Book review: Dark Genius of Wallstreet

Easter time is a good time for a “historical” book review:

The book is about the life of Jay Gould, one of the most notorious “Robber barrons” in the 19th Century in the US.

The so called “robber barons” were a group of several “arch capitalists” who made their money in the 19th century through means which nowerdays would be punished with prison.

However in those days, there was no such things as “insider training”, people were even considered stupid if they traded stocks without insider information.

The first part of the book covers Jay Gould’s childhood which I found personally a little bit boring. It gets more interesting around page 50 or so when Jay Gould’s first real business venture, leather manufacturing is described where he starts as a junior partner.

It is fascinating to see how quickly he realizes that the production part of the value chain is the most capital consuming and risky part wheras the traders need a lot less capital and make more or less the same amount of profit. Naturally he started to speculate early in leather futures.

The “spirit” of those times is already clearly shown in the fight over a leather production site with the heirs of his former partners. “Unfriendly takeovers” in those times were a lot more unfriendly than today, not only involving lawyers but also armed men and gun fights.

Some how naturally he finds his way to Wall Street, where he starts as a so called “curb trader”, traders who literally stood outside the stock exchange and making bets because they had no license to trade directly.

After trading a lot, Gould started pretty early to actually taking over a small railroad company a and operate it on a day today basis. To day one would call this a public-to-private equit deal. This lead directly to the famous battle for Erie Railroad between Gould, Vanderbild, Drew and Fisk one of the most intensively fought battles in corporate history. Anfd fighting again in those times meant armed men etc etc

More or less in parallel, Jay Gould tried with James Fisk tried to corner the Gold market, resulting in the “Black friday” of 1869.

At the peak of his career, he even managed to control Western Union additionally to a combination of several important railroad lines.

Summary:

I think it is a great read for everyone interested in the history of capital markets. The book also shows that nothing is really new in capital markets, neither market volatility nor crashes etc. It is also interesting to gain some insight into those “dark ages” of insider based capital markets, maybe a good training if someone wants to invest in China or India…..

One comment

  • In that category I always look to “Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore (Annotated Edition)”. It is well worth a read.

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