"The House of Rothschild" by Niall Ferguson
This book is an outstanding biography of the Rothschild family, an exhaustive investigation into their . Unfortunately, only the events before 1915 are based on archival research, and the coverage after that is very skimpy. Fortunately, the Rothschild's heyday was the 19th century, and this is well covered. My biggest criticism of this book is that it is too detailed (~1200 pages). Like Chernow's Morgan book, but unlike his Warburg book, it is unbiased. Ferguson includes many uncomplimentary facts and statements, but also many complimentary ones.
Generally, the Rothschilds favored low risk / low returns. As with the Morgans in this country, they used their unrivaled political connections for information and to get business. They spoke intimately with prime ministers, kings, and everyone else. Their legendary courier service was used by many crucial government officials, giving the family advance knowledge of many important matters. Although discounting bills was their main business, they did not try to make much money on the bills themselves. It was arbitraging foreign exchange rates where they made their profits, thanks to their overwhelming information advantage. The House of Rothschild was a multi-national firm ahead of its time. Not only did they use their political connections to make money, but they used their money to influence politics. Many aggressive tyrants founds themselves hampered in their ability to wage war because of Rothschild reluctance to finance. The Rothschilds tended to be conservative politically, opposing the nascent Communist movement as well as power-hungry rightists who wished to wage destructive war.
The family's decline can be attributed to a number of factors. First, their astounding information advantage began to fade after 1835, especially when the telegraph came into use in the mid-1800s. Second, their failure to establish a position in America. Third, as the family became part of the upper class, the children no longer wanted to confine themselves to the family business. Fourth, they no longer hoarded their capital. Early on, they poured all profits back into the firm, and quickly compounded their capital into a huge amount. This financial strength allowed them to survive and profit during panics. Later on, they began to withdraw capital from the firm for spending.
No doubt, the Rothschild's biggest error was not extending their empire to America. They made a half-hearted effort, sending agents over here. The most prominent, August Belmont, had some success. But, the family did not trust outsiders, and no family member wanted to leave Europe, so they never did set up a full-fledged branch in the U.S. Another factor in discouraging them was the collapse of the Bank of the United States in 1936. They had just taken over for Barings in that matter, and lost dearly. This, and the subsequent lack of a reliable central bank, left them suspicious of American finance. One interesting footnote to their American involvement is that Belmont was the Democrats' national chairman in 1860, running the campaign of Lincoln's opponent Stephen Douglas. |
