realize it's the whole thing that we talk about all the time, that history doesn't repeat, human nature does. And this book is a, it's, you know, it's a quick read. It's like 300 pages, maybe seven, eight hours, something like that, maybe nine. But it's, it was enlightening to me to see this affirmation. I feel that, that, that statement that I just said, that history doesn't repeat, human nature does, to be fundamentally true. And when you study these panics and when the book lays it out, you know, they don't go into too much detail, but they give you a nice overview of what's happening.

• 15:16David Senra?

  And you, it's a great illustration for that idea. All right. So let me jump back into my notes. Okay. So at this point in the book, Hetty, Hetty's essentially about to learn some very old lessons about human behavior during booms and busts. And she's a quick learner and she uses this to advantage her entire, entire life. So it talks about more railroad slipped as confidence fell. And for a few months, Wall Street trading primarily in railroad stocks ran gloomily off the tracks. But if speculators who had bought on margin, remember, her dad just told her, never borrow a cent, ever. So when there's gonna be a panic where most banks are failing and most businesses are going underwater, the family business that has gone over multiple generations was fine because they had no debt. So it says, but if speculators who had bought on margin were forced to sell their shares

• 16:01David Senra?

  to cover their losses, shrewd investors like Commodore Vanderbilt, so there's Cornelius, he's popping up again, and speculators like Jay Gold swooped up the stocks at low prices. Hetty Robinson would later do the same. So she was a master at studying what happened before her, so she wouldn't make the same mistakes. And it's funny to me because this book has, it mentions, I don't know, probably like 10 different people that I've already done episodes for founders on and a bunch that I'm gonna do in the future. So obviously, I've done two on Cornelius Vanderbilt. If you haven't gone and listened to him, I would recommend going back and listening to him. Alright, so now we're at the panic of 1857, and I want to tell you a little bit about what Hetty learned from it. So it says, and then the bubble burst.

• 16:43David Senra?

  Towards the end of 1857, the news from the Ohio Life Insurance and Trust Company leaked the first bits of air. Its New York branch had embezzled millions of dollars. The bank had borrowed funds from other New York institutions in order to lend money to railroad builders and speculators in railroad stocks. The overextended railroads had borrowed millions of dollars from Ohio Life and could not pay them back. A few clever men like Russell Sage, a future role model for Hetty, not only did she learn from him, she winds up, even though he's much older than her, she winds up becoming friends with him because she thought he was so smart. A few clever men like Russell Sage, a future role model for Hetty, kept substantial amounts of cash on hand and used it to buy stocks at rock bottom prices. This is happening in the 1800s.

• 17:26David Senra?

  We just saw Warren Buffett do the exact same thing 10 years ago. Like, this literally happens over and over again. It's so funny that humans, that us, for some reason, the small selective humans just cannot learn from history. And this, this, what I'm reading to here, uh, this is the general blueprint. What's happening in 1857 is, is the general blueprint that she's going to follow her whole life and happens over and over again. Uh, she takes advantage of the fact that people don't learn from history and that she did. All right. So it says, uh, she, we just talked about a few clever, clever men like Vanderbilt and Sage. Hey, they had a bunch of cash. Uh, JP Morgan told his son, there was a good lesson to be learned from other people's greed and good bargains to be found in the aftermath. In future times, Hetty would always keep cash available and use it to buy when everyone else, else was selling. So this is important, not only if you're going to invest it, but for your business as well, your personal finances as well.

• 18:10David Senra?

  You should have a giant buffer in your personal finances. You should have a giant buffer in your business for this exact reason. Much later, Warren Buffett, oh, I just said this, but I'm running over the author's point here. Much later, Warren Buffett would do the same. Warren's actually mentioned a bunch of times in this, uh, in this podcast, in this book. And again, uh, I'm going to point out one of the most important sentences in the book. So the author just gave us a bunch, a bunch of examples of people that bucked the trend and did not allow themselves to be compromised by the inevitable financial booms and busts that are going to happen in your lifetime. Right? So this sentence is important. Most people watched their money wash away in the flood. You don't want to be like most people. This, this panic of 1857 affects New Bedford as well.

• 18:54David Senra?

  I just said this, New Bedford is the richest city per capita in the world at the time. But at the end of 1857, as people switched to kerosene, the price of whale oil seeped down and the New Bedford bank went under. Edward Rob, Edward Robinson, that's her father, who made it to practice, never to borrow, kept his business buoyant. Now I want to get to explicit, this is a very, very interesting idea. How Hetty's family thought about money explicitly? So the background here is they, the family has a multi-generational, uh, history of passing the inheritance and the business on to the eldest son. And then their job is like, you better die with more money than we're giving you and you better pass that along. Right? So it says, at this time, it wasn't Hetty wasn't sure if she was going to inherit the money.

• 19:38David Senra?

  And I'll tell you more about kind of this double crossing that her dad does to her. Because he's like, yeah, you'll get it, you'll get it. Okay, so it says Hetty appealed to her father for her share in the inheritance. The Howland fortune, which is her grandfather's last name, which had gone from her great grandfather to her grandfather to her mother, should now go to her, the only direct living heir. But Edward insisted he know how to invest the money, make it grow. Not only that, this is where I mean about this is a unique way of Hetty's family thought about money. He had the responsibility to increase it until his death. Then, he reminded his daughter, he would turn the money over to her for her to do the same. So that's what she thinks the plan for her life is, right? So at this time, she goes to school, she goes to boarding school for four years, she'll take a few classes.

• 20:22David Senra?

  But really, she's educated in the family and in the family business, which is again, it's very rare in the day and age that we're in, another great idea from history. So this is some more lessons Hetty gets, learns while she's working with her father. At his request, she worked closely with him on his portfolio of stocks, bonds, and real estate, and on his shipping businesses, which demanded extensive daily attention to commodity prices and futures trading, shipping rates, banking rates, worldwide credit, and politics. After years at his side, Hetty felt more than competent to analyze the news, assess the financial markets, and keep her father abreast of changes. Now, her father dies. Let me read this to you, and then I'm going to read the note I left to myself, because I didn't understand what was happening at the time in the book. Now I realize it later.

• 21:04David Senra?

  Alright, so his father dies, the will is announced, and it's not good. She would receive the income, but not control of the principal. Hetty was crushed, diminished by a sweep of a pen. Her father was dead, and most of her money would be managed by others. Once again, she felt betrayed. For years, she had apprenticed at her father's side. For years, she had shown her father how skillful she was in finance. For years, she had proved she was smart as any man. Yet gone was the respect she had thought she had earned. So the note I left to myself was, wait a minute. Does she build her entire empire off of the investment income, not the principal? Which is what, you know, the generations before would have done. They would have given the entire principal to the person, to the heir. Which is, in her case, which is, in this case, was Hetty.

• 21:47David Senra?

  And she does, which makes her story remarkable in the sense that, wait a minute, she built an entire empire just off of investment income. Well, imagine what she could have done with her skill set and the entire principal. She winds up suing the people, the people that her father leaves to manage the investments were, in Hetty's opinion, like incompetent. So she winds up going, I think, multiple decades fighting them. I don't know if she ever gets control, I can't remember that unfortunately. I don't think she does, but it's pretty remarkable when you think about it like that. Alright, so now we're gonna see the way her mind works. And this is where she, this is where she's saying what, what she has arrived at is the secret of all successful businesses. In this case, we're around the Civil War. At the time of the Civil War, they, the US government was issuing these things called greenbacks.

• 22:31David Senra?

  So in today's day and age, you might have heard like, greenbacks is a slang for like, money, the money we use now. At the time, it was a very specific type of currency, currency issued by the US government, not backed by anything to finance the Civil War. They only did it for like, I read the Wiki, I just read the Wikipedia page, I think it was like, three different instances where they printed the money over like, five or 10 year period. It was, it was a very short experiment. So anyways, this is, we're gonna see the basic MO that Hetty uses her entire life. And I think a lot of where, when I thought about it at the end of the book, I was like, what did Claude pick away from this? I think like Claude was known, first of all, he had some of the best investment returns of all time. He did it rather simply. He focused on, you know, it was him, his wife, and an Apple II computer, and they

• 23:13David Senra?

  were out competing like, you know, people, mutual funds with hundreds of researchers and stuff. He kept things simple, watched his costs, and then he consolidated most of his money in things he knew well. Hetty did the same thing. You know, she really focused on, she loved having mortgages, loved investing in government bonds, and loved railroads. So, this is an example of that. The devastation of the South, the high debt caused by the war, and the disarray of the Union created a stormy picture. Many people viewed the country's economy as doubtful. Seeing chaos around the corner, they worried about the stability of government and refused to pay face value for greenbacks. Okay, so she's, it's like being able to buy a dollar now for 50 cents, is essentially what she's doing here. Instead, they rushed to gold. The more the public discounted paper money, pushing it down as low as 50 cents on the dollar, the more Hetty bought.

• 23:58David Senra?

  This was the start of the contrary investing she followed for the rest of her life. Buying when everyone was selling, and selling when everyone else was buying. Quote from Hetty, "I buy when things are low and nobody wants them. I keep them until they go up and people are crazy to get them." Remember, she did this by herself. She was an individual financier. Think about how crazy that is. And she, and part of the reason you're able to do that, and just part of the reason Claude was able to do that with his wife, is because you have to keep it simple. Uh, he says, "That is," and this is going back to, um, Hetty's quote, uh, "So I keep them until they go up and people are crazy to get them." That is, I believe, the secret of all successful businesses. Now, around this time, she, uh, she winds up getting married to another businessman. He's about thirteen or fourteen years older than her. He made a lot of money in the Far East. For some reason, they have to go to London to

• 24:43David Senra?

  something to do with her business. So they lived there for seven years. And so I want to talk about a little bit how she worked, and this is her years in London. Um, so it says, "Hetty had her own business to attend to, concentrating on investing the interest from her father's trust fund." So that's what I was telling you earlier. "Like Andrew Carnegie, who cried, 'Eureka, here's the goose that lays the golden egg,' when he discovered the power of dividends, Hetty had already learned the magic of compound interest." Uh, now she used her money to buy high yield, to earn a high yield, paid in gold, on Civil War bonds. Okay, so now these are some, uh, direct examples of what she's investing in. Uh, even better, she could reinvest those dividends to earn more, and all the time she was compounding her return. Now, this is really interesting. I, there, in the book, there's actually a historical

• 25:27David Senra?

  precedent for what she's doing, right? Um, she's making money on Civil War bonds. Most people do not want to invest in that because they don't, they think it's, uh, like, you know, the, the country could be ripped apart. You have a high chance of losing your money. Now, the historical precedent for this, precedent for this, that surprised me, so you know John Adams, right, the second president of the United States? His, his, his wife, Abigail, was actually a really successful investor, using ideas that we see Hetty doing, what, seventy-five years later? It says, "Abigail Adams, who had bought state notes," that's what they were called, "after the Revolutionary War," When there was little confidence in the new government, found out the value of depreciated bonds. So it's exactly what's happening with Hetty, right? Against the objections of her husband, John, who put his money in land,

• 26:12David Senra?

  Abigail used her money to buy the bonds, which increased far more in value than her husband's real estate. I thought that was hilarious. I want to tell you about that. All right, let's go back to Hetty. Hetty increased her share of railroad stocks and US Treasury bonds. We see her, you know, starting to lay the foundation of what she's going to do her whole life. The bonds would prove to be an outstanding investment. And now here, we're going to get some words from Hetty. "I started out by buying government bonds," Hetty said, describing her first year in London. "Using the gold she received as interest, she bought the bonds at a discount and earned a solid dividend." Only a small group... Now, here's also the key to Hetty. She, like Claude Shannon, like Warren Buffett, like Ed Thorp, she would collect a lot of information. And here's the weird thing about life.

• 26:55David Senra?

  If you just read more and you're reading the right stuff, that puts you ahead of so many other people. Humans are unbelievably lazy. Like, it's shocking. And the fact is, like, Hetty read more and studied more than other people. That's in part to her success. Like, that's a really low bar. That's not, you know, you're not running marathons every day. You're not picking up boulders. Like, you're just absorbing information that's helpful. I don't understand. I really have a hard time understanding why people wouldn't do that. So now, I'm going to... Let me tell you why I just gave you that opinion. It says, "Only a small group of investors had access to as much information as Hetty did on the railroads and their maze of lines. Her transatlantic connections, her insistent research,

• 27:38David Senra?

  her in-depth questioning, and her constant reading helped her decipher the complicated financial code and decide which rails to invest in and which one to avoid. In one day of that year, I added a clean $200,000 to my bank account. That's the most money I ever made in one day," she boasted. $200,000 in like 18, late 1860s money. That's crazy. By the end of the year in London, her profits reached 1.25 million dollars. The opportunities were enormous for those with a stomach to take the risks. So, actually, the time, it'd be the late 1860s, early 1870s, because this is a huge run-up before the Panic of 1873. So I want to tell you a little bit about the Panic of 1873, then we're going to talk

• 28:22David Senra?

  about like what she did during that. All right, it says, "Suddenly, something snapped and the machinery stopped." So this is one of the first financial panics where it was like the contagion couldn't be isolated to like one city or one country. It says, "A Vienna banking house broke under the weight of too heavy a load of Missouri, Kansas, and Texas securities, followed by another carrying too much of Canada Southern." These are railroad. "The financial organism winced like a leviathan with a harpoon in its vitals. As the spasms spread from stock exchanges to banks and from banks to investors, from Istanbul to Stockholm, from Edinburgh to Alexandria, the world crouched in pain. The wounds had come from speculation." More on the Panic of 1873.

• 29:06David Senra?

  "With panic growing on Wall Street, the storm turned into a tidal wave. Twenty brokerage firms shuttered their doors. Hordes of people rushed to withdraw their funds from the banks when it was clear that no one was willing to buy at any price. The stock exchange in New York closed its doors and kept them closed for 10 days." Now, we're going to get more on the Panic of 1873 and another example of that quote. "History doesn't repeat, human nature does. The Panic of 1873 was preceded by an era of gigantic railroad and investment speculations, which were the principal causes of the panic. The speculation in land was enormous all over the country. Prices in real estate were multiplied beyond all precedent."

• 29:49David Senra?

  You could say the same thing in the run-up in the early 2000s, right? "The obligations incurred in building the railroads and in this real estate speculation were too enormous to be sustained, and when it came time to settle up, people suddenly found themselves unable to resolve their obligations and became insolvent." Right? So it's the opposite of a margin of safety. They're leveraged, they're up to their eyeballs in debt, and then it turns the other way, they're fragile and they're gonna break. People that are robust are even anti-fragile like Hetty Green are gonna thrive. Which one do you want to be? Across the panorama of history, the same potent forces that have driven men to war and devastation have also driven them to financial destruction. Another one of the most important sentences in the book. "The markets may change, the methods may be revamped, but as long as human beings are propelled by greed and ego, they are doomed to repeat the mistakes of the past."

• 30:34David Senra?

  Okay, now we got to Hetty's response to the panic of 1973. "At this time, when stocks were abandoned, Hetty wanted to trade. 'I believe in getting in at the bottom and out at the top.' How many times did she repeat that in the book, she often said. 'I like to buy railroad stock or mortgage bonds. When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away.'" Remember, don't forget that Greenback investment I just talked about. That's almost 10 years before we are in the book, and it's gonna turn her way in a very um, like she's gonna make a lot of money on it because of what she just said. "I just buy it and tuck it away." For Hetty, the decline in the market offered an opportunity for the future. Hetty was a fearless pit bull charging into the sloth of frantic bears. She had a pile of cash when others were scouring for pennies.

• 31:18David Senra?

  She also had a deft mind and a colossal courage to push against the crowd. She was very much just like Henry Singleton, nearly every single person I've covered. Like, they're not gonna write a book about your life if you just follow conventional wisdom. It's like, hey, this person was born, this person lived, never had a unique thought in their life, and then they died. No one will read that book. You have to eventually develop, like, trust in your own judgment, after you put the work into trust your own judgment, and then act on that judgment. Have faith in yourself. Hetty has extreme faith in herself, and we see that over and over again. So she had the courage to push against the crowd, just said that. Now, "It was far easier to lose money than it was to make it." And isn't this statement always true?

• 32:01David Senra?

  And that's probably why so many successful entrepreneurs, investors are resourceful instead of wasteful. So it's easier to lose money than to make it. Now we're gonna see our boy Commodore Vanderbilt. Even Commodore Vanderbilt had been badly hurt on the day of the crash. But what's the difference? Why was he able to still survive this crash? And then, and then leave, you know, how much money did he leave to, to his, uh, like his, his kids or whatever? So it says, "Even Commodore Vanderbilt was badly hurt on the day of the crash." "Most of his railroad stocks had plummeted and some of the firms he did business with were forced to close." "But Vanderbilt bought his stocks in cash and was able to wait out the market." "His followers, who risked their money on 10% margin, were racing to cover their losses." And now we're gonna get some advice from Commodore Vanderbilt.

• 32:46David Senra?

  Nearly 100, what, how long is this? 150 years, something like that after he said it? "When a friend complained, he replied, 'If you had bought 100 shares instead of 1,000, you could have held on. Never be in too great a hurry to get rich.'" Like Hetty, he bought his railroads for the long haul. Um, so in the aftermath of the panic of 1873, this is when her investment in greenbacks paid off. She had to wait almost 10 years for this, though. "The following year, after the economy failed to improve, Congress legislated to strengthen the system of you, of, uh, to strengthen the system by backing US dollars with gold." "Those like Hetty, who had held on to their discounted greenbacks, bought after the Civil War, were now flush with wealth."

• 33:29David Senra?

  And around this time, she has kids and she tell, this is advice that she tells her kids over and over again. I've already said at the beginning, but it's important. Uh, "Watch your pennies and the dollars will take care of themselves." Now, I'm skipping over, obviously, you know, these are not summaries. This is just the, to me, the things I wanna remember, the most important ideas that I got from the book. So I'm gonna skip over vast parts of this. She's married, she's two kids. Her husband is like the opposite of Hetty. He's a speculator. He makes a lot of money, then he goes broke. Makes a lot of money and then goes broke. And he doesn't learn. I'm reading his, the, the stories in the book. I'm like, doofus, what are you doing here? How many times are you gonna make the same mistake over and over again? And so, her husband had the ability to get rich, but as we've talked about in the past, getting rich is, requires one set of skills.

• 34:14David Senra?

  Staying rich requires another set of skills. You have to master both, right? Hetty mastered both. Her husband mastered one. And this is the, this is going to cause the end of the relationship. Hetty would not divorce. She thought, you know, you get married, you get married for life. But they started living separately. They reunited and were on like, you know, kind of friendly and unpleasant terms. They spent more time together at the end of their lives. But she could put up a lot of stuff and you'll see here. But he essentially stole money from her and she was not willing to put up with that. So, uh, it says, "Hetty went in and saved him three or four times," said a stockbroker friend. Meaning, you know, she had essentially give a personal bailout. "She would lecture him about the chances he was taking. But time after time, the turn in the market confirmed his judgment. He disobeyed her once too often though, and she got rid of him."

• 34:58David Senra?

  I'll tell you when this happens, but at first I want to get to something else. I want to tell you why. So we, we know like what she liked, right? Government bonds, mortgages, real estate, railroads. Why, like, these are the benefits. This is the benefits Hetty saw in investing in railroads at this time. And there's probably parallels to, say, the internet and other things that are enabled by the internet today, right? So when I read this to you, don't be so fixated on, she's, she's describing railroads. Take railroads out and like, think of other things that care, that, that have these same characteristics. And you could probably find an area that you want to invest your time and energy, right? So, "The railroad revolution raced ahead and America sped with it. Hetty Green put her money in the race. The railroad's dynamic potential, their promised return on capital,

• 35:43David Senra?

  their unregulated operation and their untaxed profits provided infinite possibilities for finding its ears. Since the end of the Civil War, Hetty had been investing in, among others, the Reading Railroad, Rock Island Railroad, Connecticut River Valley Railroad, and the Louisville National, not Nashville Railroad, excuse me." Now, that's why she liked railroads, right? But another aspect of her personality is she had the ability to keep her mouth shut, which is so rare. And she purposely hid what she was doing because she didn't want people to follow on, and she also hated to being hounded for money. So it says, the note I left myself is Hetty moved in silence, which I think is smart. Hetty's investments were not always known. She purchased property under fictitious names, bought stocks under other identities,

• 36:26David Senra?

  and was praised by shrewd observers for how closely she held her positions. Not only that, if you keep quiet about what you're doing, you're also, it might be a good way to know that you're doing it for the right reasons. There's some dynamic in human beings where like, we do, sometimes, well, not sometimes, all of us are guilty, this, myself included, we do things for the wrong reasons, meaning we do things to impress other people. And that's probably not a good, usually those are not the best decisions in your life. So at least Hetty's making these decisions, and that's why the people think she's so smart, because she thought they were the best investments. Alright, so now, she switches banks. She switches banks because her husband winds up owing the bank $700,000. And she goes to do a transaction, she's like, "Oh, that $500,000 you're looking for, Hetty, isn't there anymore because your husband pledged that as collateral."

• 37:10David Senra?

  That is gonna be, is like the last, you know, the straw that broke the camel's back in their relationship. But before I get there, I want to tell you this observation that her new banker has, which I love. So she says, she switches banks, right? This is the new bank's president after meeting Hetty. And keep in mind, Hetty is transferring over $25 million in assets to him at this time. And so his last name is Williams, and he says, "Williams greeted his new customer with all the courtesy and respect due to a woman of her wealth." Now, this is the most important part. I have observed, he's telling other people, you know, she comes in, she looks like, you know, she doesn't care about clothing, she just looks like a normal person. And so he, after he meets with her, he has to tell her colleagues, he's like, "Listen,

• 37:53David Senra?

  I have observed that many a tattered garment hides a package of bonds, and that gorgeous clothing does not always cover a millionaire." So what is he saying there? That, and a lot of times, people that you think look rich, spent all their money looking rich, they don't have assets, it's a facade, they're like a peacock.

• 38:15David Senra?

  Hetty, Hetty's like an owl. She's like, she hides her strength. It's surprising when you see how adept she is. And so the first part of that sentence is really describing Hetty. "I have observed that many a touted garment hides a package of bonds." Yeah, bonds worth $25 million. Okay, so I just told you her husband bought stock on margin. Or I don't know if I told you that, but this is the note I left myself. Obviously, when things go the other way, the investment went below zero. And so now he owes money to the bank he doesn't have. So they take her $500,000 account at collateral. And he did this without her permission or knowledge, and that's just not good. So it says, "He stood by her funeral, sworn for her in lawsuits, advised her in finance, and fathered her children. But in the end, he had crossed the line.

• 38:58David Senra?

  She could live with his philandering, his drinking, his philandering." She caught him cheating on her because she hired a, she thought, she noticed he was too nice to women, so she hired a private investigator. And all she said was that he told her everything she needed to know about her husband. So she could live with his philandering, his drinking, his card-playing, and his chancing speculations, but she could not tolerate something far worse. Edward, so her husband and her father have the same first name, Edward had betrayed her. He had risked her money for his own return. He had squandered some of her wealth. And in doing that, he had cost her some of her worth. Hetty bade him a fond farewell." This is a description of how she would work. "She scoffed at the offer of a private office and instead chose a seat at an empty desk

• 39:44David Senra?

  or sat on the floor." So she's working out of the bank where she keeps all of her money and her assets, so she doesn't have to pay for an office space. "She promptly went to work, she clipped her coupons for dividends, read her newspapers thoroughly, scoured trade papers, perused periodicals, checked pertinent journals." What is, essentially, those are all different descriptions that she read. Uh, this is what I was talking about earlier. Probed the men in the office and conversed with her male colleagues. She, she, she said in the book that she really loved that, uh, so many men respected her intelligence. That every day people would like visit and try to pick her brain and stuff. So she was very, uh, proud of that. Um, when she had read, quizzed, grilled, interrogated, interrogated and investigated enough.

• 40:26David Senra?

  When she had studied the cost, analyzed the assets and dug the debt, uh, dug through the debts. When she had found the answers to suit her, when she knew the true worth of a company and understood its weaknesses. When she was satisfied that its basic values were sound and its assets strong, that the downside risk was capped. They say low, but I use the word cap and the upside high. Then she invested her money. So that's a description of how she's working. Uh, this is what she preferred most and it's not going to be a surprise to you. She much preferred common people to the stuffy socialite, socialites of the upper class, even though she belonged to the upper class. What she preferred most was her work. She loved digging up the dirt on businesses and she loved the nitty gritty of finance. I have a head for numbers, she said. They light up and tell me a story.

• 41:11David Senra?

  Something interesting, uh, about Hetty too, that surprised me. She was nomadic. Uh, so it says, she used, she was used to shuttling between places. She moved like a nomad from boarding houses to flats to hotels, from Brooklyn to the Bowery, Hempstead to Hoboken, changing her name, evading the press, the public and also the taxman. Like thousands of New Yorkers then and now, she escaped city and state taxes by refusing to establish a residence. Where she lived mattered little to her. Day, her days were a whirl, whirlwind of transactions. At night, all she wanted was refuge. More important issues occupied her thoughts. Uh, I want to tell you a little bit about what it was like to negotiate with Hetty Green and how she makes a quick $368,000 profit. She gets a visit from some railroad, uh, men.

• 41:55David Senra?

  She goes to two men from the Richard Terminal made her an offer that seemed too good to refuse. She had bought the stock of the railroad at $70. Now it was selling at 100. The officers of the railroad offered to buy her 6,400 shares at 115, uh, 115 dollars. So that's 15 dollars above market, obviously. Hetty wrinkled her nose at the cash and declared she would be willing to sell, but only if they paid her more. She would accept the deal at 125 dollars a share. They declined and left. They soon appeared again. This time, they say they would agree to, that if she would agree to support their candidate for president of the railroad, they would sign a contract secured by collateral to buy her shares at $125.

• 42:36David Senra?

  "Oh, no," she sniffed, dismissing their bid. "She couldn't do that. Their offer was not in cash. Oh, and if you want my vote, you have to pay me $130 per share." Further negotiations led to her triumph. In true Hetty's style, she sold her stock for $127.50.

• 42:55David Senra?

  Oh, this was hilarious. Let me read this quick paragraph to you and then tell you what is the context. What surprised Hetty, what surprised them was not that Hetty took the train to save money. Rather, it was that she had secretly acquired far more shares of Reading Railroad than anyone knew. She was a rare person who could hold her tongue, and they sheepishly had to admit that she managed her business far better than most men. So what they're talking is, she shows up at like a stockbroker. She shows up with a million dollars of stock in Reading Railroad. And they, for some reason or another, it has to be transferred from New York to like Pennsylvania or something. I don't remember what it was. And she's like, "Well, how much are you going

• 43:38David Senra?

  to charge me to transfer the stock?" And they're like, "A hundred bucks." And she went ballistic. And she's like, "Why would I do this? I could pay $4 round trip and do it myself." So that's what she did. So this, she's traveling around with a million dollars of the stock to save $96. It's just hilarious to me. Oh, I love this idea. So she has like a young son at the time. He's probably in his early 20s, something like that. And she wanted him, remember, she's a firm believer in investing in railroads at this time. And she wanted her son to make money from railroads. But first, she thought that he had to understand railroads at their most fundamental level. And they go all the way back to the podcast I did on the Sam Zemurray, I think the book is like The Fish That Ate the Whale. If you haven't listened to it, you gotta listen to

• 44:22David Senra?

  it. It's fantastic. Or read the book, too. And his famous quote, you know, he was a penniless immigrant and wound up becoming fabulously wealthy just by studying the banana industry, for God's sake. But the quote in the book, he's like, "Listen, if you know your business from A to Z, there's no problem you can't solve." So Hetty is trying to instill her son with that wisdom. He's like, "Well, you can't..." You'll be more successful if you actually know they were railroad industry, right? So with railroads propelling the country, she wanted him at the forefront. But she knew he needed an education in how the railroads functioned before, before he could captain his future along the track. The time had come for him to see his operations from the inside. Limping along the tracks with his new cork leg, he had to have one of his legs amputated above the knee.

• 45:06David Senra?

  He toiled as a section hand and foreman on the Connecticut River Railroad. Weeding and clearing the track, running a locomotive and eating lunch with the working men. A quick student, he learned the ways of the railroad and after several months gained an understanding of the process. From there, he was sent to Cincinnati where he worked as a superintendent and then as a managing director of the Ohio and Mississippi Railroad. There's some more, well, I'll go back to her son later. This was interesting about her personality. She had a high disdain for self-indulgent socialites, which is interesting because if you think about it, like even though her Quaker family, like they weren't into drinking and, and, and being wasteful, they did like still, you know, they're blue bloods. They were, they were rich.

• 45:50David Senra?

  And this is, but she didn't, she didn't like the idle rich. She respected people that had authentic achievement, right? People that made, that knew the value of dollar, made their own money, even if they inherited some of it, like they did something with it. There's a lot of people where they just, they got money from their relatives and they just sat and they parted all the time. Hetty was not, she did not respect those people. So her daughter's about to marry one of these people. It winds up not working out, but this is, I thought it was interesting. So this is what her daughter, this is her talking about her daughter's potential husband, who's an heir to a family fortune. He says, "I found that your young man is very nice and proper," Hetty told her daughter. "But if it wasn't for his father, the world wouldn't know a thing about him. He has never earned a dollar and doesn't know the value of money."

• 46:32David Senra?

  Hetty had only disdain for self-indulgent socialites. With that, Hetty went back to business. Others might fritter away their time and money on the conspicuous consumption of the Gilded Age, but she had scores to settle, buildings to buy and railroads to run. I want to introduce you, remember we always talk about books are original links. This is going to be Collis Huntington, he's going to be on the futures episode of Founder. If you don't know who he is, you probably know one of his partners, Leland Stanford, the founder of Stanford University. Anyways, Collis and Hetty did not like each other. They were competitors. They went up meeting, this is her threatening to kill him, actually, I wanted to include this. "She offered him a seat and some friendly conversation, but when he made threats against Ned," that's her son, "Hetty flashed her steely eyes and said, 'Up until now Huntington,

• 47:15David Senra?

  you've dealt with Hetty Green, the businesswoman. Now you're fighting Hetty Green, the mother. You harm one hair on Ned's hair, oh, excuse me, one hair on Ned's head, and I'll put a bullet through your heart.'" With that, she reached for the gun that she kept on her desk. Huntington ran out the door. Okay, now, I want to go back to Ned, because she gives really great advice. I always say, like, if you want to get good advice from somebody, and they have kids, ask them the advice they'd give their children. And this is advice she gave her son. "Years of his mother's training had taught him to study every aspect of the subject, from the condition of the roadbeds, to the state of the rolling stock, to the rates to charge for freight." So he was just talking about like, how detail oriented she was, right? "But he was sometimes too nervous to make a decision and telegraphed Hetty for advice. 'You are on the ground,' she answered.

• 48:00David Senra?

  'Mind your own business.'" "Once, when he was visiting his mother, she told him about the new Bedford whaling captain, whose two sons served as officers on his ship. They carried the titles and wore the uniforms, but stood aside while their father did all the work. When their father died, the two young men tried to steer the ship, but without experience, they lost control. The boat ran aground, and all was destroyed. The message was clear. Ned had to learn how to take command." "I sent you to Texas to learn the railway business," Hetty said. "I can't teach you by telegraph from New York." She wanted him to learn from his own mistakes. This is a description of the Gilded Age.

• 48:44David Senra?

  And this happens over and over again in the booms and busts of the period. But it says, "Companies whose stocks had skyrocketed collapsed when their lack of capital was revealed. Money became so tight that short-term interest rates had soared to as high as 75%. One of the most heavily traded stocks on the exchange could not get credit and declared insolvency. The market plunged. Investors panicked. The Gilded Age, like other areas of avarice, opulence, and easy credit, burst from gluttony." So when I read that one sentence, I really thought about something I read from one of the founders of Hewlett-Packard, David Packard. That podcast, I think I did back on like, it might be podcast number 32, I can't remember at the moment, but he says something I'd never forget about.

• 49:28David Senra?

  And he learned this from growing up in the Great Depression. He says, "Most companies, more, excuse me, more companies die from indigestion than starvation." The Gilded Age, gluttony is indigestion. It's not starvation. And it's actually surprising to most people that it kills more companies than starvation. All right. She has an interesting strategy. She owned a lot of land. This is her strategy, investing in land. "Like John Jacob Astor, almost a century earlier, her strategy on land was to let the weeds grow while others planted flowers. When the flowers bloomed and the surrounding property increased in market price, the value of her land went up too." Now, why would she do that? Because she says.

• 50:08David Senra?

  "And most importantly, to Hetty, as unimproved property, it stayed untaxed." Now, I've skipped ahead in her timeline. She's older now. And I'm going to update you about a typical workday for Hetty. Because although it changes somewhat, it remains rather consistent. So this is probably 20 years after the other part I just read where explaining like a typical workday for her. So it says, "She sat down at her desk and began her business. Four times a day, the letter carrier brought stacks of mails to the bank." She's working at a chemical bank at the time. This is where all her assets are. "Hetty read the letters, scanned the tabloids and broadsheets, sifted through piles of papers, checked the mounds of coupons to clip, tracked her lawsuits, decided which railroads, real

• 50:51David Senra?

  estate, and bonds to buy or sell, and oversaw the scores of payments on loans and mortgages to collect." This is one of the most important sentences of the book to me. "She used her intelligence to increase her wealth, her independence to live as she wished, and her strength to battle anyone who stood in her way." And then I thought to myself, I was like, what more could we all want? Use our intelligence to grease our wealth. Use that wealth to buy the independence to live as we wish and the strength to battle and overcome any objections that get in the way of that. This is something I admire about her. This is very hard to do, in my opinion. I have a really hard time of turning it off. She apparently did not have that problem. At the end of another long day, she parted from the bank, leaving behind the feel of

• 51:32David Senra?

  crisp new bills, the sounds of bonds being clipped, and her concerns over finance. "Business never disturbs me after business hours," she said. "I never worry about things. I do the best I can every day as I go along." So at this time, where are we? We're in like the, now we're 1901, okay? I want to introduce you to another person that's going to be a future founders episode. His name is John Gates. He's known as Bet a Million Gates. Let me tell you a little about him. John Gates was a smooth-talking barbed-wire salesman turned daring entrepreneur. And he led the merger mania that's about to occur here. In 1898, he combined seven factories in Illinois into the Consolidated Steel and Wire Company. Two months later, he sold that business to another firm. He starts another business. He says, uh, he was not satisfied.

• 52:17David Senra?

  He wanted to cash in on his assets by selling stock to the public. With his salesman's showmanship and with the help of banks that underwrote the issue, the new company offered shares at a market price of $24 million. Wall Street gobbled it up like cotton candy. Okay. So this is a time in American history, American business history, where there's a huge amount of consolidation. Hetty did not like that. By 1901, hundreds of small businesses were folded into huge conglomerates. The number of companies within those fields shrunk from 1,800 to fewer than 200. As a result, America rose to become the world's largest supplier of copper, cotton, corn, coal, steel, iron, and oil. But its position came at a high cost to the country. Prices were fixed and politicians were paid off.

• 53:00David Senra?

  This is crony capitalism that I think is disgusting. Chauncey DePoo, elected to the Senate in 1899, later admitted under oath that the Equitable Insurance Company had paid him a substantial annual retainer while he was a legislator. To Hetty's fury, the small businessmen who made up much of the American economy could not compete and were sidelined. "One or two people controlled entire industries. They are ruining the chances of the people," Hetty said. So this huge boom that's gonna happen right before a bust in the panic of 1907. So this is how Hetty maintained the composure during the run up before the panic of 1907. It's actually really interesting. So it says, "In the frantic heat of the market, Hetty kept a cool head. She attributed her success chiefly to her basic rule.

• 53:44David Senra?

  Always buying when everyone wants to sell and selling when everyone wants to buy. Along with her unruffled outlook and good judgment, her fierce focus, endless reading, and intensive research all helped her penetrate the complexities of the market. Determining when stocks were cheap demanded the thorough knowledge of their history, their dividend paying possibilities, and what they had sold in the past," she said. "If one can buy a good thing at a lower cost than it has ever been sold for, he may be fairly sure of getting it on the cheap." So what does she do, right? She tells you, she's just, "I'm gonna take the opposite of what everybody else is doing. That's my general thesis in investing," is what she's telling us. So at this time, there's a huge boom. She owns a lot of real estate. She's like, "Oh, this is strange. I think it's time to convert real estate to cash."

• 54:28David Senra?

  This is what happens to a boom before the bust. "The cost of land skyrocketed around the country as people raced to buy up real estate in cities, towns, and rural communities. Inevitably, the cost of borrowing the money to buy the land rose precipitously. While others bought, Hetty sold. I saw the handwriting on the wall," she later said. "Every real estate deal which I could possibly close up was converted into cash." Could you imagine? You have that she has this huge gains from this huge real estate bubble, right? Gets out before it bursts. Then the financial markets are gonna burst too. And now what's she left with? Piles and piles of cash. She turns one win into another win into another win. Let's go Hetty. All right. So what's happening at this time? People are becoming, uh, what's gonna hap- I mean, you know what's gonna happen.

• 55:12David Senra?

  People that are over-leveraged are gonna go bankrupt and Hetty, and they're gonna sell their assets to Hetty for pennies on the dollar. Banks are, excuse me, black clouds hung over the debtors. Many had little choice but to divest their holdings. Hetty watched as the rich men arrived. They arrived at Chemical Bank, wanting to talk to her. They sought her out to sell off their possessions. As rates rose, more and more of the solidest men in, solidest? Men in Wall Street, she said, from financiers to businessmen came to call. Begging, that's a hell of a word that she's using there, right? Begging to unload everything from palatial mansions to automobiles. They came to me in droves, she recalled. She knew a panic was inevitable. This is right, that's amazing. So that's like, you know, right before the bubble burst.

• 55:57David Senra?

  This also reminds me of this interview I listened to or watched or listened to, I don't remember. But Warren Buffett was saying, you know, right, right after the financial panic or I guess right, the run up to the financial pandemic in 2007. Uh, you know, got tons of calls, hey, can you do this? Can you invest in this money in this bank? Boom, boom, boom. And a bunch he turned down, some he didn't. But it's the same thing's playing out over and over again for, for those wise enough to sit on amounts of cash. And then this part was just funny because this is humans or we have to like, we're all temporary beings, like we have to enjoy this ride that we're on. And I find the behavior of human beings curious, yes, but also funny. This part is funny. It's not funny because it causes like, uh, pain, but it's a ridiculous belief.

• 56:41David Senra?

  Like people should know better. The bankers during the panic, right before the panic of 1907, it says, the bankers weren't worried. It had become a cardinal doctrine in American banking circles that panics like those of 1893 and 1873 and 1873 would never again be witnessed in this country. That's, that's a ridiculous statement. Now, this is Hetty reflecting, reflecting on the panic of 1907. It's, it's humorous. I didn't explain that correctly. It's humorous because the idea that we're so arrogant in what we think we know about a world that's way too complex for our tiny little human brains to understand, that we think that we could ever cure. Like we've now entered the age where there's never going to be any more financial booms and busts. Like that's, that's ridiculous. Uh, Hetty reflected on the panic of 1907.

• 57:25David Senra?

  Hetty believed the trade, the problems could be traced to another source. There's one reason why we have hard times. Well, there's probably multiple reasons, but this is her reason. Money, easy coming and easy going. American children are not taught how to save money, but how to spend it. These are all direct quotes from her. Everything they want, give it to them as long as you know the price of the credit. That's the policy of the modern mother and she's raising nation of spendthrifts. Whose one thought is to get what they want when they want it regardless of cost. Essentially saying they're just not disciplined financially. And then there's like this herd like tendency for humans to, you know, to react all the same way in booms and busts. And Hetty makes money just by going against the herd. This is very interesting. So now we're, she's much older. Uh, she's so old that Hetty's son is having to kind of run her business and keep track

• 58:10David Senra?

  of investments. Uh, so she hands out her son, she hands him out. This is, I love this idea of negative advice, right? I think it's usually in many cases more positive, more beneficial than positive advice. What does Charlie Munger say? He's like, me and Warren are not trying to be smart. We're just trying to not be stupid. That's negative advice. So she instead, she didn't like, she could tell her son anything. She didn't tell him, do this, do this. She says, avoid this. When you're running the business, avoid this. And here's her, her list of don'ts. She handed out a list of don'ts. Don't cheat in our business dealings, for sooner or later your conscience will trouble you and you will worry yourself into your grave. Don't fail to be fair in all things, business and otherwise. Don't kick a man when he is down. Don't envy your neighbors.

• 58:55David Senra?

  Don't overdress whether you have the means or not, because this causes envy. Kind of related, right? Don't fail to go to church for the church needs you and you need the church. Don't forget that riches dishonorably gained must be left behind someday. And when you depart, you will find the gates of heaven doubly bolded against you. Don't forget to be charitable and don't falsify. This is more advice. So this is, Hetty dies at 81 years old. This is when she's almost 80. I love advice from old people. I don't, I just think they know more than we do because they've obviously had a lot more experience than we have. No, this is really interesting. She says, when it comes to spending your life, there have to be some things neglected. If you try to do too much, you can never get anywhere.

• 59:39David Senra?

  I think that's good advice for life. It's also good advice for your in business. Like Hetty's gonna encourage you to be focused, to not like spread yourself too thin. I think Charlie Munger and Warren Buffett would say the same thing. Henry Singleton would say the same thing. Andrew Carnegie is also the same thing. This is over and over and over again. David Ogilvie, just over and over again, you see this advice. You just gotta figure out what that thing is that you want to focus on. And no one can answer that question for you, but you. Not only do I love advice from old people, but I love the fact that like this is, there's another paragraph from her from when she almost, she's almost, she's at the end of her life. And I think this is the single biggest important, this is the most important thing is that she prized the life that she led. And I think the key to a happy life is getting to the end of your life with the least amount of regrets as possible. And she goes, "I enjoy being, I enjoyed being in the thick of things.

• 1:00:23David Senra?

  I like to have a part in the great movements of the world and especially of this country. I like to deal with big things and with big men. Unlike society matron," she said, "I would rather do this than play bridge. Indeed, my work is my amusement, and I believe it is also my duty."

• 1:00:41David Senra?

  And then finally, she passes away at 81 years old. And it says, "A millionaire a hundred times over. She had made her mark besides Carnegie and Morgan, Vanderbilt and Rockefeller. But she was different. She was an enigma, a blue-blooded heiress who identified with the common folk. An interloper, a female who triumphed in the male world of finance. An independent who answered to no one but herself. A renegade, a misfit." Just kidding, the book doesn't say misfit. I added that myself, but she definitely was. "A moneymaker who thumbed her nose at what money could buy. A pariah cast out in her youth. The woman who had wandered all her life from place to place could rest in peace.

• 1:01:25David Senra?

  At long last, Hetty was home."

• 1:01:29David Senra?

  And that is where I will leave it. If you want the full story, buy the book using the link in your show notes on your podcast player or founderspodcast.com. If you do that, Amazon sends me some cash. The more people that buy the book that way, the stronger this podcast becomes. Thank you very much for listening and I will talk to you next week.