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Meet the richest man who ever lived

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Brilliant, egotistical, greedy, unyielding and powerful, the wealthiest man who ever lived isn’t who you think he is.

The genius that holds that title is Jacob Fugger, a German banker of the Renaissance, and someone from whom financial advisors can learn a thing or three, according to securities analyst Greg Steinmetz. He is the author of a new book about the clever wheeler-dealer, “The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger” (Simon & Schuster).

Not only was Fugger (rhymes with cougar) the richest man, he was the most influential businessman of all time, Steinmetz told our sister site, ThinkAdvisor, in an interview.

At his death in 1525, Fugger’s net worth was nearly 2 percent of the European economic output, or in today’s dollars, a whopping $400 billion, Steinmetz has calculated.

In the 1400s and 1500s, “The Financial Miracle Worker,” as the driven Fugger became known, created wealth through a rare talent for making winning high-risk investments by borrowing the money needed to invest from the nobility. Not an intermediary or only an asset gatherer, Fugger was the money manager and the guy who ultimately pulled the trigger.

An ace opportunist, the nervy “Banker of Kings” had an uncanny knack for persuading cardinals, bishops, dukes and counts to loan him money. Financial leverage was one of his greatest strengths.

The bulk of Fugger’s fortune came from silver and copper mining, and banking; but he also dealt in textiles, spices, jewels and martyrs’ bones (remember, this was the 1500s).

The Catholic Church deemed interest on loans to be usurious, no matter the percentage; Fugger brazenly overturned the ban. He also helped set off the Protestant Reformation and likely funded Magellan’s voyage around the world. He became the chief financial backer of the Habsburgs of Austria, the Vatican’s lead banker and the top financier to Rome.

But he was a controversial figure who often used trickery and bullying to get his way. Born a commoner, the moneylender was constantly under attack by enemies who, because of his ruthless ways, branded him a heartless usurer.

Meantime, Fugger was in fact an astute businessman who believed strongly in free capital markets. He keyed in to his competitors’ vulnerabilities and his customers’ motivations, and made himself indispensable to the latter.

Born to a wealthy family in Augsburg, Germany, in 1459, Fugger’s objective in life was to become the richest man in the world. He also became the first modern businessman because he was the first to “pursue wealth for its own sake without fear of damnation,” Steinmetz says.

An innovator, Fugger pioneered a network of branch offices and created the world’s first news service — via courier — to quickly disseminate market-sensitive information to customers, according to Steinmetz. He was also first, the author says, to combine the results of multiple operations in one financial statement, allowing him to see the big picture.

The pinnacle of Fugger’s success came after death, by which time his nephews were running the company. The family continued at the helm for another 100 years but then let the firm simply fade away.

Fugger’s only source of direct descendants is a daughter that the married banker fathered with his mistress. Steinmetz tracked down six of these heirs, speculating that there are probably others.

Our sister site, ThinkAdvisor spoke one recent morning with the Cleveland, Ohio-born author — with money managers Ruane, Cunnniff and Goldfarb and who, as a former journalist, was a Wall Street Journal bureau chief in Berlin and London — about the man that he maintains invented modern capitalism.

ThinkAdvisor: Jacob Fugger typically wore a gold cap and lush fur scarves. He lived in palaces with marble floors. His office was dubbed The Golden Counting Room. Was it actually bedecked with gold?

Greg Steinmetz: No, but that’s what people called it because it was where Rumpelstiltskin spun his gold.

How do you figure that Fugger was the richest person who ever lived?

I divided his net worth by the size of the prevailing GDP in 1500. His wealth came to 2.1 million florins, which was more than 2 percent of the European economy. Two percent of the U.S. economy today is in excess of $400 billion.

What are the top three character traits that made Fugger the wealthiest man that ever was?

No. 1: Nerve. He had it in spades. He wouldn’t have succeeded had he not been willing to take enormous bets. He had extreme faith in what he was doing. No. 2: Shrewdness. He was the smartest guy in the room wherever he went. No. 3: Ambition. He wanted to make more money than anyone ever.

What were Fugger’s top three business skills?

Vision, negotiating talent and use of financial leverage with his lenders.

What type of personality did he have?

He was jovial when the mood struck. He liked to throw parties and show off his toys and brag about his wealth.

Was charm in his arsenal?

He used charm when he thought it would help him. He was good at flattering his social betters – kings, bishops, other members of the nobility, the pope. If he wanted to make an impression on someone, he wined and dined them. Like a good investment banker, he knew what would impress them, and he made sure he had the means of delivering.

What was the fallout of failure in those olden days?

Debtors’ prison or getting your hands chopped off. Never was being in business more dangerous than at that time because of the consequences of failing, humiliation and running afoul of church law by money-lending and collecting interest, which Fugger did.

What was his biggest challenge?

Raising money. When he started out, he had to find people who were willing to invest with a young guy with a short track record.  

You write that Fugger believed God wanted him to be rich.

That’s how he was able to justify everything he did and keep within the morality of the time: “We’re here to serve and please the Lord.” He said, “I’m pleasing the Lord, or He wouldn’t have given me this great talent to make money and be rich.” It allowed him to sleep at night.

Let’s talk about his colossal nerve.

He made two enormous bets that ensured his future. The first – and riskiest deal – came when he was just starting his career. And it launched his fortune. He borrowed a bunch of money from friends and family, persuading them to invest with him in order to make a loan to Archduke Sigmund of Tyrol, Austria.

That must have taken courage.

Right. The usual crowd of lenders thought it was far too risky. So Fugger thought: “Here’s my chance.” Sigmund indeed retained control of the silver mines in Tyrol, the biggest in the world. And Fugger was able to wrap up controlling the silver business for his lifetime.

Where did his great negotiating skills show up?

He didn’t just give the Archduke of Tyrol the money – he nailed down every detail to the point where he said, “I will loan you money backed by the silver proceeds, but I’m the one you have to let control the mines and flow of money. And, by the way, you have to also let me control the Tyrol State Treasury because I want to make sure that money comes to me.”

This deal also illustrates his vision.

Yes, because others may have been more concentrated on the short term or didn’t have faith in its working out.

What was Fugger’s other huge, audacious bet?

Two yeas later, he decided to try to recreate in Hungary what he had done in Tyrol — tie up the silver business. At that time, Hungary was under siege by the Turks. So it was very risky to make investments there. But he came in and bought out as many silver mines as he could. It turned out to be a great bet because the Turks didn’t come till much later; meanwhile, he made an enormous amount on silver.

You write that he was a bully, especially with his family.

When he was dealing with them about becoming partners in his company, it was ‘my way or the highway.’ He made his family swear on a Bible that if they wanted to be partners, they would have to give him complete control: Come to him before they made any decisions but that he would have the ultimate say. He was well aware of the leverage he had to get his terms and how valuable his ability to raise money was to other people — so he used that for all it was worth.

What’s an instance of Fugger’s shrewdness?

He controlled so much of the copper mines; but when some of his competitors came to him to form a cartel to control prices, he agreed — with the sole intent of destroying those competitors. They walked into a trap: Once the other guys committed and delivered the copper, Fugger slashed prices, knowing he could hold out longer than they and thereby inflict severe damage on them.

Can you liken Fugger to anyone in the contemporary business world?

In terms of raw ambition combined with the talent, conviction and the nerve to make it happen, guys like Larry Ellison [founder] of Oracle and maybe John Malone [chairman] of Liberty Media. They’re very confident in their abilities and want to make money for its own sake — and they’ve taken big bets that have proven correct. These are people who have an enormous gift for making money — and making money is what makes them happy.

Fugger was unyielding. Any financiers on the scene now that are like that?

Hank Greenberg [former chairman-CEO of AIG]. He just wants to win and be vindicated. Fugger, even on his deathbed, refused to yield to the king of Hungary. The result was that after his death, Fugger’s heirs retained all his Hungarian assets — the single biggest source of his wealth.

Detractors called the Catholic Fugger a Jew. Why?

Jews were generally hated by the Christian public then because they were rapacious moneylenders who, when people couldn’t repay, would take whatever they had offered as collateral, whether it be land or cows. By calling Fugger a Jew, they were saying, “You’re a money-grubber who can’t be trusted – and if I’m not careful, you’re going to steal my grub!”

“Jew” was also a very loaded word because Jews were accused of causing the Black Death 150 years before by poisoning wells.

You write that Fugger’s investing philosophy was based largely on diversification. He kept a third of assets in cash, a third in investments and a third in merchandise. He stayed prepared for big losses at any moment.

You may call that Modern Portfolio Theory. But Fugger knew intuitively that diversification made sense.

Why did he own real estate?

To make sure that money would be there for future generations. So he took some off the table by buying up enough land to get his name on the map.

As he grew older, wealth preservation, rather than accumulation, became his priority. That made sense.

But in one way, it was forced on him because there weren’t unlimited investment opportunities as there are today. The one investment that could have soaked up a lot of his excess capital was exploration. He did some but was leery because it seemed unpredictable and too high-risk – he couldn’t use his edge. If he invested in shipping, he would be at the mercy of the weather.

We take for granted the accounting system of double-entry bookkeeping. Interestingly, it was Fugger who pioneered this after its invention in Italy.

He was the first person to use it north of the Alps. It allowed him to see the big picture. Before, people would either try to keep the figures in their heads or write them down on bits of paper kept in drawers. Fugger maintained detailed records and was adept at interpreting them.

Odd that the richest person who ever lived wasn’t more philanthropic, other than opening a public housing project for the working poor, which charged a fee. In Augsburg, the Fuggerei is still in operation.

Fugger’s attitude was to make more money than anyone and to leave it to his heirs to make even more money.

Yet you say that they became bored and eventually just let the business go.

Not uncommon. It’s like the heirs of the Walton family aren’t involved in the Wal-mart business.

What can financial advisors learn most from Fugger?

To look out for clients’ interest for the long term. Fugger wasn’t about making short-term deals. He wanted to take the assets of his backers and promise them returns that would keep on giving. He wanted to keep these people for life.

Any other takeaway for FAs?

Fugger kept his customers abreast of what was going on — the good and the bad, which wasn’t common practice then. He didn’t try to sugarcoat things. Fugger wasn’t pitching all the time. He gave his customers useful information. I liken this to what a CEO puts in their annual report to shareholders.

See also:

Confessions of a Hollywood elite advisor

Working with the affluent retiree market

Billionaires: Where they are, what they want