do you remember Sam insol the billionaire utility Tycoon from Chicago do you remember how his Empire collapsed and how he lost two or $3 billion how the newspapers at the time called it the biggest business failure in the history of the world you may remember the battle that the United States government had to extradite inso from Greece but chances
are you don't remember that inso had been in the electric business as long as there had been an electric business that he had started as Thomas Ed private secretary in 1881 that he more than any other man was responsible for founding the business of centralized Electric Supply that he organized the Edison General Electric Company now known as GE and that he worked out a model of
Nationwide product distribution that virtually all other American industry copied that he practiced and popularized mass production and selling at the lowest possible cost long before these ideas were attributed to Henry Ford that he was the first to successfully apply on a large scale the concepts of the load and diversity factors on which all utility rates are based today that he
brought into effect the natural monopoly principle of utility companies that he helped create the open-end mortgage that's used in financing expansion of many businesses outside of the electric industry today that he was the father of Effective Government regulation of Public Utilities and the creator of rural electrification that he pioneered successful welfare
programs years before most of business labor or government took any significant steps in that direction that he helped develop the idea and techniques of modern public relations and he was The crucial link between PT Barnum and Madison Avenue and that he devised methods of marketing Securities that made possible gigantic modern corporations next to Thomas Edison Sam
insul is the name that you should remember as the most important and perhaps the most notorious person person in the electricity business that was an excert from the book I'm going to talk to about today which is inso the rise and fall of a billionaire utility Tycoon and it was written by Forest McDonald this is a very old book it was first published in
1962 and what the book uh lays out is that inso was not just a company Builder but he actually an industry Builder so you can think of what Rockefeller was to oil what Henry Ford was to the automobile uh what JP Morgan was to finance and what Carnegie was to steal Sam insol was to electricity but unlike Rockefeller Ford Morgan and Carnegie insol made terrible drastic mistakes at
the end of his career and he dies broke and so for you and I this is going to be one of the scariest books uh that we could talk about because the idea that you can be wildly successful maybe the most successful businessman in the 1920s have an amazing 53-year career and still be overleveraged and risk everything and die with no money is ter absolutely
terrifying so I'm going to start with the relationship that he had with his father insul is born and raised in England and what is most interesting is that he had all of his dad's positive traits and none of the negative ones so his dad was described as imaginative clever and enthusiastic what his dad did not have was energy practical sense and
fortitude Sam's father was idealistic impractical and intellectual that is not how you would describe Sam Sam was very smart but he was pragmatic very much like Thomas Edison and another way Sam differs from his dad is there's a line in the book where it says his dad was not interested in earning a living uh Sam was the exact opposite he loved operating companies he was a workaholic
it says when he was his standard work day was 16 hours a day from the very beginning of his career and all the way up until when he was in the 70s he was still working 16 hours a day he loved operating companies and he was as we will'll see he's very very gifted at operating companies and after finishing the book and then rereading all my highlights before I sat down to talk to
you I think his maybe his Mo most important trait is that he had the the author says that he had near demonic energy I'm going to read this paragraph to you this is incredible and this starts out when he was really young and he had incredible energy in work ethic up until uh the very end he was small but his physical endurance was boundless and his energy was inexhaustible he had
a peculiar metabolic makeup he awoke early abruptly completely bursting with energy think about that opens his eye and he jumps out of bed uh with a burning desire to achieve Mission success is the way I would put that so he'd be bursting with energy yet he gained momentum as the day wore on and he would work long into the night later on much later on as a m as a matter of
fact uh as an adult he learned to relax but relaxation was a learned thing to be resorted resorted to only when he was on the verge of physical collapse this sounds like Thomas Edison too uh relaxation was an act of will his body always told him to go and go and go because he came from the lower middle class and sometimes he was very close to
Poverty uh from his dad's what I would call laziness uh he had to he started working really early starts having to support the family I think he's he's working uh more than full-time when he's 14 and so there's a description of him uh early on but this is something again characteristics as he maintains throughout his entire life the way I would think about when you analyze and
read about Sam is he had a very gifted and productive mind so says Sam's most obvious attributes was a capacity for racing through large quantities of reading material effortlessly perceiving its important assumptions and generalizations and thoroughly assimilating its Salient details the way his mind worked it said he reasoned from particulars to generalizations about all
the information that he was able to consume he learned to see to the heart of relations between things and to grasp the underlying principles so clearly that he could perceive ways to shift them around and make them work even better as we'll see when he goes to America to become the private Secretary of Thomas Edison I think he's 21 at the time essentially his job was hey we have
this gifted inventor now systematize all the businesses around him and so that's exactly what insul did and he's going to wind up working in that industry for the next 53 years but when he's a young boy he's reading they call him they would call them self-help books in fact uh one of the these authors uh this guy named s Smiles that inso was reading about
actually wrote a series of inspirational books that we'd call self-help today in fact one of them so it's it's like a combination of self-help and like uh biographies so he's like reading biographies of lives of great Engineers but one of the actual titles that he read and had a a m a huge affection on on his life was a book called self-help
and these books in their day sold a ton of copies so was like they inspired thousands of young uh English men with this idea that if you exercise lifelong learning and self-discipline and honesty and Thrift and Prudence then Fortune would follow and so he would take some of these lines he would have these maxims that he'd repeat and he would repeat them throughout his life ever
since he was a young man so I just want to list a couple of the ones that that stood out to me so the first one is Idle Hands are the devil's workshop number two time is money number three things are simply done or not done number four one reveres one's family number five only that which is useful is good that reminds me of one of my favorite Thomas
Edison quotes he says that sale is proof of utility Edison was famous for only wanting to invent things that had actually a commercial application and his whole point is like you know it's useful because people will buy it sale is proof of utility so again only that which is useful is good and six survival of the fittest and so Sam's first job he's 14 years old he gets a job uh at
this firm of auctioneers and he's just an office boy basically having to do whatever it is they need done just like Carnegie before him and Rockefeller see over every again he'll just start acquiring all these skills that make him more valuable to the company even at a young age so Rockefeller would learn bookkeeping Carnegie would learn how to be a telegraph operator inso's version
of that he's he becomes a stenographer and just like Carnegie who would stay up late into the night learning uh how to be a telegraph operator inso was doing the exact same thing it says he worked at a long into the night every night until he had become an expert stenographer the other night I was having dinner with two founder friends and we had we end up having this very
interesting discussion on samel and actually went it inspired me the next morning to go and reread all my highlights of from Sam Z's autobiography and there was a description of something Sam was doing early in his career it might have been one of his first projects where he was building all that student housing uh in Michigan if I'm not mistaken and there's a note I left
myself that had forgotten and it says uh do the best you can with the opportunity in front of you opportunity handled well leads to more opportunity opportunity handled well leads to more opportunity so he becomes a stenographer realizes hey this is a very valuable skill set these older more successful businessmen are in need of it so I will not just learn it but I will
spend nights and weekends becoming the very best uh scenographer I can be he's like 15 when he's doing this right and as a result his boss at this auction Auctioneer company actually knows the editor of the founder and editor of the magazine Vanity Fair and he needs help his name is Thomas G BS so he actually needed a person to come at night and be
his stenographer and because Sam did the best he possibly could with the opportunity that was in front of him and opportunity to handled well leads to more opportunity he winds up being a very close and important nighttime employee for this well-connected and Powerful founder and editor of Vanity Fair and so if you think about this Sam inso at this point is a PSD which you
and I have talked about over and over again poor smart and determined he doesn't he's not connected to he doesn't know High Finance High business he doesn't know the most powerful people in the country but what Thomas BS does and now he is at the right hand of Thomas BS so it says BS was intimate with many important politicians and able to gain entrance almost anywhere through his
personal and family connections inso would go to B's home four nights a week to take dictation from 8 until midnight he would he would this is something that inso was was famous for remember they said he had demonic energy he said sleep was unimportant so he would Arise at 4 the following morning right so keep in mind he's working all day he's got a
full-time job at the auction a all right then he goes and he works for bowls uh from 8 until midnight then he sleeps for 4 hours wakes up at 4 in the morning transcribes all the notes that he took for bows and then delivers that to the printers on his way to his day job now this is very important because you and I talk about this relationships run the world and so the way that Sam
inso is going to build a relationship and the really probably the only path to build a relationship with extremely influential and powerful people that can help you right is Service First he's not like hey gimme gimme let me go pick your brain no it's like I'm going to work excessively hard for you I'm going to provide a valuable service for you first and as a result Thomas BS teaches him
about the highest end of business and politics and finance and more important maybe maybe more importantly or just as importantly maybe it's the way you think about this Sam starts to become very comfortable around in the presence of very powerful people and so now Sam starts to see oh this is a path to advancement what does he do he doesn't like okay well I'm just going to keep
you know being an office boy and keep being a sonographer he's like no I need to to acquire more skills so then he starts to teach himself bookkeeping uh he winds up buying a bunch of like essentially almost like a course is where you could think about this that would teach him bookkeeping and accounting and then he starts keeping an imaginary set of Double Entry books to
practice then he's reading every spare minute of the day and it's not like this guy has a lot of uh spare minutes right he dived classic Works in political economy History Literature and biography he had the ability to commit to memory everything he read he also had the ability to focus which is again is I think is becom even more and more rare
in the world the modern world that you and I live in today says he developed the ability to concentrate on a single single subject and to completely shut out everything else no matter how pressing he learned to systematize and render efficient whatever he dealt with and so that is a hint to what is probably his greatest skill in operating businesses people would bring him in
from other companies and just like he could come into your company and just build systems to make every single company he was in involved in he found ways to systematize it to make it more efficient without that skill you and I would not be talking about him today this book would not have been written on because essentially what like his main
achievement is that he developed right the business model for the Modern Electric industry and he winds up he does this by turning a luxury product into a necessity his like Flagship accomplishment in life him more than any other person in history made electricity universally cheap and abundant what blows your mind is when you go and read these books especially in like this
Robber Baron era it's they essentially had a very similar idea even if they didn't put into words it's like how do we turn a luxury product into a necessity okay so I want to fast forward a few years insul is 19 and he still has this habit of reading and and using the best like absorbing as much useful information as possible he winds up coming across this article that talks
about a 31-year-old American inventor named Thomas Edison and Sam inso is blown away and after putting that article CLE down he goes and finds every single possible thing he can find on Thomas Edison and he reads it all in doing so Edison becomes inso's hero and a 19-year-old Sam insul does not know he's about to get fired for no fault of his own he doesn't know this is going to
be probably the best thing that ever happened to him so his boss that he's been working there for what four four and a half years gives insula review he's like you're incredible uh you're diligent and unfortunately we have to fire you and he was like well what's going on their most important customer that was spending hundreds of thousands of dollars a year and that's in the 1870
1880s wants his son to enter the business so he's got essentially inso gets fired because the the company he's working for the most important customer the son needs a job and that job that he gets was formerly done by Sam Insel and as you can imagine he's crushed he's humiliated he's somewhat depressed but he doesn't stay depressed for long he's
like okay I got to find another job I got to support myself and he winds up getting a job his new employer is this guy called Colonel George why did I say this is probably the most important thing that ever happens to him because Colonel George it was the European representative of Thomas Edison this is one of Thomas Edison's companies this is not has nothing to do with electricity
yet this is when he was making Innovations in the early telephone industry so Colonel George hires a young Sam inso he's like wait a minute this guy can do everything not only can he be my stenographer he can be my book bookkeeper and so what he does is he allows Sam insul to read every single thing inside the company about all these contracts and all the businesses they're
doing for Edison this is Rockefeller did the same thing if you remember on the multiple Rockefeller episodes I've done he becomes like the the bookkeeper at this like produce commission house and it's called huitt and Tuttle and what he does is he's like hey I'm just going to read through the history the complete uh history of the company so she goes back
and reads all the books and everything about that uh they say by the time Rockefeller was done he knew more about the company than the founders did you're seeing something very similar in Sam inso's life and so here's a description of that he says he went through systematically uh every scrap of paper concerning Edison that he could find in the office and he committed most of it
to memory when Edison's chief engineer C his name his name is Edward Johnson when Edison's chief engineer came from America to London to supervise the insulation of the first European telephone exchange he found that Sam insol who again is 19 at the time he found that Sam Insel knew more about Edison's business Affairs in Europe than Colonel George did and so if you think
about what's happening is this is really incredible step one learn everything about Edison step two build a relationship by serving Edison's chief engineer so by this point Edison's already inso's hero right so he's like okay I'm going to tie my fate he thinks Edison is so special he's like we need to tie our Fates together how am I going
to get a job how can I work how can I meet Thomas Edison and so this is what he says he's like well to do I must do two things I have to learn everything I could about the technical aspects of Edison's businesses and I need to build a relationship with Johnson and so how does he do that same way he's does acts of service he doesn't ask for something he's like these people
are really important I how can I what can I do to help them so he spends every single minute with Johnson's Engineers as they're building this uh European telephone exchange in London right and he's like he ask him a bunch of questions but he'll do anything he's like hey can I carry your pliers can I help you string wires every single aspect of the business and this is
something that Sam does for his entire life he probably knew more I mean he's the one that vertically integrated the electricity industry so he definitely did he knew just he knew every single aspect of the business it's just his motus opar and whatever he's whatever he does and you see it at 19 in this telephone business and so after a few months of this Johnson becomes familiar
with them right he's like okay I know this guy is he's obviously smart I'll spend some time with him but he was also complaining this is funny uh Edward Johnson you remember Edison's chief engineer complained loudly about the laziness of Englishmen who refuse to work on weekends and so Sam here him say this he's like hey he volunteers he's like I will come to your home on the
weekend and I will work without pay and so of course Johnson accepts he's like okay cool and Ed soon Sam Insel is doing all of the secretary work for Edison's chief engineer and Johnson realizes hey this kid is gifted I need to find a job for him say says Johnson was soon con convinced uh conceived of the ideal function for Sam insul Edison was always doggedly system atic and practical
regarding his inventions but he conducted his personal and business Affairs in a slip Shaw manner Johnson believed that Sam Insel was just the sort of fellow Edison ought to have around him as a private secretary and general business partner and so by this point we're you know 19 what are we 19 20 years into Sam inso's life it's very obvious the book has just
started and there's a great line that lynon Johnson has said over and over again that are in the biographies of Robert Caro I also talked about on episode 305 that I did on Robert Caro and LBJ it's do everything and you will win that's one of my favorite maxims I've ever heard do everything and you will win if you heard my episode on the mind of Napoleon right that book is so
hard to find it's episode 302 it is obvious when you study Napoleon when you study LBJ when you study a lot of the people you and I talk about if they didn't say it out of their mouth their actions are showing that do everything and you will win most people will do will not do everything and so we see he he wants to go to America he wants to
work for Thomas Edison there's no opening yet Johnson's trying to figure out how can I get him in and during this window of uncertainty this time period right it's not like Sam Ino I think you already know by now this guy's not going to sit down and do anything he wakes up with demonic energy so this is what he did during this wait he was neither Idol nor waiting he reread every one of
Edison's European contracts and then took it upon himself to write weekly letters to Johnson summarizing the fluctuations in the telephone situation and outlining Edison's shifting interest in connection with it these letters proved to be the best selling points Johnson could have in recommending inso and when Edison's private secretary suddenly resigned insul was on his way
to New York now this is incredible everybody around insul is like you are insane cuz he's like all right I'm out of here guys I'm going I'm jumping on a boat and I'm going to America and they're like what do you what your job he's like I don't know there's no job description what are you getting paid I don't know I didn't ask and so you have all of his family and friends like
you're nuts you can't go you don't even know what your job is you don't what you're going to get paid and you're going to get on a boat and go and cross the Atlantic and this description of Sam inso is one of my favorite ones in the entire book doubting yourself is very very dangerous something that's come up a bunch to have been swayed by such such
objections would have been completely out of character for him one of his most deep rooted traits was that he was Absol absolutely unable to imagine the possibility of his own failure he entirely lacked the sense of caution of those who doubt themselves caution like relaxation was unnatural to him inso gets on the boat right he gets on the boat he lands he gets in New York you
know this after a few week Journey he gets in New York it's night time the sun had just set Johnson meets him there he's like hey we have no time to wait like we're pushing right we're pushing the pace here he takes him straight to where Thomas Edison's at because at this point in Edison's career he had just completed his successful experiments on
electric lighting and so this is when he closes temporarily closes Meno Park moves to Manhattan he's getting financing from JP Morgan and he's trying to build out this is direct current right so this is the very early days I mean it is the earliest days of the electrical lighting industry and again going back to this idea that there's a something that happens over and over
again can you turn a luxury product into a necessity and you do that by making it universally cheap and affordable for everybody else they knew what they were trying to do because inso Johnson and Edison said things like this we will make electric lights so cheap that only the rich will be able to burn candles so Johnson brings insult to Edison and they look at
each other and like oh my God this guy is so young and at the time this is inso was 21 right but he looked a little younger and Edison is just 34 years old this is you know I'm obsessed with this cuz I talk about this all time because if you Google Google image search Thomas Edison you're going to see the old like the the white haired Edison you know and
this idea it's like oh we get insight and there's a bunch of uh like super old books uh mentioned in this book and one of them is like it talks about like the very early days like when Edison was in his 20s and it was written by a guy that was like one of his helpers so I just ordered it it should be here in like two or three weeks it's like very hard to find but I I'm obsessed with this idea
it's like okay yeah Edison at the very end of his career that's fascinating he's he's the you know the the Elder Statesman uh he's going on these road trips with Henry Ford for he's probably the one no he is one of the most famous people on the planet this is Edison before that this is 34y Old Edison still trying to figure things out now that did
not mean that he was he was already you know pretty famous and he had a bunch of inventions under his belt and so there's this great paragraph I want to read to from the book because it really like allays some of the fear that insults F family and friends like you're crazy don't go on the boat like why are you doing this you don't know what the job is you don't know what you're getting
paid he's like yeah but I get to work with Thomas Edison and so here was Edison's resumee at 34 here was the man who had invented the stock ticker the multiplex Telegraph the mograph machine the phonograph and the transmitter that made the telephone practical the man who said he had invented and was about to give the world electric lighting Electric Power and electric
transportation The Man Who Would invent in the next decade the motion picture and discover the principles that made possible radio and television and so of course course if you're a young 21-year-old or really any age and you have the ability to sit to literally be the private secretary to go everywhere to to be his Lynch pin to the world you of course you do it this was a a genius
idea uh and risk that turned out to not not be that very risky that a young Sam insult did so the first thing Edison's doing is like hey I'm having he's like fighting with JP Morgan and a bunch of his Finance years they won't give him the money he wants to extend uh his electric convention so he's like I don't you know I don't care I'm going to I
have to figure out how to do this myself take a look at all my resources young Sam Insel because remember he had been writing there essentially what he's going to do he's going to sell off a bunch of like his patents and and licenses for his telephone business he's like can you go through this and tell me what I should do now how would Thomas Edison and Johnson know that he should
be do that well remember that inel was writing these weekly letters I saiding I'm reading every single thing I'm reading all the contracts all your licenses I know the lay of the land over here this is what you should do so the first job he does he says Hey listen Edison tells me he goes I got $78,000 I need to finance my new undertakings and I'm ready to sell everything that I
own and the most valuable thing that Edison owned at this point that he believed was his European telephone Securities so the first job is inso has to go through all of this paperwork again and say okay where's the best play place that we can sell the dozens of and they have all these different Securities different kind of Securities we have you
know dozens of these where do we go how do we do this and how much do you think we could make from them remember this job is starting the first night that he gets there let's say the sun sets this is in February so what time would the sun set maybe you know 5: in the afternoon something like that he works all the way through the night by 4 in the morning he had gone through every
single one of these transactions and had a plan on how to distribute them and sell them for the highest Pro possible price Edison's like okay this is the guy so he goes hey what what do you want to make and inso is like I don't care just pay me whatever and again think about that it's like pay me whatever I'm going to prove my worth to you and then it's
not like Edison had Edison's not uh organized so if someone asked if someone was to go back in time and ask Sam hey uh what were you doing for Edison uh whatever was necessary is is the the answer whatever is necessary and so there's just one paragraph I want to read to you that describes this he systematized Edison's office without attempting to systematize Edison's own
activities Edison Edison's whole method of work ins so later recalled would upset the system of any business bus office he cared not for the hours of the day or the days of the week and it's so talk about it's not like he he he had a set schedule right he would work on whatever he thought was most important or most interesting at that time and so sometimes it's he would talk to all all
the people in the staff for two or three hours about an invention or a thought that he had uh the night before or he'd spend two or three days in a row trying to like hey I just got I just created something now I'm going to spend two or three days just running experiment after exper expent with as little sleep as possible to try to push this idea into
some kind of practical application as soon as possible and then once he figured like he saw the problem he would hand it off to somebody else to turn it into a product but there was no like organization or Rhyme or Reason to uh like the way Edison spent his time and there's a great description of this a few pages later where it says systematic as Edison so first it says Edison
possessed a colossal ego of course uh but systematic as he was when pursuing his own ends he had an almost pathological hostility to any form of sister system order or discipline imposed from without so the Mandate is clear build a business around me systematize that business do not try to systemize the way I spend my time I do not want input from others on how I'm
doing that and so I mentioned earlier I really think of insol and a lot of the like Carnegie and and Rockefeller uh and Ford they're definitely company Builders but even more bigger than that they're industry Builders and so inso was the same way uh because remember Edison's going to give up on electricity uh inso stays stays with it for his entire life
he works with well let me just read this line to you says uh that was to be inso's job for nearly 12 years with Edison and 40 years thereafter to make Edison's system work and so why do I say it's really industry building because listen to what they all the things they have to invent uh that you just wouldn't if you're not building an industry the the inventions the electricity
inventions could not be immediately used with existing devices so to make his electric light usable Edison and inso had first to invent every component of an electric generating and distribution system and then to create the manufacturing industry to make them an engineering organization to install them and a Central Station industry to buy them hundreds of minor parts of a
complete electrical system had yet to be devised they had to develop practical switches sockets cables junction boxes wires insulators fusers meters filaments voltage regulators and scores of other devices this is company building on hard mode because it is industry building so the great thing about insult especially from Thomas Edison's Viewpoint is like
you could just drop him in anywhere it's like hey there's a problem over here just go fix it and then you can just know that he's going to fix it without uh having to think about it so this is where he drops him into the company that eventually becomes uh General Electric now what's fascinating here is the value transfer that happens between Edison and inso and the value is not in money uh
inso's not making a bunch of money he's 25 years old at this point but he is building a world-class Network and then like Priceless experience so he's going to take this network and the experience that he builds or that he he picks up working for Edison and then apply it to his own business a few years later but I do want to point out because it's kind of crazy is like how
much time I had spent uh with this book so first of all the book is not easy to read and it's not because it's bad writing it's because there's so much it's so high like information dense and there's so much going on because uh inso's going to wind up having hundreds and hundreds of companies in these very complex uh structures so let's say the
book is 350 Pages it's not it's probably 700 Pages because I had to reread uh several Pages multiple times but what is happening is while I'm reading the book I forget like the intro is hey this guy the subtitles the rise in fall of a billionaire utility Tycoon he is so gifted at and has such great ideas that I had to remind myself over and over again while I'm reading this book this
has a terrible unhappy disastrous ending and you just cannot believe and that's why I think it's really going to resonate my brain and why I want to talk to you about it is because it doesn't matter how many great decisions you make throughout your 50-year career if you over leverage yourself you can ruin your entire life work and you can die with no
money and no like all your accomplishments wiped out so I'm going to get to that in a minute because you see his fatal flaw that barring excessive barring and excessive leverage just became this deepr rooted habit with him and you'll see that cuz he's going to mention in a minute so this is all the stuff that he's accumulating just in the short four years so now I fast
forward to four years in the story it's only 25 but he's met virtually all important fing figures in the business world he had accumulated a bunch of experiences which would ultimately prove very useful in the business that he's going to set up and run for the next 40 years after that that he knew everybody who was anybody in the electric business uh he had picked up firstand knowledge
of urban Politics on a depth and a scale that was rare he had learned enough about manufacturing selling promoting Administration and organizing and he had also learned the meaning of credit and what it could do borrowing became a deepr rooted habit with him he would say never pay cash when you could give a note and so I just want to pull up a couple things that came to my mind they
all come from Charlie M and Warren Buffett uh when I got to this part because he own a bunch of different companies one of them let me just give you the idea of like high how highly leveraged he was after the Great Depression this guy is going to wind up barrowing like another $200 million again he had gone through a bunch of this is the very difficult part
about this is like he' gone through a bunch of different Financial panics he didn't NE he didn't really believe this was his fatal one of his fatal flaws I should say he didn't believe the Great Depression was anything different he's like oh this is like I've been through a bunch of financial panics everything will be fine it'll be back in like a
couple months a couple years and so he he literally called to the the White House with a bunch of other a bunch of other like prominent American businessmen and Hoover is like oh this is you know just do conduct business as usual now all this Falls the weird thing is when you read about insult in the biographer 2 and I I watched a couple videos on him as well they all like oh
it wasn't his fault it was a Great Depression it's like no no no it's always it's always the Founder's fault doesn't mean he was I don't think he committed fraud uh he he winds up uh being I'm not even going to talk about that it's later on in the book though he winds up going to trial he he beats every single trial from what I my reading of this is very hard to tell I
don't believe that he did this I just thought he made a bunch of terrible terrible de decisions and had way way way too much leverage so I'm getting ahead of myself let me just read this because this idea came up to it's like oh never pay cash when you can give a note and so what I did is I went to Founders notes and I searched leverage and specifically this note that I had in
my mind on the dangers of Leverage and the fact that this is coming from Warren Buffett shareholder letter and he says like most people won't heed history's warning so I just want to read Because this is essentially exactly what happens very similar to what happens to Sam inso Warren Buffett says unquestionably some people have become very rich through the
use of borrowed money however that's also been a way to get very poor which is exactly what happened to inso when leverage works it magnifies your gains your spouse thinks you're clever and your neighbors get envious but Leverage is addictive he was addicted to it from a very early age and maybe you had to I'm not like again I'm not sitting here oh I wouldn't have done this if I was
him would never have that like highly likely that Sam Insel is smarter and more talented and more accomplished than I am and so it'd be very arrogant to think that if I was present in the same situation that I wouldn't have made his same decisions the point is like we need we're learning from history because learn as merer said learning from history is a former leverage it's to
know this so oh I don't do this if I'm ever presented with that opportunity right so I want to be very clear uh when leverage Works to magnifies your gains your spouse thinks you're clever and your neighbors get envious but Leverage is addictive it seems that he was very addicted at an early age Maybe had to be I don't know once having profited from
its wonders very few people Retreat to a more conservative practices uh and to repeat as we all learned in the third grade and some relearned in 2008 any series of positive numbers however impressive the numbers may be evaporates when multiplied by a single zero history tells us that leverage all too often produces zeros even when it is employed by very smart people it's impossible to
read this book and not think that Sam ins Soul was very smart right that is the dangerous that is why it's going to latch onto uran's brain it's like oh my God this happened to him I need to avoid this leverage of course can be lethal to businesses companies with large debts often assume that these obligations can be refinanced as they mature this
something happens Insel he was guaranteed don't worry you have unlimited credit and then the bank said oh you don't and ryal W that assumption is usually valid occasionally though either because of company specific problems or a worldwide shortage of credit which is what he goes through what inso goes through maturities must actually be met by payment for that only
cash will do the job end of Warren Buffett sh there two quotes that I always think about on the dangers of too much leverage Charlie Monger said smart men go broke three ways liquor ladies and leverage uh samon Soul was married to the same woman his whole life he never drank a drop of alcohol in his entire life he did not grow go broke because of ladies or liquor he went
broke because of Leverage Warren Buffett whenever a bright and rich person that is what Samu Insel was he was a bright and rich person Warren Buffett whenever a bright and Rich person goes broke it's usually because of Leverage and so this is a very important six years in Samuel's life because he is now essentially saying Hey Thomas Edison's like you you have to run the company and
Edison is he's not interested in elect he's off on other things now right he got it started and then goes off and does something else and he does it's not like he's going to give you a list of like this is what you should do this is what he tell this is what he tells him medison says do it big Sammy make it either a big success or a big failure
and so he takes over company uh the stock is around $25 uh a share they have 200 employees six years later the stock will be $150 a share and he has 6,000 people and so not only does he have to be a manufacturing of all this electrical equipment but he also has to become this is where he has to learn how to be a finance year and he says at almost times a magician because
of this rapid growth that the company is is having they're perpetually short on cash and so that that is why they're always having to they have no operating Capital so they're constantly having to borrow borrow a lot of its debt uh actually way more of its debt than than was equity which was was uh interesting as well they actually had a lot hard time to get people to invest in the
company and so this is a description of this problem he's having he spent almost half his time going from bank to bank to borrow and to beg money on short-term notes and juggling his available cash and credit with extreme dexterity in order to make ends meet this experience was ANC nerve-wracking and disgusting to him now these companies are going to be
essentially taken over and recapitalized by uh combination of Henry Villard and JP Morgan there's more about the details of that in the book um but I really the reason I want to bring this up is because I really want to hammer home how inso operated because I think these principles again minus the leverage are very valuable to this day fortified for the first time with working capital inso
reorganized and integrated the manufacturing operations rendering them vastly more efficient in inso followed a set of basic principles that he would follow throughout his career remember he is somewhere between 25 and 31 years old uh that they're describing him here the first was to expand expand by raising New Capital whenever possible expand by
plowing profits back into the business expand by borrowing every nickel he could lay his hands on the next was to treat his workers generously and generously and humanely so I need to pause there this constant expansion remember he's trying to turn a luxury product into something that is universally cheap and abundant and he knew from the very GetGo like scale is
the key to that I have to be I have to build in some cases the biggest electricity generating plants in the world and obviously to do that he's going to need a ton of of cash uh the next was to treat his workers generously in humanely not out of sentimentality but for the sound economic reason that discontent breeds stoppages and stoppages are inefficient irrational and
costly another principle was to spread fixed costs this is related to his desire to expanded scale okay another was to spread fixed costs as stly as possible by diversifying operations in order to keep the plant busy at all times keep that idea in your mind for later on this idea of like okay how do we spread fixed cost costs as thinly as possible he's going to vertically
integrate this is it's like it'll make a lot of sense like why does he keep buying electric park companies and then these electric traction um and like these electric electric essentially like trolley or train companies it'll make more sense in in a little bit but really the the main point is because he wants to friend his spread is fixed cost as
Sly as possible by diversifying operations in order to keep the plants busy at all time and then another one is sell products as cheaply as possible before he had any proof it was his belief that lower prices would bring greater volumes which would then lower unit cost of production and thus yield greater profits okay so everything I just described to you he was doing in New
York but at the very beginning of the book it mentions hey it's that billionaire utility Tycoon from Chicago how did he get to Chicago and why did he go so because he's one of the most prominent people in the early electricity industry people asking for advice uh he gets a letter from the Chicago Edison Company and they're looking for a president and so they're
like hey do you know anybody that' be good for the job like who's the best person we could hire and I don't think they wrote this letter thinking that they would get him because at the time he's running General Electric that's a $50 million company which is insane and he's making 36,000 a year just in salary with you know obviously other compensation in there and Chicago Edison Company is 150th the
size it's not even a million doll company and in the letter they're trying to find somebody that would work for $122,000 a year so a third of the salary uh 150th of like the market cap value but they are offering something that is enticing and whoever they hire gets to run things the way that they want it to run like they're looking for an operator right these are just investors and board
uh and members of the board he's going to take the job then when he's leaving he says let me actually get there I'll skip ahead real quick uh he gives us toast and he says that one day he's going to make the the Chicago Edison bigger than General Electric and everybody else except him laughed he was not joking he did he believed that he was going to do that and so it says the
job opportunity uh if he took it would be bound only by the limits of his own ability and ambition I don't think he believed he had any uh limits on his ability and his ambition and and he wasn't going to actually offer himself up for the job and he's actually having a conversation with his mom and and he's like I would take the job but you know
they're asking me to the best to help them find the best like possible fit and his mom's like what are you talking about like you should do that she goes uh they asked him in his capacity with Ed as with GE to recommend the best available men did they not well then he was the was he not the best available man and so he should sit right down and he obviously believed that he was the
best available man right and so his mom's like you should sit right down and write them a letter saying so and so he sends the letter back and they're like oh oh yeah oh I didn't even know this not this was a possibility yes please take the job and so he accepts the job and then he says Hey I want you to do I have one uh like demand uh you need to issue
$250,000 in New Stock remember the stock the market cap is 885,000 at the point he takes a job he says you need to issue $250,000 more in stock and you need to sell it to me uh to buy the stock inso borrowed the entire sum from Marshall field who's this older successful entrepreneur who in his old age figured that the best possible place to invest money was in bright young men so we
still see the exact same thing today you have you know widely successful people Jeff Bezos is still making Investments right and what is he doing he's like the best possible place to invest is probably in bright young entrepreneurs and so we see the same exact same same thing here where Marshall Field's like yeah I'll Lear you the money because
this is a great investment for me and so this is the point in which inso goes and this is what he's going to this is his starting point for the next 40 years this is he's going to turn this company and other companies into this giant holding company conglomerate whatever you want to call it and uh it's going to be phenomenally successful worth you know a couple billion dollars right
before it collapses and so he comes to Chicago and he's like hey we're going to invert the way other people think about electricity we're going to try to make electricity cheaper not uh more expensive and to do that I need the largest possible base of customers and so we have to aim for a monopoly now you and I know today like utility companies
are s like I can shop around it's like oh I want my electricity their their government mandated like a monopolies right that was inso's idea the world we're living in was influenced by this guy that were you and I talking about so it says inso was thinking differently from the others in one vital respect to most others Monopoly was desirable because it would enable them to charge
higher prices and thus make more money to insole it was imperative because it would enable him to build on a broader base of customers all of his thinking was therefore inverted their thinking was based on the premise that electricity should be considered a luxury product and that should be sold at the highest possible price inso's thinking was based on the premise that
electricity should be considered for everybody even the smallest consumer and that for able to fulfill that goal it should be sold at the lowest possible price and it is for that reason that inso set out to do to to build a monopoly before it was mandated by the government and you see this at the very beginning because the very first meeting he has with the executive committee for
this new company Chicago medicine that he's taking over he's like all right uh we need to buy our second largest competitor and so they help raise the money and they do that uh 3 months later he goes okay now we're going to buy our biggest competitor and those first two moves now this is why ke I know I've repeated this a lot why he you could really think of him as like the one way
you think about was like the Rockefeller of the electric utility industry because Rockefeller believed that too he's like listen if you're going to you're competing with a bunch of people let's say you have 20 competitors don't go for number 17 and 18 go for the top try to knock out the first guy in this case he U insult knocked out the second guy and
then the first guy cuz he's like if you can achieve that then the rest of them fall follow and so after the combination of Chicago medicine and his two largest competitors uh he is running at the time uh the largest electric power station in the world and he would continue to do so for the next 40 years and another thing that he had in common this is why like I
always say the the most important lesson from history entrepreneurship is the importance of focus it's not like this guy was like Hey I know more than any anybody else in the world about the electric industry let me go diversify into something else like why would you do that he understood the potential of his industry in a way that others didn't not you could say the same thing for
Rockefeller and oil like Rockefeller is the it just pops up off this page over and over again I think of Edwin L when you know he created the the his the like his invention created his industry which then he had a monopoly on for for 40 plus years he's like no one else in the world because we're patent protected can make instant photography and you want me
to go make a copier and you want me to go make a printer and there's many examples where he's talking to people inside his company he like no we're only going to do things that other people cannot do and that is just one of the main main benefits of focus and so what does he do one of his earli decisions is like he's buying these electric these other electric generating companies but
then he goes and he buys Fort Wayne and Chicago Ark like companies why is he doing that this is his first step in vertical integration because these people are manufacturing electrical equipment that the people generate these generating plants need he's like oh I'm going to buy this company because all the other smaller companies of him have to go to these companies to buy stuff
they need and listen to this this is going to be Rockefeller 2 the this policy quickly paid off caught between bad times and difficulty even in buying replacement light bulbs six of the small Central stations in Chicago gave up in 1894 this is the CLE this is Cleveland massacr is when in like a couple months I think Rockefeller swallowed up what
like 17 or 25 of his competitor smaller competitors or something this is something it's very similar it's happening here in Chicago in 1894 and 1895 these all these six smaller stations sold out to Chicago Edison so he knocked off two then he knocked off he knocked off the second biggest competitor then he knocked off the first now that that company combined with
those three companies right he's the biggest player in town now he's found found way to get six other smaller people to sell to him so they sell they sell to inso when he won inso was always generous to the losers paying them more for their plants than they were worth Rockefeller did the same thing this is incredible uh this was not uh this was not him being benevolent but good business this
is a great line in recognize that while money may not buy friends it will keep many a man from becoming an enemy and people while they're watching him do this like this is dangerous you shouldn't do this this is a little Boutique you know this is a tiny little business what are you doing optimists at his time right they're like okay how many possible customers can you have in
a city of Chicago the the most optimistic in the early uh Electric uh lighting electricity industry right they guess that maybe maybe one day you might be able to get 25,000 customers Sam 25,000 customers like you're spending a lot of money for only 25,000 customers you know what Sam thought that number was he's like well how many people live
in Chicago and they're like a million people he's like okay so I'm going to get a million people think about that his guess for how big his Market is and he actually shot underneath that he's going to get way more than a million people I think he winds up uh think his companies wind up combined producing all the electricity for like 1/8 of the entire country's population but think
about this everybody around him again this is why I tied it in with focus and the importance of like you if you understand the potential of your industry in a way that others do not why the hell are you diversifying into something else just keep going down that curve right because the other people that thought they understood maybe somewhat as much as he did they were 40
times he their most optimistic projections were 40 times smaller right than insoles and insoles were even what maybe 10 I don't even know how many people were in the country at the time let see if he's 1/8 and there's 100 million people in the country that means he was off on his own estimate by what 12 13 times and so look what he achieves in his first six years oh and I didn't
even mention this is he's doing this during a financial Panic so again I think you can learn the wrong lessons from your own experience he's like I've been through a bunch of financial panics I survived them and I even prospered in them what's how different can the Great b o yikes could be very different actually and so he half a dozen years so
he's got six years many of these are during some kind of like bad financial depression but not the Great Depression uh his company was 10 times as large as it had been when he took it over and during this period so that's 24 consecutive quarters he was able to pay a quarterly dividend of at least 2% 24 times in a row and so he has a great understanding of what we would call
Public Relations even though there was no such term as public relations in his day and this is what he realizes like well okay the the bigger I get the more scale I get uh the cheaper I make remember he's he's going for Monopoly so he can make it cheaper and as a result his customers love it they go from you know having to to burn uh you know
kerosene or candles and now they have electric lights and so he's a beloved person in his community he's built a lot of relationships with a bunch of politicians and he has a great line about this so he says more profound than his organizational ability was inso's sense of public relations to him the moment of applause was the moment for Action the moment of applause was the
moment for action and so he's beloved and he goes hey these should be government regulated monopolies that was his idea so he goes He initiates and he brings to successful conclusion the movement for utility regulation in United States and he believes this is necessary because he believes that you have to expand you have to spread all your your fixed costs over the largest
customer basis possible this is the most effective way to do this some people have described this as regulatory capture and so this push to for this like legalized Monopoly it helps him expand which obviously was what he is goal is is like I have to spread all my fixed costs over the largest customer base uh if I have a legalized Monopoly that's going to it's the best way the
best tool I have to ex extend my customer base now here's the problem too where this is uh this constant expansion is the way they thought about the the constant raising of debt if you go back to what Warren Buffett said earlier companies with these large debts often assume that these obligations can be refinanced as they mature that assumption is usually valid occasionally
though either because of company specific problems or worldwide shortage of credit matties much actually be met by payment and for that only cash would do the job when that happens to insult he doesn't have any of the cash and so he loses everything but the way they looked at it was hey we to expand this new industry we we're going to need vast
quantities of debt capital and it says electric companies like modern governments borrow money that they that they cannot and do not attend to repay except by perpetually refinancing they are borrowing money that they do not and cannot intend to replay ex except by perpetually refinancing and so this constant need for more money uh that's ever present because he this guy never
stops expanding uh it actually leads to the invention they credit him with the invention of the open-ended mortgage and that's the I think the main um like lesson here is the way you position and frame things actually matters and it can actually get people to comply with your request uh for something that they previously declined and so he goes to the to the board or the executive
committee uh and he says hey I need a $100 million in bonds this is 1896 they're like are you are you crazy what is $100 million in bonds and a year earlier he had tried to get them to do $6 million so this is like again how fast this guy moves and like how his ambition is and his scale like think about that last year he goes to them he's like I need six $6 million to bonds
they said no comes back in next year he goes okay I you said no on 6 million but I need 100 100 million bonds and they tell him no again of course and so he winds up talking to a friend of his who actually had a lot of experience in financing the early railroads in the United States and they had this idea he goes hey um you're going to have a hard
time convincing your your your board to to accept that I have a way you can like reposition this he says why don't you ask them for a mortgage with no limit and he says a mortgage with no limit might seem much smaller and more conservative than W with a limit of $100 million and you sound like that sounds crazy how could that possibly work inso proposed to them a mortgage of No Limit
and they accepted under this mortgage inso would issue half a billion dollars in bonds before he was through so you come and put a number on it that that 100 million scares the crap out of him then you said hey I essentially have like this open-ended mortgage I'll draw from it you know little by little whatever the case is they accept it and then over the long term he actually gets
five times the amount that he actually want that they initially did not approve and this is where this is the interesting thing he was describing to other people like when he was Raising capital on the people inside of his company like what is he doing and he called it massing production according to this book they say he is the one that came up with the
term mass production ins so soon began describing what he was doing as massing production think about it as a massing production right a phrase that his Publishers sorten to mass production long before historians mistakenly ascribe that term to Henry Ford massing production turned into mass production another very fascinating idea remember he was inquisitive by Nature
right so he's buying all these companies and what he realizes is like okay well I'm buying them sometimes I'm paying more than they're worth because uh money is a good way to avoid people being enemies with me right I want people on my on my side think about Rockefeller essentially built a a company full of Founders right he just bought their company and then he's like hey you guys
are talented come advise me and then you'll be rewarded with Standard Oil stock now this was fascinating so he starts buying all these new properties he like oh wait I'm not only applying scale I'm acquiring customers I'm acquiring equipment more important than that I get Talent so he's like Aqua hiring people back in the day right he would devise methods and he would detect
talented people and if he thought they were talented he would partner with them or buy their entire company and so he said new properties were the most prolific producers of Executives inside of the insult organization that sounds a lot like Rockefeller another Rockefeller es thing sell it to price possible sell ridiculously low uh he sold so low that
no one could afford not to have electricity service to win customers insult sold electricity at rates so low they appalled other Central Station men that's like Rockefeller trying to buy you out and you're saying no and he just shows you your his books he's like and you're like oh my God this guy can make a profit at prices that would drive me out of business to win customers he
sold electricity at rates so low that they appalled other Central Station men now he is building a public utility so he's going to need an advanced understanding of public relations and he understood that you must craft the story and you must educate your customers so there's three separate examples I think all go together that talk about this Advanced understanding of public
relations and I think there's just a lot of good ideas in here and so it says uh he displayed a an advanced concept of public relations I care not he said how good you operate he's how able may be the management of your property so he's talking about to all these he's got I don't even know 150 subsidiaries it's this is where it gets so complicated and
I think led to his downfall was how complicated his organizational structure and how many different um uh entities were involved or how good your engineer may be and how perfect your plants are unless you conduct your business as to get the Goodwill of the community in which you are working you might as well just shut up shop and move away he's talking about public relations convinced
that the vulnerability of utilities deriv from a lack of popular understanding insol attempted to educate his customers he began making public appearances at every opportunity he was instructing employees in in public relations he established an advertising Department which soon expanded into one of the first full-fledged Public Relation departments in existence he
published a magazine called Electric City and and distributed uh the magazine free of charge by the tens of thousands all over Chicago but he said by far the most effective device inso had for winning the over the public was rate cut this is exactly what Henry Ford did later on his career when the Model T was up running up and running he sto he effectively was able to stop paying for
any advertising because all he did was try to root out any inefficiency and any waste and just keep making his his automobile manufacturing PLS more efficient thus allowing him to drop the price of his car and so every time he dropped the price of the car it would be picked up in the newspapers and that made him beloved because you know this thing that used to cost $6,000 $6,000
and only be available for the rich I can buy for $250 so again the most effective device that insol had for winning over the public was rate cuts the cuts were simply good economics but they also created immense publicity just like I described for Henry Ford uh immense publicity value who had ever heard of a public utility voluntary voluntarily cutting its rates
he hits on that idea that you need to pay attention to public opinion these are your customers this is very important to you the customers obviously he's heavily regulated so also influences the customers are also voters for from inso's position the task ahead was thus one of swaying public opinion and at a time when public relations and mass selling were in their infancy in
this art insul had few peers and so they make the point later on in the book it's like listen say there's 50,000 people who understand the necessity of the service that you provide right but there are a 100 million Americans that have not even thought of it he says our task is to see that the figures are reversed right so it's 50,000 people that
understand the importance all the work that goes into what we're doing but there's 100 million those 100 those are potential customers we need to reverse that we need to make the people that understand and are customers of ours the majority and one way to do that is to one make your product as valuable as possible like as the value to cost ratio excess high right but also tell them
what goes into making and delivering the service that they enjoy so he had later much later on the book he has these two rules and they they said it was a concise summary of like his principles of Public public relations and this is now insole writing right he says practically everything that a public utility company does affects the relationship between the company and its
customers and anything it does is therefore an item of public relations the first objective in public relations work is to produce the best possible service at the lowest predictable rates why because that is of the greatest interest to the public and then once that's taken care of that leads us to the second the public is in no position to judge service and rates when it knows
nothing about the multitude of details involved in Furnishing the service so let me read this read this hence the second objective in the public utility industry's public relations work right is a public well informed on the tangible details as well as the social and Industrial significance of an of the industry in all its ramification what is
he saying this is exactly what David olgy said in the 1960s what Claude Hopkin said in the early 1900s 1910s which is apparently Sam insol had derived from his own experience you need to tell your customers what goes into making your product it may be normal to you because it's your everyday thing it is not normal to them and if you explain and you educate your customers they will
find it fascinating and as a result they will it will make the service and the product that you you provide more valuable in their eyes that is absolutely incredible that he understood that at the time in which he did so this is the end result of his career before the collapse right by the time it was over electric power would be so abundant in cheap in the United States that
people who had never expected to use it found it as natural and as necessary as breathing so there is going to be a ton of Regulation uh that is put into to law after the collapse of his Empire there's a there's a there's something that takes place that I have to tell you that shocking to me might be shocking to you uh every employee of insoles uh companies were stock salesman
so what does that mean like the employee that would come and check your meter would also like knock on your door and try to sell you stock in the company this is crazy uh he would see his personal personal Fortune increase from around $5 million in 1927 to 150 million in 1929 and then tumble by mid 1932 to zero and Below to a net indebtedness so large
that as one Banker put it he was too broke broke to be bankrupt with him went hundreds of thousands of stockholders who shared his faith in his own invulnerability and so they set the context where I could see a lot of people that like essentially say Hey you know inso was like this is the macroeconomic environments the Great Depression is kind of out of his hands
yeah but it's your choice to take this like this is when I read this paragraph is going to sound very familiar uh like you know we've gone through many times where like credit and money is essentially free and and that was happening in the late 1920s and so you have all these Bankers they come up to them and they're they they try to like essentially just F like they they're
Ling him with easy credit and they really in many cases like beg him to accept it for any purpose and so one of the banks that's going to wind up screwing him over later because they're like oh the money's there the money's there we'll back you and then they wind up losing their ass so they can't back him is Continental Bank and they would come up to them and they're saying hey
just so you know if you fellows ever want to borrow any more than the legal limit all you have to do is organize a new Corporation and we'll happy lend we'll be happy to lend you another $21 million they said that at a party like they please take 20 like set up another company doesn't even know matter if you know what you're going to do with the
money yet let me just let me W let me wire you let me send you this 21,000 21 million please uh another Banker Mr inso isn't there something you could use our $10 million for anything anything something just let us give you $10 million and so at the same time this is happening there is a corporate Raider by the name of Cyrus Eaton who is starting in late 1920 uh 27 and for the next
several years he begins buying up large blocks of stocks in inso's companies and so he's got three main companies and this is where the story gets really really really confusing uh somewhere between 1928 and 1929 Insel realizes that he did not control enough stock in his operating companies to prevent a takeover and so he creates two investment companies through which he
could control the utilities and that may have been the case if it wasn't for the Great Depression but those become overleveraged and as the prices go down he keeps having to put up more and more collateral uh we'll get there in one second so I'm going to give you like a brief overview you have the Great Depression and again like without his act his actions after the Great
Depression he his companies could have survived you know it's not like you're going to cut like you're going to cut your electricity unless you absolutely are in complete dire situations but it's what he does is like how much money and debt he takes on after like dur in the be after and the beginning and through the Great Depression this this is I
don't have any words to describe this I don't understand this I don't understand how somebody's so smart and so accomplished and with so much experience does this so it says then came the great crash in October the first thing he did was go to the rescue of his employees who were caught with margin brokerage accounts by supplying him from his personal portfolio whatever additional
collateral they needed 10 days later as if nothing had happened 10 days after the the the crash in October right Black Friday or Black Tuesday rather sorry not Black Friday Black Friday is the sales okay so Black Tuesday so it' be October 29th 1929 uh 10 days later as if nothing had happened he proceeded with the long planned opening of the policial new
Civic opera house he undertook a huge new Venture uh of a construction on a natural uh gas pipeline that he was running from Texas to Chicago that is a project that one project alone would cost $80 million remember this is $80 million in $ 1929 okay what he did next which suggests that he was possessed of delusions of grandeur supremely confident that this depression would be
neither longer nor more severe than those he had weathered in the past he expanded far more than turned out to be prudent he returned to debt financing and he bought Eaton's holding so that's that corporate raor inso's companies spent $200 million on capital investment during 1930 most of that is debt so 200 million times that by 20 to get a rough estimate
of today's dollars and he did that in one year I don't understand this I kep every page I'm like why is he doing this why is he doing this these are no leing myself and then I get to this point it's like this is a 50-year successful career destroyed this is terrifying to me and so people around him were shocked that he was willing to take on more than $200 million of new debt in the wake of the
great crash this reminded me of if you listen to the episode that I did on ten Turner it's episode 327 he winds up getting having to get bailed out uh by John Malone and John Malone says something in that book that's that I think applies to uh Sam Insel John Malone describing Ted Turner says he took his leverage too high and the structure of the leverage was a problem
so he spends that 200 million debt right then he's got to buy out this corporate radar they agreed a $63 million transaction goes back to the BET to the bank right and then they pull four times in the month of May and June in 1930 uh the the president of Continental Bank uh said that they'd be behind him all the way four times inso refused then he came
back a fifth time and inso said yes he says the only way to finance this purchase was through bank loans secured by the stocks from his two holding companies so six 50 somewhere between 56 and $63 million more of debt right secured by stocks from his two holding companies uh they get Chicago can't he's usually dealing with Chicago banks at this time they has to go to New York he
hates the New York Bankers he has to go to New York because Chicago can't fulfill this right and he says the various loans were extremely complex what did John Malone just say about Ted Turner he took his leverage to high and the structure of the leverage was a problem this is exactly what's taking place in Sam inso's life and career at this point and he's doing this in a
market that's dropping like a stone each drop in the market would force the Investment Trust to put up more collateral against their bank loans if the market were driven down far enough the bankers would have as collateral the entire portfolios of inso's company with that control of the whole inso empire and so as this is happening what do you think the reaction is
they keep buying they ignore they're ignorant of the danger and so this is what they were doing in essence they would buy up inso Securities on the exchanges and then try to sell as much as possible in small Lots through their secondary Market which is like the customer ownership uh and then the guy that is doing this for inso said very said this it's very simple he said you
can't go on buying your own stocks forever sooner or later you run out of money in spite of everything he knew inso could not as late as Midsummer 1931 bring himself to believe that he was in serious danger but he was the end was very near uh to keep the market up through the summer they Tred to keep the market up through the summer of 1931 but in September England went off the gold
standard and the New York Stock Exchange reacted with complete hysteria short sellers spread a rumor that inso was dead or dying and in that week alone the stocks of his three companies dropped by a value of $150 million as the market declined they had to put up ever increasing amounts of Securities as collateral against their bank loans by mid December the well had
run dry every nickel of the combined portfolios of the two investment trusts were in the hands of Bank creditors that is a Reynolds Wrap the creditors then in turn demand that he resigns on Monday June 6th the deed was done inso dictated and signed papers all day drafting resignations from chairmanship and presidencies and receiverships of 60 odd
corporations all afternoon as the orgy of registrations and resolutions went on newspaper men swarmed around inso's door when it was over he emerged his statement to the Press was a single sentence well gentlemen here I am after 40 years a man without a job he eventually flees and is exited back to the United States put on trial multiple times beats every single trial
that can never prove any fraud I do believe his statement that he made he says I have air but my greatest error was in underestimating the effect of the financial Panic on American Securities and particularly on the companies I was working so hard to build he didn't even understand the danger he was in I worked with all my energy to save those companies I made mistakes but they were
honest mistakes they were errors in judgment but not dishonest manipulations I do think that's that is true for 53 years for his 53 years of Labor to make electric power universally cheap and abundant inso had his reward from a grateful people he was allowed to die outside of prison he does not live for long the only remaining enemy of insoles was boredom like Napoleon Insel was
required to spend his declining years in well-fed inactivity for two more years his life dragged on he followed the news of business and politics with Keen interest but there was rarely anyone with whom to discuss these subjects and Insel was ill equipped to play the passive spectator on the morning of July 16th inso entered a Paris Subway and while while waiting
for a train he had a heart attack and died his body remained unidentified for several hours and the official police statement reported that he had nothing in his pockets and that is where I'll leave it for the full story highly recommend getting the book if you buy the book using the link that's in your show notes you'll be supporting the podcast at the same time that is
336 books down 1,000 to go and I'll talk to you again soon okay so two quick things before you go number one Founders only I'm doing an in-person conference for Founders and CEOs with founder mentality in Austin Texas March 12th to the 14th if you have not yet applied to go go to Founders only.com that's founders with an S everything I do is Founders with a s okay so Founders
only.com uh make sure you reply I'm going through all the applications it's listed it's limited to 150 slots I'll probably send out like 200 invites and then whoever just finalizes the registration fastest we'll get those so if you already applied make sure you check your email uh I'm emailing I'm sending message on LinkedIn so check both those places and just try to finish
your registration as fast as possible if you have not yet applied there is still time Jump in um and then every single person that applies will obviously go on the email list in case I fill this one out uh before I get to your application and therefore you will automatically be notified I'm doing a bunch of in-person events and conferences because my goal
is to help other Founders build relationships with other Founders has been there's two things that I'm asking asked for the most right uh is let me get for years I was asked can I get access to your notes and highlights uh that's Founders notes and then hey can you build some kind of community uh can I meet other Founders that listen to Founders how can we facilitate that the
way I do this is like I build relationships in person I just think it it helps jump start things um and so anyways there's a bunch of people speaking at this conference that are a perfect example of this these people are unbelievably impressive they are very important to me and we've built a relationship over the last 3 years because of the podcast and so I'm
calling in favors these are people that in some cases have never spoken publicly uh and in other cases speak publicly very very rarely we're not going to be recording anything this is you have to be there or you miss it kind of thing so if you are interested in doing that if you're a founder or a CEO uh there'll be other events that are you know open to
much more people but for the very first one 150 people just uh for Founders and CEOs Founders only.com apply if you haven't and then if you see a message from me just try to respond as fast as possible uh I'm dedicating the next I'm this will be done within the next like 7 to 14 days maybe something like that so time is of the essence the second thing uh is if you have not yet subscribed to
Founders notes go to Founders notes.com and get access to what I believe is the world's greatest and world's most valuable uh notebook for Founders I was sitting here thinking today as I was listening to this episode cuz I listen to every single episode before it goes out again um and I was just sitting here thinking I was like imagine a young Sam
insul right you have somebody that's super smart super determined super dedicated they he will no matter where he starts in life he's going to make his life a success and so he finds people he admires and then reads every single thing he could find about them you know Thomas Edison being the the best example of that and I was like imagine if Sam was Al alive today and he had access to
to Founders notes so what Founders notes is in case you don't know is for years I have been adding every single highlight and every single note on all the books that I read for this podcast uh into this app called readwise right and then I've gone for years on other people's podcasts and I tweet about it I link I post a LinkedIn about like brewi is the
best app I pay for I I could not make the podcast without it that is legitimate people think I say this over again people like you have such a good memory I promise you I don't it's because I reread and reread and reread same book same highlights over and over again and the reason I'm able to do that is because this app allows me to put all my notes all my highlights everything on
how I make this podcast right all the research um and if you really think about I've essentially sat in a room by myself for eight years like a maniac uh documenting the best best and worst ideas from the history of Entrepreneurship so we we can all learn from them right and like Charlie Monger said learning from history is a formal leverage and so for the first few years
like it was really hard to keep track of all that and then I discovered read I was like oh this is genius and then for years people were sending me messages like I can I get access to this get I access to it and I said no every time like I don't know a thousand 2,000 people I I didn't count but it was a lot of people that asked for this and I said
no because I thought it was like a my secret sauce like oh like what if do you get access to and you like start a competitor to Founders I don't think people are going to start a competitor to Founders like I realized that was a very like zero sum uh mentality I was having and because what would happen is like I would talk to other Founders and like we'd be on the
phone they have a problem I was like oh I would just be searching I'd bring something up they'd say something and I'd search my all of my notes and highlights I'd come up with something it was like really helpful I was like oh well not everybody can be on the phone like why don't and I do this in person in conversations too uh in fact I just had a dinner the other day with three
other founders that listen to this podcast and we essentially spent like two or three hours just talking about all the biographies we were reading uh like Phil Knight and corn is fander Steve Jobs Edwin L we're talking about all this and so I pulled out this app over and over again in fact all three of them subscribed to to Founders notes so
they had it too but in any case uh I was like oh this is like a superpower this is why it's the most valuable uh notebook for Founders in the world so it is right now it is I would not sign up and this applies to Founders only and found notes this is only for people that already have successful companies uh there's obviously no free trial you'd have to pay for it what I consider a
free trials like the podcast is a giant free trial it is free you can listen to 336 episodes as much as you want listen to them over and over again take your own notes whatever the case is so what I am trying to build is excessively high value and I would only do it is I would only do this this is only for people that have uh already successful companies because those are the people
that are going to get the most value out of it because they already have a way to turn that knowledge that's in Founders notes into profit so think about like a young uh Sam Insel or anybody anybody running a company it's like hey I want to learn every single thing I can about Steve Jobs so there's a few different ways that I I use Founders notes um and
then there's when you sign up you'll get a welcome email and it goes into detail about this so it gives you an idea and oh my God I saw a preview of the founders GPT that is going to be another feature in Founders notes uh I'd sign up now because as I add features obviously the price will go up I don't have a landing page yet so you just have to go off the
subscription and do you think like it's valuable if I use I use the product every day so that should tell you something right uh this is this is this thing's going to be nuts I have so many ideas for it it's going to be incredible because I I'll get there like I'm getting excited so I'm going to be testing in for the next few weeks it'll pop up if you're already an existing
subscriber don't worry you'll be notified that when this features is available um I don't know if I've ever been more excited about anything so the way I use Founders notes right now is when you log in right and you sign up you're dropped onto this page and at the very top page it's going to be self-explain where it says search highlights so this is put in any you can
put in a name something you're thinking about a problem you're having in your company how do I build a sales team what should I do about marketing hiring recruiting advertising anything that pops to your mind you search highlights and it'll pull back every single time that that's been mentioned either in a note or a highlight of mine so that is
something I use every day so right now there is no app this is just in your browser so you can use the browser on your computer or your phone I leave if you I would once you log in just leave it up in your browser um I search this thing every day multiple times a day okay so that is by far the most valuable feature this is where but like what I again I I know it's the most valuable
feature but what I think is like excessively special is this thing called the Highlights feed and again this is this product is for think about who I who I had in mind when when I wanted to make this right when I contacted the team at rewise and I said hey uh both of the founders listen to the podcast and I was like um hey we should build a product together I want
to essentially give people access and see exactly what I see and I want it to be a new product and I want to call it Founders notes and so that's that's that's how this thing came to be and I knew already the people that are going to get the most value out of already have a successful company so that's why I say it's for them so those people also read a ton right there's a high positive
correlation between success entrepreneurial success and reading and so the highlights feed is very special because think about all the other platforms that we're giving our attention right it's like kind of just algorithms throwing things in our face you're seeing like random posts from you know somebody you went to high school with 25 years ago or you know somebody
angry about something else it's just like you know anything that gets engagement and the way I think about highlights feed the highlights feed feature right it looks like this is what my friend Morgan me and my friend Morgan howel the bestselling author uh talked about it's a Smart Twitter feed is what it looks like or a smart Facebook feed and the highlights feed is
random highlights and notes right you go on it and instead of scrolling this is like if obviously the reason I said you should have a successful company because usually you know those people also read as well and if you could read this thing for 10 or 15 minutes a day or whenever you want to really uh sometimes I read for a couple minutes I've been lost in
here for hours uh and what happens is like it's almost like a random it's like History's Greatest entrepreneurs a random sampling of History's Greatest entrepreneurs speaking directly to you like I just clicked on and there's two quotes from poor Charlie uh portra Zac right then there's one from Ted Turner then there's one from uh John D Rockefeller then there's three in a row
uh from Sam zel then there's uh two from Napoleon there's one about Balenciaga and like it just goes on and on and on and some of them you know it depends on the context of what's going on your career some of them aren't going to be meaningful for you just like when you're scrolling any other feed uh but they're really good prompts for your thinking
and reminders of the lessons that we're learning on the podcast because you can listen to every single episode and I know a ton of people that have but you're going to forget a lot of stuff our our mind is meant to like forget you know 99% of the stuff we take in so that's why I think repetition is the mother of learning it's so important I think that's what the highlights feed
does I'm sitting here scrolling I'm talking to you it's like here's another great idea on uh David ogy for example uh he took an idea from Henry Ford and he says following Henry Ford's advice to his dealers that he should solicit by personal visitation I started by soliciting advertisers who did not employ an agency at all so he's talking about the how he started his his agency
when he was like 35 years old and the this is like yeah I can go and say hey hire me and fire your existing agency but or I should just do what Henry Ford did and like go to the people bu personal visitation that don't have any like it's easier to sell somebody that doesn't have an advertising agency already uh partner as opposed to like getting them to switch to some unknown
entity and you'd be shocked at how much like you and you'd be shocked at how much either you didn't know or you had forgotten here's another one that's fascinating he talked about this is the book my friend Jimmy Sony he's a good friend of mine now uh he's the author of this book called the founders which is on the beginning of PayPal and it talks
about how competitive in the end of it's really competitive all at all times but especially during the top.com uh bubble how competitive it was for uh engineering and like really A+ talent and something that musk uh that helped MUSC out he's just like hey I got a lot of my own money in this and so there's the unexpected benefit of putting so much of your own wealth in helps with
recruiting Because they're like this guy has I think at the time I don't remember how much of his of musk's net worth but he had a ton I think he got like after selling zip 2 you know $28 million what is that after taxes who knows 15 million something like that and then he's telling this guy I have 13 million I have 13 out of my $15 million in this
company it has to work uh so there's just these weird ideas that happen and what happens which I've heard over and over again from a ton of Founders is like an idea or comment on the podcast or reading in a book or reading Founders notes will go into your brain it'll go it'll go through everything else that's particular to your company on the outside it's something unique and
usually beneficial to your uh company so that's the way I think about highlights feed it's like it's very interesting and special um I don't even want to confuse you but almost feel like it could be like a separate app which whatever maybe I'll test that personally and see if that it just it's fascinating it's very very fascinating and then finally uh
because I don't want to talk your ear off um books you can go to the book section and just go buy books so last last week I talked about you can go read all of the highlights from Brad Jacob's book and in Brad Jacobs when I was reading about Brad ja Jacobs I was really thinking a lot about Danny Meyer and I hadn't read Danny Meyer's autobiography setting the table for
years but it is excellent and so then you can go and I think there's what 59 I said no 29 sorry 29 Highlights and so those 29 Highlights you know probably take 10 minutes to to read and really think about and it's shocking how much you can learn you know just by reading 30 from a book or 44 highlights from a book or 71 highlights from a book so that's a brief overview of how I use
Founders notes you can sign up invest in a subscription for what I think is the world's most valuable notebook for Founders at Founders notes.com uh their annual subscription so every day the I'm adding more highlights every day the product gets better so if you think about that now you sign up now within the next year odd another 50 books and probably I don't know 4,000 more
highlights the more highlight and notes that are added the deeper the ideas go and I think the the context around them uh only get more valuable with time so all right that's enough for me uh if you have not yet subscribed highly recommend doing that I think that is for sure subscribing to founders.com is the best way to support the podcast if you want
to travel to Austin Texas and hang out with me for three days is all inclusive that means if you get to you have to get yourself to Austin but then the event uh is everything's included in the price so the event all the talks um all the lodging all the food everything it is a private I rented out this entire private venue it is is not open to the public the only people that will be on the
property will be people taking part in Founders only so if that sounds interesting to you that is Founders only.com Founders notes.com both of those uh links will also be in the show notes thank you very much for your attention thank you very much for listening to Founders and I got to get going and re start reading again for the next episode I'll talk to you again soon