Brilliant, egotistical, greedy, unyielding and powerful, the wealthiest man who ever lived isn't who you think he is.
The genius that holds that title is Jacob Fugger, a German banker of the Renaissance, and someone from whom financial advisors can learn a thing or three, according to securities analyst Greg Steinmetz. He is the author of a new book about the clever wheeler-dealer, "The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger" (Simon & Schuster).
Not only was Fugger (rhymes with cougar) the richest man, he was the most influential businessman of all time, Steinmetz told our sister site, ThinkAdvisor, in an interview.
At his death in 1525, Fugger's net worth was nearly 2 percent of the European economic output, or in today's dollars, a whopping $400 billion, Steinmetz has calculated.
In the 1400s and 1500s, "The Financial Miracle Worker," as the driven Fugger became known, created wealth through a rare talent for making winning high-risk investments by borrowing the money needed to invest from the nobility. Not an intermediary or only an asset gatherer, Fugger was the money manager and the guy who ultimately pulled the trigger.
An ace opportunist, the nervy "Banker of Kings" had an uncanny knack for persuading cardinals, bishops, dukes and counts to loan him money. Financial leverage was one of his greatest strengths.
The bulk of Fugger's fortune came from silver and copper mining, and banking; but he also dealt in textiles, spices, jewels and martyrs' bones (remember, this was the 1500s).
The Catholic Church deemed interest on loans to be usurious, no matter the percentage; Fugger brazenly overturned the ban. He also helped set off the Protestant Reformation and likely funded Magellan's voyage around the world. He became the chief financial backer of the Habsburgs of Austria, the Vatican's lead banker and the top financier to Rome.
But he was a controversial figure who often used trickery and bullying to get his way. Born a commoner, the moneylender was constantly under attack by enemies who, because of his ruthless ways, branded him a heartless usurer.
Meantime, Fugger was in fact an astute businessman who believed strongly in free capital markets. He keyed in to his competitors' vulnerabilities and his customers' motivations, and made himself indispensable to the latter.
Born to a wealthy family in Augsburg, Germany, in 1459, Fugger's objective in life was to become the richest man in the world. He also became the first modern businessman because he was the first to "pursue wealth for its own sake without fear of damnation," Steinmetz says.
An innovator, Fugger pioneered a network of branch offices and created the world's first news service — via courier — to quickly disseminate market-sensitive information to customers, according to Steinmetz. He was also first, the author says, to combine the results of multiple operations in one financial statement, allowing him to see the big picture.
The pinnacle of Fugger's success came after death, by which time his nephews were running the company. The family continued at the helm for another 100 years but then let the firm simply fade away.
Fugger's only source of direct descendants is a daughter that the married banker fathered with his mistress. Steinmetz tracked down six of these heirs, speculating that there are probably others.
Our sister site, ThinkAdvisor spoke one recent morning with the Cleveland, Ohio-born author — with money managers Ruane, Cunnniff and Goldfarb and who, as a former journalist, was a Wall Street Journal bureau chief in Berlin and London — about the man that he maintains invented modern capitalism.
ThinkAdvisor: Jacob Fugger typically wore a gold cap and lush fur scarves. He lived in palaces with marble floors. His office was dubbed The Golden Counting Room. Was it actually bedecked with gold?
Greg Steinmetz: No, but that's what people called it because it was where Rumpelstiltskin spun his gold.
How do you figure that Fugger was the richest person who ever lived?
I divided his net worth by the size of the prevailing GDP in 1500. His wealth came to 2.1 million florins, which was more than 2 percent of the European economy. Two percent of the U.S. economy today is in excess of $400 billion.
What are the top three character traits that made Fugger the wealthiest man that ever was?
No. 1: Nerve. He had it in spades. He wouldn't have succeeded had he not been willing to take enormous bets. He had extreme faith in what he was doing. No. 2: Shrewdness. He was the smartest guy in the room wherever he went. No. 3: Ambition. He wanted to make more money than anyone ever.
What were Fugger's top three business skills?
Vision, negotiating talent and use of financial leverage with his lenders.
What type of personality did he have?
He was jovial when the mood struck. He liked to throw parties and show off his toys and brag about his wealth.
Was charm in his arsenal?
He used charm when he thought it would help him. He was good at flattering his social betters – kings, bishops, other members of the nobility, the pope. If he wanted to make an impression on someone, he wined and dined them. Like a good investment banker, he knew what would impress them, and he made sure he had the means of delivering.
What was the fallout of failure in those olden days?
Debtors' prison or getting your hands chopped off. Never was being in business more dangerous than at that time because of the consequences of failing, humiliation and running afoul of church law by money-lending and collecting interest, which Fugger did.
What was his biggest challenge?
Raising money. When he started out, he had to find people who were willing to invest with a young guy with a short track record.
You write that Fugger believed God wanted him to be rich.
That's how he was able to justify everything he did and keep within the morality of the time: "We're here to serve and please the Lord." He said, "I'm pleasing the Lord, or He wouldn't have given me this great talent to make money and be rich." It allowed him to sleep at night.
Let's talk about his colossal nerve.
He made two enormous bets that ensured his future. The first – and riskiest deal – came when he was just starting his career. And it launched his fortune. He borrowed a bunch of money from friends and family, persuading them to invest with him in order to make a loan to Archduke Sigmund of Tyrol, Austria.
That must have taken courage.
Right. The usual crowd of lenders thought it was far too risky. So Fugger thought: "Here's my chance." Sigmund indeed retained control of the silver mines in Tyrol, the biggest in the world. And Fugger was able to wrap up controlling the silver business for his lifetime.
