#425 The Merchant Bankers

**David Senra** (0:00)
In every merchant banking dynasty, there is one pioneer who began with nothing and died rich. The Rothschilds started out as coin changers in the ghetto. The Barings and textiles, the Hambros and foodstuffs, the Warburgs and silver and the Wechsbergs began in grains.
Grandfather arrived in town in style, sitting on top of a hay cart loaded high with corn. So the author's grandfather was a merchant baker. He said people in town used to call him Albert the Benevolent because he would lend them money at 5%.
I had no idea what that meant.
Later, I heard that when Albert the Benevolent liked a man, he would lend him money without any collateral, taking a chance on the man's promise to pay him back.
Later grandfather switched from corn to credit in the manner of all merchant bankers and opened a coin changing office.
Grandfather then extended the firm into the banking house, A. Wechsberg and Company.
The Company in the name of the firm were exactly, as in the case of most merchant bankers, grandfather's sons who became his partners. One of them was my father. The bank was doing very well. When grandfather died with his perfect sense of timing in 1913, one year before the outbreak of the First World War, he was 86 and he was the richest man in town and very much loved. He owned land, mills, factories, houses, distilleries, stocks and bonds. Occasionally, a merchant banker puts his money on the wrong debtor, as you will read in this book. I was six and I thought it would be nice to have such a funeral.
He was not ashamed of his humble beginnings. When I asked him how he would become a millionaire, he tapped his right temple, pointed his forefinger at me and said, I used my head. Don't you ever forget that, my child.
I didn't. That is an excerpt from the book that I'm gonna talk to you about today, which is The Merchant Bankers. It was written by Joseph Wechsberg. It was actually published in 1966 This is the second or third time I read the book. Never made an episode on it before. And I've just been fascinated by Merchant Bankers. And I'll explain why, as we go through the book, why I actually think there's a couple of the most interesting entrepreneurs that I've met today, that I would classify as almost like a one man merchant bank. But what I wanted to do this time is, I bought a bunch of copies of this book. I've given away to friends. And I was like, you know what, if I've read this book multiple times, I've given away the paperback version of this as gifts, I should do an episode on it.
And the reason I didn't do an episode on it is because essentially the book is, I don't know, seven or eight different chapters. Each chapter focuses on one of the great merchant banking families throughout history. So like the Rothschilds, the Barings, Lehman Brothers, Hambros, Warburgs.
And what I realized, I spent the last two days going through all my notes and highlights, I was like, you know what, it's really confusing because there's like 50 different names in the book. What I'm actually most interested in is not the names and the years that some of these things happened. It's how they think and run their business. So I stripped away everything about the individual merchant banks other than how they think and what they have in common. So I'm just going to run through the book, now have deleting most of my notes and highlights, and just give you an insight into the mysterious nature of merchant banking, which I think is interesting. And I think they just, what fascinates me and what attracts me to this is they have a very old school, like gentlemanly way of conducting business that I greatly admire. So I'm just going to jump into a lot of the themes that reappear throughout, you know, in some cases, these banking dynasties, they have 200 years of history. So it goes through multiple centuries and multiple different families and merchant bankers. So I want to start with the fact that merchant banks are the most interesting and least known. Merchant banks are among the most mysterious phenomena. The names of some of them are almost household words, synonymous with great wealth.
But what they actually do and how they make their money is a sealed book to most people outside the merchant bank and many people inside of it. The legend of the merchant bankers immediately makes one think of international intrigue, world power, kings and dictators in need of loans, empire building or empire toppling. Every loan seats a nation or upsets a throne.