We don’t often review books that don’t relate pretty directly to the alcohol beverage industry. But we’re going to do so today, and its a review of a book published 14 years ago.
The book is The Rich and How They Got That Way, by Cynthia Crossen. At the time Crossen was a senior editor at The Wall Street Journal.
When I picked it up from my local library, I was expecting another one of those dreadful business books that promise that if I’ll only give up my daily latte, and put the money I would have spent on that into an investment account, in just a few short years I will have millions to my name.
This isn’t that sort of book. It is, instead, a history of the social, economic and political milieu in which people got outrageously rich in the last millennium. Not just rich, but how and why most of the people profiled became the richest people in the world of their time.
We meet, for instance, Machmud of Ghanzi, who the strong took advantage of the weak, and the strongest became kings. What you learn from that chapter is just how miserable an existence everyone lived in the year 1000.
Or Ghenhis Khan. He was a ferocious raider, totally merciless, who killed and slaughtered his way to control of a vast space of the planet. How merciless? One village resisted being conquered for several months. Finally its leaders grew tired of the battle and asked on what terms Khan would allow them to remain in their village. His reply: a ransom of 1,000 cats and 10,000 birds. The ransom was duly delivered. That night, Ghan’s men plucked the birds, attached their feathers to the cats, set the feathers on fire. The cats ran screaming back home, setting the entire village on fire and killing all its inhabitants.
That sort of behavior led Khan to become rich by controlling land.
We also meet someone who would be more common today — the middleman. Mansa Musa made a vast fortune in Africa simply by charging a small fee to facilitate travel in the years around 1300.
Crossen describes Pope Alexander IV as “ungodly rich,” and so he was. He used the Vatican to build a vast family fortune, and in so doing laid the groundwork for the Protestant Reformation.
We meet John Law, who in the early 1700s convinced France to adopt paper currency. That led to a vast bubble that in the end bankrupted France. And we meet Richard Arkwright, who around 1750 basically invented the factory system. We meet Howqua, a Chinese businessman of the 1800s who with the assistance of his government, controlled much of Western trade with China. Again, he profited by taking a bit of every transaction.
We meet Hetty Green, the “witch of Wall Street,” who was a notorious miser, started merely rich and became extremely wealthy, and was as tough an opponent as any in the days of Commodore Vanderbilt, Jay Gould and others. Just how rich she became is illustrated by one vignette: In 1905 she personally lent the City of New York $4.5 million at 4% interest, undercutting the banks rate by a fraction of a percent. (She never borrowed.)
The book concludes with Bill Gates, but uses him — reportedly the richest man in the U.S. when the book was written — to illustrate how hard it is to say with any certainty who is the richest person today, or, for that matter, which one of those Crossen profiles, was richest of all time.
Not only is the book an exceptional history lesson, but it does in fact point toward ways of becoming rich. One way is to simply take a small sliver of every transaction, which is essentially what all wholesalers do. (It didn’t take me long, when I first started covering the alcohol beverage business, to learn that wholesalers could be very, very wealthy — even though they protested loudly that theirs was a business of nickles and dimes.)
The other key is to be in the right place at the right time. The people Crossen profiles also had many similar personal qualities. Some, Crossen notes, were admirable: courage, fortitude, creativity, wit and confidence. But some were less desirable — ruthlessness, egotism, elitism, and crassness.
Crossen concludes by noting that “except for Bill Gates, no matter how rich a person is, there will always be someone richer. And if the past millennium is a guide to the next one, before long even Gates will be displaced as the world’s richest person by a creative, ambitious and lucky person who can see the future.”
And that, it seems to me, sums up the matter: To be rich, one has to be creative, ambitious and lucky. But none of that counts unless one can also see the future. All the great fortunes were built by people who could see the future — whether it was JP Morgan, who saw how financing corporations (and taking a tiny sliver of the spread between the cost of money and what it could be lent at) could lead to wealth, to Commodore Vanderbilt who saw how linking railroads across the nation could speed commerce, to John D. Rockefeller, who saw how oil could become key to the future, to Andrew Mellon, a Pittsburgh banker whose backing created giant enterprises included aluminum, industrial abrasives , and coke.
We’ve seen the same thing in the beverage business: George Garvin Brown recognized the opportunity to bottle and brand whiskey, creating Brown-Forman; Adolphus Busch recognized not only the appeal of a consistent lager but how aggressive marketing could let it go nationwide and become “the King of Beers,” as well as Ernest and Julio Gallo who recognized the opportunity that came with the end of Prohibition. While Gallo started the E&J Gallo winery in Modesto, Calif., other men at the same time used their own muscles and trucks to build distributorships that would take those beers, wines and spirits to retailers.
This is a book that is worth keeping, and reading and rereading. At a time when the nation’s economy is strangled because the “best and brightest” seek quick riches on Wall Street and K Street, this is the book that should be required reading in every business school in the country.