8 Essential Financial Lessons From J.P. Morgan (And How to Apply Them to Your Personal and Professional Life!)

 

Your end goal might be to become a genuine modern-day fat cat, live ostentatiously rich, and dominate entire industries. Or maybe you just want to better your modest life and to improve your systems, or something in between.

Whatever the case, it is always good to have models for you to look up to. Models teach us essential lessons that we can apply to our financial and professional lives.

Today’s problem?

In an ever-changing society, it can be hard to know who to look up to. Standards are evolving every single day, and our paparazzi-society constantly deflates figures who, just yesterday, we deemed to be demigods.

One day you are untouchable. Venerated.

The next day you are a disgrace whose past was unveiled on a social media post.

One of the greatest tools we have as a society is that we have the ability analyze our ancestors. Hindsight allows society to build upon the past.

Where better to look than at one who was among the Pantheon of Greats who built America?

Who better to analyze than the original fat cat, the giant of finance, J. P. Morgan?

The Life of a Financial Wizard (And What He Did to Get There)

John Pierpont Morgan was one of the most powerful bankers in America during the Gilded Age, who organized U.S. Steel and General Electric, bailed out the country from multiple financial crises, battled with President Theodore Roosevelt, gathered a massive fortune throughout his life, and whose legacy company would become the largest bank in the United States at the time of this article’s publishing.

So here I am describing this legendary man of finance and you are undoubtedly asking yourself:

“Why do I care? No one will ever again realistically do what this man has done so how would this apply to me?”

History does not have room for many legendary figures. An extremely small number of people will come close to what Morgan was. His accomplishments were innumerable, but we can try to distill from them essential lessons that we can apply to ourselves. We can still learn from him and replicate his best qualities and achievements to improve our lives.

The Essential Financial Lessons That Will Transform Your Life!

So here are the lessons you can take away from Morgan, whether you plan to apply them to your personal life, want to shore up your personal finance chops to survive the next recession (or crash), or if you just want to learn more about this legendary figure!

1. Be prepared when opportunity shows itself and have the courage to take action.

Morgan had shown to be a shrewd businessman as early as his 20s. While on business in New Orleans, he met a captain with a full shipment of coffee who had no buyer for the product. Sensing opportunity, Morgan used his company’s funds to purchase the coffee and then turned it around at local markets for profit, even though he had no authorization for such transactions. He was energized by this success and ran with it, carrying this lesson with him for the rest of his life.

In the late 19th century, the U.S. railroad industry had experienced rapid and haphazard over-expansion, which threatened the entire railroad market and eventually the rest of the economy. Morgan negotiated between major railroad companies, refinanced bankrupt one, and consolidated redundant railroads that were drying each other out through destructive competition.

Through these actions and by gathering stocks and influence over the boards of directors at the companies, he established significant control of the railroad industry. At his height, Morgan controlled a sixth of all rail lines in the United States.

He became one of the world’s most powerful railroad magnates.

Just like Morgan, you have to ensure that when the time comes, you will be ready to pounce on the opportunity. The best investment to make is in yourself. You will never know when it presents itself, but you owe it to yourself to be ready when it does.

It is the only way for you to become a captain of industry! Leaders do not become part of leadership by being passive. They act.

2. Research and internalize the rules and innovate around them.

Morgan was reputed in the media as a stoic figure in meetings with a large, imposing frame, ever-accentuated with a large Cuban cigar in his mouth leaving many people to believe him as an indomitable person. On the contrary, he had a dual reputation of being quick to temper, leading to many seemingly impulsive moves no matter the consequences.

Despite these two contrasting public images, only people close to Morgan, especially in the world of finance, knew that behind his towering, rock-like presence and his impetuous nature was extensive research and due diligence attached to every decision. Morgan sent his lieutenants to gather information on every potential deal and client before they went into business together. He often knew more about the client’s business than the client did.

His thoroughness was imbued by his father who taught Morgan to mitigate risk. It was this thoroughness that taught Morgan to learn all the rules of the game he was playing so that they could be used to his advantage.

This complete understanding of the game led to innovations and rule-bending that both enriched Morgan and benefited the public.

One such example in which Morgan’s mastery of his industry led to innovation is the voting trust, which was a maneuver he utilized to wrestle control of a large portion of the railroad industry away from their owners. The move transferred voting rights to a trustee in exchange for assumed relief of a shareholder from potential liability from a bankrupt company.

This innovative structure allowed the creation of a large voting block within the corporation, giving him great power to act as the majority shareholder without actually owning the shares.

Morgan is widely known for his rescue of the American economy twice. In the successful rescue during the Panic of 1893, U.S. Treasury was running dangerously low on gold reserves. Morgan reached through his network of international bankers and pulled together a large amount of gold, which was then offered to the government in exchange for a favorable rate on $65 million worth of bonds.

There was one problem.

Then-President Grover Cleveland was meeting resistance in the legislature to obtain any help from Morgan. Another source of resistance was from the public; Morgan’s reputation at that point in history was less than stellar, being known as a baron robber who maneuvered every situation to his gain at the expense of the common man.

Baron robber or not, both Cleveland and Morgan understood that a tanked economy would help no baron.

So what options did Morgan have to save the economy?

He and his company delved into the books and found an obscure statute in an 1862 law that allowed the Secretary of the Treasury to buy gold coins without congressional approval in the event of an emergency. The President authorized this transaction and the gold reserves were replenished.

J.P. Morgan had gone out of his way to uncover a loophole for him to rescue the American financial system from disaster. He arose a hero and profited at the same time.

Knowing the rules help you out in every facet of life. When paired with J.P. Morgan’s Essential Financial Lesson #1, it will make you dangerous in the arena. It will allow you to improvise and flex your creativity when others stutter. You still stand out and attract business.

3. Find a passion that stirs your soul and feed it.

Morgan attended galleries and concerts with his parents, which stoked the discovery of his affinity to art. He then cultivated a passion to collect paintings, sculptures, gems, rare manuscripts, and tapestries. He attended public school, was discovered to be gifted in math, but went ahead and obtained an art history degree from Germany’s University of Gottingen.

(Who says you need a STEM degree to get rich?)

Just kidding.

At the age of 14, he mailed a card to the President of the United States, Millard Fillmore. Young J.P. had made a request to the President to sign and return the card, which Fillmore obliged. After his father’s death, J.P., in his middle ages, spent a portion of the inheritance to further his collections.

So did Morgan end up doing with his epic hoard?

Many works of art in his collection were donated to the Metropolitan Museum of Art, which boosted the museum’s stature as a worldly collection. His book collection and the building in which they were housed eventually became the Morgan Library & Museum.

Morgan’s lifelong passion for the collection of art gave him a second purpose in life.

This made a difference when his first life was consumed by finance.

Having this passion helped Morgan with his overall perspective personally and professionally. Have a focus separate from business allowed him to change gears, to have fresh eyes and mind when needed.

You have to find your own passion, whether it involves your profession or not. When you do, do all you can to grow it. You do not want to be old and realize that there is nothing left for you after retirement.

4. Know when you need a break and take it.

Morgan was a sickly child and spent long periods sheltered at home. He had a host of health problems which included skin and stomach ailments, and was prone to fatigue. Prior to launching his career in London after college, he visited the Azore Islands, thinking the tropical sea air would help with his health issues.

He developed an invaluable habit of taking many vacations each year and was never afraid of extending them at his leisure. He never felt chained to his businesses.

How did this all help him?

Maybe this was the secret to Morgan’s absolute dominance in the world of finance in his age. He needed an escape from the traps and politics of his industry. In today’s cutthroat business world, too many people worry about the trajectory of their careers, foregoing any breaks that would help with their mental and physical health in the long run.

You have to be able to ask yourself if running yourself so hard is worth it. Take the time to find a real answer, and take action when you do.

5. Learn to evaluate talent and trust your gut to cultivate it.

Everyone knows Thomas Edison and what he achieved. J.P. Morgan was the one who backed Edison financially after hearing about the light bulb.

You are probably wondering:

“If I had money back then, I would have done the same and invested in Thomas Edison. There’s nothing special here!”

That might have been the case with benefit of hindsight, but what will really shed light on the degree of risk that Morgan undertook is an understanding of his upbringing and the context of history.

Edison was a rising inventor who had a slew of patents. There were duds, but there was enough success for him to establish a then-modern laboratory and manufacturing facility in New Jersey. He grew up just like every other kid at the time, except he spent his free time reading scientific and technical books. He was talented, all right.

After Edison moved his family and staff to Menlo Park, New York, he invented the tin foil phonograph, a device that recorded and reproduced sound. Edison was now an international sensation, so much so that he was invited to the White House for a demonstration of his new invention.

This claim to fame would have been enough for anybody else to rest on their laurels and coast for the rest of their lives. Not Edison. He took on another challenge: lighting up the world.

Not only did he accomplish it as we all know, he revealed it in spectacular fashion. He announced at a press conference that he would be putting the gaslight industry out of business.

So here we have a young man at the top of his game, seemingly with a lifetime’s worth of achievement already behind him after which he goes on to make a claim that was seen as insanity, or at the very least, cockiness.

J.P. was brought up by an intelligent father, Junius Spencer Morgan, who taught J.P. most of what he knew in the industry. Junius preached a mitigation of risk and modeled his business enterprises after the European-style legacy companies that would be passed down from generation to generation. He warned J.P. that electric lights were a fad that would come and go since the industry was unproven, and inherently brought with it a high risk of failure.

Despite all the warnings from his father and the brazen speech from Edison, J.P. Morgan decided not only to invest in Thomas Edison, but to hire the young inventor to make Morgan’s mansion one of the first electrically powered residences in the world and to allow Edison to use it as another laboratory for his experiments.

The rest is history. Innovation met is funder.

What did they do?

The duo went on to create the first power station in the entire world, and powered up a large portion of Manhattan with Edison’s technology. The Edison Electricity Company was formed, and became General Electric after the infamous War of Currents. The Age of Electricity had begun.

If Morgan had listened to his father’s warnings, or attributed Edison’s insane speech to hubris, history would have turned out wildly different.

Morgan had attached his name to history because he stuck to his gut.

Just like Morgan, you have to be able to recognize talent. These are the people who you want in your life because they will make a difference and impact the world (not that you won’t!). They do not come around often, so value your time with them and help them grow as much as you can.

6. Value your professional connections and utilize them.

Morgan was raised in Hartford, Boston, and London. He was schooled in New England, Switzerland, and Germany. He started a career in finance in London at a merchant banking firm, Peabody, Morgan & Co., where his father was a founding partner. He rose through the ranks and made business dealings in Cuba and Louisiana. He started a New York branch and worked with English investors.

Through his massive network, Morgan was able to freely connect those in need of capital to those who had it. Much of the grow of the American industrial economy in the 1870s was attributed to Morgan, who provided many burgeoning corporations with capital backed by European bankers he was associated with. The American economy as a whole grew at a remarkable rate during the years of his best activity.

Also through means provided by his international network, Morgan started and facilitated the mergers of many of the largest, most iconic megacorporations of all time. J.P. Morgan & Company which eventually became J.P. Morgan Chase. Edison General Electric and Thomson-Houston Electric Company into General Electric. Federal Steel Company, Carnegie Steel Company, and other steel companies into United States Steel.

If you’re more of a visual person, here is a graphic created in 1914 which illustrates J.P. Morgan & Co.’s sprawling influence over large corporations:

Who you know is everything. Your contacts list is an asset. You will never know when that old acquaintance you knew way back when pops up with a request for help. When you provide value to them, do not expect value in return, but don’t be surprised when you are paid back in spades. Be generous with your time, be generous with your work, and you will reap the rewards.

7. Trust your authority and assert it when necessary.

The Bank Panic of 1907 was a financial crisis in which Morgan is credited to averting. In the midst of the Panic, Morgan gathered New York City’s chief bankers to his mansion to draw up a solution that would ease the situation, caused by crashing global markets. He locked the door, stating that the assembly would not be released until a workable solution was agreed upon.

It gets better.

As the night drew on and none of the bankers came up with anything worth Morgan’s attention, he drafted his own version of a bailout package to save collapsing banks and trust companies, which involved having all those present to back a line of credit that would be made available to the companies at risk. The package essentially made the stronger banks risk their funds and assets to invest in the weak, failing ones.

He ordered everyone to sign the plan, which they did.

Morgan’s plan worked. The U.S. economy was pulled back from the brink of a full-on depression and it was stabilized. When the government realized that it had been saved by a private banker who acted essentially as the central bank, it was forced to create an entity that would mimic Morgan’s power should it be required again in the future. The Federal Reserve System was created, thanks to J.P. Morgan.

He grabbed the issue, removed the politics, and forced his own solution.

Just like Morgan, you have to have the confidence to grab the bull by its horns and take control. In any situation, you might be the only one who can. You might as well do it and steer it in the direction that you prefer.

8. Know your roots and own it.

 

Morgan was worth over $118 million at the time of his death. That number is any means of assessment, but when you figure that his wealth was about 0.3% of the U.S. GDP, that number catapults to around $55.7 billion (2018 U.S. GDP is $18.57 trillion).

How did he get there?

Morgan was born into wealth and prominence. His father, Junius Spencer Morgan, was a prominent and well-connected banker and financier. A distant relative, James Pierpont, was a founder of Yale University. Another distant relative, James Lord Pierpont, was the composer of “Jingle Bells”.

Morgan had a worldly education and was set up well professionally. He went to school in the best European institutions. He had traveled through most of the major cities on Earth before his teenage years were over, exposing him to an international environment which was well-suited for a business career. His first job was an internship at a company where his father was an affiliate. After his father passed, he was left a $12 million estate, which he assumed control of easily due to the fact that he had no brothers to quarrel with.

The best part about all this?

Morgan was honest about where he came from and owned it.

Morgan had everything going his way from the day he existed every step of the way and he knew it. He never claimed to be self-made. He even admitted that his success was attributed “more than anything to the endorsement of my father’s friends”, as revealed in The House of Morgan: An American Banking Dynasty and the Rise to Modern Finance.

He lived an opulent lifestyle. He founded the private social club, the Metropolitan Club. He was a connoisseur of fine wines, spirits, and cigars, and an owner of a fleet of yachts. He was an original fat cat, and now he is revered as one of the most important figures to put the American economy on track to where it is today.

It is easy to disparage a greedy person, but the only thing worse than a greedy person is a dishonest one.

No matter your origin or what your background is, own it. Being insecure about where you came from helps nobody. You might as well use it to your advantage! Do not forget this Essential Financial Lesson from J.P. Morgan!

And That’s a Wrap-Up!

So that is it!

We have explored the life of John Pierpont Morgan, but this is by no means a definitive or comprehensive summary of it. This is a tiny tasting of his rich and legendary life.

What we have done is extract Essential Financial Lessons from Morgan’s life and achievements.

Hopefully this list has inspired you to learn what you can from a type of man that only comes around every century or so.

There are many different interpretations of how he affected the history of America and the world. There are positive ones that paint him as the financial sheriff whose personal mission was to bring order to chaos (and profit while he was at it) and negative ones that paint him as a greedy robber baron, forever lusting for riches and power.

What that said, no matter how you see him, there is absolutely no one in the world who can argue against the fact that he influenced the world in an immense way.

What we can do for ourselves is to try to learn from him so that we may change the course of our own lives (and maybe the world?) for the better.

Let me know what you think!

Have you used any of these Essential Financial Lessons for yourself?

Leave a comment and tell us!

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