#375 The Single Biggest Individual Financier In The World. The Richest Woman In America: Hetty Green

Hetty Green bailed out New York City. Her decisions on what interest rates to charge moved markets and were reported in major newspapers. She was a one woman bank and the single biggest individual financier in the world. She took no partners and ran her own money. She built a financial empire of stocks, bonds, railroads, and real estate. She battled the great men of her day and kept a gun on her desk. She did all of this alone. Defiantly independent and ferociously intelligent she built a vast, liquid fortune at a time when women couldn't even vote. 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. This episode is what I learned from reading Hetty: The Genius and Madness of America’s First Female Tycoon by Charles Slack and The Richest Woman in America: Hetty Green in the Gilded Age by Janet Wallach. ---- Ramp gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud by going to Ramp and learning how they can help your business control your costs and save more. ---- Vesto: All of your company's financial accounts in one view. Connect and control all of your business bank accounts from one dashboard. Go to Vesto and schedule a demo with the founder Ben. Tell him David sent you. 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. ---- Join my free email newsletter to get my top 10 highlights from every book ---- “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 ---- 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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  All of history's greatest entrepreneurs studied history's greatest entrepreneurs. Hetty Green was the smartest woman on Wall Street. She was a financial genius and the single largest individual financier in the world. And yet, she made it a point to learn from people like Cornelius Vanderbilt, Andrew Carnegie, Rockefeller, JP Morgan, and Jay Gold. And one thing that she had in common with them was that she had the habit of keeping track of every cent and making sure that she's getting the most value for every single dollar that she spent. One thing is clear from studying hundreds of history's greatest entrepreneurs. Anyone who's committed to being great at building their business is obsessed with watching their costs. This is something I was talking about with my friend Eric.

• 0:43David Senra?

  My friend Eric is the co-founder and CEO of Ramp. Ramp is now the presenting sponsor of this podcast. I've gotten to know all the co-founders of Ramp and have spent a bunch of time with them over the last year or two. They all listened to the podcast and they all picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend and how doing so gives you a massive competitive advantage. And that is the reason that Ramp exists. Ramp gives you everything you need to control your spend. Ramp exists to give you everything you need to make cost control an obsession. Ramp gives you easy-to-use corporate cards for your entire team, automated expense reporting, and cost control. Ramp helps you run an efficient organization.

• 1:27David Senra?

  I read a Ramp customer review that sums this up perfectly. It said, "Ramp is like having a teammate who you never need to check in on because they have it handled." Warren Buffett, who has a lot in common with Hetty Green, said that "a good manager must be a demon on cost." Ramp makes it easy for you to be a demon on cost and make your business more efficient. Ramp's website is incredible. Make history's greatest entrepreneurs proud by going to ramp.com to find out how they can help you make your business more efficient and make cost control an obsession. That is ramp.com. One more thing I want to tell you about before we jump into this episode is Vesto. A lot of my friends are using Vesto to see all of their company accounts in one view. So Vesto helps you connect and control all of your business bank accounts.

• 2:10David Senra?

  From one dashboard. I know the founder Ben, I'm friends with him. We spent a bunch of time together. We've had dinner, we've gone on walks. And I've offered to help him by introducing him to some of my friends that could benefit from using Vesta. So I called one of my friends and he said, listen, David, I will meet with anyone that you want me to, but I must tell you that we say no to over 90% of the software we were pitched. And yet, a week later, I hear back from him and he told me that Ben and Vesta are great and that they signed up. So I asked him to tell, to ask his team to explain the benefit that they get from Vesta in their own words. So I'm going to read the text message exchange where they, his team is now, in their own words, telling what the benefit they got from Vesta. It says, "It provides us the

• 2:55David Senra?

  ability to view all of our bank accounts and loan accounts on one platform with a single sign-on. It makes it much easier to grant access to users in one place as opposed to 20 different banks." So I respond, "What did they do before Vesta?" He said, "They had 20 different bank account, bank logins across five accountants. We literally used 21 banks, so every bank had an account and a loan that multiple people need access and views to. Just to log in and see everything would take hours and would all be in different tabs." So if you have multiple businesses, if you have multiple accounts, go to vesto.com and schedule a demo with the founder Ben and tell him David sent you. That is Vesta with a V, vesto.com. The link will also be down in the show notes. And now let's get

• 3:38David Senra?

  to the episode. I hope you enjoy the episode on the one and only Hetty Green. I want to talk to you about two books today, the two biographies of Hetty Green that I've read. The first is Hetty, The Genius and Madness of America's First Female Tycoon, is written by Charles Slack. And the second is The Richest Woman in America: Hetty Green in the Gilded Age by Janet Wallis. So you may not know who Hetty Green is, but in her day, she was one of the most famous and infamous financiers, investors, and entrepreneurs. She was by far the smartest woman on Wall Street. She's a financial genius, a railroad magnet, a real estate mogul, and she was also described as a Gilded Age renegade, which you and I will talk a lot about today. It's one of my favorite things about her.

• 4:23David Senra?

  And shockingly, this is one of the things that blew my mind the most, is she was a reliable source of funds for city government. So on more than one occasion, Hetty, as a single individual, bailed out the city of New York. And the reason I think it was important to read two books on her is because we're dealing with a very singular individual here. You have to keep in mind, at a time when women weren't even allowed to vote, Hetty was the single biggest individual financier in the world. And so I just want to give you a brief overview before I go into her childhood, because I thought her childhood and the education she received from her family was very fascinating. She refused, one of my favorite things about her, this is mentioned in both books multiple

• 5:04David Senra?

  times, is she refused to comply with any type of stereotype. There was a description of Hetty by another person that I absolutely loved. They said Hetty was defiantly independent, that she made her own rules and lived by them. In fact, when I read that part, made me think when I got to have dinner with Charlie Munger, I asked him what he thought of Jeff Bezos. And Munger described Bezos, one of the best ways I've heard anybody describe. He says that Jeff was ferociously intelligent. And so this idea of combining ferocious intelligence with being defiantly independent, I absolutely loved. And this is a great quote that'll give you a sense of Hetty's personality. And she said, "I've had fights with some

• 5:47David Senra?

  of the greatest financial men in the country. Did you ever hear of any of them getting ahead of Hetty Green?" And she had a personal motto that she lived by. She says, "I go my own way, I take no partners, and I risk nobody else's fortune." Again, she was the single biggest individual financier in the world when she was alive. So Hetty was born in the same decade as Andrew Carnegie, John D. Rockefeller, George Westinghouse, Jay Gould. The difference between her and other robber barons that were born in the 1830s was that she actually came from an extremely wealthy family. She grew up in New Bedford, Massachusetts, which at the time, and this blew my mind. New Bedford, Massachusetts was the richest city per capita in the world.

• 6:29David Senra?

  And the reason that it was is because it was the center of one of the most, the world's most valuable industries, which was at the time whaling. And Hetty's family owned and operated one of the most valuable whaling companies in the world. And this part shocked me. So like, why would whaling be so profitable? Now, keep in mind, the whaling industry is going to get disrupted by Rockefeller and his organization of the oil industry. But at the time, you could send a single ship out, right? To go hunt whales. A single ship could come back with 4,000 barrels of whale oil. That would be a value of approximately about $100,000 in 1850. So the whale oil that comes back from the ships, it's used in all types of industries.

• 7:13David Senra?

  They would use whale oil to grease machines for industry. They would use it to lubricate watches and guns. It was used for lighting. That is the main part that Rockefeller winds up disrupting a few decades later. And it's also used to make clothing for women like corsets and was converted into perfume as well. Hetty's family not only ran one of the most successful whaling companies, but they also had a very specific belief when it came to money. And so what they believed and they taught their children, and this is going to go back many generations, that it's the duty of every heir to increase the family riches. So they would say, hey, you're just a steward of the family wealth. It is your job to inherit it and then grow the family fortune and teach the next generation to do the same.

• 7:56David Senra?

  And there's actually a funny story about this later in Hetty's life. This is the time when the Vanderbilts are building all these gigantic mansions in New York City. And Hetty at the time is living in a really small apartment. And she was asked by a reporter, like, why don't you, like, why aren't you like the other robber barons? Why aren't you building, you know, these palatial palaces or whatever the case is? And she said, my family has been rich for five generations. We don't need pomp and circumstance. So Hetty is going to be immersed in the world of business and under the tutelage of her grandfather and father. Her father's nickname was Black Hawk Robinson because he kept a close eye on all of his business affairs. So there's this maxim that you and I talk about over and over again, appears in a lot of these biographies. And it says, you can always understand the son by the story of his father.

• 8:41David Senra?

  The story of the father is embedded in the son. The exact same case is accurate for the relationship that Hetty had with her father.

• 8:50David Senra?

  Her father said, he's on record, and he has, there's a great quote in one of the biographies, where he said that making money was the great object of his life, and that he pursued his fortune the way that Captain Ahab pursued Moby Dick. Hetty is going to be exactly the same when she's older. Hetty's father is brilliant at business. In fact, Hetty said that she trusted his business judgment above everyone else's. And that's even though they had, they had a very uneven relationship. Her father, when he found out that his wife was pregnant, he wanted a son. And he wanted a son so the son could take over the family business, just like he was taught in a previous generation. The problem was Hetty's born first, then they have another child.

• 9:33David Senra?

  That child is a boy, but that child, that boy dies in infancy. And so Hetty's father winds up sending Hetty, when she's around two years old, to go live with her grandfather. Her grandfather was also a partner in the family business. And so it's going to be her grandfather and her father who actually enroll Hetty into service of the family business from a very young age. In fact, from the age as soon as she could read, and here is why. Hetty's father and grandfather had very poor eyesight. So she had to read the financial news and their financial reports of the business to them. I want to read this, this quote from the book. "She read shipping statistics, tariff news, currency debates, the latest on securities and investments, and trade news from New York. She absorbed everything.

• 10:17David Senra?

  By the time she was 15, she said she knew more about finance than many other financial men. Hetty would describe this as the best business education a young person could receive. She said, "When quite a child, I was required to read the reports of the stock markets and of various business transactions to my father, who would carefully explain to me those things I did not understand. I was obliged to keep a strict account of personal and household expenses. All of these things were most useful in forming the mind for business responsibilities when it became necessary for me to assume them. In this way, I came to know what stocks and bonds were, how the markets fluctuated, and the meaning of bulls and bears."

• 11:01David Senra?

  This formative education was so important to her. Her father's gonna die when she's about 30 years old. Hetty works, lives and works until she's like 80 or 81. Decades after her father passes away, she's constantly referencing the importance of this education that she received from her father and grandfather. And it's not just reading things and looking at reports. She talks about going to all aspects of the entire business. So they're running a whaling company. So they would take their daughter down to the docks and to all the other various parts of the company, the office and everywhere else. Again, this functions as another form of education for her. And so let me read from the book. "She watched him closely as he assessed the inventory, inspected the ships, dealt with the captains, and heard the rough talk of the crews." There's something funny that's repeated over and over again is that women were expected

• 11:46David Senra?

  at this time to, you know, act a certain way. And they said that Hetty rejected all of society's norms and she cursed like a dock worker. That's a line that made me laugh. "She listened to him bargain with merchants and berate them when he thought they were charging too much. She followed along when he took her to the counting house and showed her how to read the ledgers, or brought her to the brokers and taught her how to trade commodities. She paid attention when he 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." This is what she said, "There is nothing better than this sort of training. I acquired the habit of keeping track of every cent and I got the most value for every dollar I spent."

• 12:31David Senra?

  He also taught her how to invest the profits of the family business. A skill that she will do almost better than anyone else in the world later on. It says, "At his request, she worked closely with him on his portfolio of stocks, bonds, and real estate. After years at his side, Hetty felt more than competent to analyze the news and assess the financial markets." And another lesson that her father taught her over and over again, something that he would repeat to her throughout her entire life, something that she would then repeat after he was gone. She was, Hetty Green was anti-debt her entire life. She says, "My father taught me never tell anyone anything, not even a kindness." This is going to be extremely valuable later on in her work because Hetty's life and career, there's a series of financial panics.

• 13:13David Senra?

  And again, I've told you this in the past, but now we call these things recessions or depressions. But 250 years ago, 200 years ago, they called them financial panics. That is a much better term, in my opinion, because that describes the behavior of humans when there is, you know, financial downturn. There is a panic. So I went and grabbed a list of all the financial panics that occurred during her lifetime. So the panic of 1837, 1857, 1873, 1884, 1893, 1896, and 1907. In every single financial panic, it is the people that kept a fortress of cash that is able to buy up assets for pennies on the dollar. So her father teaches her this, and he teaches her through repetition by saying this, but

• 13:57David Senra?

  also she was watching his actions. He taught her to keep a fortress of cash and never have any debt. And so even during downturns, her father was able to scoop up assets for pennies on the dollar. He said he thrived through all of the downturns because he always had a ton of cash and he had no debt. In fact, there's a great line I was reading about David Geffen, and it says that David Geffen was as liquid as the day is long. And so you could say that Hetty, throughout her life, she's going to be liquid as the day is long. Remember, she's going to be a single individual bailing out the city of New York. And so over and over and over again, the books give examples of all these financial panics, and then Hetty just greatly increasing her wealth during these financial panics.

• 14:41David Senra?

  This stemmed really from the blueprint that her father taught her in childhood. No debt, no buying on margin, watch every penny, and stack your cash. And that was the way that her father stayed winning. So they're going to see the very end of the industry that made them wealthy, because now you have, in the 1850s, all these people in 1860s are all switching to kerosene. So the price of whale oil is going to crash. The actual Bank of New Bedford winds up going under. Hetty's father's business, which had no debt, wind up surviving. But her father was smart enough to not get out of a dying industry too late. I've got to read this section to you, because I thought this was brilliant on his part. And also it changes the trajectory of his daughter's life, because they're going to leave New Bedford, right?

• 15:26David Senra?

  When they realize, oh, this opportunity is... Drying up, we're going to go to where the action and the money is, and that's New York. So whaling, you could think of this as whaling oil is going to get disrupted by Rockefeller. And here's a great description of how shrewd her father was. As always, his business timing was impeccable. He had entered the whaling business in the 1830s, just as it was approaching its zenith. And now he quietly, that's a really important word there. Bad boys move in silence. Hetty, her father taught her this, and Hetty does this throughout her entire life. She constantly hides. You'll never know what assets she has, what stocks she's buying. She's very, she operates very, very quietly. And so now he quietly but quickly sold off the ships and other assets when he recognized unmistakable signs that the industry was headed for a decline from which it would not recover. The recent discovery of oil in Pennsylvania, combined with new techniques for refining it,

• 16:11David Senra?

  promised a new and seemingly inexhaustible supply of oil that did not require costly, dangerous voyages on the far seas. Some whaling men, now they're going to compare and contrast Hetty's father's actions with people that got rich in the industry. It's very hard to, when you just got rich from an industry, to leave it voluntarily. Some whaling men would ride the industry down to its bitter end, sending fewer and fewer ships out to hunt ever more elusive whales for an oil that the world no longer wanted. But sentimentality was never one of Robinson's traits. To him, whaling had been nothing more than the best way to make money, and New Bedford was the best place to do it. When the time came, he cast them both off with a brisk indifference.

• 16:54David Senra?

  In New York, he found new success in merchant shipping and real estate. Hetty moved to New York with her father. And for Hetty's life, this was perfect. She's going to New York. She had a genius financial mind, and there's no better place that she could be. So I want to go back to this idea that she was defiantly independent. And again, I think this was a huge asset for her, especially because she could act against the crowd over and over again. But there's a great, you sell this defiantly independent nature of her from a young age. She actually was, her aunt, there was a story in the book where her Aunt Sylvia warned her away from a dangerous horse. And Hetty took it upon herself to break him and rode the wild animal until it settled down. I think that's a great metaphor for how she approached business. So this defiance, this dedication to doing things her own way,

• 17:39David Senra?

  it really helped her immensely because she never really cared to follow the crowd. And then she also would observe. So there's this line where it's like, okay, all of history's greatest entrepreneurs studied all of history's greatest entrepreneurs. She is a young woman. She's in her early twenties, and she's doing the exact same thing. So the financial panic of 1857. Hetty learned some very valuable lessons. And at 23 years old, she's going to see firsthand how humans panic and then how those that didn't panic got rich. And so there's a bunch of names in here that will be familiar to you and I. It says Hetty learned some very old lessons about human behavior during booms and busts. More railroads slipped as confidence fell. And for a few months, Wall Street, which was trading primarily in railroad stocks at the time, ran off the track.

• 18:22David Senra?

  But if speculators who had bought on margin would force to sell their shares to cover their losses, shrewd investors like Cornelius Vanderbilt and Jay Gold swooped up to stocks at low prices. Hetty would later do the same. 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. J.P. 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." This pattern will repeat throughout her life.

• 19:06David Senra?

  There's another example a few decades later. This time, it's during the panic of 1873, and Cornelius Vanderbilt profits from that as well. Most of Vanderbilt's railroad stocks had plummeted. Vanderbilt bought his stocks for cash and was able to wait out the market. But his followers, who risked their money on a 10% margin, were racing to cover their losses. 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, Cornelius Vanderbilt bought his railroads for the long haul. Okay, so then Hetty's dad dies. Hetty is around 30 years old when this happens. I need to talk about the complicated relationship they have. Because at first, he was furious that his firstborn child was a girl. He wanted a son.

• 19:50David Senra?

  He wanted an heir, somebody to teach the family's business. So he sends her away to live at her grandfather's. Over time, when he realizes not going to have another child, now his only child is Hetty, his emotions cool down. He mentors her. But Hetty thought she's gonna, she feels she's gonna feel betrayed when she sees the results of his will. Because her father died, you know, she thought he was obviously a very tough man, a very difficult man. But she thought they had a better relationship than the will is going to reveal. And even though he knew his, he had trained his daughter, he knew his daughters were very smart, he still decided he couldn't trust her with the family fortune.

• 20:31David Senra?

  And this is gonna be wild, because I'll just read this note to you that I wrote to myself, which blew my mind, because I thought, okay, your family's been rich for generations, you inherited a bunch of money, and then you made that money bigger. It's still an impressive feat, but I didn't realize that she is going to become the richest woman in America, and maybe the richest woman, self-made woman in the world, not by investing the principal of her family's fortune, but by, by, by investing the investment income. She turned, she's gonna turn a yearly cash flow of a couple, a few hundred thousand dollars into over a hundred million.

• 21:12David Senra?

  So, her father dies, decides that the money he leaves her should be managed by other people. This is gonna be the biggest betrayal she has of her entire life, okay? And so this is 1865. And it says, "An inventory made after his death showed an estate of nearly $5.7 million." That's crazy in 1865. "Of that, only 163,000 remained invested in whaling ships, showing the extent to which he had succeeded in extracting himself from the business that had made him rich." Now, her father left the entire estate to his only heir, his daughter, okay? It says, actually, that she's five months shy of her 31st birthday. But there was a catch. Robinson had arranged to leave Hetty a little over $900,000 outright.

• 21:57David Senra?

  The rest of it, which was almost $5 million, would be bound up in a trust with Hetty as the beneficiary. Hetty was a woman, and her father followed the conventions of the day and kept some 80% of his fortune in a trust for her, so she would not fritter it away. Imagine working by your father's side since you were a child, and his will...

• 22:20David Senra?

  It's revealed his true feelings that you're a girl. I can't give you this money because you'll fritter it away. She is one of the best financiers in human history. Says Hetty could interpret the will as nothing other than a deep and burning insult. She would carry anger over her father's will throughout her life, transferring her rage from her father to the men he had selected to administer her trust. So again, she's going to become the richest woman in America, maybe the world, not by investing the principal of her family's fortune, but just the investment income. How many other people, right? Could turn a few hundred thousand dollars a year into 100 million? So now with that in mind, I think it's the perfect time to talk about how Hetty worked and give you a few examples of some of the investments that she made.

• 23:02David Senra?

  So as you could imagine, if you just felt you went through the biggest betrayal of your life, she is fiercely independent and she works alone. And I think this paragraph gives some insight into why that's the case. Hetty lived her life convinced that she was fundamentally and completely alone. Nobody else could watch out for her interests. She mistrusted all forms of alliances and cabals. Where other investors sought the safety of numbers, the soothing ring of consensus, Hetty felt most comfortable on her own, trusting her own judgment and instincts. And when they say that she worked alone, she didn't even have an assistant. She said she wants to read everything. She read everything herself. She did not want anybody else filtering her information. Now, she kept a very simple and predictable daily routine. She woke up early.

• 23:47David Senra?

  She would eat a small breakfast in her small apartment. Then she would take the 7:00 AM ferry to Manhattan. And then she went to her desk at the Chemical Bank. She was their biggest customer. They offered her a private office. She goes, no, I just want a desk in the middle of the bank. And so this is what she was doing all day. This is a typical workday for Hetty at her desk at Chemical Bank. She sat down at her desk and began her business. Four times a day, the letter carrier brought stacks of mail to the bank. Hetty slid her knife across the envelopes, read the letters, scanned the tabloids and the broadsheets. She shifted through piles of paper, checked the amounts of coupons. This is coupons for all the bonds she would own to clip, tracked her lawsuits, decided which railroads, real estate and bonds to buy or sell, and oversaw the scores of payments on loans. And mortgages to collect.

• 24:31David Senra?

  She reveled in conversations with the officers of the bank and the men who came to call on her. At the end of another long day, she would part the bank, leaving behind her concerns over finance. So she's one of the first people to arrive at the bank, she's one of the last to leave. And then she was capable of leaving work at work, which is something I struggle with and you might as well. She says, "Business never disturbs me after business hours. I never worry about things. I do the best I can every day as I go along." She would then leave the bank, go back home and have dinner around 8:00 PM with her daughter. And then the more you read about Hetty, you just realize, oh, she was completely in love with her work and she was completely obsessed. And I actually think there's a lot of genius to the fact that she didn't let anybody else filter information. All the reading that she did, all the work that she did, was contained in one, inside of one brain.

• 25:16David Senra?

  And I think that actually, over time, gives you a massive advantage. And so this is her describing, or this is the book describing, this is the research process that she would make before making an investment. "When she had read, quizzed, grilled, interrogated, investigated enough, when she had studied the cost, analyzed the assets, assets, and 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 low and the upside high, then she would invest her money." And so, there's this great line from Steve Jobs where he says, "Make what you love your work. Make what you love your work." And there's multiple examples in both books. I just pulled out a few for you.

• 26:01David Senra?

  That, that's exactly what Hetty did. What she preferred most was her work. She loved digging up dirt on businesses and she loved the nitty gritty of finance. "I have a head for numbers," she said. "They light me up and tell me a story." Another example of making what you love your work. She prized the life that 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." And so she's talked about, you know, the idea, what she was supposed to do at this time in history. She was supposed to be a society matron. And she's like, "This is boring as hell." So I would rather do this than play bridge.

• 26:43David Senra?

  Indeed, my work is my amusement and I believe it is also my duty. And so when people found out how wealthy she was, they would ask her like, why, why don't you retire? Why, like, why are you still working? And they're like, no, she loved it. It was like this giant puzzle and game. She never wanted to stop. She says, I know of very few people who are busier than myself and who are better trained to combine business with pleasure. After she asked if she planned to retire, Hetty responded, why should I give up my work? And this is one of my favorite things about her is the fact that the rules that she chose to live by were her own and not what. She didn't give a shit about other people's expectations, society, friends, family members, what they thought she should be doing. The rules that she lived by were her own.

• 27:28David Senra?

  I think that's one of the biggest takeaways from studying Hetty Green. Again, this goes back to the fact that one of the things I most admire about her is that she was defiantly independent. She was very comfortable, more comfortable, maybe the most comfortable, trusting the results of her own thinking and trusting the results of her own judgment. There's a line in the book I just want to read to you. The rules she chose to live by were her own rather than society's. By casting off the societal expectations of her time, she freed herself to do as she pleased, to live a life on her terms that she and she alone determined. So let's go into some examples of investments that she made. People would ask her like, how do you do what you do? And she would, she would say it over and over again. She had a very simple strategy. 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.

• 28:13David Senra?

  And you see this over and over again. She's just literally doing that exact same thing over and over again. Completely content to go against the crowd, which is very, very hard. Obviously, if you study the history of financial panic, it's very, very hard for humans to do. So she has this one trade that she does shortly after her father dies. It's the, it's, she's, she's trading in greenbacks. So. It says she was already establishing the patterns of investment that would define her career, sticking with conservative instruments such as United States bonds and having the cool head to stay on course when others had panicked. So she starts buying up United States greenback notes. The government had printed, the United States government had printed large quantities of these notes right after the Civil War to try to cover some of its huge expenditures. Okay.

• 28:55David Senra?

  So at the time, the Union had just won a huge military victory, but people were very scared and really just doubtful about the future economic prospects of this, you know, country that's trying to put itself back together. As a result, there's this huge rush to the safety of gold and the value of greenbacks wind up dropping as low as 40 to 50 cents on the dollar. Hetty sees everybody else panicking and fleeing greenbacks for gold, and so you know what she does. She's going to end up buying greenbacks. Essentially what she's doing, she's buying dollars for 40 or 50 cents. There is a great description of this trade from this book called The Men of Wealth. And it says, "Here was an excellent chance for any far seeing person to pick up government securities at half

• 29:40David Senra?

  their value. All it required was little faith in the nation that had just demonstrated in a most extraordinary way its ability to come through a terrific civil war. Looking back at it now, the recovery of the country ought to have seemed a sure thing to any observer. The war had given an immense impetus to the resources of the continent." So all these natural resources are going to, they're going to have huge, essentially booms in all these natural resources like coal, iron, oil, copper, gold, and silver. But for all that, the nation's credit was at a low ebb and through 1865, 1866, 1867, Hetty bought all the government bonds she could lay a hold of. So she ran her playbook with greenbacks and government bonds. She does the exact same thing for real estate.

• 30:25David Senra?

  She is going to build a gigantic real estate empire, portfolio. Most of this real estate she's going to acquire happens during financial panics. You could think of Hetty, again, remember, the largest single individual financier in the entire world. That just, that sentence breaks my brain. It just blows my mind. You can really think of Hetty as a one-woman private bank. Okay, so it goes back to what her father told her to do when she was young. You have to keep a fortress of cash. She is going to use that to buy real estate out of foreclosure. Okay, so banks in need of cash would sell Hetty loans, mortgages, that they had made to other people using property as collateral. Some of these borrowers are going to default on their loans.

• 31:07David Senra?

  Hetty began to acquire the property for the mortgages, right? This was the beginning of what's going to become this gigantic real estate empire. So she's going to wind up owning dozens of buildings in block after block in New York, Chicago, St. Louis, and Boston. Most of them were acquired because they were through foreclosure on the mortgages that she held. She rarely, if ever, bought a property outright on the open market. And once she owned a property, she held on to it. That is repeated over and over again. Hetty's philosophy on real estate was very simple. Hold on to property. So I actually found an interview that is, that took place, I think, in New Yorker magazine. Let me check, it's 1836. Yeah, it was in October 22nd, 1938, sorry.

• 31:52David Senra?

  In New Yorker magazine, it is describing, and I actually looked it up and read the whole thing. It's describing an interview that Hetty gave about 30-something years earlier in 1899. Okay, so I pulled a quote from this interview of hers in 1899 that describes her real estate portfolio. She says, "I have mortgages on 28 churches and on four cemeteries. I have blocks of business houses, theaters, livery stables, hotels, restaurants, farms, and nearly everything you can imagine. Five years ago, I started out to take a look at all these buildings." So she's like, "I gotta go see all the property that I own all over the country." "I traveled for nearly two years and stayed at 40 hotels."

• 32:35David Senra?

  So I think that gives you an insight into like the sheer scope of her real estate portfolio, that it took her two years and 40 different hotels just to see all of it. Okay, so we see Hetty running her playbook in government bonds, in greenbacks, in real estate. She also does this, she's going to invest in railroads and then she's going to wind up... Buying some railroads outright, but I want to give you an example of how Hetty worked and how she applied this playbook to the most important industry of her day. And she hears about this takeover attempt of this small railroad called the Georgia Central Railroad. And I think it's an important example for you and I to study because it really gives us a glimpse into the tactics and style that she's going to use over and over again for the rest of her career.

• 33:19David Senra?

  So starts out with a group of wealthy investors in New York. They start studying the Georgia Central Railroad. They're like, hey, this is a ripe takeover opportunity. And they just thought there's a bunch of assets inside the railroad that the railroad also owned that was not being properly accounted for. One of this was a steamship line. And so since the steamship line, they figured had been really undervalued among the railroad's assets. They are going to buy up enough stock to take over control. And then they want to install their own managers and directors. So Hetty gets wind of this plan and early on begins quietly. Remember, she hid over and over again.

• 33:59David Senra?

  I'll tell you more about this later, but she would always conceal the movements and what she was doing. So she begins quietly buying up a bunch of Georgia Central stock. She's paying around $70 a share. She winds up accumulating almost 7,000 shares, 6,700 shares. And then what did she do? Nothing, which she always does. She just waits very patiently. And so as the other group keeps buying more and more stock, the stock starts shooting up. So now the shares that she paid $70 for are now $100 a share. She could have easily sold at this point for a quick $200,000 profit, but she chose to sit tight, figuring that as the clock ticked, the New Yorkers would grow even more nervous. In a close election, her chunk of stock might mean the difference.

• 34:42David Senra?

  So the guy that's going to run the railroad, if they win this election, his name's Alexander. He goes and speaks with Hetty once he finds out that she owns this huge chunk of stock. So, okay, you paid 70 for it. It's trading on the open market for 100. I will give you $115 for each share. That means she could walk away with a $300,000 profit. Hetty responds. You can have my shares for $125. Alexander says, okay, I will give you $125, but not until after the election. Instead of selling her shares now, she would have to promise to vote their way. When the election was over, she would get her money in full. Hetty replied, if I have to wait for my money, the price is $130. So they went up settling at $127.50. The vote happens.

• 35:27David Senra?

  Hetty's shares provide nearly half of Alexander's 15,000-share victory. And she winds up making a profit of $385,000, nearly double what she would have made just by holding on a little longer. And it's important to note that she's able to seize that opportunity when it presents itself in railroads because of all the work that she did before the opportunity presented itself. I want to go, I find the way she worked very fascinating. Here's another description of it. 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, her in-depth questioning, and her constant reading helped her decipher the complicated financial code and decide which rails to invest in and which ones to avoid.

• 36:10David Senra?

  Now you'll see, she talks about this, and she made a bunch of money on railroads in the panic of 1873. At the time, stock, when stocks are being abandoned en masse because of the panic of 1873, this is when Hetty decides that she wants to trade. She says, I believe in getting in at the bottom and out at the top. I like to buy railroad stock and mortgage, or mortgage bonds. When I see a good thing going cheap because nobody wants it, I buy a lot of it and I tuck it away. For Hetty, the decline in the market offered an opportunity for the future. 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. It goes back to that. See how all of, all of the lessons that she learned from her, her father, her grandfather,

• 36:54David Senra?

  the training that she had when she was a child. Also, Interacted very well with her natural drift, with her, with her nature, which her nature was to be defiantly independent, which also gave her the courage to trust her own judgment and to do her own thinking. And this was, she's going to teach and train her own children as well. And before we move on, because she's going to buy a railroad out of foreclosure and then have her son run it. I've said this to you before, but it is impossible to overstate how important and life-changing the railroad industry was at this time in America. I just did this episode on James J. Hill and there was just crazy stats in there. So by 1885, railroads brought in twice the revenue as the federal government. They, railroads were the nation's largest employer.

• 37:39David Senra?

  The railroaders were the largest private landholders in the country. They owned more than 10% of the land in the United States. And then this blew my mind, which I just learned from reading this book on Hetty Green. The reason that we have the concept of standardized time came because of the railroads. It was standardized time was unheard of until railroad schedules made it necessary for two towns located hundreds of miles apart to keep the same clocks. Okay. So now I want to get to Hetty and her children. Remember, Hetty tells her kids, you know, she comes from a family that believed that each generation was just a steward for the family's wealth and your job is to increase it and then prepare the next generation to do the same.

• 38:22David Senra?

  So there was a curious line in the book about this. It says, "Hetty never failed to tell her children how rich they would be one day, and she meant it, for her goal was to leave them as the richest people in America. And she was not shy about the fact that she recommend training your kids in business from infancy." She says, "A certain amount of business training would be an excellent thing, but it should be begun, but it should be begun in their infancy." So her firstborn child is a son that they named Ned. She wanted to prepare Ned to learn the railroad business because it's the most important industry in America at the time. And she's like, "Listen, I'm not just going to buy a railroad and then install you. You're going to work from the ground up."

• 39:05David Senra?

  She said that the best way to learn any industry was from the ground up. So his very first job was as a clerk and a handyman for this, this railroad in Connecticut. And her son said, "She wanted me to learn railroading and the only place to learn that business is on the railroad down on the ground among the men." Ned found himself patrolling a stretch of track for $10 per week, cutting weeds and helping repair track. She would constantly test her son. He's 22 years old in this story I'm about to tell you. As Ned left for Chicago, his mother gave him a package of papers, telling him to guard them on the train at all costs. Figuring that he was transporting some vast sum in negotiable bonds or other securities, Ned barely slept on the journey,

• 39:49David Senra?

  keeping the package under his mattress as he lay awake. When he reached Chicago and delivered the package to the office, it turned out to contain wads of expired fire insurance policy. The delivery was simply his mother's way of testing his reliability. When he was asked what the most important lesson he had learned from his mother, he replied without hesitation, self-reliance. And the way she does this after making him pass a series of tests beforehand is really, really smart. So she's going to buy a railroad out of foreclosure, and she puts her son in charge of expanding and improving it. Keep in mind, they're living in New York. She buys this in Texas. She's going to send Ned to Texas, he's 24 years old,

• 40:33David Senra?

  to run this railroad. She's going to be, he's going to be in Texas for the next 16 years. And it is in Texas with this railroad, which they're going to rename the Texas Midland Railroad, is where she's going to make him prove himself as a businessman. It's very fascinating what she does here. So first of all, Texas Midland, she bought it out of foreclosure, not much of a railroad. It was outdated, poorly maintained. She's like, you have to get it profitable. You have to expand it. You have to repair the lines, and you have to keep adding miles and connections. It's very simple how you make a railroad more valuable, right? So it says, though the money was headies, when it came to decisions on what to do with a sagging railroad, she made it clear that her son was in charge. So he is 24 years old. He's got this genius, overbearing mother. And he's like, I don't know what to do.

• 41:18David Senra?

  So every time he's faced with a business decision, he would immediately send her telegraph and be like, what do I do? What do I do? And she would send back a very terse response. You're on the ground, mind your own business. She would make him make the decision. And he was so nervous and he became so frustrated that he winds up going, catching a train, and going back to New York to see her. And I love what she does here in this situation. So they're in New York. And she goes, suppose I was not here? What would you do if I was dead? You have to be self-reliant. So she tells, she winds up telling her son this, it's an old wailing parable that she learned when she was a kid, about a captain and her and his two sons. And this is the story. "His sons were his mates," Hetty said.

• 42:03David Senra?

  "They wore uniforms and looked very spruce, but they didn't take their turn at the wheel or stand watch. Finally, when the captain died, and no one on board was being competent enough to navigate the ship, it went on the rocks. I sent you to Texas to learn the railway business. I cannot teach you by telegraph from New York. Go back and do the best you can." And that's exactly what he did. He learned the only way there is to learn. Do experience slowly over time. And so he winds up improving the existing line. He winds up adding connections, winds up adding miles, fixes the bridges. He paid attention to every detail. And he just made this little incremental improvement over time. And at the end of 10 years, you have a very valuable railroad. And in fact, it was important because he saw how his mom,

• 42:46David Senra?

  you know, you could say she definitely micromanaged her affairs. She's working by herself. She has to do everything, right? And Ned, his favorite actual place, was onboard one of his locomotives, in riding in the cab beside the engineer, paying attention to every single mile of the track. So one of the things that she would repeat to her children is you don't kick a person when they're down. And she also applied that to cities. So remember, I mentioned earlier that she winds up loaning and bailing out in New York City multiple times. And this is just really this one woman bank, this single largest individual funding center in the world. She's going to wind up being like this one woman Federal Reserve, which I'll get to in a minute. But there's this paragraph I want to read to you, where it says, "More than once, she bailed New York City out of a pinch. It is staggering to think of a major city coming to a single person.

• 43:31David Senra?

  She rarely if ever took the opportunity to kick a borrower when they were down. That was bad business," she always said. And so in 1898, she lent the cash-strapped city of New York a million dollars at the rate of 2%, which is well below the prevailing rate of 3% to 3.5%. When I mentioned that she's a one woman Federal Reserve, the media would follow her every move, the way that we would follow like the Federal Reserve cutting rates to this day. "Her millions in cash and her willingness to lend made her a one-woman Federal Reserve, whose decisions on interest rates were followed the way investors today await the word for the Fed chairman." Here's this headline that New York Times reported on January 7, 1911. "Hetty Green Cuts Rates."

• 44:15David Senra?

  Just imagine that. It's not like the Fed chairman cuts rates. It's like, no, this single woman sitting at a desk, chemical bank downtown Manhattan decides to cut rates. And so therefore, we need to pay attention to it. And we need to, to, to report it in every single paper in the country. It was just hilarious to me. And then I think it's important to like, round out her personality, because I think the same kind of personality she had when she was younger is much more pronounced when she was older. She's very secretive, very frugal, and very paranoid. Again, bad boys and girls in this case move in silence. She would not tell other people what she owned, or what investments she was making. She bought property under fictitious names and stocks under other identities. On more than one occasion, she would show up to her banker

• 44:58David Senra?

  with larger amounts of stock than anyone suspected. I just want to read one section to you. This, this jumped out to me because I grew up playing Monopoly and I loved buying the railroads. She had secretly acquired far more shares of Reading Railroad than anyone knew. She was a rare woman who could hold her tongue, and they sheepishly had to admit that she managed her business far better than most men. She was frugal to the extreme. I already told you how she lived in small apartments her entire life, when she could be living, you know, the biggest house in New York. But she, she's carrying around essentially the equivalent of hundreds of thousands of dollars in securities on public transportation. That's like me and you walking around with a bag full of, you know, hundreds of thousands of dollars for cash. So, her banker meets her outside one

• 45:40David Senra?

  day, and he sees her getting off of public transportation. He admonishes her for carrying negotiable securities on public transportation. "It's dangerous," he told her. "You should have taken a carriage." So this is again, how frugal she is. She's one of the richest people in the city. And she says, "Heady shot him a look and replied, 'A carriage, indeed. Perhaps you can afford to ride in a carriage. I cannot.'" And so that's in line to advice that she would give her children, "Watch your pennies and the dollars will take care of themselves." And she was largely mistaken, not that she cared when she was alive, but she was largely mistaken. People will assume that she was unhappy because she refused to spend her wealth. And in fact, she, to this day, she's in the Guinness Book of World Records as the world's greatest miser. I don't think she was an unhappy person at all. I think she was in love with her work and she thought it was a huge

• 46:23David Senra?

  game, and she thought she was really good at it. And she was obsessed with the compounding nature of wealth. And so she was very reluctant to spend any of her money. Another part of her personality is she had disdain for self-indulgent socialites, which she could have played the role if she wanted to. She never had to work if she didn't want to. So she's talking to her daughter about, you know, do not marry this young useless man who comes from, he comes from a wealthy family. But, but, but Hetty says, 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 have the value of money. Another trait of her, she was good and she knew that she was good. This is her personality in a sentence. I never set out for anything that I don't conquer.

• 47:07David Senra?

  Another example of her knowing that she, how good she is during the panic of 1907. Okay, so she's set up inside of her desk at the bank. All these over, these people that were over leveraged, right? Are seeking Hetty out because they know that she has tons and tons of cash. And they appear at her desk to sell her, to sell Hetty their assets for pennies on the dollar. I want to read this paragraph to you. So it says, "Black clouds hung over many of the debtors. They had little choice but to divest their holdings. Hetty watched as rich men arrived at the Chemical Bank, taking off their top hats, drawing out their expensive engraved cards and handing them to a clerk at the door. They sought Hetty out to sell off their possessions. As rates rose, more and more of the, quote, 'solidest men in Wall Street,'

• 47:52David Senra?

  she said, this is Hetty now talking about this. "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. Another interesting thing about Hetty, she kept a gun at her desk and she had a mama bear's protective instinct. So, one of the most famous railroad entrepreneurs in the country is Collis Huntington. And he winds up coming to visit her in New York at the Chemical Bank. They're having like this huge fight over this railroad in Texas. And he says he threatened that if she and Ned, her son, did not relent, he would see it to it that Ned was tossed in a Texas jail. Hetty's eyes narrowed on Huntington.

• 48:37David Senra?

  "Up until now, Huntington, you have dealt with Hetty Green, the businesswoman. Now you're fighting Hetty Green, the mother. You harm one hair on Ned's head and I'll put a bullet through your heart." She made a motion towards the revolver that she kept on her desk.

• 48:53David Senra?

  Hetty did not play. There was another interesting thing I learned about her. The fact that she gave her children not a list of "do this." She gave her children a list of "don'ts." So again, this is going to remind me and you of Munger. In fact, I think I discovered, originally discovered Hetty Green because Warren Buffett and Charlie Munger had studied her. But that idea that Munger said, that you invert, always invert, that you can actually, like Munger, Hetty studied the cause of human failure and folly and then just avoided that. And so here's the list of "don'ts" that she wanted to pass on to her children. "Don't cheat in any of our business dealings, for sooner or later your conscience will trouble you and you'll worry yourself into an early grave."

• 49:34David Senra?

  "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." "Don't overaddress, whether you have the means or not, this causes envy." That's another interesting thing that she had in common with Warren Buffett and Charlie Munger. The fact that they both said that greed doesn't drive the world, envy does. And that you have to cure yourself of envy because envy is a weakness. "Don't fail to go to church, for the church needs you and you need the church." They were Quakers. "Don't forget that riches dishonorably gained must be left behind someday, and when you depart you will find the gates of heaven bolted against you." "Don't forget to be charitable and don't falsify."

• 50:19David Senra?

  And then when she was 80 years old, right before she dies, she gives more advice. "When it comes to spending your life, there have to be some things neglected. If you try to do too much, you'll never get anywhere." And so when you actually study the traits of not only how she lived her life, but especially, it was very fascinating, the conversations that she was having with her son and her daughter. Because we know how important the conversations and the upbringing for the multiple generations that came before her were to Hetty. And really, you can identify the reverse of the stuff that she was trying to get them to avoid.

• 50:56David Senra?

  The mirror image of that are the traits that she winds up admiring. And a lot of these traits she possessed herself. So I just wrote, I was just like sketching out like how, how can I like distill the, the model of Hetty in my own mind? And based on her actions and which was important to her. So Hetty was simple, resourceful, focused on compounding for the long term, frugal, focused and paranoid, very, very paranoid. Traits that Hetty valued in herself and others, solid, secure, sober, frugal, conservative and prosperous. And before she died, she left behind a list of maxims. Here's a few of them. Before deciding on an investment, seek out every kind of information about it.

• 51:42David Senra?

  And the second one, watch your pennies and the dollars will take care of themselves. The third one, after your business is over, you may take your colleague to dinner or the theater or allow him to take you, but wait until the transaction has been closed and the money paid. She understood incentives. She understood the deep desire for humans to reciprocate. This is why you see like people like Sam Walton and other people, they would not let any of their salespeople or any of their buyers take any kind of gifts. You see the echo in, in the knowledge that, that Hetty shone to depart to her, impart to her children. Number four, 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.

• 52:24David Senra?

  If you decide overnight, she's essentially saying sleep on it. If you decide that it would be to your advantage to accept the offer, say so the next day. So the very next maxim, she repeats that again. In business generally, do not close a bargain until you have reflected on it overnight. Here's another one. When good things are so low that no one wants them, buy them and lay them away in the safe. When owning to some new development and that makes them go up and they're needed, that other men will pay well for them, then you sell. And finally, I am always buying when everyone wants to sell and selling when everyone wants to buy. And finally, I think this is a great description of Hetty to close on.

• 53:05David Senra?

  She was an enigma, a blue-blooded harris who identified with the common folk. A female who triumphed in the male world of finance. An independent who answered to no one but herself. A renegade and a moneymaker who thumbed her nose up at what money could buy. 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 that is where I'll leave it. For the full story, highly recommend buying both of the books. I will leave the links in the show notes and available on your podcast player. If you buy the book using those links, you'll be supporting the podcast at the same time. That is 375 books down, 1,000 to go, and I'll talk to you again soon.