The Character that Built ‘The House of Morgan’

The House of MorganIn modern times, bankers are seen as greedy and evil men, immune to the proper good of society, the ultimate dollar chasers. But this was not always the case, and at one point in time it was the banker who helped form the moral backbone of the business community. It was their reputation for fair and balanced decision making that made the economy turn, that provided the capital for businesses to consolidate and grow, long before the times of World Banks and online trading markets. A banker was only as good as his word, and none were greater than JP Morgan. One of the few banks that has stood the test of time, the Morgan banks (started by JP’s father, Junius, and continued with JP’s son, Jack) have presided in one fashion or another over the history of modern business. But what is most interesting about this family is not the sheer magnitude of their dominance (JP single-handedly organized the bailout of the entire financial system in the Panic of 1907, a panic that saw the stock-market drop 50%), but how they came to be so dominant in an age of great political, societal, and financial change and uncertainty. At over 800 pages there is a lot to chew on, and the book starts to lag a bit towards the back half as the scope of the narrative broadens with the spawn of modern globalization. But the lessons on seizing opportunities from uncertainty, and on building world-class organizations that last across centuries is far and away worth the price of admission.

Executive Summary: High character of early figures led to strong business relationships and brand. But globalization over the decades eroded the need for relationships as competition sprung up and client’s gained access to more capital. As competition increased, relationships and morals declined, and banking became more commoditized, with short-term perspective. But the rise came from “doing high-class business in a high-class way,” and disciplined control to find low-risk, high-reward opportunities in an age of intense speculation.

Key Concepts:

  1. Success and Longevity through Culture and Morality
    1. “Never, under any circumstances, do an action which could be called into question if known to the world” – JPM
    2. Gentlemen Banker’s Code: “Do high-class business in a high-class way”
      1. No advertising, no price competition. Kept clients as dependents
    3. Also believed in keeping an air of mystic around yourself; self-control and reserve
      1. Junius Morgan (JP’s Father)– Solemn and business-like, always master of his emotions.
      2. Preferred silence, mystery to public. “Everyone should reduce their talk by 2/3rds”
  2. Pierpont (JP) Morgan Characteristics
    1. Had an idealism, a desire to set the moral code of society. Not just greedy like many others of his generation
      1. Believed in the work ethic, duties of the rich; Use their wealth for good, not pleasure
    2. “With his clear-cut sense of right and wrong, he quickly became accustomed to exercising leadership” – Deeply conservative, religious nature
      1. Had trouble delegating authority; and extreme micro-manager
    3. Wanted to add rigidity to a world he saw in flux. Hated disorder
      1. Real vice was “power to take […] a topsy-turvy financial world and turn it right.”
    4. Never mistook business for whole of life; $ was not the point. Loved travel and art
  3. House of Morgan Business Philosophy
    1. Power > money; Preferred a seat on company boards and stock options vs. cash payments when taking over a company
    2. Abhorred stock speculation, investment in young companies
      1. Strategy was to deal only with big, low-risk companies. Blue-chip, ‘Buy and Hold’
    3. JPMorgan and Company engaged almost solely in a wholesale bond and banking business. With glaring exceptions, it refused to water down standards. It recommended conservative investments, such as railroad bonds, but shied away from the tipsters art of plugging stocks”Wouldn’t take any deals on faith – “A man always has two reasons for the things he does: a good one, and the real one
      1. Therefore, not hit hard by Depression as not heavily invested in stocks.
      2. Made them appear high-character to others, especially in times of crisis
  4. The Decline of the House of Morgan: Due in part to loss of character
    1. Lost its etiquette. “Ran by bright, young executives, who seemed curiously devoid of larger political or social concerns in their narrow pursuit of profits”
      1. All accelerator, no brake. Companies started acting on impulse, no strategy
      1. But as clients gained access to their own capital, the need to compete rose.
      2. No longer about relationships; power tilted to client, forcing competition“The elite financiers [had] straddled all aspects of business. They had time to read, to ponder, to enter politics; the grey era of specialization hadn’t dawned”
    2. Led to a shift in desires from financing operations of industry to financing ownership of industry

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Other Notes/Quotes

  • Junius Morgan as a youth got a great offer to buy a partnership stake in a banking house, but stayed level headed. Didn’t leap at the fortune; instead, he reviewed the books and finances first to make sure it was a good thing
  • Jack Morgan (JP’s son): Relaxed manner. Delegated power, reached decisions thru consensus.
    • Through this methodology, Jack presided “over an institution of perhaps even larger power than the one ruled by his willful, rambunctious father”
  • Tom Lamont, Jack’s successor, tried to live a well-rounded, intellectual and artistic life.
    • But fell short of the ideals that he articulated. In trying to please too many people, he lost the habit of truth
  • “There is something about too much prosperity that ruins the fiber of the people. The remedy is for people to stop watching the ticker, and dancing to jazz, and return to the old economics of prosperity based around saving and working” – Tom Lamont
  • In WW2, Lamont thought that Americans were “too self-absorbed by materialism, and too coddled by peace to brace for violence”
  • On another prominent 1950s banker, Dwight Morrow: Always stressed, depressed that he didn’t get what he wanted out of life, but at the same time “he didn’t ask for things”
  • I want people who want to do something, not be someone” – Lou Preston

For Historical Context, A Summary of the Financial Ages:

  • Baronial Age (1850 – 1912) was characterized by immaturity of industry, government. Large-scale, nation-wide corporations were still being established, and so didn’t have the capital available that was needed, hence the need for bankers.
  • Diplomatic Age (1913 – 1948) is characterized by beginnings of globalization, rise of globally oriented finance as foreign governments began to industrialize.
  • Casino Age (1949 – Present) is characterized by matured companies/governments who could pay for their operations or obtain multiple sources of capital through other global financial firms, leading to increased competition. Also, rise of hostile takeovers as markets saturated and profit margins shrank.

 

I hope you find these notes to be useful and thought-provoking. Again, these are just my takeaways from the book and don’t encapsulate the entire message. If you’re interested in delving deeper and reading the book for yourself, and want to support the page, you can grab a copy here.

And if you want even more, here is a list of books within the same topic (19th Century Biographies) that I have found useful:

Happy Reading

3 Big Takeaways from ‘How to Win Friends and Influence People’

How to Win Friends and Influence PeopleThe quintessential development book for social interactions, Dale Carnegie’s 1936 classic How to Win Friends and Influence People has gone on to sell over 30 million copies worldwide since its release, and is listed as a one of the Top 25 most influential books of all time by Time Magazine. And while the book does stand the test of time to deliver some solid advice on social interactions, the entire premise of the book can be boiled down into a few points, three to be exact. At just under 300 pages, it is a quick enough read that it would still be worth reading over for yourself, but here is a quick primer on the key takeaways, some of the building blocks for interacting both at work and at home.

 

Executive Summary: The book boils down to two main concepts in line with the title. How to Win Friends = Make people feel important. How to Influence People = Make them want to do what you want them to do out of their own volition. And in all things, be diplomatic with people. The high road will always pay dividends in the end.

Key Concepts:

  1. Be Diplomatic
    1. Don’t criticize (will only upset the other and make them defensive)
    2. Praise often, at every improvement in others
    3. Don’t call direct attention to others mistakes, and lead with your own mistakes before discussing the other’s mistake
      1. Say “I may be wrong, and frequently am, so let’s examine the facts” (not word for word though)
      2. Make their faults seem easy to correct, always encourage – “I make that mistake all the time
    4. Even when you are right, win people gently and tactfully to your way of thinking, don’t try to bowl them over with the force of your correctness
    5. Ask questions instead of giving orders
    6. Good manners are made up of petty sacrifices” – Emerson
  1. Make the Other Person Feel Important
    1. Do this by making them feel appreciated
    2. Remember their name, find out what they like. Ask questions
    3. Nourish other’s self-esteem same as you would nourish their bodies by giving them food
    4. Give titles and authority to people, even if they are really meaningless. Again, makes them feel important, and brings out the nobler character within them
      1. This is something that Napoleon Bonaparte was famous for with his soldiers. Even called them the Grande Armee, as an example.
  2. Influence by Making People Want to Act of Their Own Accord
    1. Give them what they want. Focus on how they will benefit from what you want, and frame the request in that manner
    2. Galileo Quote: “You can’t teach a man anything. You can only help him to find it within himself”
    3. Respect others opinions, don’t directly say they’re wrong.
    4. Admit your wrongs, and if wrong, admit it quickly. Don’t pass the blame on others
    5. Get the other person saying “Yes, Yes”
      1. Socratic method of asking questions to reason their way into your way of thinking
    6. Appeal to their nobler motives
      1. Give the other person a reputation to try to live up to
    7. Sympathize with others ideas, and try to see their point of view
      1. So they don’t feel alone. No one wants to feel alone
    8. Tell a story. Dramatize your idea (Think of Malcolm Gladwell. Great ability to take dull scientific data and weave it into a captivating story that drives home the key points you would otherwise gloss over)

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Other Notes / Quotes

  • When dealing with people, let us remember that we are not dealing with creatures of logic; we are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity.”
    • Win the heart first, then the head
    • Win a man to your cause by first convincing him you are his sincere friend. There is the “honey which catches his heart, the great high road to his reason“.
  • 99% of the time people don’t criticize themselves for anything
  • “Be wiser than other people if you can, but do not tell them so”
  • Everything we do springs from two motives (According to Sigmund Freud):
    • 1) Sex urge
    • 2) The desire to be great/important
  • Alfred Adler – “It is the individual who is not interested in his fellow men who has the greatest difficulties in life, and provides the greatest injury to others. It is from among such individuals that all human failures spring”
  • People don’t want to feel sold. They want to buy. Similar to the main concept of The Little Red Book of Selling
  • At one point in the book there is a story of woman, new at her job, who is not making any friends or acquaintances
    • Finally tells herself “Maria, you can’t expect these women to come to you, you have to go out and meet them”
    • Takeaway is that in a new situation, the onus is on the new person to go out and meet the existing people. Be a self-starter, don’t be dependent on others to feel included
  • Good quote – “Do not fear being misunderstood and do not waste a minute thinking about your enemies. Try to fix firmly in your mind what you want to do, and then, without veering off direction, you will move straight to the goal. Keep your mind on the great and splendid things you would like to do, and then, as the days go gliding away, you will find yourself unconsciously seizing upon the opportunities that are required for the fulfillment of your desire … Picture in your mind the able, earnest, useful person you desire to be, and the thought you hold is hourly transforming you into that particular individual. Thought is supreme
  • Be forceful and assertive whenever you meet someone new to introduce yourself, and then remember their name in the future. Alleviates ice, puts you on friendly terms right away.
  • Unrelated thought from the rest of the book, but a concept that I still found meaningful: Andrew Carnegie was limited in his steel making knowledge. He just knew how to manage, lead, and organize people who knew more than he did.
  • Advocates that if lack of experience, not lack of ability, is reason for failure, then this is ok
  • Overlook people’s faults, even if they are overwhelmingly glaring
    • Instead, focus on even the little things they do right and praise those things.
    • Praise the improvement, and they will take heart in that, gain confidence, and turn other aspects around as well
      • However, this is mostly oriented toward people with little experience, new people. Not pre-established relationships
  • If accurate, good quote: “All men have fears, but the brave put down their fears and go forward, sometimes to death, but always to victory” – King’s Guard in Ancient Greece

 

I hope you find these notes to be useful and thought-provoking. Again, these are just my takeaways from the book and don’t encapsulate the entire message. If you’re interested in delving deeper and reading the book for yourself, and want to support the page, you can grab a copy here.

And if you want even more, here is a list of books within the same topic (social interactions) that I have found useful:

Happy Reading

 

October BoM – The 7 Habits of Highly Effective People

Overview7 Habits

Since its initial release, The 7 Habits of Highly Effective People, originally published in 1989 by the late Stephen Covey, has gone on to sell over 25 million copies, and is consistently ranked in various Top 25 lists – and for good reason. In this timeless book, Covey lays out a set of principles, or habits, that lead to effective intra- and interpersonal management, what he calls the “Character Ethic.”

I must confess, I actually put the book down after the first 40 pages during my first crack at it, as I was both surprised and disappointed at the book’s subject matter. I went into the book expecting to read about business and management practices, as this is how the book is typically marketed. Instead, the reader gets a tour de force on how to effectively reach your goals through personal independence (Habits 1-3) and relationship development (Habits 4-6).

As I learned first-hand, one must approach this book with an open mind. It can be easy at first glance to dismiss 7 Habits as self-help nonsense. But given deeper consideration, the book serves as a blueprint for how to build the fundamental skills we all need to reach our personal potentials. It has easily become one of my all-time favorites, and will be added to the growing list of books I plan to revisit frequently over the years to come

Key Concepts

There are two key concepts that Covey’s book is based around. The first is that effectiveness cannot be created through a quick fix. Learning new tips and techniques to handle email more efficiently or make more connections will not make you more productive over the long haul. Instead, it is our core values that propel us forward in a sustainable fashion, and therefore we must build proper ‘habits’ to capitalize on these values in our everyday lives. Improper habits can be broken, but not at a surface level; one needs deep, core shifts in perspective to make real change in yourself.

“For every thousand hacking at the leaves of evil, there is one striking at the root”

– Henry David Thoreau

The second key concept is that there exists a maturity continuum that dictates much of how we think and act. We all start as dependent individuals, reliant on our parents for physical, mental, and emotional security. But as we age, we begin to shift down the continuum, first moving to independence in these three categories, and finally ending at interdependence on the far right of the continuum. The problem, Covey states, is that many of us do not progress very far on this continuum, instead hovering somewhere between dependence and independence. We develop our own sense of self-worth solely from the opinions of the people we surround ourselves with.

The overarching purpose then of this book of to help move people down this continuum, and in doing so, the book breaks down the seven ‘habits,’ which are really more of life maxims. The first three are internally focused, revolving around building self-mastery to “move a person from dependence to independence.”

  1. Be Proactive – Things are going to happen to you that are out of your control, but it will always be your decision in how you choose to respond: “[Effective people] do not blame circumstances, conditions, or conditioning for their behavior. Their behavior is a product of their own conscious choice, based on values, rather than a product of their conditions, based on feeling.”
  2. Begin with the End in Mind – Imagine you are nearing the end of the line, and are reflecting back on your life. What do you want to be remembered for? These are the core principles that matter most to you, and to live an effective life is to have the courage and independence to align your daily decisions to these principles.
  3. Put First Things First – Living in this manner requires a great deal of long-term thinking and prioritization – balancing the day-to-day of what is in front of you with what you know is most important over the long haul. These are what the author calls Quadrant II activities, things that are important but not necessarily urgent: delegating work, properly preparing for meetings, building relationships. Its basic Pareto Principle stuff – making time for the 20% of your work that will eventually net you 80% of your results.

Reaching this base level of personal independence positions you to then move on to the second half of the book, focusing around effective interpersonal habits –what is today mostly referred to as the concept of Emotional Intelligence. These are the skills needed to build effective and lasting relationships with others, which helps you further your progress down the maturity continuum from independence to interdependence.

  1. Think Win-Win – There is always a best of both worlds scenario. You just have to work to find it. Work with other people to always find a win-win solution, instead of being combative and protective of your own desires
  2. Seek First to Understand, then to be Understood – This Win-Win scenario can only be accomplished when you communicate effectively with others, which happens when you listen first to understand people’s viewpoint. This will build other’s trust in you, which will then make them must more likely to try and understand your point.
  3. Synergize – When we act synergistically, we utilize the above skills to collaborate with others to build far greater things than we ever could alone: “What is synergy? Simply defined, it means that the whole is greater than the sum of the parts. It means that the relationship which the parts have to each other is a part in and of itself.”

Finally, you reach the final habit of the book, which stipulates that one ‘rinse and repeat.’ In the same way that your education and learning do not stop when you graduate school, being an effective individual requires constant reflection to make sure you are progressing.

  1. Renewal: Sharpen the Saw – This is the preservation and continuous enhancement of our greatest assets – ourselves. “This is the single most powerful investment we can ever make in life – investment in ourselves, in the only instrument we have with which to deal with life and to contribute. We are the instruments of our own performance, and to be effective, we need to recognize the importance of taking time regularly to sharpen the saw”

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10 Takeaways

  1. Ignore the pit in your stomach – This is the physical manifestation of emotional dependence on other’s approval: that gnawing feeling you get in your gut when someone disagrees with you. It compels you to cave in and go along with them, against your better judgement, just to appease the momentary situation. You are most effective when you ignore this feeling, an act of emotional independence – having the mental and emotional strength to pursue what you want, even when those around you try hard to dissuade you.
  2. Maturity: Courage vs. Consideration – Having emotional independence gives you the courage you need to do what you want. But too much independence can cause you to ignore and hurt the feelings of those around you. Maturity is the fulcrum point between these two extremes: balancing the desire to consider the needs of others in your decision making process while still maintaining an air of independence.
  3. Write a Personal Constitution – Similar in concept to goal-setting, Covey urges the reader to go one step further. Instead of writing down the things you want to accomplish, write down the person you want to be. When people think or talk about you, what are the traits you want them to identify you with? What are your values and ideals? On a grander scale, what is your reason for being? These answers form your personal constitution, a statement of what you are about and who you want to be, for you to review and adhere to in times of distress.
  4. Focus on the Important, not Urgent – Urgent tasks are the flash fires that come up during your day. While these tasks are no doubt critical, their completion brings very short-term benefits, before more seemingly urgent tasks pop up that again call your immediate attention. This cycle keeps you constantly busy, and prevents you from focusing on your long-term objectives, the things that are truly important. Example: Take time away from completing urgent tasks (email, reports, etc) to instead focus on completing the important task of hiring and training more staff. These staff members can then help handle most of the urgent tasks you were swamped with before, freeing up more of your time to handle the important long-term tasks.
  5. Have an Abundance Mentality –An abundance mentality is the belief that there is an unlimited pie. When someone else you know succeeds, that doesn’t mean that you lose out on a slice of the pie (with the exception of business deals. There is a finite number of customers and clients). When you envy someone’s success, there is a hidden fear that you cannot now succeed yourself as a direct result of their achievement. With an abundance mentality, you know there is plenty more of the pie left, and that you will get yours in time through your own work, freeing yourself to truly congratulate and appreciate the success of those around you.
  6. Security + Guidance = Wisdom -> Power – The formula for personal power: when we no longer depend on others for our sense of self-worth, and we identify our core values and what we are truly about, we gain sense of internal calm and wisdom, the foundation for power. Know what you want, the independent thought to get it, and blend that will with the needs of those around you
  7. The Four Dimensions – The author states that there are four essential dimensions to life that one must constantly balance and work to improve upon: the Physical, the Mental, the Emotional/Social, and lastly the Spiritual. For introverts, the most critical is the Emotional/Social, as the other dimensions can all be enhanced individually. We must continually work to ‘sharpen the saw,’ as Covey puts it, even in areas where we struggle, as without this fourth pillar, no building can stand for long on the remaining three alone.
  8. Varying Paradigm Centers – We all have different paradigm centers, or core values that drive the way we act and perceive the world around us. For some, it is Wealth; for others, it is Title and Status; and yet others are centered on Family or simply Pleasure. What is important is not that we all strive to have the same center, but that we recognize and respect the centers of others. These centers drive our psychology, and by being aware of them, we can better engage and relate with those around us.
  9. Balancing P and PC – To be an effective person, one must master the art of balancing their Production (P) with their Production Capacity (PC). The body cannot run (P) indefinitely without food or sustenance (PC), much the same as one cannot continue to produce at work without learning new skills or investing in new relationships. Eventually you will stagnate and be passed by. Similarly, we cannot be so forward focused that we ignore the present. You must eventually bring your investments and new skills to bear and turn the intangible tangible through production.
  10. Your Place in the World – The world is bigger than any one individual. It is our moral obligation to dedicate ourselves to the improvement of the larger whole, not just the improvement of ourselves, for this is when we do our best work: “As long as you feel you are serving others, you do the job well. When you are concerned only with helping yourself, you do it less well – a law as inexorable as gravity.”

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The 7 Habits of Highly Effective People is a foundational text that sets the groundwork upon which any person of ambition should build the rest of their knowledge, habits, and activities. I can’t recommend highly enough, especially if you are young and just starting out, that you prioritize the reading of this book and escalate it to the top of your reading list. But one must come into reading this book with an open mind; the text can at times be either overly convoluted (elaborates on building Emotional Bank Accounts with individuals to build relationships, otherwise known as trust), or overly dramatic (see Habit 6). But by bringing your past experiences to bear through active reading, you can uncover and start developing some of the foundational principles of effective human behavior that can collectively build momentum for yourself toward a life of success.

Additional Reads from the Month: