WEBVTT 00:00:00.000 --> 00:00:02.080 So if I ask you to close your eyes and just, 00:00:02.120 --> 00:00:05.040 you know, picture the ultimate capitalist, the 00:00:05.040 --> 00:00:09.199 platonic ideal of the old school cigar chomping 00:00:09.199 --> 00:00:12.119 banker, who do you see? For most of us, it's 00:00:12.119 --> 00:00:14.740 got to be the Monopoly man, right? Rich Uncle 00:00:14.740 --> 00:00:18.879 Pennybags. Exactly. The top hat, the cane, maybe 00:00:18.879 --> 00:00:21.210 a monocle. If you're feeling that Mandela effect. 00:00:21.410 --> 00:00:23.410 Which, fun fact, he never actually wore one. 00:00:23.550 --> 00:00:25.750 He didn't. But that's the point. That caricature, 00:00:25.850 --> 00:00:28.629 it didn't just appear out of the ether. It has 00:00:28.629 --> 00:00:31.750 a very, very real inspiration. And the man behind 00:00:31.750 --> 00:00:34.490 that cartoon was infinitely more complex, vastly 00:00:34.490 --> 00:00:37.770 more powerful, and frankly, a lot more terrifying 00:00:37.770 --> 00:00:40.609 than a mascot on a board game. I mean, it's a 00:00:40.609 --> 00:00:43.149 safe bet that Rich Uncle Pennybags couldn't have 00:00:43.149 --> 00:00:45.390 single -handedly saved the United States government 00:00:45.390 --> 00:00:48.320 from defaulting on its debt. Twice. Twice. We're 00:00:48.320 --> 00:00:49.960 talking, of course, about John Pierpont Morgan. 00:00:50.119 --> 00:00:52.299 J .P. Morgan. And while the monopoly comparison 00:00:52.299 --> 00:00:55.460 is fun, it really, really diminishes the sheer 00:00:55.460 --> 00:00:57.979 scale of who this man was. We're not just talking 00:00:57.979 --> 00:01:01.320 about a rich guy in the modern sense, like a 00:01:01.320 --> 00:01:04.060 tech billionaire who buys a social media platform 00:01:04.060 --> 00:01:08.040 on a whim. We're talking about a man who, at 00:01:08.040 --> 00:01:10.299 the height of his power, didn't just run a bank. 00:01:10.379 --> 00:01:13.120 He was the bank. He was the central nervous system 00:01:13.120 --> 00:01:15.260 of the American economy. That's a perfect way 00:01:15.260 --> 00:01:17.719 to put it. And that's exactly the hook that grabbed 00:01:17.719 --> 00:01:20.140 me when we started pulling all these sources 00:01:20.140 --> 00:01:22.140 together. It's hard to wrap your head around 00:01:22.140 --> 00:01:24.439 because we live in a world with, you know, safety 00:01:24.439 --> 00:01:26.579 nets. Right. We have the Fed. We have the Federal 00:01:26.579 --> 00:01:28.760 Reserve. We have the SEC. We have deposit insurance. 00:01:29.900 --> 00:01:33.819 But for a huge chunk of American history, those 00:01:33.819 --> 00:01:36.819 things just didn't exist. None of them. Instead, 00:01:37.060 --> 00:01:40.000 you had JP Morgan sitting in his library in New 00:01:40.000 --> 00:01:42.959 York playing solitaire and deciding which banks 00:01:42.959 --> 00:01:45.430 would live and which would die. It is so difficult 00:01:45.430 --> 00:01:48.269 for a modern mind to comprehend how precarious 00:01:48.269 --> 00:01:50.750 that era was. Right. There was no central bank 00:01:50.750 --> 00:01:53.329 in the United States during Morgan's prime. The 00:01:53.329 --> 00:01:56.069 economy was incredibly volatile. It crashed frequently 00:01:56.069 --> 00:01:59.290 and violently. And when it did, the president 00:01:59.290 --> 00:02:01.569 didn't call some government agency. He didn't 00:02:01.569 --> 00:02:04.109 look to Congress. He looked to a private citizen. 00:02:04.290 --> 00:02:06.950 Which is just wild to think about. A private 00:02:06.950 --> 00:02:11.150 citizen with that much leverage. So I think the 00:02:11.150 --> 00:02:13.590 mission for this deep dive is pretty clear. We 00:02:13.590 --> 00:02:15.870 want to move past the caricature, past the robber 00:02:15.870 --> 00:02:18.650 baron twisting his mustache. We want to understand 00:02:18.650 --> 00:02:20.889 the mechanics of this power. How did he get it? 00:02:20.949 --> 00:02:23.189 How did he use it? And specifically that tension 00:02:23.189 --> 00:02:24.770 you mentioned in our prep, the tension between 00:02:24.770 --> 00:02:27.810 order and competition. Exactly. Because we're 00:02:27.810 --> 00:02:29.569 all taught competition is good, right, Morgan? 00:02:29.650 --> 00:02:33.080 Yeah. He did not agree. Not at all. That is the 00:02:33.080 --> 00:02:35.039 central theme we need to keep coming back to. 00:02:35.159 --> 00:02:38.219 To Morgan, competition, the very thing we celebrate 00:02:38.219 --> 00:02:40.740 as the engine of capitalism. The thing that lowers 00:02:40.740 --> 00:02:43.439 prices and drives innovation. He saw it as a 00:02:43.439 --> 00:02:46.219 disease. He called it ruinous. He saw it as chaotic, 00:02:46.439 --> 00:02:49.400 wasteful, and destructive. His life's work was 00:02:49.400 --> 00:02:52.080 replacing that competition with what he called 00:02:52.080 --> 00:02:54.960 a community of interest. Or consolidation. In 00:02:54.960 --> 00:02:57.560 a word, order. But it was always order on his 00:02:57.560 --> 00:03:00.430 terms. And we've got a fantastic stack of sources 00:03:00.430 --> 00:03:02.569 to get us there. We've got biographical records, 00:03:02.830 --> 00:03:05.330 business archives from the House of Morgan, detailed 00:03:05.330 --> 00:03:08.090 breakdowns of those huge financial panics. Ones 00:03:08.090 --> 00:03:11.150 in 1893 and 1907. And some really interesting, 00:03:11.330 --> 00:03:14.349 maybe slightly darker stuff on his personal life, 00:03:14.469 --> 00:03:18.590 his art collecting, his health, the controversies 00:03:18.590 --> 00:03:20.909 that just never seem to leave him. And just to 00:03:20.909 --> 00:03:23.780 set the tone here. We're going to see a man who, 00:03:23.840 --> 00:03:27.039 yes, he accumulated wealth, but he seemed way 00:03:27.039 --> 00:03:29.659 more interested in control. He was the architect 00:03:29.659 --> 00:03:31.900 of the modern American industrial economy. And 00:03:31.900 --> 00:03:34.020 whether that architecture is a cathedral or a 00:03:34.020 --> 00:03:36.539 prison. Well, that's what historians still debate. 00:03:36.960 --> 00:03:40.180 But there's no denying he laid the bricks. So 00:03:40.180 --> 00:03:41.939 let's unpack this. We have to start at the beginning. 00:03:42.480 --> 00:03:45.360 Origin story time. And I think there's this misconception 00:03:45.360 --> 00:03:48.259 that every robber baron was a rags to riches 00:03:48.259 --> 00:03:50.539 story. The classic Andrew Carnegie narrative. 00:03:50.939 --> 00:03:53.379 Yeah. Poor immigrant boy makes good. That is 00:03:53.379 --> 00:03:55.740 not J .P. Morgan, is it? Not even close. This 00:03:55.740 --> 00:03:57.960 is not a pull yourself up by your bootstrap story. 00:03:58.139 --> 00:04:00.680 This is a story of dynastic succession. Right. 00:04:00.860 --> 00:04:03.840 John Pierpont Morgan was born on April 17th, 00:04:03.840 --> 00:04:07.560 1837 in Hartford, Connecticut, right into the 00:04:07.560 --> 00:04:11.270 Morgan dynasty. His father, Junius Spencer Morgan, 00:04:11.509 --> 00:04:14.370 was already a Titan. Okay, so he wasn't starting 00:04:14.370 --> 00:04:16.870 from scratch. He was a partner at a massive dry 00:04:16.870 --> 00:04:19.870 goods wholesaler, then moved into merchant banking 00:04:19.870 --> 00:04:22.850 in London. Pierpont didn't start from the bottom. 00:04:22.889 --> 00:04:24.970 He started from a launching pad his father built. 00:04:25.250 --> 00:04:29.149 So JP, or Pierpont, which he preferred, and honestly 00:04:29.149 --> 00:04:31.069 that just sounds so much more aristocratic. It 00:04:31.069 --> 00:04:33.670 really does. He was born into the game. But reading 00:04:33.670 --> 00:04:35.329 about his childhood, it doesn't sound like he 00:04:35.329 --> 00:04:36.949 was just a spoiled rich kid. There was a lot 00:04:36.949 --> 00:04:38.949 of pressure on him. Immense pressure. He was 00:04:38.949 --> 00:04:41.649 born into the game, but he was also born into 00:04:41.649 --> 00:04:44.329 a very specific kind of psychological crucible. 00:04:44.709 --> 00:04:46.870 His upbringing was incredibly international. 00:04:47.269 --> 00:04:49.689 Which gave him a huge advantage. A perspective 00:04:49.689 --> 00:04:52.089 most Americans at the time just didn't have. 00:04:52.250 --> 00:04:54.649 He wasn't just schooled in Connecticut. He was 00:04:54.649 --> 00:04:56.689 sent to school in Switzerland at a place called 00:04:56.689 --> 00:04:59.350 Bellarive, where he became fluent in French. 00:04:59.410 --> 00:05:01.470 And in Germany, right. Then the University of 00:05:01.470 --> 00:05:05.189 Göttingen in Germany. He mastered German so well 00:05:05.189 --> 00:05:07.569 he could conduct complex business deals in it 00:05:07.569 --> 00:05:09.509 later in his life. And he got a degree in what, 00:05:09.589 --> 00:05:12.449 economics? Art history, of all things. Art history. 00:05:12.670 --> 00:05:14.649 Yay. That's surprising for a guy who ended up 00:05:14.649 --> 00:05:16.629 owning half the railroads in America. It's a 00:05:16.629 --> 00:05:19.370 huge tell, though. It totally foreshadows his 00:05:19.370 --> 00:05:23.170 later life as this voracious collector. But there 00:05:23.170 --> 00:05:25.009 was another reason for all this travel, a physical 00:05:25.009 --> 00:05:28.259 one. Pierpont was a sickly child. Right. He had 00:05:28.259 --> 00:05:30.740 rheumatic fever. Yes. And that's a nasty condition, 00:05:30.920 --> 00:05:33.319 especially in the 19th century. It's an inflammatory 00:05:33.319 --> 00:05:35.879 disease that can develop after a strep infection. 00:05:36.160 --> 00:05:38.560 And it left him with lifelong pain. Lifelong 00:05:38.560 --> 00:05:41.199 pain and joint issues. At one point, he couldn't 00:05:41.199 --> 00:05:43.879 even walk. His father sent him to the Azores, 00:05:43.920 --> 00:05:45.579 those islands in the middle of the Atlantic. 00:05:45.800 --> 00:05:48.139 To recover. To convalesce for a year, basically 00:05:48.139 --> 00:05:51.579 alone. So picture this. You have a boy who is 00:05:51.579 --> 00:05:54.879 isolated, often in physical pain, highly educated, 00:05:54.879 --> 00:05:57.699 and constantly being watched from afar by a very 00:05:57.699 --> 00:06:00.040 demanding father. Let's talk about the father 00:06:00.040 --> 00:06:03.040 Junius, because the sources highlight this one 00:06:03.040 --> 00:06:06.379 quote from Junius to his son that feels it's 00:06:06.379 --> 00:06:09.600 heavy. It is incredibly heavy, and it defines 00:06:09.600 --> 00:06:13.379 Pierpont's entire psychology. Junius was a strict, 00:06:13.519 --> 00:06:16.180 strict disciplinarian. He wrote to Pierpont, 00:06:16.439 --> 00:06:19.379 Remember that there is an eye above that is ever 00:06:19.379 --> 00:06:23.259 upon you. And that for every act, word and deed, 00:06:23.339 --> 00:06:25.860 you will one day be called to give account. I 00:06:25.860 --> 00:06:29.160 above. Wow. That's not just do your homework. 00:06:29.339 --> 00:06:32.839 That's God is watching you. And so am I. And 00:06:32.839 --> 00:06:35.259 every single mistake you make is a moral failing. 00:06:35.579 --> 00:06:39.000 Exactly. It instilled this mix of terror and 00:06:39.000 --> 00:06:42.079 duty. It created a rigid, almost terrifying sense 00:06:42.079 --> 00:06:44.579 of religious discipline and this relentless ambition. 00:06:44.819 --> 00:06:47.060 He wasn't just working for a paycheck. He was 00:06:47.060 --> 00:06:49.660 working to justify his existence to that. eye 00:06:49.660 --> 00:06:51.959 above. That's crucial. He didn't see business 00:06:51.959 --> 00:06:54.459 as separate from his morality. In his mind, bringing 00:06:54.459 --> 00:06:56.519 order to chaos was almost a religious calling. 00:06:56.740 --> 00:06:59.339 So he starts his career in London under his father's 00:06:59.339 --> 00:07:01.540 watch. Then moves to New York to work for Duncan 00:07:01.540 --> 00:07:04.079 Sherman and Company. He was effectively the representative 00:07:04.079 --> 00:07:06.120 of British capital in New York. Which puts him 00:07:06.120 --> 00:07:08.120 in a very unique, very powerful spot when the 00:07:08.120 --> 00:07:10.120 American Civil War breaks out. The perfect spot. 00:07:10.639 --> 00:07:13.379 He's young, he's rich, he's in New York with 00:07:13.379 --> 00:07:15.860 access to all this foreign money. And this is 00:07:15.860 --> 00:07:18.480 where we get the first real whiff of that robber 00:07:18.480 --> 00:07:21.160 baron label, isn't it? Oh, absolutely. This is 00:07:21.160 --> 00:07:23.180 where the polish on that eye above starts to 00:07:23.180 --> 00:07:25.600 look a little tarnished. The Civil War was a 00:07:25.600 --> 00:07:28.120 complicated time for finance, and Morgan made 00:07:28.120 --> 00:07:30.680 some moves that, well, that critics have never 00:07:30.680 --> 00:07:33.500 really forgiven him for. Never. And first, there's 00:07:33.500 --> 00:07:36.139 the issue of the draft. Morgan was in his mid 00:07:36.139 --> 00:07:39.040 -20s, healthy enough to work these long hours. 00:07:39.139 --> 00:07:41.360 He could have fought. But like a lot of wealthy 00:07:41.360 --> 00:07:44.100 men at the time, Grover Cleveland, Rockefeller, 00:07:44.199 --> 00:07:46.779 he took advantage of the Conscription Act. He 00:07:46.779 --> 00:07:49.600 did. He paid a substitute. He paid a guy $300 00:07:49.600 --> 00:07:52.560 to go take his place in the Union Army. $300. 00:07:52.839 --> 00:07:55.300 That was the going rate. And we have to be clear, 00:07:55.379 --> 00:07:57.879 this was legal. Completely legal. The government 00:07:57.879 --> 00:08:00.000 actually encouraged it as a way to raise funds. 00:08:00.240 --> 00:08:02.879 But looking back... It sets a tone. It sets a 00:08:02.879 --> 00:08:05.699 tone. It establishes the separation. There's 00:08:05.699 --> 00:08:08.279 a class of people who fight the wars and a class 00:08:08.279 --> 00:08:11.079 of people who finance them. But the bigger controversy 00:08:11.079 --> 00:08:13.980 wasn't the giraffe dodging. It was the rifles. 00:08:14.480 --> 00:08:17.560 The whole carbine affair. This story is just 00:08:17.560 --> 00:08:19.420 wild. Walk us through the mechanics of this deal 00:08:19.420 --> 00:08:20.959 because it sounds like an out -and -out scam. 00:08:21.319 --> 00:08:23.399 This is the incident that haunted his reputation 00:08:23.399 --> 00:08:26.779 for decades. It's often cited as the origin of 00:08:26.779 --> 00:08:29.259 the robber baron narrative for him. Here's how 00:08:29.259 --> 00:08:31.870 it worked. Okay. The Union Army was desperate 00:08:31.870 --> 00:08:35.529 for weapons in 1861. There was a lawyer named 00:08:35.529 --> 00:08:38.049 Simon Stevens who knew the government had these 00:08:38.049 --> 00:08:41.269 old Halkardians sitting in an armory. They were 00:08:41.269 --> 00:08:44.350 obsolete. Obsolete and condemned. The government 00:08:44.350 --> 00:08:46.830 had actually condemned them and sold them to 00:08:46.830 --> 00:08:50.129 an arms dealer for just $3 .50 each. Okay, so 00:08:50.129 --> 00:08:52.950 scrap metal prices. Basically. So Stevens gets 00:08:52.950 --> 00:08:55.269 this idea. He wants to buy them from the dealer 00:08:55.269 --> 00:08:57.870 and immediately flip them back to General Fremont, 00:08:57.950 --> 00:09:00.049 who was commanding troops in the West and was 00:09:00.049 --> 00:09:03.429 screaming for guns for $22 each. Fly at $350, 00:09:03.669 --> 00:09:07.009 sell at $22. That is a massive markup, almost 00:09:07.009 --> 00:09:10.049 600%. But Stevens didn't have the cash to buy 00:09:10.049 --> 00:09:12.870 them first. He needed front money. So he goes 00:09:12.870 --> 00:09:15.850 to J .P. Morgan. He goes to Morgan. Morgan looks 00:09:15.850 --> 00:09:18.970 at the deal and loans him $20 ,000 to finance 00:09:18.970 --> 00:09:21.529 the purchase. So Morgan finances it. But here's 00:09:21.529 --> 00:09:24.620 the kicker. Weren't these rifles dangerous? I 00:09:24.620 --> 00:09:26.600 read something about thumbs. They were notorious. 00:09:26.679 --> 00:09:29.259 The hull carbines had a breech -loading mechanism 00:09:29.259 --> 00:09:32.019 that was known to be defective. If you didn't 00:09:32.019 --> 00:09:34.620 close it perfectly, or if it was worn out, the 00:09:34.620 --> 00:09:37.080 explosion from the gunpowder could blow backwards. 00:09:37.139 --> 00:09:39.659 There were reports they could literally blow 00:09:39.659 --> 00:09:42.820 the thumb off the soldier firing them. Yikes. 00:09:43.059 --> 00:09:46.789 So, just so I have this straight. Morgan finances 00:09:46.789 --> 00:09:49.470 the sale of thumb -blowing, condemned rifles 00:09:49.470 --> 00:09:53.289 to the Union Army at a 600 % markup, while the 00:09:53.289 --> 00:09:55.370 Army is desperate for weapons to fight a war 00:09:55.370 --> 00:09:58.700 he paid $300 to get out of. That is the accusation, 00:09:58.740 --> 00:10:00.700 and it is a damning one. Okay, but what's the 00:10:00.700 --> 00:10:02.720 defense? There has to be a defense. There is. 00:10:02.820 --> 00:10:05.139 As responsible historians, we have to look at 00:10:05.139 --> 00:10:07.980 it. Biographers like Ron Chernow argue that there's 00:10:07.980 --> 00:10:10.159 no hard evidence Morgan knew the rifles were 00:10:10.159 --> 00:10:12.320 defective, or that he knew about the fraudulent 00:10:12.320 --> 00:10:14.240 nature of the markup at the time he signed the 00:10:14.240 --> 00:10:15.879 check. He just thought it was a normal loan. 00:10:16.139 --> 00:10:18.940 Chernow argues he treated it as a standard commercial 00:10:18.940 --> 00:10:21.759 loan. He lent the money, the guns were delivered, 00:10:21.960 --> 00:10:24.539 the government paid, and Morgan took his commission 00:10:24.539 --> 00:10:27.769 and interest. He saw about $55 ,000 come into 00:10:27.769 --> 00:10:30.350 his account, took his cut, gave the rest to Stevens. 00:10:30.629 --> 00:10:33.210 But then you have other historians, like Matthew 00:10:33.210 --> 00:10:35.690 Josephson, who actually popularized the term 00:10:35.690 --> 00:10:39.750 robber baron, who basically say, come on. Morgan 00:10:39.750 --> 00:10:42.769 was a sharp guy. He was meticulous. He presented 00:10:42.769 --> 00:10:45.929 the bill to the government himself. Is it plausible 00:10:45.929 --> 00:10:48.590 he didn't know what he was financing? It's a 00:10:48.590 --> 00:10:50.289 debate that will never be fully settled because 00:10:50.289 --> 00:10:52.549 we don't have a smoking gun document, no pun 00:10:52.549 --> 00:10:54.950 intended. But the optics were just terrible. 00:10:55.049 --> 00:10:56.789 A congressional committee later investigated 00:10:56.789 --> 00:10:59.309 and called the profiteers worse than traitors 00:10:59.309 --> 00:11:02.129 in arms. Morgan wasn't charged. No criminal charges. 00:11:02.470 --> 00:11:04.950 Yeah. But the Hulk Harbin affair became shorthand 00:11:04.950 --> 00:11:07.129 for the idea that these financiers viewed the 00:11:07.129 --> 00:11:10.309 war as a profit center, not a national tragedy. 00:11:10.570 --> 00:11:12.549 And he didn't help that perception with the gold 00:11:12.549 --> 00:11:14.600 speculation either. That feels even more. More 00:11:14.600 --> 00:11:16.679 like betting against the home team. It does. 00:11:16.960 --> 00:11:21.039 In 1863, the Union war effort was stalling. Confidence 00:11:21.039 --> 00:11:24.080 in the Union greenbacked. The paper currency 00:11:24.080 --> 00:11:27.200 was wavering. So Morgan and a partner, Edward 00:11:27.200 --> 00:11:30.899 Ketchum, they secretly shipped about $1 .15 million 00:11:30.899 --> 00:11:34.559 in gold to England. Yes, to create a scarcity. 00:11:35.159 --> 00:11:37.519 By taking that much gold out of the New York 00:11:37.519 --> 00:11:39.879 market, they caused a temporary spike in the 00:11:39.879 --> 00:11:42.240 price of gold in the U .S. And the economics 00:11:42.240 --> 00:11:44.559 of that. If gold goes up, the greenback goes 00:11:44.559 --> 00:11:46.720 down. And if the greenback goes down, it usually 00:11:46.720 --> 00:11:49.879 meant the union was losing. So betting on gold 00:11:49.879 --> 00:11:52.299 was essentially betting against the union currency. 00:11:52.299 --> 00:11:54.620 So if the union loses a battle, gold goes up 00:11:54.620 --> 00:11:57.559 and Morgan makes money. Precisely. He made a 00:11:57.559 --> 00:11:59.440 fortune on the fluctuation he helped create. 00:11:59.580 --> 00:12:02.500 Again, strictly legal. But it reinforced this 00:12:02.500 --> 00:12:05.360 image of a cold, calculating opportunist. But 00:12:05.360 --> 00:12:07.279 this is the pivot point in his life. Yeah. He 00:12:07.279 --> 00:12:09.440 moves from this raw opportunism to something 00:12:09.440 --> 00:12:12.320 else. Yes. As he matured, he stopped looking 00:12:12.320 --> 00:12:14.860 for these quick flips and chaotic profits. He 00:12:14.860 --> 00:12:16.340 started looking for that order we talked about. 00:12:16.700 --> 00:12:18.659 He realized that chaos might be profitable in 00:12:18.659 --> 00:12:21.000 the short term, but control was profitable forever. 00:12:21.240 --> 00:12:23.419 All right, let's pivot to that because Morganization 00:12:23.419 --> 00:12:26.179 literally became a verb. It wasn't just business. 00:12:26.220 --> 00:12:28.759 It was a strategy. It sounds like something out 00:12:28.759 --> 00:12:31.360 of science fiction. You have been Morganized. 00:12:32.019 --> 00:12:34.960 What does that actually mean? Morganization is 00:12:34.960 --> 00:12:38.159 essentially the process of taking a bankrupt. 00:12:38.830 --> 00:12:42.049 chaotic or inefficient industry. OK. Taking control 00:12:42.049 --> 00:12:44.929 of it through financial leverage, reorganizing 00:12:44.929 --> 00:12:48.110 its corporate structure. And this is the crucial 00:12:48.110 --> 00:12:51.149 part, eliminating competition to ensure profitability. 00:12:51.289 --> 00:12:53.769 See, that eliminating competition part is where 00:12:53.769 --> 00:12:56.429 I get stuck. I thought capitalism was all about 00:12:56.429 --> 00:12:59.470 competition. Coke versus Pepsi, Ford versus Chevy. 00:12:59.750 --> 00:13:01.710 Doesn't competition make things better for the 00:13:01.710 --> 00:13:04.740 consumer? To a modern economist, yes. Competition 00:13:04.740 --> 00:13:08.039 drives innovation and lowers prices. But J .P. 00:13:08.039 --> 00:13:09.980 Morgan wasn't looking at it from the consumer's 00:13:09.980 --> 00:13:11.620 perspective. He was looking at it from the investor's 00:13:11.620 --> 00:13:13.820 perspective. Exactly. And you have to understand 00:13:13.820 --> 00:13:16.259 the specific economics of the railroads in the 00:13:16.259 --> 00:13:19.179 late 19th century. Railroads are a high fixed 00:13:19.179 --> 00:13:21.659 cost industry. Meaning it costs a fortune to 00:13:21.659 --> 00:13:23.740 lay the track before you ever make a dime. A 00:13:23.740 --> 00:13:26.360 fortune. You have massive debt to pay for the 00:13:26.360 --> 00:13:28.019 tracks and the trains. If you don't fill those 00:13:28.019 --> 00:13:30.679 trains, you go bankrupt. So you had all these 00:13:30.679 --> 00:13:33.419 different railroad lines building. duplicate 00:13:33.419 --> 00:13:35.840 tracks parallel to each other. They were desperate 00:13:35.840 --> 00:13:38.179 for cash flow. So they started these vicious 00:13:38.179 --> 00:13:42.080 rate wars. Vicious. They would slash ticket prices 00:13:42.080 --> 00:13:44.620 below the cost of operation just to get people 00:13:44.620 --> 00:13:47.379 on the train. It was a race to the bottom. Everyone's 00:13:47.379 --> 00:13:50.519 losing money. It was ruinous competition. Morgan 00:13:50.519 --> 00:13:53.399 looked at this and saw waste. He saw capital 00:13:53.399 --> 00:13:56.620 being set on fire. He believed that if you consolidated 00:13:56.620 --> 00:13:58.620 these companies, brought them under one roof 00:13:58.620 --> 00:14:01.330 or a community of interest. You could stop the 00:14:01.330 --> 00:14:04.110 rate wars. You could set stable prices. And sure, 00:14:04.190 --> 00:14:06.590 the consumer pays more, but the railroad stays 00:14:06.590 --> 00:14:09.009 in business, the bonds don't default, and the 00:14:09.009 --> 00:14:12.009 system is stable. He valued that stability over 00:14:12.009 --> 00:14:14.129 the brawl of the free market. And he didn't just 00:14:14.129 --> 00:14:16.889 write op -eds about this. He summoned people 00:14:16.889 --> 00:14:20.110 to make it happen. The outline mentions the 1889 00:14:20.110 --> 00:14:22.350 conference. This sounds like a scene from The 00:14:22.350 --> 00:14:25.340 Godfather. It was incredibly dramatic. Morgan 00:14:25.340 --> 00:14:27.460 summoned the presidents of the major railroads 00:14:27.460 --> 00:14:30.039 to his home in New York. These were powerful, 00:14:30.159 --> 00:14:33.460 wealthy men who hated each other. They were warlords. 00:14:33.679 --> 00:14:36.019 And Morgan basically locks them in a room. He 00:14:36.019 --> 00:14:39.139 does. And tells them to stop fighting. He pushed 00:14:39.139 --> 00:14:42.240 them to agree to public, reasonable, uniform, 00:14:42.419 --> 00:14:45.779 and stable rates. So he created a cartel. Let's 00:14:45.779 --> 00:14:47.879 just call a spade a spade. In essence, yes. He 00:14:47.879 --> 00:14:50.200 was trying to enforce a private treaty among 00:14:50.200 --> 00:14:52.980 these warring factions. And why did they listen? 00:14:53.320 --> 00:14:55.639 Money. Because Morgan held the purse strings. 00:14:55.759 --> 00:14:58.639 He was the bridge to British capital. If you 00:14:58.639 --> 00:15:00.919 wanted European money to expand your railroad, 00:15:01.139 --> 00:15:03.299 you had to go through the House of Morgan. If 00:15:03.299 --> 00:15:05.539 you didn't play by his rules, the tap ran dry. 00:15:05.779 --> 00:15:08.039 And by 1900, he basically controlled the whole 00:15:08.039 --> 00:15:10.899 network. The House of Morgan controlled or influenced 00:15:10.899 --> 00:15:13.700 a massive web of American transport, something 00:15:13.700 --> 00:15:16.639 like 48 ,000 miles of track. And he didn't stop 00:15:16.639 --> 00:15:19.639 at railroads. He took this blueprint and applied 00:15:19.639 --> 00:15:22.919 it everywhere. Electricity. Steel. General Electric 00:15:22.919 --> 00:15:26.039 is a classic example. He saw Thomas Edison struggling 00:15:26.039 --> 00:15:28.340 with the business side, so he arranged the merger 00:15:28.340 --> 00:15:30.840 of Edison General Electric and Thompson Houston 00:15:30.840 --> 00:15:34.419 Electric Company to form GE. He literally removed 00:15:34.419 --> 00:15:36.720 Edison's name from the company. Which tells you 00:15:36.720 --> 00:15:39.500 exactly where the power lay. But the crown jewel 00:15:39.500 --> 00:15:42.539 of Morganization was, without a doubt, U .S. 00:15:42.580 --> 00:15:45.340 steel. The numbers on U .S. steel are staggering, 00:15:45.519 --> 00:15:48.519 even today. It is hard to overstate. In 1901, 00:15:48.740 --> 00:15:51.039 Morgan decided to consolidate the steel industry. 00:15:51.340 --> 00:15:53.879 To do that, he needed to buy out Andrew Carnegie, 00:15:54.039 --> 00:15:56.559 the biggest steel man in the world. And the story 00:15:56.559 --> 00:15:58.879 goes that Carnegie just writes a price on a scrap 00:15:58.879 --> 00:16:02.519 of paper. $480 million. He hands it to his lieutenant 00:16:02.519 --> 00:16:06.299 to give to Morgan. $480 million in 1901 money. 00:16:07.210 --> 00:16:10.330 That's billions and billions today. Did Morgan 00:16:10.330 --> 00:16:13.830 haggle? Did he call in the auditors? No due diligence. 00:16:13.830 --> 00:16:16.409 No lawyers picking apart the assets. Morgan glanced 00:16:16.409 --> 00:16:18.929 at the paper and said, I accept this price. Wow. 00:16:19.070 --> 00:16:21.529 He knew that to create the monopoly he wanted, 00:16:21.610 --> 00:16:23.830 he had to pay whatever Carnegie asked. That is 00:16:23.830 --> 00:16:26.549 an insane amount of confidence or hubris. A bit 00:16:26.549 --> 00:16:29.870 of both. He merged Carnegie's operation with 00:16:29.870 --> 00:16:31.990 several others to form the United States Steel 00:16:31.990 --> 00:16:34.309 Corporation. It was the world's first billion 00:16:34.309 --> 00:16:36.690 -dollar company. Capitalized at $1 .4 billion. 00:16:36.990 --> 00:16:40.070 At a time when the total national wealth of the 00:16:40.070 --> 00:16:43.070 United States, everything, land, buildings, cash, 00:16:43.169 --> 00:16:46.409 was estimated at around $90 billion. This one 00:16:46.409 --> 00:16:48.809 company was a noticeable percentage of the entire 00:16:48.809 --> 00:16:52.029 nation's value. So he owns the rails, he owns 00:16:52.029 --> 00:16:54.009 the steel to build the rails, and he owns the 00:16:54.009 --> 00:16:56.809 electricity to light the cities. He is effectively 00:16:56.809 --> 00:17:00.509 the emperor of industry. But his power goes beyond 00:17:00.509 --> 00:17:03.570 just companies. We need to talk about his role 00:17:03.570 --> 00:17:06.509 as the unofficial central bank. This is the part 00:17:06.509 --> 00:17:09.190 that, frankly, scares me the most. This is where 00:17:09.190 --> 00:17:11.470 the story becomes almost unbelievable to modern 00:17:11.470 --> 00:17:14.130 years. We mentioned that the U .S. had no central 00:17:14.130 --> 00:17:17.130 bank, the currency was fragile, and twice the 00:17:17.130 --> 00:17:19.109 U .S. government faced total financial collapse. 00:17:19.809 --> 00:17:22.309 Twice J .P. Morgan stepped in to save it. Okay, 00:17:22.369 --> 00:17:25.029 let's break down the panic of 1893. What was 00:17:25.029 --> 00:17:26.710 the crisis? Why was the government going broke? 00:17:26.950 --> 00:17:29.809 It was a run on gold. At the time, the U .S. 00:17:29.809 --> 00:17:31.809 dollar was on the gold standard. You could take 00:17:31.809 --> 00:17:33.829 a paper dollar to the treasury and exchange it 00:17:33.829 --> 00:17:36.670 for gold coin. Right. But foreign investors were 00:17:36.670 --> 00:17:38.490 getting nervous about the U .S. economy, so they 00:17:38.490 --> 00:17:41.150 started pulling their money out. They were trading 00:17:41.150 --> 00:17:43.630 in their greenbacks for gold and shipping that 00:17:43.630 --> 00:17:46.089 gold to Europe. So the National Vault is just 00:17:46.089 --> 00:17:50.089 emptying out. Rapidly. By 1895, the reserves 00:17:50.089 --> 00:17:53.019 had plummeted. The safe limit was considered 00:17:53.019 --> 00:17:57.059 $100 million. It dropped below $50 million if 00:17:57.059 --> 00:18:00.599 it hit zero. Default. The entire economy implodes. 00:18:00.660 --> 00:18:02.859 Total collapse. And President Grover Cleveland 00:18:02.859 --> 00:18:05.680 is in the White House watching this happen. What 00:18:05.680 --> 00:18:08.220 does he do? Cleveland was paralyzed. He was a 00:18:08.220 --> 00:18:11.369 Democrat. deeply suspicious of Wall Street, the 00:18:11.369 --> 00:18:13.569 last thing he wanted to do was ask J .P. Morgan 00:18:13.569 --> 00:18:15.690 for help. He tried a public bond offering first. 00:18:15.869 --> 00:18:18.509 He did, but it wasn't working fast enough. So 00:18:18.509 --> 00:18:20.670 Morgan takes a train to Washington. He arrives 00:18:20.670 --> 00:18:22.829 at the White House and Cleveland refuses to see 00:18:22.829 --> 00:18:25.009 him. So what does Morgan do? He just sits outside 00:18:25.009 --> 00:18:27.869 the Oval Office smoking his cigar, waiting. That's 00:18:27.869 --> 00:18:30.950 the power move to end all power moves. I'll wait. 00:18:31.309 --> 00:18:33.890 Finally, Cleveland lets him in. And they're sitting 00:18:33.890 --> 00:18:36.049 there while the president is trying to find another 00:18:36.049 --> 00:18:39.450 way out. During the meeting, a clerk comes in 00:18:39.450 --> 00:18:41.349 and whispers to the president that there's only 00:18:41.349 --> 00:18:45.329 about $9 million left in the gold vaults. A single 00:18:45.329 --> 00:18:48.049 large check could wipe them out before the banks 00:18:48.049 --> 00:18:50.650 even close that day. The clock is literally ticking. 00:18:50.910 --> 00:18:54.029 Morgan looks at the president and says, the government 00:18:54.029 --> 00:18:58.150 will default before 3 o 'clock today unless you 00:18:58.150 --> 00:19:01.069 do something. And Cleveland asks, what do you 00:19:01.069 --> 00:19:03.849 suggest? Morgan then pulls out an obscure statute 00:19:03.849 --> 00:19:07.359 from the Civil War era. a legal loophole from 00:19:07.359 --> 00:19:10.500 1862 that allowed the Secretary of the Treasury 00:19:10.500 --> 00:19:13.259 to buy gold directly without congressional approval 00:19:13.259 --> 00:19:16.019 in an emergency. He found a loophole the president 00:19:16.019 --> 00:19:18.180 didn't even know about. He knew the law better 00:19:18.180 --> 00:19:20.359 than the government did. Incredible. He proposed 00:19:20.359 --> 00:19:22.880 that he and the Rothschilds, the great European 00:19:22.880 --> 00:19:26.519 banking family, would sell 3 .5 million ounces 00:19:26.519 --> 00:19:28.579 of gold directly to the Treasury in exchange 00:19:28.579 --> 00:19:31.440 for bonds. It was making a profit. Oh, yes. But 00:19:31.440 --> 00:19:33.539 more importantly, Morgan promised to use his 00:19:33.539 --> 00:19:36.000 influence to stop the gold outflow. He would 00:19:36.000 --> 00:19:38.200 basically order the financial markets to stop 00:19:38.200 --> 00:19:40.579 betting against the dollar. So he basically said, 00:19:40.660 --> 00:19:43.500 I'll lend you the gold to save the country, but 00:19:43.500 --> 00:19:45.480 I'm going to make a profit on the bonds and I'm 00:19:45.480 --> 00:19:47.819 going to flex my muscles to fix the market. Exactly. 00:19:47.980 --> 00:19:50.339 And it worked. The credit of the United States 00:19:50.339 --> 00:19:52.960 was saved. But the political fallout for Cleveland. 00:19:53.559 --> 00:19:57.619 was massive. Disastrous. The populace screamed 00:19:57.619 --> 00:19:59.960 that the president had sold out the country to 00:19:59.960 --> 00:20:02.559 the bankers. It ruined Cleveland's reputation, 00:20:02.859 --> 00:20:05.740 but it cemented Morgan as the man who owned the 00:20:05.740 --> 00:20:09.049 country's solvency. That's 1893. But the Panic 00:20:09.049 --> 00:20:11.690 of 1907, that sounds even more cinematic. This 00:20:11.690 --> 00:20:13.450 is the one with the locked library story, right? 00:20:13.509 --> 00:20:16.529 Yes. The Panic of 1907 was the absolute peak 00:20:16.529 --> 00:20:19.289 of his power. It was a classic liquidity crisis, 00:20:19.650 --> 00:20:22.049 started with a failed attempt to corner the copper 00:20:22.049 --> 00:20:24.329 market. Which led to the collapse of the Knickerbocker 00:20:24.329 --> 00:20:27.220 Trust Company. And panic spread like wildfire. 00:20:27.359 --> 00:20:29.859 People were lining up around the block to pull 00:20:29.859 --> 00:20:32.359 their money out of banks. Trust companies were 00:20:32.359 --> 00:20:35.259 falling like dominoes. The New York Stock Exchange 00:20:35.259 --> 00:20:37.460 nearly had to close because there was just no 00:20:37.460 --> 00:20:40.200 money. And again, no Federal Reserve to pump 00:20:40.200 --> 00:20:44.359 money in. No lender of last resort. Except Morgan. 00:20:44.990 --> 00:20:46.970 He was semi -retired at this point, about 70 00:20:46.970 --> 00:20:49.829 years old. He came back to New York like a general 00:20:49.829 --> 00:20:52.529 returning to the front. And he summons the nation's 00:20:52.529 --> 00:20:55.349 top financiers to his library. That beautiful 00:20:55.349 --> 00:20:58.069 Renaissance -style building on 36th Street filled 00:20:58.069 --> 00:21:00.809 with rare books and art. He needed the presidents 00:21:00.809 --> 00:21:02.630 of the other trust companies to put up their 00:21:02.630 --> 00:21:04.890 own money to save the weaker ones. And they were 00:21:04.890 --> 00:21:06.529 reluctant. They didn't want to risk their own 00:21:06.529 --> 00:21:09.670 capital. They were arguing, dithering. So Morgan 00:21:09.670 --> 00:21:12.190 had the doors locked. He literally pocketed the 00:21:12.190 --> 00:21:14.759 key. He held the richest men in America. a hostage. 00:21:14.960 --> 00:21:17.700 In a very velvet line hostage situation, yes. 00:21:18.279 --> 00:21:20.900 He went into the other room and played solitaire. 00:21:21.059 --> 00:21:23.440 His favorite way to think. While these titans 00:21:23.440 --> 00:21:25.680 of finance sweated it out. And he told them what? 00:21:25.799 --> 00:21:28.900 He essentially told them, no one leaves until 00:21:28.900 --> 00:21:32.279 we have a solution. He bullied them. He shamed 00:21:32.279 --> 00:21:35.099 them. He told them if they didn't act, the whole 00:21:35.099 --> 00:21:36.880 system would collapse and their wealth would 00:21:36.880 --> 00:21:41.119 vanish anyway. Finally, at 4 .45 in the morning, 00:21:41.259 --> 00:21:44.250 they broke. They signed the papers, pledged the 00:21:44.250 --> 00:21:46.089 money. But there was one more hurdle, right? 00:21:46.289 --> 00:21:49.869 The Moore and Schley brokerage. Right. This brokerage 00:21:49.869 --> 00:21:52.210 firm was about to fail because it held a huge 00:21:52.210 --> 00:21:54.410 amount of stock in a company called Tennessee 00:21:54.410 --> 00:21:58.829 Coal, Iron and Railroad Company, or TCI. If the 00:21:58.829 --> 00:22:01.670 brokerage dumped that stock to raise cash. The 00:22:01.670 --> 00:22:04.150 market would crash all over again. So Morgan's 00:22:04.150 --> 00:22:07.200 solution was classic Morgan. He proposed that 00:22:07.200 --> 00:22:10.420 U .S. Steel buy TCI. Wait, U .S. Steel, the company 00:22:10.420 --> 00:22:12.480 he already controls. He wants to buy a major 00:22:12.480 --> 00:22:14.700 competitor to save the market. That sounds convenient. 00:22:15.000 --> 00:22:18.140 You see the brilliance and the danger. It saved 00:22:18.140 --> 00:22:20.519 the brokerage, but it also let U .S. Steel swallow 00:22:20.519 --> 00:22:23.140 a major competitor at a bargain price. But there 00:22:23.140 --> 00:22:25.960 was an antitrust problem. A big one. Theodore 00:22:25.960 --> 00:22:28.220 Roosevelt was president now, and he was the trust 00:22:28.220 --> 00:22:30.940 buster. He'd been breaking up monopolies. So 00:22:30.940 --> 00:22:32.579 they had to get the president's permission to 00:22:32.579 --> 00:22:35.359 create a monopoly in order to save the economy. 00:22:36.140 --> 00:22:39.880 The irony is just staggering. Precisely. Morgan 00:22:39.880 --> 00:22:42.400 sent envoys to Roosevelt and Washington on a 00:22:42.400 --> 00:22:45.539 night train. They told Roosevelt, we need to 00:22:45.539 --> 00:22:47.920 do this merger immediately to stop the panic, 00:22:47.980 --> 00:22:51.230 but we need immunity. from antitrust laws. And 00:22:51.230 --> 00:22:54.369 Roosevelt blinked. He had to. Faced with a collapsing 00:22:54.369 --> 00:22:57.190 economy, he agreed. He let the deal go through. 00:22:57.430 --> 00:22:59.690 And it worked. The panning ended by November 00:22:59.690 --> 00:23:03.410 7th. Morgan was hailed as a hero. Crowds cheered 00:23:03.410 --> 00:23:05.930 him in the street. He had single -handedly stopped 00:23:05.930 --> 00:23:08.029 a depression. But, and this is the key insight, 00:23:08.170 --> 00:23:11.869 this event was the tipping point. Yes. The country 00:23:11.869 --> 00:23:14.950 looked at this spectacle and realized a terrifying 00:23:14.950 --> 00:23:18.690 truth. One private citizen has the power to save 00:23:18.690 --> 00:23:21.630 us. That means he also has the power to destroy 00:23:21.630 --> 00:23:24.650 us. It was too much power for one man. And that 00:23:24.650 --> 00:23:27.069 event directly led to the political will to create 00:23:27.069 --> 00:23:29.230 the Federal Reserve. That's a fascinating irony. 00:23:29.710 --> 00:23:32.029 Morgan's greatest display of power was the very 00:23:32.029 --> 00:23:33.869 thing that ensured that kind of power would be 00:23:33.869 --> 00:23:36.450 taken away forever. It was the last gasp of the 00:23:36.450 --> 00:23:39.269 era of private central banking. Now, we've painted 00:23:39.269 --> 00:23:42.089 him as this invincible force, the man who locks 00:23:42.089 --> 00:23:44.230 bankers in a room and stares down presidents. 00:23:45.019 --> 00:23:47.480 But he wasn't invincible, was he? No, he absolutely 00:23:47.480 --> 00:23:50.099 had limits. And his biggest adversary was that 00:23:50.099 --> 00:23:52.460 same president, Theodore Roosevelt. We talked 00:23:52.460 --> 00:23:54.579 about U .S. Steel, but before that, there was 00:23:54.579 --> 00:23:57.259 the Northern Securities Battle. Right. What was 00:23:57.259 --> 00:23:59.220 Northern Securities? Another massive railroad 00:23:59.220 --> 00:24:02.240 trust. Morgan, along with E .H. Harriman and 00:24:02.240 --> 00:24:06.559 James J. Hill, merged three huge railroads, the 00:24:06.559 --> 00:24:08.920 Northern Pacific, the Great Northern, and the 00:24:08.920 --> 00:24:11.640 Chicago Burlington, into one holding company. 00:24:11.920 --> 00:24:14.960 And they basically controlled all... real traffic 00:24:14.960 --> 00:24:17.880 in the Northwest. All of it. And Roosevelt sued. 00:24:18.079 --> 00:24:20.460 He used the Sherman Antitrust Act, which had 00:24:20.460 --> 00:24:22.680 been collecting dust. Morgan was shocked. He 00:24:22.680 --> 00:24:24.539 didn't understand this new political reality. 00:24:24.839 --> 00:24:26.440 He famously went to the White House and said 00:24:26.440 --> 00:24:29.019 what? If we have done anything wrong, send your 00:24:29.019 --> 00:24:31.740 man to my man and they can fix it up. Send your 00:24:31.740 --> 00:24:34.539 man to my man. Like it's a dispute between two 00:24:34.539 --> 00:24:38.519 kings, not a citizen and the president. Exactly. 00:24:38.640 --> 00:24:41.019 He viewed the president as an equal, just another 00:24:41.019 --> 00:24:43.579 rival to negotiate with. And Roosevelt replied 00:24:43.579 --> 00:24:46.099 that he didn't want to fix it up. He wanted to 00:24:46.099 --> 00:24:48.640 stop the illegal monopoly. And the Supreme Court 00:24:48.640 --> 00:24:52.299 sided with Roosevelt. They did in 1904. The company 00:24:52.299 --> 00:24:55.220 was dissolved. It was a huge blow to Morgan's 00:24:55.220 --> 00:24:57.980 sense of political invincibility. He realized 00:24:57.980 --> 00:24:59.799 he couldn't just buy his way out of everything 00:24:59.799 --> 00:25:02.339 anymore. Speaking of things he couldn't buy his 00:25:02.339 --> 00:25:04.500 way out of. Right. Let's talk about Nikola Tesla. 00:25:04.859 --> 00:25:07.079 Morgan funded Tesla. I feel like people forget 00:25:07.079 --> 00:25:11.559 this. They do. In 1900, Morgan gave Tesla $150 00:25:11.559 --> 00:25:15.240 ,000, which is nearly $5 million today, to build 00:25:15.240 --> 00:25:17.519 a wireless communication system at Wardenclyffe 00:25:17.519 --> 00:25:19.579 on Long Island. And Morgan's goal was practical. 00:25:19.819 --> 00:25:22.539 Very. He wanted a competitor to the transatlantic 00:25:22.539 --> 00:25:24.779 telegraph. He wanted to send stock quotes across 00:25:24.779 --> 00:25:27.039 the ocean instantly and privately. Sounds like 00:25:27.039 --> 00:25:29.210 a smart investment. Why did it fall apart? Because 00:25:29.210 --> 00:25:31.950 Tesla was a visionary, not a pragmatic businessman 00:25:31.950 --> 00:25:35.269 like Morgan. Tesla pivoted. He started talking 00:25:35.269 --> 00:25:37.750 about using the tower for wireless power transmission. 00:25:38.049 --> 00:25:40.549 He wanted to beam electricity through the earth, 00:25:40.690 --> 00:25:43.009 potentially providing free energy to the world. 00:25:43.250 --> 00:25:46.150 Free energy. I can just imagine a banker hearing 00:25:46.150 --> 00:25:48.829 the words free energy and clutching his wallet. 00:25:49.069 --> 00:25:51.470 That's exactly what happened. The legend goes 00:25:51.470 --> 00:25:53.910 that Morgan asked a very simple, very Morgan 00:25:53.910 --> 00:25:56.930 question. Where do I put the meter? If you can't 00:25:56.930 --> 00:25:59.309 meter it. You can't charge for it. Exactly. If 00:25:59.309 --> 00:26:01.210 anyone with an antenna can just tap into the 00:26:01.210 --> 00:26:04.029 power, it destroys the business model of the 00:26:04.029 --> 00:26:06.390 electric companies. Morgan had just spent millions 00:26:06.390 --> 00:26:09.470 consolidating, like GE. So you pulled the plug. 00:26:09.930 --> 00:26:12.289 He refused any further funding. He abandoned 00:26:12.289 --> 00:26:14.750 the project. Tesla begged him, wrote him letters. 00:26:14.930 --> 00:26:18.069 But Morgan was cold as ice. The project collapsed. 00:26:18.349 --> 00:26:21.490 It's one of the great what -ifs of history. Brutal. 00:26:21.509 --> 00:26:23.450 And then there's the London Underground. I didn't 00:26:23.450 --> 00:26:25.089 even know Morgan tried to build a subway in London. 00:26:25.250 --> 00:26:28.710 He did in 1902. He wanted to build the Piccadilly 00:26:28.710 --> 00:26:31.390 Line. But he was outmaneuvered by an American 00:26:31.390 --> 00:26:34.450 rival, a real scoundrel named Charles Tyson Yerkes. 00:26:34.569 --> 00:26:36.589 And Yerkes just snatched the rights out from 00:26:36.589 --> 00:26:39.680 under him. using some very shady tactics. Morgan 00:26:39.680 --> 00:26:42.640 was furious. He called it the greatest rascality 00:26:42.640 --> 00:26:45.400 and conspiracy I ever heard of. It was a rare, 00:26:45.460 --> 00:26:48.500 total defeat for Morgan. In London, he was the 00:26:48.500 --> 00:26:51.599 outsider. And finally, under failures and near 00:26:51.599 --> 00:26:55.859 misses, the Titanic. This one gives me chills. 00:26:56.000 --> 00:26:58.359 The Titanic connection is deep. Morgan actually 00:26:58.359 --> 00:27:01.369 owned the White Star Line? His trust, the International 00:27:01.369 --> 00:27:04.329 Mercantile Marine Company, was the parent company. 00:27:04.589 --> 00:27:06.869 So he owned the ship? He owned the ship. And 00:27:06.869 --> 00:27:09.329 he had a private suite booked on the maiden voyage. 00:27:09.410 --> 00:27:11.789 It was specially designed for him with a private 00:27:11.789 --> 00:27:14.089 promenade deck and even a special cigar holder 00:27:14.089 --> 00:27:16.430 in the bathroom. He was supposed to be on that 00:27:16.430 --> 00:27:18.710 ship. Why wasn't he? He changed his plans at 00:27:18.710 --> 00:27:21.589 the last minute. He was in France. Some sources 00:27:21.589 --> 00:27:24.029 say he wanted to stay to buy more art. He was 00:27:24.029 --> 00:27:26.789 obsessing over some tapestries. Others say he 00:27:26.789 --> 00:27:29.789 was just feeling unwell. But he canceled. And 00:27:29.789 --> 00:27:32.109 when the ship sank. It was a financial disaster 00:27:32.109 --> 00:27:35.009 for his company, which was already over leveraged. 00:27:35.089 --> 00:27:37.390 But his reaction was telling. He was quoted as 00:27:37.390 --> 00:27:40.309 saying, monetary losses amount to nothing in 00:27:40.309 --> 00:27:43.150 life. It is the loss of life that counts. It 00:27:43.150 --> 00:27:45.970 is that frightful death. That brings us to the 00:27:45.970 --> 00:27:47.930 man himself. We've talked about the banker, the 00:27:47.930 --> 00:27:50.970 titan. But who was he physically? He was quite 00:27:50.970 --> 00:27:52.769 distinct. You noticed him when he walked in a 00:27:52.769 --> 00:27:55.289 room. You didn't just notice him. You were likely 00:27:55.289 --> 00:27:58.170 terrified of him. He was an imposing figure, 00:27:58.390 --> 00:28:01.529 massive shoulders, piercing eyes. People said 00:28:01.529 --> 00:28:03.470 they looked like the headlights of a train coming 00:28:03.470 --> 00:28:06.490 at you. But the most defining feature was his 00:28:06.490 --> 00:28:10.029 nose. The nose. We have to talk about it. It 00:28:10.029 --> 00:28:12.769 wasn't just a big nose. No. He suffered from 00:28:12.769 --> 00:28:15.410 a condition called rhinothymia, which is a severe 00:28:15.410 --> 00:28:18.910 complication of rosacea. It made his nose bulbous, 00:28:18.950 --> 00:28:22.099 purple, and deformed. It had a bumpy texture, 00:28:22.259 --> 00:28:24.500 and for a man who controlled everything, he couldn't 00:28:24.500 --> 00:28:26.200 control this. Yeah, he must have been incredibly 00:28:26.200 --> 00:28:29.200 self -conscious. Extremely. He hated being photographed. 00:28:29.220 --> 00:28:31.000 If you look at the official portraits, they're 00:28:31.000 --> 00:28:33.440 all heavily retouched to smooth out his nose. 00:28:33.779 --> 00:28:36.240 He would attack photographers with his cane if 00:28:36.240 --> 00:28:38.059 they got too close on the street. There was even 00:28:38.059 --> 00:28:40.839 that cruel rhyme kids used to sing. Johnny Morgan's 00:28:40.839 --> 00:28:44.039 nasal organ has a purple hue. Ouch. Why didn't 00:28:44.039 --> 00:28:46.220 he get it fixed? Surely he had the money for 00:28:46.220 --> 00:28:48.819 surgery. The medical speculation is fascinating. 00:28:49.480 --> 00:28:51.819 His son -in -law suggested that Morgan refused 00:28:51.819 --> 00:28:54.779 surgery because he had suffered from infantile 00:28:54.779 --> 00:28:57.640 seizures as a child. He was terrified that the 00:28:57.640 --> 00:29:00.200 trauma of surgery or the anesthetic might trigger 00:29:00.200 --> 00:29:02.480 the seizures to return. So he just lived with 00:29:02.480 --> 00:29:05.039 it. He lived with the disfigurement. But here's 00:29:05.039 --> 00:29:08.559 the genius of Morgan. He weaponized it. How do 00:29:08.559 --> 00:29:11.029 you mean? He used his terrifying appearance to 00:29:11.029 --> 00:29:14.589 intimidate people. He knew he looked scary. When 00:29:14.589 --> 00:29:17.309 he stared at you during a negotiation, he dared 00:29:17.309 --> 00:29:19.630 you to look at his nose. If you looked away, 00:29:19.829 --> 00:29:22.009 you showed weakness. If you stared, you were 00:29:22.009 --> 00:29:24.289 rude. He trapped people with his own insecurity. 00:29:24.670 --> 00:29:26.789 He made people feel small before he even opened 00:29:26.789 --> 00:29:29.210 his mouth. It adds such a layer of vulnerability 00:29:29.210 --> 00:29:31.849 to this powerhouse. And his personal life had 00:29:31.849 --> 00:29:35.029 real tragedy, too. His first marriage. Amelia 00:29:35.029 --> 00:29:37.970 Sturges, Mamie. This is the heartbreaking romantic 00:29:37.970 --> 00:29:40.390 side of Morgan that doesn't fit the robber baron 00:29:40.390 --> 00:29:43.069 mold. He courted her as a young man, but she 00:29:43.069 --> 00:29:45.289 was dying of tuberculosis. Her family tried to 00:29:45.289 --> 00:29:47.250 stop the wedding. They did, saying she was too 00:29:47.250 --> 00:29:50.430 sick. But he married her anyway in 1861. He literally 00:29:50.430 --> 00:29:52.390 had to carry her to the altar because she was 00:29:52.390 --> 00:29:54.529 too weak to stand. And he thought he could save 00:29:54.529 --> 00:29:56.990 her. He took her to Algiers, hoping the warm 00:29:56.990 --> 00:29:59.410 climate would cure her. She died four months 00:29:59.410 --> 00:30:01.990 later. He was devastated. It left a permanent 00:30:01.990 --> 00:30:04.849 mark on him. He did remarry. To Frances Louisa 00:30:04.849 --> 00:30:07.970 Tracy. They had four children, including his 00:30:07.970 --> 00:30:10.670 heir, Jack Morgan. But that marriage was more 00:30:10.670 --> 00:30:13.269 of a partnership. He spent a lot of time away. 00:30:13.289 --> 00:30:16.069 That first loss, it seemed to lock something 00:30:16.069 --> 00:30:19.130 away in him. And he filled that void with stuff. 00:30:19.289 --> 00:30:21.150 We talked about him being an art history major. 00:30:21.349 --> 00:30:24.529 He wasn't just a casual collector. He was a hoarder 00:30:24.529 --> 00:30:26.710 of high culture. The collector of collections, 00:30:26.890 --> 00:30:28.869 that's what they called him. He didn't just buy 00:30:28.869 --> 00:30:31.609 a painting, he bought whole libraries. He bought 00:30:31.609 --> 00:30:34.849 manuscripts, gems, tapestries, watches. He was 00:30:34.849 --> 00:30:36.930 the president of the Metropolitan Museum of Art. 00:30:37.069 --> 00:30:38.630 And he wasn't just buying for his living room. 00:30:38.710 --> 00:30:41.450 He saw it as a patriotic duty. He believed the 00:30:41.450 --> 00:30:43.849 United States was a great industrial power, but 00:30:43.849 --> 00:30:46.490 it lacked cultural history. We were a nation 00:30:46.490 --> 00:30:49.769 of factories, not cathedrals. So he used his 00:30:49.769 --> 00:30:52.789 money to raid Europe's history and bring it to 00:30:52.789 --> 00:30:56.089 New York. He was buying civilization. The Morgan 00:30:56.089 --> 00:30:58.349 Library in New York today, that's his personal 00:30:58.349 --> 00:31:00.869 collection. It has Gutenberg Bibles, original 00:31:00.869 --> 00:31:03.890 Mozart scores, just incredible things. Even had 00:31:03.890 --> 00:31:06.809 a gem named after him. Morganite. A pink barrel. 00:31:07.400 --> 00:31:09.519 He was a major patron of Tiffany & Co. and their 00:31:09.519 --> 00:31:11.960 chief gemologist named that after him. He also 00:31:11.960 --> 00:31:14.740 funded Edward S. Curtis to photograph North American 00:31:14.740 --> 00:31:18.319 Indians, a massive project. He had a deep appreciation 00:31:18.319 --> 00:31:21.680 for preservation. And he lived large. The yachts. 00:31:21.680 --> 00:31:23.940 You can't be a Gilded Age tycoon without a yacht. 00:31:24.099 --> 00:31:27.119 The Corsair. He had several of them, each bigger 00:31:27.119 --> 00:31:29.500 than the last. They were basically floating palaces 00:31:29.500 --> 00:31:32.700 over 300 feet long. He used them to escape the 00:31:32.700 --> 00:31:34.880 heat of the city and the prying eyes of the press. 00:31:35.160 --> 00:31:36.819 And that's where we get that famous quote. If 00:31:36.819 --> 00:31:38.759 you have to ask the price, you can't afford it. 00:31:39.019 --> 00:31:41.259 Classic. Whether he actually said it or not, 00:31:41.380 --> 00:31:44.339 it fits the attitude perfectly. So we're approaching 00:31:44.339 --> 00:31:47.539 the end of his life. The year is 1912. The Peugeot 00:31:47.539 --> 00:31:49.799 Committee. This feels like the government is 00:31:49.799 --> 00:31:52.210 finally catching up to him. The mood in the country 00:31:52.210 --> 00:31:54.869 had changed. The progressive era was in full 00:31:54.869 --> 00:31:57.829 swing. People were sick of the trusts. The Pujo 00:31:57.829 --> 00:32:00.269 committee was a congressional investigation into 00:32:00.269 --> 00:32:02.349 the money trust. And they hauled Morgan in to 00:32:02.349 --> 00:32:05.430 testify. They did. They wanted to prove that 00:32:05.430 --> 00:32:07.730 a small cabal of bankers in New York controlled 00:32:07.730 --> 00:32:10.539 the entire U .S. economy. And they weren't wrong, 00:32:10.619 --> 00:32:13.160 were they? The stats were damning. They found 00:32:13.160 --> 00:32:17.079 that Morgan and his partners held 341 directorships 00:32:17.079 --> 00:32:21.599 in 112 corporations controlling $22 billion in 00:32:21.599 --> 00:32:23.720 resources. Which was more than the assessed value 00:32:23.720 --> 00:32:25.980 of all property in the 22 states west of the 00:32:25.980 --> 00:32:28.680 Mississippi River. All of it. But Morgan's testimony, 00:32:29.039 --> 00:32:32.509 he didn't back down. He didn't apologize. He 00:32:32.509 --> 00:32:34.829 was defiant. There's a famous exchange where 00:32:34.829 --> 00:32:37.150 the council, Samuel Untermyer, asked him if commercial 00:32:37.150 --> 00:32:39.609 credit was based on money or property. And Morgan 00:32:39.609 --> 00:32:41.990 replied, no, sir, the first thing is character. 00:32:42.190 --> 00:32:45.490 Character, not collateral, not assets. He insisted 00:32:45.490 --> 00:32:48.170 on it. He said money cannot buy it. A man I do 00:32:48.170 --> 00:32:50.069 not trust could not get money from me on all 00:32:50.069 --> 00:32:52.210 the bonds in Christendom. Which sounds noble, 00:32:52.349 --> 00:32:55.269 but it also sounds like a club. I lend to people 00:32:55.269 --> 00:32:58.750 I know and trust. Which usually means other... 00:32:59.069 --> 00:33:02.210 Rich white guys in his circle. Exactly. To Morgan, 00:33:02.390 --> 00:33:04.549 it was about personal honor. To the committee, 00:33:04.750 --> 00:33:07.089 it sounded like an admission of a closed system 00:33:07.089 --> 00:33:09.450 where access to capital depended on whether J 00:33:09.450 --> 00:33:12.450 .P. Morgan liked you. He also claimed, I like 00:33:12.450 --> 00:33:14.710 a little competition. Which drew laughter in 00:33:14.710 --> 00:33:16.690 the hearing room because everyone knew he had 00:33:16.690 --> 00:33:19.589 spent his entire life destroying it. But in his 00:33:19.589 --> 00:33:21.930 own mind, he truly believed he was a force for 00:33:21.930 --> 00:33:23.769 good. He died shortly after that, didn't he? 00:33:23.789 --> 00:33:26.470 In 1913. The stress of the hearings took a real 00:33:26.470 --> 00:33:28.970 toll. He traveled to Rome, his favorite city. 00:33:29.109 --> 00:33:31.250 He died in his sleep at the Grand Hotel there 00:33:31.250 --> 00:33:34.750 on March 31st, 1913. And the reaction tells you 00:33:34.750 --> 00:33:36.829 everything about his standing. The stock market 00:33:36.829 --> 00:33:39.349 closed for two hours. That's an honor usually 00:33:39.349 --> 00:33:41.690 reserved for heads of state. Flags on Wall Street 00:33:41.690 --> 00:33:43.710 flew at half -staff. But here's the surprise. 00:33:43.890 --> 00:33:46.970 His estate. We think of him as the richest man 00:33:46.970 --> 00:33:50.519 ever. Was he? When his estate was tallied, his 00:33:50.519 --> 00:33:53.420 net worth was about $80 million plus the art 00:33:53.420 --> 00:33:55.880 collection, which was worth another $50 million 00:33:55.880 --> 00:33:58.359 or so. Now that's about $2 to $3 billion today. 00:33:58.539 --> 00:34:01.500 A huge amount. But not Rockefeller rich. Not 00:34:01.500 --> 00:34:03.960 even close. John D. Rockefeller, who was worth 00:34:03.960 --> 00:34:07.079 vastly more, supposedly read the obituary and 00:34:07.079 --> 00:34:10.000 said, and to think, he wasn't even a rich man. 00:34:10.340 --> 00:34:12.860 That is the ultimate shade. He wasn't even a 00:34:12.860 --> 00:34:15.699 rich man. It highlights the difference. Rockefeller 00:34:15.699 --> 00:34:18.730 owned the oil. Carnegie owned the steel. Morgan 00:34:18.730 --> 00:34:21.469 was a banker. He controlled money, but much of 00:34:21.469 --> 00:34:23.989 it was other people's money. His power was influence, 00:34:24.250 --> 00:34:27.190 leverage, and trust, not just raw net worth. 00:34:27.349 --> 00:34:30.130 And his legacy. The House of Morgan isn't one 00:34:30.130 --> 00:34:32.949 thing anymore. No. The fear of that power led 00:34:32.949 --> 00:34:35.369 to real changes. First, the Federal Reserve was 00:34:35.369 --> 00:34:38.929 created in 1913, just months after he died. Then, 00:34:39.110 --> 00:34:41.150 after the Great Depression, the Glass -Steagall 00:34:41.150 --> 00:34:44.409 Act of 1933 forced banks to separate commercial 00:34:44.409 --> 00:34:46.849 banking from investment banking. So the House 00:34:46.849 --> 00:34:48.969 of Morgan had to split. JPMorgan & Co. became 00:34:48.969 --> 00:34:51.030 the commercial bank. which eventually became 00:34:51.030 --> 00:34:53.829 today's JPMorgan Chase. And the partners who 00:34:53.829 --> 00:34:56.349 left formed Morgan Stanley. So both of those 00:34:56.349 --> 00:34:58.929 massive modern entities come from the same root. 00:34:59.309 --> 00:35:01.949 Before we wrap up, we have to address a modern 00:35:01.949 --> 00:35:04.329 revelation. We talked about origins earlier. 00:35:04.469 --> 00:35:07.429 In the 2000s, some very dark history came out 00:35:07.429 --> 00:35:10.789 about the bank's ties to slavery. Yes. And this 00:35:10.789 --> 00:35:12.789 is crucial for a full accounting of American 00:35:12.789 --> 00:35:16.190 finance. In the early 2000s, cities like Chicago 00:35:16.190 --> 00:35:18.650 passed ordinances requiring companies to disclose 00:35:18.650 --> 00:35:21.289 any ties to slavery if they wanted city contracts. 00:35:21.570 --> 00:35:23.590 So JPMorgan Chase did an internal investigation. 00:35:23.989 --> 00:35:26.210 They did. And they found that two of their predecessor 00:35:26.210 --> 00:35:29.050 banks, Citizens Bank and Canal Bank in Louisiana, 00:35:29.349 --> 00:35:31.769 had accepted enslaved people as collateral for 00:35:31.769 --> 00:35:35.429 loans between 1831 and 1865. So plantation owners 00:35:35.429 --> 00:35:37.679 would say, I need a loan. And they would put 00:35:37.679 --> 00:35:40.400 human beings up as the security. Correct. And 00:35:40.400 --> 00:35:42.219 when the plantation owners defaulted on those 00:35:42.219 --> 00:35:44.420 loans, the banks took ownership of those human 00:35:44.420 --> 00:35:46.800 beings. The investigation showed the banks ended 00:35:46.800 --> 00:35:50.059 up owning approximately 1 ,250 enslaved people. 00:35:50.159 --> 00:35:52.300 They took possession of them. That just turns 00:35:52.300 --> 00:35:55.380 that whole eye -above concept on its head. It's 00:35:55.380 --> 00:35:57.639 a stark reminder that the capital that built 00:35:57.639 --> 00:36:00.920 this system wasn't just gold. It was blood. It 00:36:00.920 --> 00:36:03.940 is. JPMorgan Chase apologized for this in 2005 00:36:03.940 --> 00:36:06.360 and set up a scholarship fund, but it serves 00:36:06.360 --> 00:36:08.739 as a permanent reminder. You cannot separate 00:36:08.739 --> 00:36:11.019 the history of American capitalism from the history 00:36:11.019 --> 00:36:14.119 of slavery. They are intertwined in the ledger 00:36:14.119 --> 00:36:17.340 books. So we've unpacked the man, the myths, 00:36:17.440 --> 00:36:20.579 the nose, the power, and the darkness. What does 00:36:20.579 --> 00:36:23.659 it all mean? J .P. Morgan was just a total paradox. 00:36:23.960 --> 00:36:26.440 He really was. A man who saved the nation's economy 00:36:26.440 --> 00:36:29.579 twice, yet his power was so terrifying it forced 00:36:29.579 --> 00:36:31.659 the nation to create the Federal Reserve to replace 00:36:31.659 --> 00:36:34.639 him. A devout religious man who ruthlessly crushed 00:36:34.639 --> 00:36:36.940 his competitors. A patron of the arts who was 00:36:36.940 --> 00:36:39.039 mocked for his appearance. He built the tracks 00:36:39.039 --> 00:36:41.300 we still ride on and the companies that still 00:36:41.300 --> 00:36:43.539 light our homes. And that brings us to our final 00:36:43.539 --> 00:36:45.780 thought. Morgan believed ruinous competition 00:36:45.780 --> 00:36:48.960 was bad. He believed consolidation led to efficiency 00:36:48.960 --> 00:36:52.289 and stability. And that is the question for you, 00:36:52.329 --> 00:36:55.090 the listener, today. Look at our world. Look 00:36:55.090 --> 00:36:58.250 at big tech. Amazon, Google, Microsoft. We see 00:36:58.250 --> 00:37:00.889 massive consolidation. We see efficiency. You 00:37:00.889 --> 00:37:02.869 can get anything delivered in two days. We see 00:37:02.869 --> 00:37:06.130 stability. Are these modern tech monopolies just 00:37:06.130 --> 00:37:09.539 the new organization? Was Morgan a prophet of 00:37:09.539 --> 00:37:12.139 modern capitalism, proving that scale is the 00:37:12.139 --> 00:37:15.420 only way to compete globally? Or is he a warning 00:37:15.420 --> 00:37:17.980 from history about what happens when one entity 00:37:17.980 --> 00:37:21.099 or one man holds too much control over the levers 00:37:21.099 --> 00:37:23.440 of society? A prophet or a warning. I'll let 00:37:23.440 --> 00:37:25.420 you chew on that. And hey, next time you play 00:37:25.420 --> 00:37:27.340 Monopoly, show a little respect to Rich Uncle 00:37:27.340 --> 00:37:29.099 Pennybags. He might just lock you in his library 00:37:29.099 --> 00:37:31.400 until you trade in Park Place. Indeed. Thanks 00:37:31.400 --> 00:37:32.900 for diving deep with us. We'll catch you on the 00:37:32.900 --> 00:37:33.219 next one.