SPECIAL: The Rothschilds (Part 1)

yeah i feel like i could rule where to know i could be what i want to put at all in it like a days all on a goal less travel never looking back alright today we have a special episode it is the biography of the roth charles family which if you're not a history but that doesn't sound interesting throughout the bat but i'm gonna explain to you why we're doing this so ben who's our producer he has this podcast called how to take over the world and it is a historical podcast but talks about the biographies of people so we're talking history as in like alexander to the great but also recent folks like walt disney's is coming out soon then he has steve jobs that's out now and it's kinda like listening to a biography but over the course of two episodes it's amazing and all of the episodes are about basically business people or people on achieving great things so napoleon things like that you know people who are great leaders people who are great inventors like thomas edison it it's amazing you're gonna take this one's about the roth family i wasn't eager to listen to this when i first got into it and then i got ten minutes to it i was oh my god i'm hooked and i could not stop listening to it basically we hear about the roth child now they're like some secret family that like controls the world's banks or some crazy conspiracy theory like that but they started in the eighteen hundreds in europe but they were eventually all over europe and they start a bank they were mostly honest people and it's just a crazy fascinating story so give us a listen this is ben from how to take it for the world this is a two episode podcast and we're dropping them both at the same time part one and part two check it out and if you want more let us know thus sam in twitter or sean vp on twitter and then look up ben wilson from how to take over the world and we'll show you how big but have high power i just one second to follow me hard i'd like to take this chance to apologize absolutely nobody hello and welcome to how to take over the world this is ben wilson so i was thinking of doing an episode on the richest person of all time because being really rich sounds nice and i would like to learn how to do it but first i had to figure out who is the richest person of all time and as i was reading up on different arguments for different people i read this really interesting story and the story goes something like this it's the middle of eighteen hundreds and clouds of war are forming over europe france and germany are at each other's throats once again and people are just brace for war waiting for it to break out at any moment in the middle of this situation there is an old grandma sitting in her attic on her rocking chair a friend comes to visit her and they're chatting about the news and the friend says you know the situation is so horrible i'm so worried it looks like war is gonna break out again and the old grandma says oh don't worry war won't break out my sons won't allow it and she's right despite everyone's fears the year comes and goes without a war now that's pretty impressive obviously my ears perk up when i heard that because if you're interested in people who have taken over the world that sounds like it fits the bill apparently these sons were so powerful that they could control nations they could decide who went to war and who didn't so who were these guys well they were the roth child sons and the roth child are a family of jewish bankers who originated in frankfurt germany in the late seventeen hundreds and spread out across europe and eventually into the united states and they were very very wealthy and some people argue they were the wealthiest family of all time you can make a a pretty good case for that and whether they were the wealthiest family of all time or the second or third wealthiest family of all time they're up there now that story that i shared about old grandma or roth child it's ap in all likelihood it ever actually happened and in all honesty the story is an exaggeration they couldn't really stop two world powers from going to war but while maybe it wasn't impossible to make war without the consent of the roth child brothers by the mid eighteen hundreds the roth were making decisions on a geopolitical level at least one country owes its existence to the roth child arguably too and you could make the case and many people have that in the early eighteen hundreds the roth child family decided the outcome of the greatest war the world had ever seen up to that point the napoleonic wars you could say that it was really the roth child who beat napoleon obviously i have profile napoleon on this podcast and the volume of his accomplishments is astonishing and impressive as a military commander he went fifty four eight and two and of those eight defeats only two waterloo and lei sig were you know real defeats the kind that he so often inflicted on his opponents but we also know he died completely defeated and out of power so how do you win that much you know how do you basically win fifty four times only suffer two big losses and then still lose the war well roth child is a big reason why their financial capabilities were just as important to that war as the strategic capabilities of any general including napoleon we'll get into the details of all that later but that to me is power so i wanted to study the roth family for two reasons one is because they were extravagant wealthy perhaps wealthy family of all time and so i wanna discover the secrets of of that wealth how you do that and secondly because they were able to turn that wealth into real power and as i read the story of the roth child family it became very clear the strategies to becoming extremely wealthy haven't changed a whole lot over the last two hundred years and the strategies for turning that wealth into power have not changed either you can see a lot of similarities between them and the great financier and great wealth generators of our day and i'll point out those similarities as we go but suffice it to say if you're looking to be the world's first trillion this is a pretty good story to learn from now before we start one disclaimer the roth clouds were powerful so powerful that they have sparked the imagination of conspiracy theorists all over the world then and now some conspiracy theorists claim that today in two thousand nineteen the roth child secretly run a one world government and they use their illuminati ponds to control all the world's governments and all that kind of stuff people claim they are the puppet masters who really control the the strings they're they're you know the ones who decide what really goes on and a lot of these conspiracies are pretty anti semitic it's the scary jews with their j gold that are h digitizing the world and making world leaders do their bidding and that is not the case the roth child are still a wealthy family to this day which is pretty remarkable it's been a couple hundred years since that all started and the roth child bank amazingly is still a functioning firm that does pretty well for itself but they are far from the richest people in the world these days there's only one roth child billionaire and he's worth just over a billion dollars again pretty impressive i would love to have a billion dollars but by comparison jeff bezos is worth well over one hundred billion dollars so you know this guy is not deciding the fate of the world and controlling all the world's governments so if you do extra research and read some of the conspiracy stuff don't buy it don't believe it i should note my sources i mainly relied on two excellent books for this episode the first is a biography called founder by amos yuan and the second is an economic history of the family and its financial firm it's called the house of roth child volume one money's profits and that was written by nile ferguson i should also know the help of my new research assistant jack tie who had did some excellent work doing extra research on this so thank you very much jack okay so let's get into it this episode is going to focus on the man who started at all a man by the name of mayor ams roth child i'm gonna cover the rest of the family in later episodes but to talk about mayor i want to start with a mental exercise imagine it is the early eighteen hundreds and you are a wealthy merchant headed to frank germany and you have an appointment to meet mayor roth child at this time he isn't the wealthiest man in the world but he is already a very successful banker with considerable wealth you're on a boat on the main river most traders arrived to frankfurt by boat and as you're first arriving at frankfurt you're navigating the busy waters and you notice a large mural on the exterior wall of the city and as you look carefully to your shock you realize that it's a depiction of a large fat pig with jews nursing from it and eating its ex increment since the man you are going to meet again one of the richest in the world is himself jewish you find this not only revolt but extremely shocking you pass the mural and reach the docks and the docs are c full of merchants loading and unloading barrels and bags of every commodity imaginable as you pass by these you notice the wide city walls which have been turned into promenade walking paths and you also notice the signs saying no juice allowed as you walk past the walls and into the actual city you can't miss the enormous cathedral it looms over the city and here the holy roman emperor has been elected for hundreds of years in solemn ceremonies passing by you cross the main street and see some of the beautiful enormous homes your mind begins to race you start scanning the houses to see if you can figure out which one is roth gil and obviously you're looking for one of the biggest ones you ask a man on the corner which house mister roth child lives roth child he says he doesn't live here he lives in the jude ga the jewish quarter he points you in the other direction and so you start walking towards this jude ga and you smell it and hear it before you see it ten thousand people packed into a single city block now the jude gas isn't really just a city block it's a world within a world it is completely walled off you have to enter through a gate and as you pass through the gate a guard tells you that you have to be out before nightfall fall when the gates are locked shutting the jews in for the night as you get your first glimpse inside you can barely believe how many people there are in this packed space the j gus had grown significantly over the years in terms of population but it had not been allowed to grow at all in terms of space the consequence was a truly extraordinary level of over they had these extremely skinny houses i'll post a picture on instagram they're the skinny houses you've ever seen right next to each other all along the street and there are houses on top of these houses and houses behind these houses where their backyard should be there were no more yards in the jude and gas there was not a single shrub or piece of grass or tree or bush anywhere in it every last inch of the neighborhood had been filled with houses shops and people and so you ask someone on the street where the roth child live and they point you toward a home pretty much like any of the others nice yes comfortable sure but not significantly different from the many other homes around it you walk in the bottom floor of the house to find the banking operation and mayor is there very much involved and mayor is there very much involved in the day to day affairs and his wife and daughters are helping keep the books he's also employed a few local jewish boys to help out at least one of them from less fortunate circumstances mister roth child greet you personally and that's where we'll leave off this mental exercise i'll let you imagine the deals that you strike with him and the fortunes that you make now that contrast is obviously pretty surprising you know the modern equivalent is like if jeff bezos the richest man in the world or african american and he still lived in a predominantly black neighborhood in like birmingham alabama or something like that except it's also nineteen fifty and the jim crow laws are still on the books and as i read more and more about this story i was blown away that the roth rochelle were able to fight such incredible oppression to be able to achieve the heights that they did the roth child family had lived in the frank ghetto for hundreds of years but they probably should have come from somewhere else i mean really anywhere else frankfurt was terribly oppressive towards jews at the time they were forced to pay higher taxes than their christian neighbors they were forced to pronounce loyalty that proclaimed the members of a cursed race they were not allowed to farm or trade in most types of commodities and if a jew was walking on the street and someone said jew pay your dues they had to take off their hats step aside and bow they wore insignia marking them out as jews yellow patches for men and like veil for women and this is all at a time in europe in the mid seventeen hundreds when the idea of natural human rights was sweeping through europe and yet ludwig the first of ba var holy roman emperor defined the jews of frankfurt status this way he said quote you are ours in body and possession we may make do and deal with you as it pleases us and by the way this was not typical i mean it when i say the roth rochelle probably should have come from any other city it's not like every european city or even every german city treated its jewish inhabitants this way frankfurt was known for its harsh treatment of jews they wanted to be known for their hatred of jews and you can see this in the mural i was talking about the beginning of the episode this was one of the most prominent pieces of public art in the city and it's a mural of jews eating ex from a pig so this is not a city that was quietly anti semitic it was very upfront about it it was proud of it and so mayor am s roth child is born into this environment in seventeen forty four in terms of physical appearance elon describes him as quote tall with large penetrating eyes a high forehead centrist lips and a good nature ironic some may have thought it s smile his family had only recently acquired the name named roth child the name means red shield or red coat of arms the family had lived in a house that had a red sign out front and therefore had become known as the red shield family the roth child family you can kinda hear the resemblance in english english is a germanic language after all shield red shield roth child mayor's father was a small time money lender in merchant and they were not very wealthy they were middle class for the jude ga and as we have established they were pretty tough conditions in the jude gas virtually all the houses in the neighborhood were split between multiple families and the roth child were no exception to that their family had a part share of a house and shared their home with a couple other families roth child received a typical jewish education as a young man which was virtually entirely religious and he carried this devotion with him his entire life he visited the synagogue and prayed almost every single day his father died when mayor was just eleven years old and his mother when he was twelve he was raised there by his older siblings and other relatives but they didn't have to do it for too long when he was thirteen years old mayor was apprentice to a wealthy merchant named oppenheimer in the german city of hanover and this is a stroke of good luck it was a really nice placement for him in his apprentice apprenticeship mayor learn the ins and outs of international trade and money exchanging and he was learning from a good source oppenheimer is one of the most successful jewish bankers in germany and by the way i say germany but there was no concept of germany at the time he was not governed as a whole and the people living in the area we now know as germany felt little of no patriotism or kinship with one another the cities were independent free cities often with little in common i mean for example frankfurt it was really terrible towards jews and hanover were mayor apprentice just a hundred and sixty miles away was one of the most tolerant cities in europe in hanover he had many of the basic freedoms that were missing in frankfurt so imagine growing up in the conditions that mayor or did and all a sudden having your entire world open to you you go from living literally your entire life in a single loud smelly dark city block to being able to go wherever you want and no one's making you wear a yellow patch or about a christians on the sidewalk or any of that kind of stuff and yet when he was done with the apprentice apprenticeship mayor return to frankfurt married a girl from frankfurt started having children in frankfurt and stayed there for his whole life he was always incredibly close with his tight jewish community and as far as i can tell he never considered leaving the city in frank mayer goes and joins his older brother ka in business and becomes a small time lender in merchant this is in seventeen sixty three mayer is nineteen years old and this isn't exactly high international banking this is really basic stuff but he achieves quite a bit of success from the get go and why is he able to have success from the get go in what is a rather common and un glamorous business well you might remember from the caesar episodes that my theory is that the number one common attribute among the great ones is not intelligence or charisma it's energy people who achieve great things have just tons of energy so of course i was not surprised to see this as the second sentence in the elon biography again this is a second sentence in the whole book quote roth child was a man of seemingly energy so again this is just more proof of that theory if you're looking to identify people who are going to achieve greatness ask yourself not who's the smartest or who the most charismatic but who is the one with the in energy who is the one that can keep going and going and going okay so what is roth child doing with all his boundless energy like he would love to be doing international banking just like the man he apprentice for but that's not an opportunity available to him at this moment of time he doesn't have the connections and even more importantly the necessary capital the money you have to have money to lend money obviously but mayer is a pretty smart guy and he has a plan he needs money and he needs connections and he figures that a way that he can do both at the same time he starts to specialize in dealing in rare coins and metals at the time the nobility of europe love to collect that kind of stuff and mayor develops a really smart business model he basically creates a male order business before there was such a thing he create a beautiful catalog people remarked on them at the time they were incredible remember he's selling to the nobility and really only the nobility that is in central europe pretty close to frankfurt so this is a limited customer base and he doesn't have to mass print these catalogs so they're bound books with gold emboss lettering on the front and they're really beautifully crafted uncommon for this and age these noble men could look through the catalogs and then choose the metals and coins they were interested in based on the descriptions provided and roth child would send them the medals and coins for free they could look them over choose which ones to keep send back the rest again free of shipping and only then was payment required from them you can see the similarities to these internet direct to consumer businesses that do so well today mayer business is almost like a war parker casper mattresses or something like that and this is one of the most fascinating parts of roth child career to me because it is so relatable to our current day he understood his customers well he knew what they wanted and he provided value and made it easy for them to purchase and for that he got a successful business and the business again was not just successful for the money it was bringing in which was good but was not quickly making him the richest man in the world but it was more important for the people it was connecting him with there is some truth to saying it's not what you know it's who you know and i would add it's not just who you know it's how you know them and roth child is meeting some really important people german princes and dukes and he's meeting them in a really important way he's given the opportunity to do work for them they all know he's reliable trustworthy hardworking and that he's giving them good deals and all these dukes and princes now know that they can trust mayor a roth job so if your ultimate goal is to do international banking for these guys well that's a pretty good start right and by the way his friendly relations with these ruling elites is getting him the ability to travel freely and freedom from many of the restrictions placed on his fellow jews in frankfurt at the same time because he's gaining a little bit more money he's also starting to trade commodities like cotton coffee and sugar and doing some small time banking and lending now during this venture he has the good fortune of selling coins to someone named wilhelm the land grave of he castle now land grave is not a word that we hear a lot today but it was noble title that was basically the equivalent of duke and wilhelm is one of these great characters he's a larger than life guy wilhelm oc this unique spot in that he's not quite as powerful as a king when it comes to land armies and prestige however wilhelm did have a fortune that could rival that of any king he was not by many to be the richest man in europe and he may well have been he had inherited a bunch of money from his dad but he also did a lot to make himself even more he was a shrewd enthusiastic businessman even one of the biographies founder it refers to wilhelm as one of the best examples we have of a pure capitalist in other words this guy loved getting money just for the sake of getting money he was like an ebony or sc type although i must say he bothered something like a dozen children out of wed lock so it wasn't just for the sake of getting money he apparently enjoyed other activities as well but wilhelm as you might guess was not exactly a paragon of charity in virtue he's was very cut throat he was suspicious and un yielding but one good thing about wilhelm was that he was not prejudice at all i mean he wasn't some open hearted guy who was a true believer in religious and racial tolerance or at least i don't think so there's nothing in historical record to indicate as much but if you could help him make money he didn't care if you were christian jewish black white whatever he liked you and wilhelm territory was very close to frankfurt so this is an ideal partner for mayor again here's a guy who's got a huge fortune the largest in europe and he's trying to invest it he needs help doing so he's not a prejudice against jews and he's close by so roth child wants to be a banker for him obviously but that's easier said than done wilhelm already had bankers and at this point roth child is just someone who sells him coins and metals from time to time something happens that helps change this in seventeen seventy six if you're american the significance of that year is probably not lost on you it's the beginning of the american revolution and if you can go way back to to elementary school when you were learning about the american revolution you may remember that there were some other troops fighting along the british and they were called the he mercenaries and these are wilhelm helm troops he is the ruler of hess and so he's basically renting his men out to the british and the british empire was extremely wealthy and paid a lot of money for these troops but then the question arises if you're the british king how do you pay wilhelm for his men you can't send him british money british pounds because what's he gonna do with that you can't buy anything in germany with british pounds and you don't wanna send him a local german currency because you're british you don't have any so what ends up happening is that britain sends wilhelm promissory notes that can be redeemed for british pounds in london wilhelm then has to sell those intermediaries at a discount who sell them to other intermediaries who redeem them for british pounds sorry are you with me so let's say wilhelm sells his soldiers to britain for a million pounds so they give him ten thousand pieces of paper that say this is worth one hundred pounds in london or whatever he then sells those papers to local bankers for maybe ninety percent of their value those bankers auction them off to merchants for let's say ninety five percent of that value and those merchants do the work of actually traveling to britain and redeeming the notes for british pounds for full value so it's basically like a big game of telephone where everyone takes a little cut of the british pounds as they make their way back to london that's a little bit of an overs simplification even though it wasn't that simple but it will work just fine for our purposes this is called discounting and for a talented banker this business could be really profitable so roth child starts with rare coins but he really wants to help will to discount these notes however wilhelm already has well established bankers to do this he likes roth child well enough for selling him coins and metals but he's got no reason to give him this big banking deal but roth child does get some smaller pieces of the business wilhelm is having big established banks do ninety five percent of the work but he's getting roth child a tiny slice and in this state roth child again is doing well he's getting wealthier and wealthier he's one of the richest jews in the jude ga but he's not be richest and his wealth was certainly nothing to be remarked upon and this continues until he is forty years old these things take time and he's forty and he's not even the richest guy in his own neighborhood yet admittedly it's a big neighborhood ten thousand people but still and that's one of the things you realize about these people who accumulate just tons of wealth they're all really patient and they let their wealth slowly build over time but then everything changes from eros child this is when everything really starts to go from you know he's a moderately successful jewish banker a merchant to moving him towards becoming one of the richest people in the world this is kind of when it all starts when he's forty years old and why what do you think happens think about this what could take someone from being a very successful businessman but but not anything special to being one of the richest people in the planet what would make that difference and it's something kinda surprising i'm sure it's not what you're thinking but let me introduce it this way just this weekend i was reading an article called how to be successful is obviously right up my alley by a guy named sam alt and sam is the president of y comb which is a seed accelerator it's kinda like an early stage of venture capital firm that invest in companies that are just barely starting even even earlier than venture capital and they have helped launch companies like dropbox airbnb reddit stripe their companies are worth more than eighty billion dollars in total so this guy knows something about you know how to be successful and what it takes to found one of the most successful businesses in the world and in his article how to be successful he lays out thirteen things you have to do to be exceptionally successful and i wanna read from number one the most important principle according to him because it's really relevant to how mayor roth child starts to really take off so it says one compound yourself compounding is magic look forward it everywhere exponential curves are the key to wealth generation you want to be an exponential curve yourself you should aim for your life to follow ever increasing up into the right trajectory it's important to move towards a career that has a compounding effect most careers progress fairly linearly so how does this relate to our good friend mayor the thing that makes him so successful is that he literally compounds himself his sons start coming of age and he incorporates them into the business right away he was always a very devoted father he focused really hard on raising his sons the right way making them work hard and all five of his sons turn out to be little mini they're just about as intelligent and energetic as their own father so this is the time when his two oldest sons come of age am s is now sixteen he's the oldest and a second oldest solomon is fifteen and they're able to take up enough responsibility from the main business that it frees up mayor to do some new things first he starts a transportation and forwarding business it starts doing really well and it also pays dividends in information they're receiving a forwarding mail across all europe and this gives them great access to the news of the day and by the way if you wanna see a parallel to the modern day check out michael bloomberg he's worth more than fifty billion dollars and how did he become so wealthy international finance much like roth child and he started bloomberg news and other financial news related businesses because he knows what roth child knew immediate access to information is crucial for good investing so roth child forwarding business is kinda like the bloomberg news of its day he's using it to get news from all over europe and make intelligent investments from that there there's this really cool story that i think demonstrates just how important rapid information was to roth child eventually he establishes bank branches and other cities and of course they would use their forwarding service to communicate information between branches and he uses this information to invest will a problem arises when the local officials decide that jews can't be trusted and all their mail needs to be held for a day read and inspected before it can be picked up so what does roth child do instead of just waiting and saying okay well all our mail takes a day longer he instruct his foreign agents to send him mail in colored envelopes and comes up with a coding system so you know for example a red and white striped envelope might mean that the pound the british pound is going to rise and a blue and white striped envelope might mean that the pound is going to fall etcetera stuff like that and then at the end of the day they would finally get the actual letters and be able to read them but in the meantime just by going to the post office and seeing the color of the mail that was coming in for him he would have information in broad strokes about what was happening in europe and be able to make investments during the day based on that information now this forwarding business helps the firm to quickly grow and then something else happens that helps roth child make even more money as mentioned at the beginning of the episode he was hugely influenced by one of the other historical figures profile on this podcast napoleon bonaparte and in seventeen ninety two the war of the first coalition begins this is france against the coalition that included austria britain in a few other kingdoms wilhelm who remember is the land grave of hess the ruler of hess wade whether he should remain neutral or join the coalition and in the end he chose to join the coalition one reason for doing so was that the british offered him a huge cash subsidy to do so roth child hired to provision the allied army not just wilhelm helm men but men from elsewhere in the holy roman empire as well and this means both acquiring supplies like wheat horses and uniforms for the men and also distributing the soldiers wages and so that's a you know he's paying tens of thousands of soldiers that's a lot of money passing through so why does roth get the contract instead of some of the other rich even more established christian bankers two reasons the writer christian wilhelm berg hof riding in the nineteen twenties with access to original documents from the era wrote quote at this time of the greatest money shortage roth child appeared more resource full and more efficient than the banking houses which occupied the prime position not only in frankfurt but throughout germany okay so you know the first reason is he's just far more efficient and resourceful he's giving them better prices better terms he's young and hungry and able to negotiate better deals by just being smarter bottom line but he's also got this air of depend ability here's another quote this one from a contemporary guy by the name of lo who says quote hair roth child always struck me as unusually solid prompt and fully worthy of confidence n may speak against him but he is a good man who deserves respect it's amazing how much the small stuff has a big effect i mean simply being reliable and prompt and seeming like a trustworthy guy made a big difference for roth child he's able to get these contracts in part because of it okay so back to provisioning the armies this is a huge complicated task roth child frankly didn't have the money to do it but he gets the contract and then he makes deals with other jewish bankers in his network to help him front the capital necessary to supply the coalition army this would be a huge source of income for roth child for the next couple decades in eighteen hundred mayor or became an official crown agent for the austrians and throughout the napoleonic wars continued to aid the anti napoleon cause then disaster struck in eighteen o six napoleon defeated the fifth coalition at the battle of jaina after the battle jaina napoleon decided to punish wilhelm for his show of insulin in joining the coalition so wilhelm territory was promptly invaded and wilhelm had to flee into exile first in denmark and then later in prague roth child remained in frankfurt under great risk remember this is a man who is helping to fund cloth and arm the armies that had been opposing the french now the french have taken them over and roth child could lose everything if they decided to con his wealth but that's not what happens no actually instead of it bankrupt him the french invasion is what actually makes roth child most of his money and so what happens is wilhelm secretly turns over all his assets to roth child before leaving this demonstrates the immense trust that wilhelm must have had for mayor and also his lack of options very few people were willing to manage the estate of someone who was you know an enemy of the state someone who was a fugitive the french military governor frank was suspicious of course of mayor's ties with wilhelm and kept a really close eye on the jewish banker and at times roth rochelle house was searched and he was interrogated for hours by french soldiers but mayer was extremely skill at keeping up the deception and hiding his management of the land graves affairs he kept an entire second ledger and this one was fa it didn't include any of the graves assets and managed to explain away any income from those assets he also went so far as to have a secret basement installed in his house this basement had a false wall with a secret passageway that led to a neighbor's basement so that even if the french authorities discovered the basement he could move money in documents to the neighbor's basement before they could reach it and by the way this happened multiple times and now that roth child is fully managing one of the largest estates in europe he's playing with a lot of capital and now is when he can really start to make himself some real money and this is another lesson people who are really successful have a what i like to call a heads eye win tails you lose strategy if the coalition had beaten napoleon roth child would have continued to supply them fund them and make money off their war effort when napoleon won instead roth child got to manage wilhelm homes estate and get money that way so it was like he he found a way but he could win no matter the outcome the writer and investor nas tal calls this being anti fragile so if you have a fragile strategy it means it collapses whenever there is a shock so for example if you have a business and a recession hits in your business folds that is a fragile business the next best thing you can be is durable a durable business is one that has some cash reserves maybe but it's able to make it through a recession without collapsing it it will probably suffer but it'll make it but the best thing you can be is not durable it's anti fragile so for a business that might mean you actually make more money because of a recession and this is what roth rochelle does again and again again he's anti fragile he's prepared for every eventual and things that would bankrupt a lesser banker actually end up making roth child even richer eighteen o six would prove to be a critical year for roth child in other ways too first the holy roman empire which was neither holy nor roman nor an empire but we can get into that later was finally dissolved and frank status as a free imperial city was rendered null and void carl van dahl the new mayor made some positive overt church towards the jewish community made him you know he's he he tried to act like he was a friend of theirs but he still refused to liberal frankfurt anti jewish laws and mayor would spend much of his later life champion the cause of jews in germany and and trying to liberal the laws to allow him to travel in such another event that occurred in eighteen o six was napoleon's declaration of the continental system i know none of my listeners would ever forget a single piece of information from any of my episodes but just in case you need a refresher on the continental system here it is napoleon and the french empire were at war with the british empire france had a much stronger army and had political control that extended across europe however england had a much stronger navy and more colonial possessions england was able to use their navy to completely disrupt trade with france the quote is that napoleon was the master of europe but he was also a prisoner there he complained that he couldn't launch even a fishing boat without it being captured by the british navy so as a way to hit back at england napoleon tried to cut off british trade with europe and this was called the continental system or the continental blockade but as you might imagine trying to make sure there are no british goods allowed in any port anywhere in europe from m spain to saint petersburg russia is pretty tough smuggling was rampant it was everywhere and one of those people who helped smuggle goods was none other than mayor roth child now the roth child and mayor in particularly pride themselves on integrity it's in their family motto concord integrity that's latin for harmony integrity industry which is actually a pretty good summary of how their roth child achieve so much success and smuggling does not exactly seem to fit with that motto it doesn't seem like a very honest trade but remember he had already committed to managing wilhelm homes money which he's managing by keeping it away from the french authorities so is kind of a moral bind does your integrity demand that you submit to the local authorities and in so doing rene na on the commitment you made to watch over your client's money or does integrity demand that you preserve your commitment to your client and lied to the local authorities well for roth child this was made easier by the fact that the jewish community sided with the coalition which is not what you would expect they were prisoners in their own city who are constantly humiliated and frequently persecuted the french on the other hand treated the jews quite liberally after all the french revolution esp the ideas of human rights and equal recognition before the law and there are a number of potential reasons why the jews of frank backed the coalition forces some con that it was like a mass case of stockholm syndrome and others guess that they were just pretty savvy and realized that the french would soon be giving up the territory that they had recently acquired and you know if the old austrian regime the old holy roman empire were put back in charge of frankfurt and the jews had supported the french that would have been interpreted as t and who knows what the consequences would have been for the jewish community when they're living amongst an already very hateful populous in any case roth child was smuggling goods from england mostly textiles and he was doing very well with it making money hand over fist the problem with smuggling is you can make a lot of money but obviously there's also a lot of risk many officials basically turned a blind eye to the smuggling that was quite clearly going on in frankfurt but then at one point some higher ups decided to crack down and there's a big bon fire in the center of town and the french soldiers burn all the imported british goods and a good deal of roth child's goods are seized and burned well roth child is like traumatized by this he says he has learned his lesson and he has never going to go into smuggling this way again and this kind of seems like an over reaction i mean after all but he had to have known there was some risk right and his losses from the entire thing were pretty modest i mean it didn't sink his business and yet he was enraged and embarrassed it's pretty crazy to read about how how traumatized he was by by this experience so how to explain this reaction the reaction reminds me a little bit of warren buffett rule for investing rule number one never lose money rule number two see rule number one great investors are haunted by their losses they hate losing money and you really see this with mayor great investors don't love making investments that much more than the average person i mean of course they like making money and they're trying to making great investments but everyone likes making money what really sets them apart is how much they hate losing and you can kinda see that here now remember while all this is happening roth child is also running wilhelm helm estate while he's exiled wilhelm had ended up settling first in denmark then prague with members of his court from these residences in exile wilhelm sent mayor constant letters asking him him about the state of his holdings and mayor was always a very faithful steward and he kept wilhelm in the loop of what was happening mayer son am sc was attached to wilhelm helm court this acted both as a move to prove mayor's reliability and giving wilhelm a trusted adviser and also to have his son in a position to keep an eye on wilhelm to make sure he didn't do anything sketchy which was always a possibility to keep wilhelm informed mayor developed a sophisticated system of sneaking letters to and front prague right under the noses of the french authorities in the letters mayor was known as peter ar wilhelm was known as goldstein and and they had all these coats the austrians who were still at war on and off with the french allowed these secret activities to continue freely because they helped the war effort quite a bit this is a testament to the skill and tact of mayor even in difficult circumstances like a war with france even when dealing with an employer is anxious as wilhelm mayor calmly maintained business as usual it's very easy for a person of business to fudge the numbers skim a little bit off the top especially when their boss lives hundreds of miles away and can't check up on you in fact if he wanted to he basically could have seized wilhelm entire estate but mayor kept his integrity and maintained wilhelm interests during the ladder long absence while he's losing out on money that he could be skimming in the short term the reputation he's gaining as an honest steward is priceless it's a long term play and the roth bank is becoming known as someone that you can really trust your money with right they'll go above and beyond to make sure that it's cared for and that you see return on your profit even if you know the worst happens and and you are exiled from your estate and and and taken over and everything is seized ross is still managing to find a way to oversee his clients best interests and make him money in these circumstances as this is going on mayor's boys are continuing to agent into adulthood and as they do he's sending them out to build a banking network across europe they would come to be known as the five arrows and they establish five banking centers his first son amc as was previously discussed went to prague but eventually came back to frankfurt to run the original branch his second son solomon went to vienna his third son nathan went to london his fourth son carl went to naples and his fifth son james went to paris now when it comes to the napoleonic conflict two of the brothers matter the most the first is nathan we'll talk about him more in the next roth child episode but nathan was the third son and he was considered by all the brothers to be the natural leader he was the most energetic and intelligent of them all and that's saying something they required the energetic intelligent bunch he was either sent to london or decided to go himself depending on who you asked and london is really where the family started to make real money he was at first acting as an exporter and then he went into what we think of as high finance major investing making big loans but london was the financial capital the world at time and nathan did very well there the other important brother in this business is james who went to paris james was extremely outgoing entrepreneurial and active he makes an immediate impact in paris and one of the first things he does is to help fund at the anti napoleonic effort in the war they are funding the war efforts of all these governments across europe to fight napoleon in the french if the coalition forces lose they're all likelihood not going to be able to pay the roth child's back so the roth are very invested in seeing the coalition forces win this war you may recall that there were actually two main theaters of war to help defeat napoleon the one everyone remembers is russia he suffered catastrophic the defeat there but he actually might have been able to recover from that defeat if it weren't for spain napoleon invaded spain and it turned out to be a huge debacle that tied up resources diverted his attention and was a huge contributing factor to his downfall but in march of eighteen eleven a crisis faced the anti napoleonic forces the general arthur welles was leading the british forces in spain and the conflict there was really dirty and terrible there were massacres and atrocities on both sides it's a dirty ugly war and welles rights to london to say hey we need more cash i can't pay my soldiers and if i continue to not be able to pay my soldiers i'm gonna have to halt this campaign because no one's going to obey my orders anymore the british badly needed cash to pay their troops and their allies in spain or else they're risking you know being completely defeated and if they were defeated in spain at this point in time the napoleon's not in russia yet the conflict would be completely over there would be no fighting this was the one theater of war that they were maintaining against napoleon in london nathan gets a contract to pay the british troops in spain and he gets it because he was the only one bidding no one had any idea how to pay them after all they trying to pay men in an active war zone and they would have to cross enemy lines in order to do so and they needed it in a currency that could be useful in spain right so they can't just take british pounds and sail them over so here's what roth child does nathan buys gold using british pounds in london and the gold bull is then forwarded to paris where james sells it for spanish currency he then smuggle the spanish currency in false compartments and carriages to the british forces in spain crossing french lines to do so now this is a massive amount of gold that is entering the city of paris and james is literally funding the british war against the french from paris right under their noses so how's he explaining this away well james tells the french investigators that actually they're moving lots of gold from london to paris which is true because they're losing confidence in the british war effort which is not true they aren't losing confidence in the british war effort they're paying british troops and they're smuggling money from london to spain and half the journey is being fully monitored in a fact sanctioned by the french government and these are the kind of bold moves that end up making the roth child the richest family in europe and of course we all know what happens next right all this funding this this prolonged continuing war in spain wears down napoleon he loses in russia comes back is defeated and is eventually exiled first to alba and then to saint helena but sadly mayor roth child actually doesn't live to see this victory he dies in eighteen twelve now we're talking about you know who's the richest man in the world and it was never mayor am s roth child but on his deathbed he said to his oldest son quote keep your brothers together and you will become the richest men in germany well they did they became not only the richest men in germany but in the world he also begged his sons to be charitable and remain faithful to the faith of their fathers he ordered his funeral to avoid all os solicitation which it did but that didn't stop the entire jude gossip from showing up for it there were no speeches and he was buried beneath a very plain simple tombstone it should be noted that his wealth was actually very little remarked upon in the jude go when he died instead they all talked about his pie and his charity and that's because mayer roth child was like santa claus in the jude ga seriously he was always giving away money listen to these descriptions from his conte the first one is from a german writer ludwig born he said quote people crowded behind roth child in the streets like a court masses of poor people to whom he gave arms if one saw a row of beg in the street looking pleased and comforted one knew that the old roth child had just passed through when i was a little boy i was passing with my father through the jude ga and we ran into the old roth child coming out of the synagogue roth child spoke first to my father he then addressed a few kind words to me and placed his hand on my head to bless me thanks to this blessing and although i became a german writer the cash in my pocket never completely ran out here's another description from another contemporary writer quote roth child believed that god best rewards those acts of charity for which the donor receives no thanks he often walked at night through the jude and ga pressed a few coins into the palms of all who seemed to pour and hu on in the dark and this type of behavior starts early on for him it's not something he does only once he becomes fabulous wealthy he was a friend of the death and homeless from the time he was a young man should also be noted that he prayed often and was quote very orthodox in his religious ob servants but was tolerant of those who were not he never moved into a mansion and always wore plain simple clothing now this is important both as just a model for how you should live your life but also because i think this whole mindset and philosophy was what allowed his sons to be so successful usually if you're rich and you have five boys at least one of them going off the deep end but the fact that he never dressed fancy never moved out of their modest jude go home and never displayed their vast wealth except to pay the poor with it probably helped his sons to be hardworking and well adjusted he also technically only left them the minimum required inheritance now in reality all his wealth went to his sons but not as an inheritance they became partners in the firm once they had earned it and then were given a proportional share of the company but they weren't just given money for the fact that they were his sons they were given money for the fact that they worked in the firm and earned money as members of the firm he wasn't a particularly harsh father if anything he was rather dot and kind but he also had high expectations for his sons and gave them very little for free okay so let's do an analysis to what shall we attribute the phenomenal success of mayor roth child and the beginning of the roth child dynasty let me pull out just a few principles first and we've already gone over this but compound yourself maybe you're not going to be able to do this by teaching your children to behave exactly like you but you can compound your efforts in other ways teach others mentor them you know basically just be a leader leadership is all about learning to compound your efforts through others number two lesson number two is hate losing money i won't harp on this anymore because i also touched on this but i will also add protect your downside when his goods were burned and it shocked and upset him so much it actually didn't set the business back too much the roth child were experts are hedging against risk it's the reason he sent his sons to the five corners of europe with five bases of operations a single catastrophe couldn't wipe you out and that became crucial in the nineteen thirties when the nazis confiscated a good deal of the roth child wealth so again hate losing money and protect your downsides so that you don't lose money very often okay number three information is key capital allocation is competitive you don't make real money by being smart or hardworking or even by being lucky you make real money by being smarter or harder working or luck than anyone else roth created a lasting advantage for himself by having more information and faster communication so you have to think about what your advantages are and information is one of the biggest ones this is why it's no secret that michael bloomberg the guy who started bloomberg news and is the key of financial news is worth more than fifty billion dollars if you want to make money learns something that no one else knows number four start early go steady whether it's warren buffet or mayor roth child or john d rockefeller the great wealth builders start making money as soon as they can compound interest really is the most powerful force in the universe as the saying goes and these great investors and money makers they're not up and down they slowly build their wealth over time and over a period of decades it becomes enormous as it did in the case of mayor roth child and the last thing i'll end with is the real lesson for mayor roth child's life he told us exactly what he wanted us to remember and it's the motto that was adopted on the roth child coat of arms concord in integrity in that order concord harmony mayor roth child always put his family first he made his family his business and he made his business his family the result was a family that despite sq and fights from time to time has stayed mostly united for two hundred years this was so important to mayor roth child that he even put in his will that any child who disrupted the harmony of the family should be taken out of the will they would receive nothing and be kicked out of the firm so remember concord harmony you have to find your family your tribe who you will be loyal to and you know will be loyal to you the second integrity integrity mayor's reputation for honesty integrity followed him his entire life and it's what allowed him to continue to have success and it's the reason people were willing to trust him with their money and and let him invest it integrity was incredibly important and it's not just integrity in normal circumstances but remember when frankfurt was invaded and it would have been so easy to take some of will homes money or even more so it would have been easy to just do nothing you know he had made this commitment to look after his estate but come on think we're being invaded who could have blamed the guy if the french invaded and he said look you know yeah i promise to take care of your estate but you know what could i do we were invaded but he didn't do that he valued his integrity so much that he worked through extremely difficult circumstances to keep maintaining and looking after wilhelm holmes estate so extreme integrity is something that's really important that reputation will stay with you and will help you to be really successful the third industry hard work remember the hallmark of greatness is energy roth child was flat out harder working than any of his competitors and that's a trait that he passed on to his sons okay that does it for this episode next episode we will be talking about how his sons managed to carry on the legacy and create a financial empire the likes of which the world has never seen until then thanks for listening to how to take over the world