The Most Interesting Investor of The Gilded Age

Henrietta Green is one of the most important and peculiar figures in American economic history. She was known mostly as Hetty Green. In the Guinness Book of World Records, she was labelled as the greatest miser. She was America's first value investor, a financial grandmaster, and the wealthiest woman in the United States. But most notoriously, she was known as the Witch of Wall Street. I've been sifting through newspaper archives and old business records for way too many hours this week, but I just can't stop because I keep finding fascinating and often really bizarre stories about her. Stories of building excessive wealth in a volatile and corrupt period of America known as the Gilded Age. But paradoxically, also stories of her frugality that was often beyond belief. I want to show you the empire Hetty Green built and how she did it. How a mostly uneducated widow from Massachusetts was alongside the likes of John Rockefeller and J.P. Morgan in reshaping American industries at the turn of the 20th century. So let me share with you the many shades of Hetty Green's life and how she became the Witch of Wall Street. Henrietta Howland Robinson was born on November 21st, 1835 in New Bedford, Massachusetts. Her parents were Edward Mott Robinson and Abby Howland, who were already very rich. Hetty's father was in the whaling industry, which used to be one of the biggest industries in the US. Companies would hunt whales and sell their meat, but the big business was their blubber. Oils could be extracted that were used in a variety of ways, such as the manufacturing of soaps and cosmetics, candle wax, and sold directly to be used as fuel in oil lamps. Hetty's father owned a large whaling and trading fleet, and it's estimated he made about $6 million from the business, which is hundreds of millions in today's money. But the family's wealth didn't start with Hetty's father either. Her grandfather and great-grandfather had also built fortunes in the whaling industry. In an interview for National Magazine in 1905, she said, We have been wealthy for four generations. When her father passed away in 1865, she inherited his entire $9 million estate as the primary beneficiary, the equivalent of almost $200 million today. But she was unmarried at the time, and so she was only allowed to access a million dollars of the estate. The remaining $8 million was placed in a trust, which would be accessible by her children, which she didn't have yet. Later that year, Hetty's aunt, Sylvia Anne Howland, also died. Hetty had lived with her aunt for much of her childhood, and was also excessively rich. Her estate was worth $4 million, but the original will left Hetty out of the estate. This angered Hetty, and led to one of many lifelong legal battles. She presented the courts with an addendum to the will. It claimed that Hetty was the direct beneficiary of a near-entirety of her aunt's fortune. There isn't much documentation about this court session, but it's reported that the evidence strongly indicated that the addendum was fake, that Hetty had forged her aunt's signature in order to be included in the will, so the court rejected Hetty's claim. I wanted to start with this story, not because it's anywhere near the craziest part of her life, but because I think it sets the tone for the lengths that Hetty was willing to go to accumulate wealth, and later in her life, to hoard every single penny of it. Let me take a quick detour out of the 19th century, and talk about something incredibly important in the 21st century, internet privacy and safety. If you're not worried about being hacked in 2024, well, you should be. No, but seriously, even if you consider yourself a relatively safe internet user, you are vulnerable to having your accounts hacked or your data stolen. 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So in 1865, at the age of 30, Hetty inherits her father's immense fortune, which she would take and turn into an empire many times larger. But the skills she needed to do this came much earlier. Hetty was obsessed with business from a very young age. At just 6 years old, she was already reading stock reports, flipping through newspapers to see which stocks rose and fell that day, with a deep curiosity to understand why. At the age of 8, she opened her first bank account, and by 10, she was working alongside her father as a confidential clerk. He taught her about financial self-control, which would later become foundational in her investing strategy. He used to tell her that if she would learn how to manage her brain, she would know how to manage her fortune. And by the age of 15, her financial acumen rivalled that of her father. Even as a young adult, Hetty had no interest in finding a husband. Her aunt pushed her to find a man, giving her $1200 to attend lavish balls and events in New York City. But when she returned home, she'd spent just $200 of the budget, and instead invested the money in high-quality bonds. Investing in railway bonds was one of her specialties. The first freight and passenger line was created just 8 years before Hetty was born, and the industry was booming during her adult life. Track mileage grew 6 times in size between 1860 and 1920. This post-Civil War era in America is known as the Gilded Age, a phrase which came from Mark Twain's 1873 book, The Gilded Age, A Tale of Today. Gilding is a technique of applying a thin coat of gold to an object. The name was making fun of the government, who had promised a golden age of America after the Civil War ended. On the surface, America was experiencing a golden age. The Industrial Revolution had driven the railroad expansion, and made other industries like oil and mining much bigger too. But under the surface, it wasn't so gold. The need for huge capital investments in these expanding industries meant that those with capital would benefit from rapid growth, while those without didn't. People like Hetty, who owned assets in companies, became even more wealthy than before. By the early 1900s, a handful of corporations controlled nearly every industry, such as Standard Oil, the trust founded by John D. Rockefeller. In the end, he practically owned the entire industry. But this was still very early on in the development of the American financial system, and so investing in corporations was a minefield for most investors. Hetty invested through many booms and busts, 1873, 1884, 1893, 1907. In fact, she was a key player in saving New York City in that 1907 crash. I'll come back to this a little bit later. And all of these crashes played out in a similar way. A new, disruptive innovation was discovered, and investors were attracted by growth prospects. Prices were then bid up to absurd levels, and it turned out that most companies were completely worthless. When it collapsed, investors felt cheated by the financial markets, and so they stayed away for a long time, and therefore assets remained cheap for long periods of time. But the volatility wasn't a problem for Hetty. In fact, it was the volatility that made her successful. She could decipher between bonds likely to pay, and ones that were worthless. When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away. Then, when the time comes, they have to hunt me up and pay me a good price for my holdings. She applied this logic to the real estate market as well. She regarded real estate investments as the safest means of using idle money. Over her life, she owned many properties, including a large piece of office buildings in Chicago, and the iconic Fisherman's Wharf in San Francisco. All you have to do is buy cheap and sell deer. There's no great secret in fortune making. She also invested in the stock market, which looked a little different than it does today. When you bought stocks or bonds, you held on to physical certificates. This is one of the certificates Hetty owned at the time of her death, 20 shares of the Joseph Dixon Crucible Company, a graphite mining business that led to the introduction of graphite pencils, a cleaner, portable alternative to the ink quill pens that people were using at the time. This certificate shows she owned four shares of the Chicago Rock Island and Pacific Railway Company in 1902. These shares were originally sold by the company at $100 each when they were raising capital. Despite owning the stock of many companies, towards the end of her life, she said she didn't much believe in stocks. Wall Street is no place for a woman. I try to steer clear of it, and I never buy industrials. Much like the value investing strategy that would become popularized later by Benjamin Graham and Warren Buffett, she was very, very conservative. One thing, however, has been wrongly attributed to me, and that is speculating. Such stocks as belonged to me were purchased simply as an investment, never on a margin. Hetty was known for being a very generous lender, even being at one point the most credit-worthy lender to America's most respected stock operators, corporations, and even city governments. On the 18th of April 1906, San Francisco experienced a severe earthquake and it caused a financial chain reaction. New York City, being the financial hub of America, was hit hard. Banks and trusts were experiencing huge outflows of cash. Remember the FDIC, which today insures your bank accounts and gives you no reason to panic during a financial crisis? Well, it started after the Great Depression in 1933. So back in 1906, when a bank was beginning to fail, you had every reason to panic and want to withdraw your money before it evaporated. Of course, if everyone withdraws their money, it creates a bank run, the very thing you're trying to avoid. This 1906 earthquake was the beginning of what became known as the Panic of 1907. The final catalyst was a man named Otto Heinz. He was borrowing heavily in an attempt to corner United Copper Company stock. Cornering the market means buying complete controls so that you can set the prices, and when he failed, it led to the bankruptcy of several brokerage firms and triggered a run on the banks. J. Pierpont Morgan played a huge role in the US dodging a recession that year. He was able to persuade many companies to put up money to save the banking system, and one of the biggest contributors was Hettie Greene. She actually saw the entire crisis coming a few years earlier. I saw this situation developing three years ago, and I am on record as predicting it. I said the rich were approaching the brink, and that a panic was inevitable. So in the years leading up to 1907, she had been hoarding cash. She loaned $4.5 million to New York City a few months before the crisis, and another $1.1 million after the collapse began. By any measure, she was a wildly successful investor, but you clicked on this video to learn about the Witch of Wall Street, and she got the name for more than one reason. Part of the name is because of how she dressed the exact same way. The New York Times described her attire as, her neat dress of plain black, the skirt was of sateen, and upon her head she wore a crepe veil twisted about her hair. It's also possible that the name relates to her family's They were Protestant Christians who belonged to the Religious Society of Friends. They were called Quakers, because the founder of the movement, George Fox, had once told a judge in court to quake before the authority of God. But the Witch of Wall Street nickname also came from the most interesting and bizarre aspects of her life, her obsessive frugality. The fact is, I prefer not to be extravagant, she once said. Which, as I'm about to explain, is the understatement of the century. That iconic black dress that she wore everywhere, well when she got it washed, she'd only pay for someone to do the hem which got dirty from touching the ground. She once yelled at her family for putting candles on her 21st birthday cake, that it was a waste of money apparently, and after the party she wiped the candles down and returned them to the store for a refund. She was even included in the 1988 edition of the Guinness Book of World Records. She was labelled the greatest miser, which is an old term for someone who hoards wealth relentlessly. Her record entry claims she lived off cold oatmeal to save money from boiling the water, at a time where her estate was worth 95 million dollars, which today is the equivalent of billions of dollars. Her frugality, like much of her traits, is credited to her father. Someone once gifted him a 10 cent cigar, but he rejected it, stating I only smoke 4 cent cigars and I like them. If I were to smoke better ones, I might lose my taste for the cheaper ones that I now find quite satisfactory. But by far the most insane story of her stinginess is what happened to her son's leg. It's reported that her son, Ned, dislocated his knee when he was 14 years old. But Hetty, who, again, is worth hundreds of millions of dollars at this point, didn't want to pay for the clinic. So she took him to a charity hospital that offered free treatment. It's a place for the poor to go, and she was quite well known as a generationally wealthy person, so she wore a disguise. Before the doctor treated her son, she was recognised, and they demanded that she pay full price for the appointment. The cost? 50 cents, which is still less than $50 in today's money. But no, even that was too much, so she refused the treatment and took Ned home. Left untreated, her son developed gangrene in his leg, and later it had to be amputated. Okay, to be completely transparent, there are other accounts of this story that say that the amputation is unrelated to the dislocation and not wanting to pay for the clinic story. But that right there, these wild stories of Hetty Green, reveal one of the most important pieces of the Witch of Wall Street story. The truth is that a lot of these stories are probably just made up. There's a popular myth that she would carry around thousands of dollars in a black bag everywhere she went. But that story is false. She'd use the bag to hold business paperwork. People just made up that the bag was nothing but a purse full of money. She eventually had to stop carrying the bag because she feared someone would try to attack her for it. It's likely that one of the reasons there's so many myths about Hetty Green is because it was particularly unusual for a woman in the 1800s to dedicate her life to finance. In 1916, a week after she died, the New York Times wrote, If a man had lived as did Mrs. Hetty Green, devoting the greater part of his time and mind to increasing an inherited fortune, nobody would have seen him as very peculiar. There would have been no difficulty in understanding the joys he obtained from participation in the grim conflicts of the higher finance. At her death, she was estimated to be worth about $100 million dollars, almost $3 billion dollars in today's money. Something that's even more impressive when you consider she wasn't legally allowed to serve as a director on a corporate board, buy a seat to trade stocks on the New York Stock Exchange floor, or even vote. 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