this is a book about family and business at its heart is the dynasty the succession and interaction of family members over generations and the firm the business unit that embodies and expresses this interaction I shall Define a dynasty as three successive
generations of family control no small achievement growth diversification and technological Advance can all work against the continuity of the family firm to these factors I shall add another success simply put as the firm develops power and Prestige The Heirs
find many interesting and amusing things to do rather than run their business typically rather than wear the shirt sleeves of their forefathers they finish in silks and velvets and focus on politics culture and the unabashed pursuit of The Good Life as a historian
I was drawn into the drama of these stories and the Larger than Life qualities of many of these competitors for wealth these Tales trace the entangled histories of legendary lineages such as the WS The Rockefellers and the gugenheim but one that need not be a rild or a Toyota to have use for
the lessons in this book our own families play Central roles in most of our lives and the successes failures and cautionary notes of these narratives can inform and Inspire us all we can learn a great deal about business from these dynasties these are extraordinary men
and women full of e centricities and genius as an example consider the legendary patriarch the Bold enterpriser who sets out to do well for himself and ends up founding an Empire Nathan rild fits this bill he had a super Keen mind a sharp tongue and a sense of dignity
and Authority that some families need many generations to acquire Nathan quickly moved from selling merchandise into Banking and outdid the best of his competitors the Brits his existing competitors were not always ready or able to understand the force of this
Outsider who ignored the rules of proper behavior this is an example of one of my favorite maxims which is those on the margins often come to control the center those on the margins often come to control the center one day a powerful wealthy English dignitary pushed his way into
Nathan's office and interrupted the busy Banker at his task Nathan told him to take a chair that he'd be with him in a minute the man was offended don't you know who I am he said pointing to the Royal Crest on the lining of his top hat Nathan's reply then take two chairs
another time someone asked him how he had made his fortune and he answered by minding my own business it is from such Brash Keen dedicated entrepreneurs that great dynasties are founded that was an excerpt from the book I'm going to talk to about today which is dynasties fortunes and
misfortunes of the world's great family businesses and it was written by David landies so I've told you before one of my favorite things to do is uh spend time and use bookstores and this is where I stumbled Upon This Book picked it up read within like like two minutes
I was like oh I'm definitely buying this book what it is is the author is a historian and he profiled 11 family dynasties throughout history uh in three primary uh Industries so you got banking Automobiles and then natural resources and so before I jump into the first
family Dynasty this is what after studying all these different families across all these different Industries this is what he realized was the largest predictor or the large largest cause rather for their eventual like Decline and downfall and the way you and I have
spoken about this in the past is the fact that they it's very common in human nature that they go to sleep on a win and they wake up with a loss and so this is what I mean here the biggest threat to continuity meaning dynastic family continuity okay the biggest threat to
continuity was enrichment and success we will see this story repeated across Industries once the family had the wherewithal to indulge their inflated Ambitions they tended to copy their better so I need to pause there so what is he talking about all the D the dynasty started as Outsiders this is
something that's very obvious in this book but also very obvious if you read you know a couple hundred biographies of some of the great uh history entrepreneurs that's why I said one of my favorite maxims actually comes from Game of Thrones the one I mentioned in
the intro that those on the margins often come to control the center so what happens after those on the margins get to control the center you see this over and over again uh once the family had the wherewithal to indulge their inflated ambitious they tended to copy
their betters meaning they started on the outside they usually overtake their competitors they wind up generating wealth and what do they do they just copy and imitate the people that they are replacing so that's what he means that is they tend to buy Estates they purchase honors and titles and live the
life of idleness and self-indulgence that was the mark of gentility and so all of these dynasties without exception can be traced to one formidable individual somebody that's intensely and insanely focused on the building up of both their business and their family
think about what David Oggy told us lastek week I think it was on episode 306 he says great industrial leaders are always fanatically committed to their jobs they are not lazy or amateurs these are power law type people of course individual families are not going to be
able to produce multiple family members of the same caliber that doesn't mean they can't like continue on and so the first family I'm going to talk about is the one that really out of everybody in the book kind of buck the trend and that's the Ross Charles and we're get
into there uh cuz you know there's not another there's never been another Nathan rild but they have been able to muster enough talent and discipline to not squander the wealth that's been built up over the last few centuries and so David has a great way of putting the
me the difference in mentality between like the founder of the Dynasty and those usually the people that come afterwards he he writes it in French so I had to go and um I had to actually go and translate this this is the first time I've come across this maximim and
it's excellent something I I already put in a rewi something I'm going to like keep reminding myself of and he says for many of the Great Founders appetite comes with eating I was like what the hell does that mean and it's a saying that means that the more you have the
more you want to have the great Founders are obsessed with what they're doing they want to continue doing more of it they enjoy it it's like work as their own hobby their their descendants just like the fruits of the labor in many cases the labor that they did not
themselves do and so they like the these like lazy like what he calls a life of idleness and self-indulgence but that is one of my favorite lines in the entire book for many of the founders appetite comes with eat eating the more that you have the more you want to have and I
think that's obvious if you look back on a lot of the founders that you and I talked about a lot of the founders that you and I have read biographies on their exit strategy is death they found their life's work and they they had no intention of retiring and they just kept
doing it because they enjoyed to do it okay so with that the first family I I I picked four families that I'm going to talk about uh many of them three out of the four families have done multiple podcasts on what I will do is I would use this podcast this episode as like a
jump off point I will list in the show notes you can find on your podcast player and a Founders podcast.com All of the episode and the episode numbers of all the different I've done on the Rothchilds The Rockefellers and the Morgan Family this would be the first
time I talk about the Toyota family which I actually really enjoyed and then from there based on what you hear in here if you want to go deeper you you can use that as a reference point but I do want to start with the rilds because they seem to be the the exception uh to
the rule at least in the the 11 families profiled in this book he says more than anything the rth Childs are a case study in tenacity and a dynasty in which the traits of persistence and intense Focus have been passed down from one extraordinary generation to the the next
their family Dynasty is going to start in a ghetto I think it's the world's actually first Jewish ghetto in Europe uh it's Frankfurt was the ancestral home of the rash Childs and it was neither a pleasant nor an auspicious place to start a global Empire it was home to the
first Jewish ghetto in Europe which is created in 1460 first thing that pops out here is number one the rosch child's uh capability of turning an a liability into an asset the ghetto is a terrible environment in which to live but the adversity and oppression bred traits
that would be Central to the rise of the rilds first a network of Jewish Traders and financiers developed who offered one another support Second the rild learn that family was their greatest resource the one place where they could place absolute trust so no one wants to be
born into an environment like this but the people that are capable of surviving they develop a very unique uh set of skills uh from this environment they fought to overcome oppressive oppressive conditions and became stronger more Savvy and better connected as a result
and there's really only two generations of rilds that have to deal with this so the founder of the rild dynasty I I did a two-part series on the rilds episode 197 is on the the the dad mayor and episode 198 is more on his sons so let's go over a few traits that he had that
are valuable uh number one he had an innate talent for his trade uh he starts out they're Merchants but they're also money lenders and money changers mayor had a good head for figures meaning he's good at math which was great advantage in a world of multiple monies multiple
currencies is what they mean there number three he took time and built the foundation of the Empire by gaining specific knowledge very valuable specific knowledge one specialty of money changers which was their business their initial business was a knowledge
of the rare coins that passed through their hands there was a significant Market among collectors for these items and Savvy dealers which was what mayor was would begin systematic uh systematically hunting for Rarities which then they resold to Specialists so
that skill and specific knowledge is valuable and interesting but what makes it even more powerful is that mayor combines it with a trait that actually bucks human nature he thought that long-term relationships were more valuable than short-term profit that may
be easy to say when you're already rich this guy is living in a ghetto he's living in a two room house with I think they have like something like 10 kits so let me give an example this uh mayor was a go-getter he would shave his margin or even sell it a loss for important people
the Readiness to prer connections to immediate profit testified to his long longterm Horizon second thing he did he realized that they were without a lot of financial resources at the time so everybody in the family had to help the business this is something that they
would continue over the next few Generations uh so they're changing money they're collecting coins but they're also selling dealing merchandise so they would sell things like Fabrics yarn uh goods from tropical lands they would sell spices teas coffee and chocolate
where's he going to put all this stuff he's got to put in his house his Crowded House was jammed with crate barrels and stacks of merchandise the family occupied what little space was left there was one bedroom for mayor and his wife in the other bedroom the children
boys and girls of all ages were piled together a top one another as they grew old enough they were all enrolled in the business as the children got old enough to marry their spouses were also joined in the Enterprise as employees but never as partners he actually puts that rule
in writing uh on like his last will in Testament they were very very fearful of Outsiders and another way they avoided this which I'll get into a little bit is there's a lot of incest eventually this is something that's going to reoccur like I said all the dynasties can be
traced down back to one formidable individual we're going to call the people the power law person eventually the power law person will appear and that is going to be for The Rush outs that is going to be Nathan rild it was mayor's third son Nathan rild who gave
the rild a special Advantage when he immigrated to England Nathan was bright and enterprising and he had the kind of Pride that exacerbated those who expected Jews to be suitably meek and differential and as we'll see he also had extreme extreme levels of self-confidence way
before I always talk about the there's this great maximum that belief comes before ability he had extreme levels of self-belief way before there was any evidence that that belief was justified we'll get into that in a minute he quickly made a fortune in cotton and
then married the daughter of one of the richest Jews in England when his prospective father-in-law asked for proof of his prospects meaning this is very common like are you're going to be able to provide for my daughter like what's your business how much money do you make that kind of stuff
L this is what I mean about excessive self-belief when his respective father asked uh father-in-law asked for proof of his prospects Nathan told him that if he was concerned about having his daughters provided for he might as well just give them all to Nathan and be done
with it whoa Nathan then moved to London and began competing with other Bankers for a share of government issues that's going to be the main uh source of like they're going to have a bunch of different businesses but essentially like they're financing governments
they're financing Wars they're having some of the most powerful people in Europe indebted to them uh Nathan became the Commanding General of the clan of his entire family even though he was his father still alive he's the third son they all recognized
him for as just this unique formidable genius uh he ran his office under strict rules of privacy and discipline no one could enter unless summoned this is a something I already mentioned in the intro but it's one of my favorite stories so I'm going to repeat it one
day an English dig dignitary pushed his way in uh Nathan recognized uh the visitor he said take a seat I'll be with you in a minute the visitor was offended by such off-hand disres don't you know who I am he said showing Nathan the Royal Crest on his hat Nathan was in no
way disconcern then take suit two seats it was a great time to work and earn in London so it's something that you sees over and over again some of this is just you know Randomness luck whatever you want to call it but Nathan was the right person at the right place at the right
time in history with the right set of skills and this is an example of that it was a great time to work and earn in London British businessmen were far ahead of anyone else in industrial Enterprise and they needed a constant flow of funds Nathan had come along just
at the right time so the order I have that I'm going to talk to you about uh start with the rth Childs then I'm going to go into the Morgans because the Morgans just like every they I don't even know why I'm repeating this because this is so obvious at this point the Morgans pattered themselves off the
great people that came before them so they literally studied the rilds and they looked at the career of the rild family Dynasty and say okay how can we do that what did they learn over the course of their career that we can use on our own right and what is fascinating
to me is so the r shells start in London they're at the right place right they miss at this point in history you'd rather be in London than anywhere else now what the Morgan's growth of the Morgan Family Dynasty is the Morgans are going to play that role but in America
and the rth child had russels had an uh the opportunity to expand to America before the Morgans and they didn't think they needed to do so because all their power derived from Europe and so that Gap in the market that the rosch child seated the Morgans jumped into and so
therefore you could also argue that JP Morgan was the right person the right place at the right time with the right set of skills and in the right geographic location okay so moving on at the beginning of this chapter on rild it's like 10 15 pages earlier than where
I am in the book right now something something that was fascinating it says the r child's developed the technique of absolute discretion to Perfection I like okay what does that mean later on it gets into some of the services that they're offering these great like Royal
houses all throughout Europe and a lot of them not only did they need financing but they also needed the rild to help them hide and then move their wealth around the continent and so when you go back and you read books on the Rothchild a lot of it was the value of the network
they built not only the network for business people but also like the logistical Network The rild Scrambled around using special carriages horse drawn carriages pre-arranged relays of horses and hidden compartments they also had a network of ships where they could
move things over water Nathan's biggest coup was lending the British government the money it needed to finance Wellington's campaign against Napoleon Nathan had just bought 800,000 pounds in gold from the East India Company now here's the problem because they're such a secr a family
there's more unanswered questions than there are like no knowns about the rush child so like this one section when they're talking about this where they made an unbelievable amount of money it starts there's just a bunch of questions on this page like how why where and the
answer to a lot of these questions are we don't know it says Nathan made this money available to the British crown though we have no record of this operation in the rosch child archive but it is believ that this was the single most lucrative transaction that the rash
child's ever made so Nathan is running his family even though his father is alive however when his father dies he leaves behind like a list of guiding principles for the family they adhere to this pretty strictly for the next let's say two generations there's one one or
two deviations and then eventually uh you know it it changes over time obviously the further away you get from mayor's death he died in 1812 but I want to tell you a little about this before he went he drew up a partnership agreement and a will that laid out the
principles he felt should guide the family Enterprise into the Future these clear rules for order family Behavior and the succession of power very much distinguished the Roch house from the other banking Dynasty so that's why I wanted to start with because they are
the ones that are the exception to the rule the ones that buck the trend uh he began by distinguishing his direct male descendants from any other rth child relations there would be no room in the business for son-in-laws they could work as employees but they cannot they have
no ownership and they have no sat in the management and then very similar to Sam Walton's autobiography that he's writing when he's dying he say sayy if you you come with any of this foolishness I will come back and haunt you from the grave he has like a line that's very similar
to that in his autobiography we see that mayor puts this in his will I shall never forgive my children if they should against my parental will take it upon themselves to disturb my sons in the peaceful possession of their business I do want to get into one way
that the rash Childs try to keep the business in the family and this is what I referenced earlier 16 of the 18 matches made by mayor's grandchildren were between uncle and niece are first cousins so Nathan D young at the time of his death uh he is likely the richest
person in the world Nathan died in 1836 when he was only 59 he may have been the richest man in the world but he had The Misfortune to live in an age where that that did not know about antisepsis he was infected by an abscess on his lower back and then this line is a great
description of what I was explaining earlier that you shouldn't expect there to be another Nathan especially in the own family the brilliant entrepreneur and innovator was gone and his like would not be found again and so what happens next should be expected human
nature is constant the family's rigid adherence to mayor's rules began to lose Force As Time marched forward and future Generations came of age this was inevitable one cannot become enormously Rich drink and dine with high status dignitaries and play and flirt without
absorbing new values and habits and so it was with the Rothchilds and really what they're about to describe is the difference between a founder and a manager the founder wants to innovate it wants to grow it wants to keep on going the family's already rich they just
don't want to lose what they already have the passage of time changed the family gradually from an active promoter and investor to a custodian of family fortunes so then we have this guy named Frank Harris who talks about this conversation he has with one of the grandchildren the grandchildren are
adults and running the business at this point in history and it says Harris reports gleefully on the profits made by bearings which is another family Dynasty they're actually covered in this book on this transaction they did for the Guinness Brewing Company and where
bearings made over a million dollars and this would have been in the mid to late 1800s and so Harris says don't you wish that you had done the deal and the rosch child uh descendant returns a soft answer we did have it and we turned it down Harris said aren't you sorry now
and the rild grandchild said when I turn down deals I go home at night carefree and easy when I take on a project I can't sleep the tacit rules of the rosch child Dynasty now were aimed at preserving sleep and peace of mind and so I got this page I left a note to
myself and I think the reason this happens over and over again is because if your goal is just accumulation of more money like that's probably the right move you are already one of the richest families in the world if not the richest family and being abundantly cautious is probably the the correct
move if the just the continuation and uh continual accumulation of money and then pass it down to the next generation is the goal and we are living almost 200 years after the events that you and I are discussing this book and we can't tell how much money they have but we
know they have a lot or I should say it is likely that they have a lot the author is then comparing and contrasting Nathan the power law person power law founder with uh his descendants Nathan had given himself heart and soul to making money his descendants worked
rather to spend it a theme that we shall see repeat itself for many of the Great dynasties but unlike many of the Great dynasties where The Offspring began to stray many Rothchilds remain powerful in the business world it is as if they possessed a secret genetic gift for for
making money and then this summary of the section is exactly why I wanted to talk about them first the Rothchild family is perhaps the most important and tenacious Dynasty in modern business history only a few dynasties have shown as much persistence across
centuries okay let's jump right into the Morgans the great thing about the Morgan chapter is the author does a lot of the work for you and I where he is going to constantly reference I guess compare and contrast the Morgans and the Rothchilds so it says the Morgans offered a very
different response to success and growth from that of the Rothchilds the Rothchilds insisted that their Bank be an exclusively family Enterprise no outside partners and they have held to that the Morgans were not numerous enough to do that nor did they see
outside Partners as Intruders on the contrary they needed them the result was that the family Bank moved on to a Morgan L managerial Corporation so I just want to pause there because they're like hey the Morgans couldn't do what the rilds did cuz there just wasn't enough of them I can't remember which
other family it's talked about in the book on another another family I'm not going to profile where they realized that the essentially if you want to build a family Dynasty uh they would recommend that you have a bunch of kids 8 10 15 kids whatever the case is you're
going to because the natural distribution of let's say you have 10 kids a handful of them are not going to be interested in business maybe one or two are going to have the same level of drive and intensity that maybe the founder or similar drive and intensity
that maybe the founder the family had but that was explicitly stated in the book where they're like okay the only way to get around this if you want to have a family Dynasty that lasts a long time is you have to have a bunch of kids and then you have to convince your
children to have a bunch of kids and so I'm pretty sure JP Morgan's dad Junius who I'm going to talk to about in a second I think he only had two sons and when they say kids in in this time you know it's obviously it's going to be the male line of the family that they're
optimizing for before I get to Junius want to talk about junius's Dad the Morgan Family Dynasty is interesting because the actual Morgan company wasn't even started by a Morgan we we'll get to there in one second but there was a lot of wealth transferred down over multiple
Generations so they were successful like they are a case study and successfully saying hey we start with Joseph Morgan he's goingon to make a bunch of money he's goingon to give some of that money to his son Junius Junius is going to make a bunch of money give that money to
his son JP and so they were successful in taking an inheritance and growing it and passing it on to the next Generation uh so JP Morgan his grandfather was this guy named Joseph Morgan he did a bunch of things but what he is most well known for is that he was he he made a lot of
money in real estate but he was also one of the founders of the EA fire insurance company so Joseph Morgan is the first person in the Morgan Family where he has a knack and a law for business and then he passes along that love and passion for business to his son uh so it says
most important Joseph put his son Junius Spencer into the trade so Junius is going to have 10 years of experience in banking and in commercial trade before his father passes away Joseph left in a state of over a million dollars so that would be about4 to $50 million when this
book was published this book was published 20 years ago so it's even more now uh Junius took this money and then went after bigger game now he does something really smart here he winds up moving from America the Morgans are Americans he moves to America cuz this
is 1854 where is the center of Commerce in the world at this point in the Western World clearly London he' moved to London and then send his son JP Morgan to school in France and German on the past episodes I've done on the Morgan Family I told you before that I
found Junius to be the most impressive of all the Morgans this is an example of that this untypical breakout from local to Regional to National to International over the course of generations was the building of a global family fortune Junius to me seems the most driven we
have evidence of this here he is he set out he's like I want a Dynasty uh from the beginning Junius had far-reaching aspirations he would build a dynasty his models were the bearings and the Rothchilds both European banking family dynasties both are covered in this book
so it talks about his son JP Morgan JP's Health left much to be desired throughout his entire life work had to be compensated by intervals of recovery and Repose he would engage in Fierce spells of activity followed by long vacations and months of travel you can
still get if you're in the right business you could still get really Wealthy by doing this like Sprint Sprint rest Cadence that's very different from I would say most of the founders that you and I cover the Grinders when I got to this part all the way back on episode
124 I did a three-part series on Larry Ellison there's this there's this fantastic biography of Larry Ellison called Soft War an intimate portrait of Larry Ellison and Oracle and Larry Ellison was like this too he States in that book he's like listen Bill Gates is
a is a grinder I'm a Sprint and so let me just read a quote from the biography of Larry Ellison and it says although he always talked about technology and Oracle with passion and intensity he didn't have the methodical relentlessness that made Bill Gates so formidable and feared by his own
admission Ellison was not an obsessive Grinder like Gates I am a sprinter I rest I Sprint I rest I Sprint again Ellison had a reputation for being easily bored by the process of running a business and often took time off leaving the shop to senior colleagues that is
very much in my mind the model I have of JP Morgan and I think he was bored by the process of running a business I think he think he said he did something like I can't remember the exact number like he would do a Year's worth of work in 3 months or maybe a Year's worth of
work in 9 months something like that but I know he took at least three months off every year but that comes later in the Morgan Family History this is what I meant that makes their Dynasty so interesting because the actual the launching Point not including the the
the money from their grandfather and junice's Father Joseph comes from George Peabody he's not even a mortgage says George Peabody was also an American living in London he was a high quality Merchant Banker of London Peabody is going to run across Junius and recruit
him to take over I'm pretty sure Peabody was like this like miserly figure I think at one point I'd read about him previously let's say he was making like $300,000 a year he would live on like $3,000 like he wouldn't spend any of his money I think you know let's say he's
making 300,000 he would live on like $3,000 like he would actually spend like $3,000 a year so anyways I'm pretty sure he didn't have any kids so he recruits Juni almost like this adoptive son and it's from this this is the the like the prehistory of what becomes now in our
modern day and age JP Morgan Chase uh Chase Manhattan obviously buys out JP Morgan I think for $30 billion that's how this chapter ends this was a great opportunity not only because peab was a lead was the leading house in anglo-american trade Peabody himself was
also approaching retirement he had run into Junius Morgan in various transactions liked what he saw and offered him a partnership in in 1854 when Peabody then retired 10 years later The Firm became JS Morgan and Company JS Morgan and Company uh when Junius retires it's taken over by JP that
becomes JP Morgan company that is the company that Chase Manhattan buys uh many many years later I I love what uh the auth points out because this is exactly how I felt when I was reading the history of the Morgans a few years ago the history of the House of Morgan
tends to Glide too quickly over the career of Junius and yet it was he who won the family place and fame in International Banking and their first Big Break comes from again we talked about this earlier your competitor is always going to leave gaps in the market he is very much
Junius is very much pattering his family off the rilds the bearings even came before the rilds they're all operating in Britain at the time this is the center of the financial universe and there is this war between Prussia and France that France loses and needs a
bunch of money for restoration this is an 1870 but the leading British Bankers including the bar and the rilds had little faith in this opportunistic French political creation so they're like no we're going to pass on this Junius is like oh I'll take this up I'll
take you up on this it was at this point that JS Morgan and Company stepped forward and agreed to underwrite the loan and so there's a bunch of more detail about what happens I'm just going to get to the punchline Junius made a fortune from this unanticipated windfall
it estimated he made about $450 million in today's money from this one trans this one single transaction like the rush Childs after the Napoleonic Wars he now felt him self a legitimately important player in international finance and like the Rothchilds then he
found the old-timers beginning now with the rilds unwilling to concede status to this Brash newcomer just like in the story of Nathan rild the people that were ower the the powerful families powerful businesses business owners at the time in England did not want to see
their position to this young upstart now two I think a generation two generations later we have Junius playing the role of Nathan Rush Junius sends his son JP to America Junius is going to stay in London so they're going to have like basically the bank of Morgan the house
of Morgan becomes like this two-headed monster and this was perfect timing again and this is probably why JP Morgan is so well much well known throughout history than than his dad was even though his dad might have even been a more impressive person it's because he's
at the right place where you're going to have this gigantic explosion in the American economy and that is where his son is Junius Morgan continued to thrive by doing business with American exporters and importers much of this rise was the of his son JP and so for
the next 30 Years and this this is terrible that this happened JP winds up uh burning all these letters but for the next 30 years we just have Junius you have 30 years of history of Junius and JP writing uh letters back to each other and Junius is really trying to shape and
get his son ready to take over the family Dynasty a little bit of detail about that here Junius did his best to provide his enterprising son with experience guidance and Working Connections Junius was a tough act to follow the father was determined to shape the son to the highest standards
his technique was to scold and chastise and give no praise and this is something he also had in common with how Nathan Rush child that he did the same thing that Junius did JP exerted himself to meet these boundless demands driving himself to fatigue depression and even
physical illness but not even his father could keep JP in line JP would not haggle and he dealt with others on a take it or leave it basis biographer Ron trau describes JP as a young moralist turned despot JP found it hard to find collaborators he thought no one was good
enough when he did find a man that he wanted as a partner and he offered him a job he would not take no for an answer hours at Morgan's Bank in America exceeded normal endurance the house was known as a partner killer and so now we got to the point where I mentioned
earlier that JP is at the perfect time in history the Ros Childs had missed the American boat Junius Morgan with his son's firm in New York had not this Frontier nation was a different world different world than Europe it was large scale full of business syndicates and
monopolistic and JP was the man to find the funds and take these things in hand there's also a bunch of quotes in this book that give you an idea of who JP Morgan was as a person I think this is a good example of that JP once said a man always has two reasons for the things he
does a good one and the real one and so even though JP Morgan was not the richest of the robber barons he did he was like involved in all the different important industries at this time so that's why he's so well known the the American economy took off after the
Civil War at the heart of its growth were the railroads so he was involved in railroads he also was involved in Oceanic transportation and then he winds up getting involved in steel and iron uh so it says linked to both the transport Industries with Iron and Steel and it
was Morgan that in 1901 put together us steel this is the world's first billion dollar Corporation part of that was buying he bought a bunch of businesses but he winds up the main thing was buying Carnegie steel Andrew Carnegie's company and the reason Morgan bought him
out is because Morgan wanted to compete in steel and Carnegie had built by far by far the best steel company Morgan B did this meaning bought out Carnegie because Carnegie was responding to moves by other steel works by integrating backward and forward and Carnegie could
undersell those other Mills Morgan wanted to elay this potential competition and it just so happened that Carnegie was in the mood to listen so he winds up buying out Carnegie for like $400 and something million dollars I think out of that Carnegie I think Carnegie's end after paying out his
Partners something like 250 million what I've read in the past is that at the point at that point and he took it in cash he did not want stock in US steel at that point it was highly likely that Andrew Carnegie had the world's largest liquid Fortune when he saw the growth of
us still was like oh I sold out too cheaply Carnegie came to feel that he sold too cheaply Carnegie told Morgan that he should have asked for 100 million more uh there's a great book on this I covered it all the way back on episode 142 I it's excellent I highly
recommend if you're looking some for something to read right now to buy the book it's called the hour of Fate Theodore Roosevelt JP Morgan and the battle to transform American capitalism and I think the description in that book is even better it says Andrew Carnegie
celebrated too quickly he later admitted to Morgan that he had sold out too cheap by at least $100 million and Morgan replied very likely Andrew and so if you look at all the deals that JP did I do think this author really hit the nail on the head here with this he said JP had
one great strength he had a feel for new technologies and the business opportunities they created it was not an accident that he had had formed the general electric company and I'm going to interrupt this paragraph because this is another demonstration you want to
know these people exist you may not want to be friend you probably don't want to be friends with them and you definitely don't want to work with them because they are ruthless Henry Villard president of Edison Electric had come to him had come to Morgan for help in
taking over Edison's company this was a mistake Morgan was not by Nature a helper he was a driver he arranged a counter coup and so then you can argue with JP's death which is about to happen here that this was actually the end of the Morgan Dynasty JP felt burned out and prepared to take
one of his European yacht trips that had always done so much to revive him in a conversation with George Baker before leaving he asked his old friend to assume the role his role in the event that he JP did not return He was not feeling well and indeed his premonitions
were Justified he suffered an acute breakdown was very uh tired mentally and physically kept going downhill and he stopped eating on March 31st 1913 he died in his sleep and this is when the Morgans permanently deviate from the rash after JP's death in 1913 The Firm needed
outside Talent more than ever uh 10 years later you they had 13 managing outside managing Partners this dependence on partners and managers was so different from the rosch's and it was reinforced by genealogical Decline and what they mean there is one they didn't
have enough male erors and the ones they did were just not the same quality of JP or Junius JP had matched or even surpassed his father Junius John Jr was not in the same class as his father and his sons were simply not cut out for business okay so now I want to move on
to a family Dynasty I am ashamed to say I have never done a Founders episode on and I'm going to rectify this as soon as I can if you have any great biographies or books on the Toyota family please send them my way this was one of the shortest chapters in this book and it
was it might be my f favorite chapter okay so and these names are Japanese there's no way you know by now I don't think you expect me to pronounce anything correctly but there's no way I'm going to pronounce these correctly I'm just going to try to pronounce them
fanatically the founding father of Toyota was sakichi Toyota the patriarch of Toyota got his start in the textile industry he was born in 1867 the son of a carpenter in a remote Country Village so in the area he's growing up the men are working in agriculture the the women
are expected to earn additional income for the family by weaving cotton cloth so most homes where he was born in the area he lived had a handloom that's really important because he's going to build his the seed money for Toyota Motors comes from the patriarch of the
Toyota Dynasty selling his technology on a more efficient and they call it like a power loom which I'll get to in one second from a young age sakichi was fascinated with the challenges presented by these looms he set himself to making improvements much to the despair of his
father who felt his son should stick to carpentry sakichi had his own ideas he traveled to Tokyo to visit an industrial Exposition that showed him modern mechanical Marvels that he had not imagined a year later he patented a new wooden handloom that increased
productivity by 40 to 50% so when I read that paragraph the first thing I wrote down is one of my favorite quotes from the book 0 to1 by Peter teal which I covered on episode 278 for the second time properly understood any new and better way of doing things is technology
the patriarch of what is soon to be the Toyota family Dynasty is creating his initial wealth by creating new technology he then moves to Tokyo where he shifted his Focus to a power loom which would truly alter the dominant mode of production in textiles his first
marriage failed he had to move back to his home Village he then divorced and remarried he left behind his first wife but then he brings his kids and this is important because his son kiero uh who as we shall see becomes a worldclass entrepreneur as an adult and on the very
next page is a bunch of f ideas on how to build uh your business from the patriarch of the Toyota Dynasty here's some notes I left myself do it yourself insist on quality make something that will benefit society and pick a mission that is bigger than yourself in Japan
the sons-in-laws are often brought into the family with all the rights of a child by birth this contrasts with that of the rosch Childs so it is through marriage the marriage of one of his daughters that sakichi gets a new son it's this guy named rizab Bur who was 10
years older than his biological son which is kiero so it says rero took the Toyota name as his last name and became in effect saki's eldest son and the first heir to his fortune okay so that's very very different from the European and American dynasties that you and I
have been studying siki's looms tested better than his German and French competitors but never quite so well to beat the British which had the highest quality looms this on this is fascinating because his response was fantastic this only stimulated him to work harder it is impossible to create
an Innovative product he wrote unless you do it yourself pay attention to every detail and then to test it exhaustively this sounds like James Dyson never entrust your creation of a product to others that also sounds like James Dyson for that will inevitably
lead to failure and cause you deep regret that that that whole sentence those multiple sentences could have come out of James Dyson's uh mouth episode 300 if you have not listened to it I've got a ton of messages in the last few weeks of about that episode people seem
to really love it these new looms found a ready Market abroad so that was important let me pause there he's like I'm beating the Germans I'm being the French can't beat the British I'll just have to work harder he winds up improving it that wind up being really
important because that leads to a sale that sale then leads to the seed money that's going to give birth to the Toyota Automobile Fortune these new looms found a ready Market abroad but instead of continuing to expand the company's cloth and Loom business sakichi made a radical
choice in 1929 he sold its patents that sale bought in the seed money for the Toyota Motor Company sakichi also does something very smart realizes hey I built my business and my fortune in one industry the world has changed in a generation just like it always does my
son you have to figure out what your path forward is and he gives him idea he's like well I was just in America these cars seem to be this this automobile industry seems to be exploding maybe we should get into that siki himself was too old to undertake autom manufacturing but a visit to
United States convinced him that cars had a mighty future he saw this as a suitable task for his son kiero this is the biological son okay whom he admonished I devoted my most of my life to inventing new kinds of looms now it is your turn you should make an effort
to make something that will benefit society that is the most important sentence in this entire chapter I will read it again you should make an effort to make something that will benefit Society he challenged kiero to build a Japanese car with Japanese hands so
kiero goes to America and he does what Sam Walton did he visited his soon to be competitors more than anybody else he visited automobile plants and took copious notes on what he saw and heard just like Sam Walton did I don't remember if I mentioned on this recent
soulle price episode I did a few episodes ago but uh they catch and they caught uh Sam Walton walking through like a price Club I think at the time and I think so Price's son was a run one running the business at this point and he had been walking around not just taking notes but he had like this
the like a a recorder tape recorder so he's walking around like a microphone and he's just notes to self do this do that do that Minds up getting caught they confiscate his tape recorder in the tape Sam Walton writes a letter to Robert Price which is the son of Soul
price he's like hey I understand if you don't want give me my tape back but can I at least have my tape recorder back and Robert's like you know I'm not going to like we're not going to destroy your tape and he sent him back you know all the notes didn't delete anything and
just like here Sam take it okay so let's go back into the early development to remember keep this in mind 1929 is when they have the idea 1929 is when they have this idea that we should do cars okay this is going to be M the success is multiple decades in the
making at this point in history Japan had no true automobile industry even 30 years after major companies had been estab automobile companies have been established in Europe and America Japan's like oh we need to fix this the state appointed a committee to look into
developing a national automobile industry and urg a trio of producers check out the names I think all these names are still around maybe not Isuzu they asked Nissan Isuzu and Toyota design a standard chassis for all of them this was the easy part the big
problem was the engine they did not know how to make an engine like the Americans and Europeans did at this point now his starting point is fascinating right he's like anybody can build a chassis we need to figure out how to make an engine he's going to wind up copying an engine and
I'll tell you why I think that's smart but from the very beginning he realized he's like listen we're not just making a car we're making a system of production he understood that he was creating not only products but an industry and a new system of production this understand
understanding of the importance of developing successful processes lay and still lies at the center of Toyota success so when you look at books on Toyota a lot of them goes into the Toyota production system which then spread to many Industries outside of the automobile industry what I found
interesting is Kio decided he like okay we've never manufactured an engine before and essentially he he reverse engineers and he copied the Chevy engine and so I'm going to read this one sentence I'm going to read the note that came to mind uh after this it says the
result was an engine so exact that it could accept Chev replacement parts A major advantage when the inevitable breakdown occurred so a Toyota engine could break down Toyota does not have an abundance of Natural Resources they don't have a lot of money but what they
could do and they don't have a bunch of excess inventory waiting uh uh just sitting there waiting around and so it's like oh wait my Toyota engine breaks down we can just order parts from Chevy and then we could fix our car this is a smart move with a country with limited natural
resources for this actual industry that they're in now later on obviously you want to control as much as possible but at this point he's like okay we just want to make sure one that we can build a car that's reliable and two that we can sell them there's a there's a weird
parallel that just came to mind uh my friend Andrew Wilkinson started this company he's he's the co-founder of tiny he owns a bunch of companies like 30 something companies but he started an email management company called mailman and so he had mentioned it and so I went
to the mailman site it's mailman hq.com and I was like oh this is really smart mailman starts as a Gmail plugin and what it does it just gives you more control over like when and what email lands in your inbox right but I think there's actually an interesting parallel
to where we are in the story of Toyota now making a Gmail plug-in where you have you know two billion Gmail users out there is a great way to test if there's a market for the product and if in that market people are willing to pay out their hard-earned money I I highly
suspect that this is true and then from there it's like okay we can expand this we can stay with the plugin maybe that's a wonderful business or we can create our entire own email vertically integrated email service but this idea of starting out with something smaller
to prove what you're doing to see if there's a business there and then if there is a business and a demand for there going and building out and controlling more aspects of the customer experience is exactly what I think mailman could do and is exactly what Toyota is doing at this point in the
story in the book I think that is a reoccurring theme in the history of Entrepreneurship that the greatest entrepreneurs are usually start out resource constraint it forces you to be more creative to be more resourceful and to actually test to see if there's
actually enough demand to build a valuable business for the product that you think that you're trying to put out into the world and so this idea of lean production is a is a major theme in the Toyota family Dynasty Kier also began to experiment new systems of supplying
materials he cut back on traditional C cash outlays because he didn't have it by deliberately decreasing Warehouse capacity the goal was to produce vehicles on order and to use the proceeds to pay for materials and parts as needed kicho's idea came to be known
as lean production and so remember earlier I said remember 1929 this is this is Success M many decades in the in the making the note I have on the next page how many other car companies had to Pivot to making food so they didn't starve to death this is in the middle of
this Japanese Imperial expansion they're always at War they're eventually going to go into war with America which obviously is a bad move on their part Toyota workers who unbeknownst to them had barely escaped a murderous bombing scheduled by the American command for
the next week wept at their machines so they're in the they're closing down the Toyota factory right this is after they lost the War uh World War II to America and now they have to Pivot they're like we cannot make cars there's no demand we have to make food the outlook for Toyota
was Grim they transferred their manufacturing efforts to focus on substance employees were set to planting vegetables and the company built a flower Mill a bakery and a charcoal plant to take care of food and cooking the family put other Toyota units set to
making pots and pants this was a family that did not know the meaning of quit and tirelessly continued seeking income in those activities that were linked to survival and everyday living that is crazy how many other car companies had to Pivot to making food so they didn't
serve to death very few now the weird thing is this liability winds up flipping into a an asset because post World War II Japan is occupied by the American Army and they need Transportation so they look around like who can build us a bunch of trucks turns
out Toyota has the capability of doing that the Americans needed Transportation they asked Toyota to start making trucks again that is in the mid to late 1940s and 1950s uh Toyota has a huge influx in money because from America again because of the Korean War and then in 1950s the
company was momentarily rescued by the Korean War America needed friendly Manufacturing in Asia and Japan was in the perfect position to supply the US Department of Def uh defense between 195 1954 nearly $3 billion dollar in industrial contracts flowed in Japan and
Toyota took its share here's another smart thing that kiero did he's getting towards the end he's about to retire this has been going on for multiple decades he's like listen we've been making money but we've been making money we've been saved by this artificial
Market from the US government we need to have the skills to survive in a free market towards the end of his presidency in a memo that became something of a moral car Call to Arms he said the Japanese Auto industry has been fostered and protected in a controlled economy
and has never braved the rough ways of a free market system it is like a hot house plant moreover viewed impartially from a global standpoint Toyota is far from being a first class company because of Japan's defeat in the war we see ourselves as something like a third
class auto company so he's like all right we need to fix this kiero retires and he leaves in charge his cousin e and e does something smart he goes to the United States who could dream that a Japanese car maker at this point in history would ever be able to compete with American with an American Giant at
the time Toyota was making 40 cars a day Ford was making 20,000 e learned much of value on his trip to the United States most important he returned with the sense that nothing he'd see in he saw in America was beyond Toyota's ability they just have to find a way to do it with
their limited natural resources e is still really young so the actual real power in the Toyota uh company at this time was with this guy named Ono that's his last name Ono who was a professional manager and a mechanical engineer Ono had Vision it was he who developed and
implemented kicho's idea of lean production into a system that became known as TPS or the Toyota production system which could be used in making not only automobiles but all manner of complex Industrial Products TPS was perhaps the most important technical
Innovation since Ford's successful implementation of the moving assembly line and the Toyota production system has transformed manufacturing throughout the world the aim was to waste neither time nor space which they did not have an abundance of they were lean and mean
workers didn't need to move about and materials were delivered to them materials arrived only when needed are quote unquote just in time which cut down considerably on waste much of what Ono wanted ran against Dee rooted Japanese habits of hoarding against feared
shortages his lean manufacturing process took several decades to develop and perfect so the great benefits were not clearly visible at first and so in 1967 the family finally thought the E Toyota was ready to to take back the Reigns uh he finally got a CH his chance and he
took over as president the first family member by bloodline to hold the position since kiero growth continued at a rapid Pace in 1972 the company's annual production hit 2 million cars in in 1980 it was 3 million by the early 1990s Toyota could compete with anyone on
equal terms the seed of this success in 1990 was planted in 1929 by sakichi Toyota 60 years earlier to this day Toyota is still a family Enterprise okay so then let's end the episode on dynasties talking about a family that's not an actual Dynasty The Rockefellers are an interesting case
study in any examination of dnes everyone thinks of the Rockefellers as a dynasty everyone knows the Rockefeller name and is aware that the Rockefellers remain active in powerful in business politics and philanthropy when it comes down to it though the Rockefeller story
is really that of the mediocre eyes of one person the patriarch John D Rockefeller Rockefeller was a brilliant but difficult man and perhaps it ought not to be surprising that a person of his drive and ruthlessness did not inspire a passion in his descendants to
take command of the family Enterprise as as he had and so Rockefeller is another example of right person right place right time right set of skills rockefeller's Luck came from time and place the Cleveland of his early years was a small Boom Town a place that
favored energy and ambition and John had plenty of both along with cleverness and cunning part of this was due to his upbring I cheat my boys every chance I get his father bragged I want to make him sharp I trade with my boys and I skin them and I just beat them every
time that I can and so Rockefeller did the same came to the rest of his competition in the oil industry his father's lessons paid off John went to work as an office boy and a bookkeeper and caught the eye of his employers as an intelligent and zealous young man
feeling underpaid he left to begin his own mertile partnership for this he needed $1,000 which his father was ready to lend him at 10% a above the then prevailing interest rate but Jon was happy to take it at 19 he was his own boss he went down on his knees and begged the lord to bless his new
Enterprise Rockefeller met with immediate success because he was patient and methodical his life aim was to get money and then use it as wisely as possible this pursuit of wealth was a sacred calling I've done multiple episodes on Rockefeller I will continue to do
multiple episodes on Rockefeller in the future because he may be arguably the most important entrepreneur in history this is so important to understand Rockefeller he believed in his like me and you may look at this and like this is obviously not true he believed that
he was put on the Earth by God to make as much money as possible and then therefore he could give it away for the betterment of humanity from the outside there's this huge disconnect between his methods and his accumulation of monopolistic power and his Divine belief
in his mission but just as you and I believe that the sky is blue Rockefeller believe this the pursuit of wealth was a sacred calling wealth was a sign of God's grace and poverty then the sign of heavenly disapproval Rockefeller believed that he would be rich and he
believed that this was because God wanted him to be so he has this fundamental religious belief but he's also one of the most talented entrepreneurs that's ever walked the face of the planet rational thoughtful systematic committed and diligent he also cultivated an intense curiosity a
spirit of calculation and an attention to opportunity his competitors and Associates were amateurs by comparison and he saw them for what they were more on the right place right time right set of skills John D did not look for oil oil came to him he was partners with
this guy named Maurice Clark a Boyhood friend of Maurice Clark is going to make Rockefeller aware of the opportunity in oil I'll get there in one second people had long known that oil was abundant in Western Pennsylvania but looked on it as a nuisance it stained the water and
spoiled the ground for cultivation this guy named George Bissell changes all that he came came to the idea that rock oil might outdo coal oil as illuminant and so he sent a sample to Professor to a professor at Yale and asked him to analyze it the answer came back positive
not only could the kerosene and rock oil provide light but the oil would yield a number of other useful components this was all took and the oil rush was on Sam Andrews was an industrial chemist who knew how to cleanse the oil and just happened to come from the same Hometown
as Maurice Clark Andrew would visit Clark and Rockefeller and talk up the possibilities of them investing in industrial refining the result was a major shift in the content and direction of the partnership the story of oil was in large part a story of Transportation
so the question became how are you going to move this stuff and so they realized well the best choice at this point this is before the invention of the pipelines by the way the best choice is Railways and so it says anyone who looked at the situation at that point would have
declared that Railways are going to be the inevitable winner they could squeeze producers and refiners within an inch of their survival yet that is not what happened and so this is the idea that John D Rockefeller and his partner Henry Flagler come up with that gives them a
major Edge over every single one of their competitors the idea was to elicit discounts and rebates not only on one's own shipments by rail but on those of the competitors and what could be better than to have your competitors working for you especially when the railways
raised rates to cover the cost of rebates to Rockefeller and Company Rockefeller won on every count published Railway tariffs meaning what they're putting out publicly is this is what it costs to move your goods on my railroad it's fake published Railway tariffs were
for the small man they were not for major shippers who could pay who could play one railroad against another while promising steady cargo this is why this is the the most important fact that this all hinges on Rockefeller was such a large producer that he could promise the
railways steady amount as you probably know there's a history of booms and busts with Railway traff just like in many other Industries just like in the oil industry and rockera was like I'll smooth that out for you but I want the best prices available another
important part this was secret when it was found out it was made illegal these were not seen as ethical so that in the long run Federal legislation made preferential rates illegal by then the game had long been played out Rockefeller succeeded in persuading just about every refiner of importance to
join his cartel that was the only way that they could obtain good rail rates the stub stuborn holdouts meaning the other oil men the stubborn holdouts went under and died hating him the wise ones sold most of them took cash the Smart Ones took stock and became Rich John D
told them to do that good advice even so they hated him and this goes back to that predilection for long-term thinking when most other humans can only see what's right in front of their face John D deserves credit for vision the vision of what could be if only the industry
could have been gotten under control where others could think only of quick profits and fast living he thought of restraint organization rationality and frugality he also knew he was Best in Class in a brand new industry he his business was by far better it was run
more economically in fact that that Advantage fed kept like kept compounding this is one of my favorite all-time Rockefeller stories is he'd go he's approaching all these different oil companies he's going to you know build he's going to monopolize this entire
industry and he's like listen just you can't compete against me better let me buy you out I'll give you cash if you want but you can get stock in the best oil company the world has ever seen and one of his closur was that he would actually give the people he's trying to
overtake look at our books look at can how can you think that you're going to compete with me uh his Clincher was to offer the victim a look at the books of standard a potential seller was dumbfounded to learn that standard was able to sell at less than his own cost
of production they could kill him whenever they pleased another smart move that John D Rockefeller did and I've told you about in the past he's B you wouldn't even know if he bought up other companies he would say Hey listen it is very important to keep these contracts
confidential keep the deal secret even from your wife and this is also another advantage to compound so let's say there's there's Oil Company a and Oil Company B right Rockefeller wants to buy a and b approaches them both B says hell no I'm not going to sell to you I know
what you're doing company a sells to him Rockefeller now secretly owns and controls company a and then he has people from company a go hey let's go to Company B and we can stand up and fight against Rockefeller you just got to sell to me and be's like okay to get back at
Rockefeller I'm the owner of Company B I'm going to sell to you not realizing that Company B had in had secretly sold to Rockefeller thinking that he was just selling to company a that is another reoccurring theme in the history of Entrepreneurship Bad Boys move in
silence and so the reason the author says that Rockefeller Dynasty properly understood is actually not a dynasty at all is because Rockefeller never tried to have the continuation of the business run by his family he had partners of Standard Oil says well into their lives
the Rockefeller children were kept in ignorance of the family fortune and when Rockefeller retired and I say retired in like quotation marks cuz he's still running the show he's just not showing up at the office uh anymore what's fascinating is that he actually retires
before the mass production of cars and so all the demand that the automobile industry will bring for oil so he actually gets much richer in retirement technically retirement than he did when he was actually working at the office day today but when he chooses to retire
he actually picks his hand important successor who still reports directly to him and he didn't picked his son he pked this guy named John Archbold and so the strange decision that Rockefeller does here is he gives a ton of money to his son but actually doesn't try to teach
him the business between 1917 and 1922 John D gave almost half a billion dollars to his children almost all of it went to Junior I think he had one son and maybe three daughters if I remember correctly or maybe two uh junior did not have the same taste for business that
his father did and by age 36 he he stepped aside from many of his duties at Standard Oil to focus on the Family's philanthropic work the old patriarch wasn't doing anything to familiarize the Next Generation with the oil business the founder who built the dynasty failed
to influence his descendants in any way other than by encouraging a commitment to Thrift and philanthropy that urgent money-making impulse was lost as was the sense of the family business which was transformed to merely the family fortune and that is where it for the
full story I recommend getting the book the great thing about the book is each chapter each family is covered in about 30 to 40 pages and you don't have to read in chronological order so if you like a family that's profiled you go look for a more in-depth and longer
biography to go a little deeper I will leave a link down below if you buy the book using that link you'll be supporting the podcast at the same time another great way to support the podcast is to sign up for Founders premium I've been doing a bunch of these AMA episodes
you can listen to the AMA episodes and ask me questions directly that link is down below if that sounds interesting to you and finally if you haven't yet joined my email newsletter for every book I read it usually take somewhere between like 50 to 100 different highlights I go over all my highlights
after I'm done recording try to to distill that down to my top 10 highlights from every book and then I email you those top 10 highlights that link is also down below and available at Founders podcast.com that is 307 books down 1,000 to go and I'll talk to you again soon